SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of
[x] Definitive Proxy Statement the Commission Only (as
[ ] Definitive Additional Materials permitted by
[ ] Soliciting Material Pursuant to Rule 14a-6(e)(2))
Rule 14a-11(c)
or Rule 14a-12
Epitope, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(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)(1) 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:
- --------------------------------------------------------------------------------
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.
<PAGE>
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
[Epitope logo]
EPITOPE, INC.
8505 S.W. Creekside Place
Beaverton, Oregon 97008
January 16, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of
Shareholders to be held on TUESDAY, FEBRUARY 17, 1998, at the Oregon Convention
Center, 777 N.E. Martin Luther King Jr. Boulevard, Portland, Oregon, at 9:00
a.m. Your Board of Directors and management look forward to personally greeting
those present. At the meeting, you will be asked to elect one Class I director
and two Class III directors to serve on the Board of Directors until the Annual
Meeting of Shareholders in the years 2000 and 2001 respectively; and to transact
such other business as may properly come before the meeting, or any adjournments
thereof.
Your Board of Directors has approved the nominees for director named in
the enclosed Proxy Statement and recommends that you vote FOR their election to
the Board of Directors.
Your vote is very important, regardless of the number of shares you
own. Whether or not you plan to attend the Annual Meeting in person, we urge you
to mark, sign, date, and mail the enclosed proxy card promptly in the
accompanying postage prepaid envelope. You may, of course, attend the Annual
Meeting and vote in person even if you have previously mailed your proxy card.
Sincerely yours,
John W. Morgan
President and Chief Executive Officer
<PAGE>
EPITOPE, INC.
8505 S.W. Creekside Place
Beaverton, Oregon 97008
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 17, 1998
--------------
To the Shareholders of Epitope, Inc.:
The Annual Meeting of Shareholders of Epitope, Inc., an Oregon
corporation (the "Company"), will be held at the Oregon Convention Center, 777
N.E. Martin Luther King Jr. Boulevard, Portland, Oregon 97232, on TUESDAY,
FEBRUARY 17, 1998, at 9:00 a.m. to elect one Class I director and two Class III
directors, and to consider such other business as may properly come before the
meeting or any adjournments thereof. The foregoing items of business are more
fully described in the proxy statement accompanying this Notice.
Only holders of Common Stock of record at the close of business on
December 22, 1997, will be entitled to vote at the Annual Meeting of
Shareholders and any adjournments thereof.
By Order of the Board of Directors
Andrew S. Goldstein
Secretary
January 16, 1998
Beaverton, Oregon
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YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE
URGED TO MARK, SIGN, DATE, AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE
ENVELOPE PROVIDED. RETURNING YOUR PROXY DOES NOT DEPRIVE YOU OF YOUR RIGHT TO
ATTEND THE MEETING AND TO VOTE YOUR SHARES IN PERSON.
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<PAGE>
EPITOPE, INC.
8505 S.W. Creekside Place
Beaverton, Oregon 97008
-----------
PROXY STATEMENT
This proxy statement is being mailed on or about January 16, 1998, to
shareholders of Epitope, Inc., an Oregon corporation (the "Company"), in
connection with the solicitation of proxies in the accompanying form ("Proxies")
by the Board of Directors of the Company (the "Board") for use at the Annual
Meeting of Shareholders to be held on February 17, 1998, at 9:00 a.m., at the
Oregon Convention Center, 777 N.E. Martin Luther King Jr. Boulevard, Portland,
Oregon 97232, and at any adjournments thereof (the "Annual Meeting"), pursuant
to the accompanying Notice of Annual Meeting of Shareholders.
PROXIES
Shares represented by a properly executed Proxy will be voted in
accordance with the shareholder's instructions indicated on the Proxy. If no
instructions are given, the shareholder's shares will be voted according to the
recommendations of the Board as stated on the Proxy. Shareholders may revoke the
authority granted by their Proxies at any time before the Annual Meeting by
notice in writing delivered to the Secretary of the Company, by submitting a
subsequently dated proxy, or by attending the Annual Meeting, withdrawing the
Proxy, and voting in person.
At the Annual Meeting, action will be taken on the matters set forth in
the accompanying Notice of Annual Meeting of Shareholders and described in this
proxy statement. The Board knows of no other matters to be presented for action
at the Annual Meeting. If any other matters do properly come before the Annual
Meeting, the persons named on the Proxy will have discretionary authority to
vote thereon in accordance with their best judgment.
The cost of soliciting Proxies will be borne by the Company. In
addition to solicitations by mail, certain of the Company's directors, officers,
and regular employees may solicit Proxies personally or by telephone, telegraph,
or other means without additional compensation. The Company has retained D.F.
King & Co., Inc., to assist in such solicitation for an estimated fee of $2,500
plus reimbursement for certain expenses.
Arrangements will also be made with brokerage firms and other
custodians, nominees, and fiduciaries to forward solicitation material to the
beneficial owners of stock held of record by such persons, and the Company will,
upon request, reimburse them for their reasonable expense in so doing.
PLEASE MARK, SIGN, AND DATE THE ENCLOSED PROXY CARD, AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE PROVIDED FOR THIS PURPOSE.
1
<PAGE>
VOTING SECURITIES
On December 22, 1997, the record date for determining shareholders
entitled to vote at the Annual Meeting, the Company had outstanding and entitled
to vote at the meeting 13,454,330 shares of Common Stock, no par value (the
"Common Stock"). Each share of Common Stock is entitled to one vote on any
matter brought before the meeting. A majority of the shares of Common Stock
outstanding as of the record date, represented in person or by proxy at the
meeting, will constitute a quorum for the transaction of business.
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of December 30, 1997,
regarding the beneficial ownership of the Company's Common Stock by (a) each
person who is known to the Company to be the beneficial owner of more than 5
percent of the Common Stock outstanding, (b) each director and nominee for
election as director, (c) each of the Company's executive officers named in the
Summary Compensation Table under EXECUTIVE COMPENSATION, and (d) all directors
and executive officers of the Company at January 16, 1998, as a group.
<TABLE>
Amount and Nature of Percent
Beneficial Owner Beneficial Ownership (1) (2) of Class
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
W. Charles Armstrong 84,540(3) *
Joseph A. Bouckaert 25,443 *
Richard K. Donahue 21,650(3) *
Adolph J. Ferro, Ph.D. 558,312 4.0%
John H. Fitchen, M.D. 194,406(3) 1.4%
Andrew S. Goldstein 450,338 3.3%
Margaret H. Jordan 31,000 *
Gilbert N. Miller 211,934 1.6%
John W. Morgan 5,000(4) *
R. Douglas Norby 68,750 *
Michael J. Paxton 52,052 *
Roger L. Pringle 136,177(3) 1.0%
G. Patrick Sheaffer 90,000 *
All directors and executive officers as a group (11 persons) 1,111,168(3) 7.8%
</TABLE>
- ---------
*Less than 1%
(1) Subject to community property laws where applicable, beneficial
ownership consists of sole voting and investment power except as
otherwise indicated.
(2) Includes shares subject to options exercisable within 60 days of
December 30, 1997, as follows: Mr. Armstrong, 80,000 shares; Mr.
Bouckaert, 25,000 shares; Mr. Donahue, 10,000 shares; Dr. Ferro,
2
<PAGE>
556,204 shares; Dr. Fitchen, 188,800 shares; Mr. Goldstein, 194,000
shares; Ms. Jordan, 30,000 shares; Mr. Miller, 209,104 shares; Mr.
Norby, 65,000 shares; Mr. Paxton, 50,552 shares; Mr. Pringle, 110,552
shares; Mr. Sheaffer, 77,500 shares; and all directors and executive
officers as a group, 786,604 shares.
(3) Includes shares as to which the individual has shared voting and
dispositive power as follows: Mr. Armstrong, 165 shares; Mr. Donahue,
1,000 shares; Dr. Fitchen, 100 shares; Mr. Pringle, 1,500 shares; and
all directors and executive officers as a group, 2,665 shares.
(4) Does not include 27,752 shares of Common Stock held in the Epitope,
Inc. 40l(k) Profit Sharing Plan (the "401(k) Plan"), as to which Mr.
Morgan shares voting power as a trustee of the 401(k) Plan. Mr. Morgan
disclaims any economic beneficial interest in such shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors and persons who own more than 10 percent of the
Common Stock (collectively, "Reporting Persons") to file reports of ownership
and changes in ownership with the Securities and Exchange Commission (the
"Commission"). Reporting persons are required by the Commission's regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms and written
representations regarding the absence of a filing requirement received from
Reporting Persons, the Company believes that with respect to the 1997 fiscal
year, all Reporting Persons complied with all applicable filing requirements.
ELECTION OF DIRECTORS
At the Annual Meeting, shareholders will vote on the election of one
Class I director and two Class III directors. The Nominating Committee of the
Board of Directors has nominated John W. Morgan, President and Chief Executive
Officer, for election as a Class I director, for a term expiring at the Annual
Meeting of Shareholders in 2000, and Margaret H. Jordan and Michael J. Paxton
for election as Class III directors, for terms expiring at the Annual Meeting of
Shareholders in 2001. The nominees for election as directors are presently
members of the Board.
In the absence of instructions to the contrary, shares of Common Stock
represented by properly executed Proxies will be voted for the three nominees,
each of whom has consented to be named and to serve if elected. If a quorum is
present, each nominee will be elected if he or she receives a plurality of the
votes cast by shares entitled to vote at the Annual Meeting.
The Company does not know of anything that would preclude any nominee
from serving. However, should any nominee for any reason become unable or
unwilling to serve as a director, the persons named on the enclosed Proxy will
vote the shares represented by each Proxy for such substitute nominee as the
Board may approve.
Any vacancy that occurs during the term of a director may be filled by
the affirmative vote of a majority of the remaining directors even though less
than a quorum of the Board. The vacancy may be filled until the next annual
meeting of shareholders. Mr. Morgan was elected to the Board to fill the vacancy
that occurred upon the resignation of Adolph J. Ferro, Ph.D., in connection with
the spin-off of Agritope, Inc. ("Agritope"). Accordingly, Mr. Morgan has been
nominated for re-election as a Class I director at the Annual Meeting. R.
Douglas Norby, currently a Class II director, and Richard K. Donahue, currently
a Class III director, have submitted their resignations as directors, effective
on the date of the Annual Meeting. The Nominating Committee of the Board has not
yet identified candidates to replace Mr. Donahue and Mr. Norby. Accordingly,
only two candidates for Class III directors have been nominated for election.
Proxies cannot be voted for more than two Class III directors at the Annual
Meeting. The Board expects to elect directors to succeed Mr. Donahue and Mr.
Norby at some time
3
<PAGE>
following the Annual Meeting. The Company expects that Mr. Donahue's and Mr.
Norby's successors will be nominated for re-election at the Annual Meeting of
Shareholders in 1999.
Certain information with respect to each person nominated for election
as a director and each person whose term of office as a director will continue
after the Annual Meeting is set forth below.
<TABLE>
Director
Name Principal Occupation Age Since
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Class I (Nominee and Directors Whose Terms of Office Expire in 2000):
<S> <C> <C> <C>
W. Charles Armstrong Private Investor 53 1989
John W. Morgan President and Chief Executive 38 1998
Officer of the Company
Roger L. Pringle President of The Pringle Company, 57 1989
a management consulting firm,
Portland, Oregon
Class II (Directors Whose Terms of Office Expire in 1999):
Andrew S. Goldstein Senior Vice President of Advanced 49 1981
Technology Development -
Epitope Medical Products
G. Patrick Sheaffer Chairman, President and Chief 58 1983
Executive Officer of Riverview
Savings Bank, Camas, Washington
Class III (Nominees for Terms of Office to Expire in 2001):
Margaret H. Jordan President of The Margaret Jordan 55 1995
Group L.L.C., a management consulting
firm for the health care organization
industry, Addison, Texas
Michael J. Paxton Chairman, President and Chief 51 1995
Executive Officer of
O'Cedar Holdings, Inc., a manufacturer
of household cleaning products,
Springfield, Ohio
</TABLE>
W. Charles Armstrong, now a private investor, served as interim
President and Chief Executive Officer of the Company from May 1997 to October
1997. He was Chairman and Chief Executive Officer of Bank of America Oregon from
September 1992 until September 1996. From April to September 1992, he was
Chairman and Chief Executive Officer of Bank of America Idaho. Mr. Armstrong
served as President and Chief Operating Officer of Honolulu Federal Savings Bank
from February 1989 to April 1992. Prior to February 1989, he was President and
Chief Executive Officer of West One Bank, Oregon. He is also a director of
Agritope.
Andrew S. Goldstein is a Senior Vice President of the Company, a
position he has held since June 1990. Prior to that time, he had been Vice
President of Product Development from December 1988, Vice President of
4
<PAGE>
Scientific Affairs from July 1987 to December 1988, and Vice President of
Research and Development from 1981 until July 1987. He also has served as
Secretary from December 1988 to February 1993 and from November 1995 to the
present and served as Treasurer until March 1991. Mr. Goldstein was Research
Associate and supervisor of the Histocompatibility Laboratory at the Oregon
Health Sciences University ("OHSU"), where he was engaged in paternity testing
and transplantation immunology, from 1974 to 1981. Mr. Goldstein received a B.S.
degree in microbiology from Cornell University in 1969 and a M.S. degree in
cytology from Fordham University in 1973.
Margaret H. Jordan has been President of The Margaret Jordan Group,
L.L.C., since October 1997. Prior to that time, she was President and Chief
Executive Officer of Dallas Medical Resource ("DMR") from February 1996. DMR is
a not-for-profit alliance of Dallas' major medical organizations that was
created to make Dallas, Texas, a regional, national and international center for
medical referrals. Ms. Jordan was Vice President of Health Care & Employee
Services at Southern California Edison Co. from December 1992 until January
1996. She had previously been a Vice President and Regional Manager with the
Kaiser Foundation Health Plan of Texas, Inc., beginning in 1986, and was an
Associate Regional Manager of Kaiser Foundation Health Plan of Georgia, Inc.,
from 1984 to 1986. Ms. Jordan received a B.S. degree in Nursing from Georgetown
University in 1964 and an M.S. degree in Public Health from the University of
California, Berkeley in 1972. She also serves on the Board of Directors of
Eckerd Corporation.
John W. Morgan has been President and Chief Executive Officer of the
Company since October 1997. Before joining the Company, he was
President-Americas of Regent Medical Products Group, Norcross, Georgia since
1996. Prior to joining Regent, he held various positions with Baxter Healthcare
Corporation, where he worked for 13 years. From 1993 to 1996, he was President,
Mid-America Regional Company of Baxter. Mr. Morgan received a B.S. degree in
Public Administration and Economics from the University of Arizona in 1982. Mr.
Morgan also serves on the board of directors of Koch Supply, Inc., a
manufacturer and distributor for the red meat and poultry industry.
Michael J. Paxton became Chairman, President and Chief Executive
Officer of O'Cedar Holdings, Inc., in January 1996. From March 1992 until
joining O'Cedar Holdings, Inc., he was President and Chief Executive Officer of
The Haagen-Dazs Company, Inc. Prior to that he was President of the Baked Goods
Division of The Pillsbury Company. Both companies are subsidiaries of Grand
Metropolitan PLC. He is also a director of Transport Corporation of America,
Inc.
Roger L. Pringle has been Chairman of the Board of the Company since
April 1990. He is President of The Pringle Company, a management consulting firm
in Portland, Oregon, which he founded in 1975. Mr. Pringle has been a director
of Agritope since 1990 and is also a director of Bank of the Northwest.
G. Patrick Sheaffer has been President of Riverview Savings Bank in
Camas, Washington, since 1979, and has served as a director of the bank since
1983. In 1993, Mr. Sheaffer also became Chairman and Chief Executive Officer of
Riverview Savings Bank and Riverview Mutual Holding Company, a bank holding
company. He has been a director of the Washington Savings League since 1980.
D I R E C T O R S' M E E T I N G S
The Board held 18 meetings during the fiscal year ended September 30,
1997. Each director attended more than 75 percent of the combined total of
meetings of the Board and of committees of the Board on which the director
served at any time during the year, except R. Douglas Norby who attended 59
percent of the combined total of meetings.
C O M M I T T E E S O F T H E B O A R D
The Board has designated an Executive Committee to assist in the
discharge of the Board's responsibilities. The Executive Committee is composed
of four directors, Roger L. Pringle, Chairman, W. Charles Armstrong, John W.
Morgan and Michael J. Paxton. The Executive Committee met two times during the
fiscal year ended
5
<PAGE>
September 30, 1997. The Executive Committee may exercise all the authority and
powers of the Board in the management of the business and affairs of the
Company, except those reserved to the Board by the Oregon Business Corporation
Act or the Company's bylaws.
The Executive Compensation Committee of the Board establishes and
reviews from time to time compensation for executive officers of the Company,
administers the Company's Incentive Stock Option Plan for Key Employees ("ISOP")
and 1991 Stock Award Plan (the "Plan"), and performs other tasks as the Board
may direct. Members of the Executive Compensation Committee are W. Charles
Armstrong, Chairman, G. Patrick Sheaffer and R. Douglas Norby, none of whom is
eligible to participate in the Company's compensation plans other than to
receive options awarded to nonemployee directors of the Company pursuant to the
Plan. See EXECUTIVE COMPENSATION - Compensation of Directors - Equity
Compensation. The Executive Compensation Committee met ten times during the
fiscal year ended September 30, 1997.
The Audit Committee of the Board reviews the performance and
independence of the Company's independent accountants. Members of the Audit
Committee are G. Patrick Sheaffer, Chairman, R. Douglas Norby, and Roger L.
Pringle. The Audit Committee met once during the fiscal year ended September 30,
1997.
The Nominating Committee of the Board solicits and recommends potential
candidates for membership on the Board of Directors. The members of the
Nominating Committee are Roger L. Pringle, Chairman, Andrew S. Goldstein,
Margaret H. Jordan and John W. Morgan. The Nominating Committee was appointed in
fiscal year 1998 and accordingly did not meet during the fiscal year ended
September 30, 1997.
The Nominating Committee will consider nominees recommended by
shareholders. Shareholders wishing to recommend a candidate for consideration by
the Nominating Committee should submit information about the candidate in
writing to the Company at the address and by the deadline stated under "Deadline
for Shareholder Proposals."
The Company's Bylaws provide that nominations for election to the Board
may be made by the Board or by any shareholder entitled to vote for the election
of directors. Notice of a shareholder's intent to make such a nomination must be
given in writing, by personal delivery or certified mail, postage prepaid, to
the Secretary of the Company and must include the name and address of the
shareholder and each proposed nominee, a representation that the shareholder is
a record holder of Common Stock and intends to appear in person or by proxy at
the shareholder meeting to nominate the person or persons specified in the
notice, a description of any arrangements or understandings pursuant to which
the nominations are to be made, the consent of each proposed nominee to serve as
a director if elected, and such other information regarding each nominee as
would be required to be included in the Company's proxy statement had the person
been nominated by the Board. Such notice, with respect to an election to be held
at an annual meeting of shareholders, must be given at least 60 days in advance
of the anniversary of the date of the previous year's annual meeting of
shareholders or, with respect to an election to be held at a special
shareholders meeting, must be given no later than the close of business on the
seventh day following the date on which notice of such meeting was first given
to shareholders.
6
<PAGE>
EXECUTIVE OFFICERS
The table below gives information about the current executive officers
of the Company.
<TABLE>
Name Age Position
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
John W. Morgan 38 President, Chief Executive Officer,
and Director
Charles E. Bergeron 52 Chief Financial Officer
J. Richard George, Ph.D. 56 Chief Scientific Officer
Andrew S. Goldstein 49 Senior Vice President of Advanced
Technology Development - Epitope
Medical Products, Secretary and
Director
</TABLE>
Officers of the Company hold office at the discretion of the Board.
For biographical summaries of Mr. Morgan and Mr. Goldstein, see
ELECTION OF DIRECTORS.
Charles E. Bergeron has been Chief Financial Officer of the Company
since January 1998. He has served as Chief Financial Officer - Epitope Medical
Products since September 1997, and has been Vice President of Operations -
Epitope Medical Products since July 1995. Mr. Bergeron joined the Company in
August 1993 as President and Chief Executive Officer, Agrimax Floral Products,
Inc., then a wholly-owned subsidiary. From 1978 to 1992, Mr. Bergeron was Senior
Vice President - Finance of Freightliner Corporation, a Portland, Oregon, truck
manufacturer. He holds a B.S. degree in Management Engineering and an M.S.
degree in Management Science from Rensselaer Polytechnic Institute and a Masters
of Business Administration degree from Columbia University.
J. Richard George, Ph.D., has been Chief Scientific Officer of Epitope
since January 1998. He joined the Company as Vice President of Scientific
Affairs - Epitope Medical Products in March 1995. A career scientist, Dr. George
previously served the Centers for Disease Control and Prevention ("CDC"),
Atlanta, Georgia, which he joined in 1960. He held a series of management and
technical positions at the CDC, becoming Chief, Developmental Technology,
Laboratory Investigations Branch, Division of HIV/AIDS in 1988. He holds B.S.
and M.S. degrees from Georgia State University and a Ph.D. in microbiology from
the University of Georgia.
7
<PAGE>
EXECUTIVE COMPENSATION
S U M M A R Y C O M P E N S A T I O N T A B L E
The following table summarizes the compensation of all individuals who
served as Chief Executive Officer during fiscal year 1997 and the four other
most highly compensated individuals who were serving as executive officers of
the Company at September 30, 1997.
<TABLE>
Long-Term
Compensation
Annual Compensation Awards
------------------- ------------
Securities
Underlying All Other
Name and Principal Position Year Salary Bonus Options(#)(1) Compensation(2)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Adolph J. Ferro, Ph.D. (3) 1997 $ 240,000 $ - 296,204(4) $440,773(5)
President and Chief Executive 1996 214,183 50,000 - 4,237
Officer 1995 200,769 113,245 74,000 5,390
W. Charles Armstrong (3) 1997 - - 30,000(4) -
Interim President and Chief 1996 - - - -
Executive Officer 1995 - - - -
Joseph A. Bouckaert 1997 160,000 - 50,000(4) 4,000
President and Chief Executive 1996 160,000 33,600 50,000 -
Officer - Vinifera, Inc. 1995 115,592 40,000 - -
John H. Fitchen, M.D. 1997 178,740 - 88,800(4) 4,327
Senior Vice President and Chief 1996 147,548 37,200 - 3,540
Operating Officer - Epitope 1995 148,606 - 43,000 3,578
Medical Products
Andrew S. Goldstein 1997 149,163 - 94,000(4) 3,750
Senior Vice President of 1996 128,510 30,000 - 3,206
Advanced Technology 1995 126,923 - 34,000 3,182
Development - Epitope Medical
Products
Gilbert N. Miller 1997 165,000 - 85,104(4) 4,125
Executive Vice President and 1996 128,510 33,075 - 3,206
Chief Financial Officer 1995 130,962 - 34,000 5,021
</TABLE>
(1) Represents the number of shares for which options were awarded. No
stock appreciation rights ("SARs") have been granted to any named
executive officer during the years indicated.
(2) Includes amounts contributed to the Company's 401(k) Profit Sharing
Plan as employer matching contributions in the form of Common Stock.
(3) Dr. Ferro served as President and Chief Executive Officer of the
Company through May 1997, at which time Mr. Armstrong was appointed to
this position on an interim basis and Dr. Ferro began serving as
President and Chief Executive Officer of Agritope on a full-time basis.
8
<PAGE>
(4) Option grants for fiscal year 1997 consist solely of replacement
options granted to effect the repricing of outstanding options, except
for an option to purchase 40,000 shares granted to Dr. Ferro to replace
an expiring option for the same number of shares and an option to
purchase 15,0000 shares granted to Mr.
Armstrong.
(5) Includes $436,764 payable in installments over 22 months to Dr. Ferro
pursuant to his employment agreement with the Company, in connection
with the change of his position from President and Chief Executive
Officer of Epitope to full-time President and Chief Executive Officer
of Agritope, Inc. in May 1997.
O P T I O N G R A N T S I N L A S T F I S C A L Y E A R
<TABLE>
Individual Grants (1)
Percent of Potential Realizable Value at Assumed
Total Annual Rates of Stock Price
Number of Options Market Appreciation for Option Term (2)
Securities Granted to Exercise Price -------------------------------------
Underlying Employees Price on Date
Options in Fiscal Per of
Name Granted Year Share Grant 0% 5% 10%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Adolph J. Ferro, Ph.D.(3) 296,204 12.0% $ 7.25 7.25 $ - $1,350,394 $3,422,637
W. Charles Armstrong 15,000 .6% 5.72 7.63 28,650 100,620 211,050
15,000 .6% 7.25 7.25 - 68,385 173,325
Joseph A. Bouckaert 50,000 2.0% 7.25 7.25 - 227,950 577,750
John H. Fitchen, M.D. 88,800 3.6% 7.25 7.25 - 404,839 1,026,084
Andrew S. Goldstein 94,000 3.8% 7.25 7.25 - 428,546 1,086,170
Gilbert N. Miller 85,104 3.4% 7.25 7.25 - 387,989 983,376
</TABLE>
(1) Option grants for fiscal year 1997 consist solely of replacement
options granted to effect the repricing of outstanding options, except
for an option to purchase 40,000 shares granted to Dr. Ferro to replace
an expiring option for the same number of shares and an option to
purchase 15,000 shares granted to Mr. Armstrong. Options are
nonqualified options with an unlimited term, except that the options
granted to Dr. Ferro and Mr. Armstrong have terms of ten years. The
holder's right to exercise the options will terminate immediately upon
the termination of employment for cause, will expire five years after
retirement, and will expire one year after death, disability, or
ceasing to be an active employee of the Company, Agritope, Inc., or its
subsidiaries for any other reason. Subject to certain conditions, the
exercise price of the options may be paid by delivery of previously
acquired shares of Common Stock. No SARs were granted during fiscal
1997.
(2) The amounts shown are hypothetical gains based on the indicated assumed
rates of appreciation of the Common Stock compounded annually for a
ten-year period. Although, as described in more detail in note (1)
above, the options shown in the table have either a ten-year term or an
unlimited term subject to expiration at specified times following
termination of employment, a ten-year period has been used in
calculating thc amounts shown as an approximation of the expected
average time during which the options will be outstanding. There can be
no assurance that the Common Stock will appreciate at any particular
rate or at all in future years.
(3) Includes an option for 40,000 shares granted to Dr. Ferro on June 16,
1997, to replace an expiring option for the same number of shares. The
initial exercise price per share was $7.75 and the market price on the
date of grant was $7.63 per share. The option was repriced on July 26,
1997, together with other options held by Dr. Ferro to purchase 256,204
shares of Common Stock.
9
<PAGE>
F I S C A L Y E A R - E N D O P T I O N V A L U E S (1)
<TABLE>
Number of Securities Underlying Value of Unexercised In-the-
Unexercised Options at Fiscal Money Options at Fiscal Year-
Year-End End (2)
------------------------------------------- -------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adolph J. Ferro, Ph. D. 531,536 24,668 $ 693,044 $ 19,981
W. Charles Armstrong 75,000 5,000 127,468 4,050
Joseph A. Bouckaert 25,000 25,000 20,250 20,250
John H. Fitchen, M.D. 174,466 14,334 228,817 11,611
Andrew S. Goldstein 182,666 11,334 235,459 9,181
Gilbert N. Miller 197,770 11,334 301,694 9,181
</TABLE>
(1) The named executive officers neither exercised any options or SARs
during fiscal 1997 nor held any SARs at September 30, 1997.
(2) In-the-money stock options are options for which the exercise price is
less than the market value of the underlying stock on a particular
date. The values shown in the table are based on the difference between
$8.06, which was the average of the high and low sales prices of the
Common Stock as quoted on The Nasdaq Stock Market on September 30,
1997, and the applicable exercise price.
10
<PAGE>
T E N - Y E A R O P T I O N R E P R I C I N G S
On July 26, 1997, the Board and its Executive Compensation Committee
authorized the repricing of all outstanding options held by directors or
employees that were then out-of-the-money. The table below sets forth
information about the repricing, which was the only repricing of options held by
directors or executive officers during the last ten completed fiscal years. No
SARs have been issued or repriced by the Company.
<TABLE>
Market Price of
Number of Shares Common Stock Exercise Price at New
Underlying Options at Time of Time of Repricing Exercise
Name Repriced Repricing (1) Price
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adolph J. Ferro, Ph. D. 60,000 $ 7.25 $ 7.3750 $ 7.25
82,204 7.25 13.6875 7.25
74,000 7.25 14.9375 7.25
40,000 7.25 7.7500 7.25
W. Charles Armstrong 15,000 7.25 18.3750 7.25
Joseph A. Bouckaert 50,000 7.25 13.5000 7.25
John H. Fitchen, M.D. 45,800 7.25 8.1875 7.25
43,000 7.25 14.9375 7.25
Andrew S. Goldstein 60,000 7.25 7.3750 7.25
34,000 7.25 14.9375 7.25
Gilbert N. Miller 10,000 7.25 7.3750 7.25
41,104 7.25 13.6875 7.25
34,000 7.25 14.9375 7.25
</TABLE>
(1) All options were repriced on July 26, 1997. The original options had an
unlimited term, but the holder's right to exercise the options
terminated immediately upon the termination of employment for cause,
five years after retirement, or one year after death, disability, or
ceasing to be an active employee of the Company, Agritope, Inc., or its
subsidiaries for any other reason.
E M P L O Y M E N T A G R E E M E N T S
Pursuant to written employment agreements with the Company, all current
executive officers are entitled to receive one year of salary in the event of
termination without cause (two years in the case of Mr. Goldstein for
termination in connection with a change in control of the Company). The
agreements with Messrs. Morgan and Bergeron permit them to treat a change in
control and certain other events as a termination without cause. The agreements
with Messrs. Morgan, Bergeron and Goldstein in each case prohibit the officer
from competing with the Company for one year after termination unless the
officer elects to waive the right to amounts otherwise payable. The agreement
with Dr. George makes any post-termination payment contingent on his refraining
from competing with the Company. The agreements do not expire by their terms and
are terminable by the Company with cause (upon 90 days' notice, in the case of
Mr. Goldstein) or, subject to payment of the salary amounts described above,
without cause.
Mr. Morgan relocated from the Atlanta, Georgia area when he joined the
Company in fiscal year 1998. The Company has agreed to reimburse Mr. Morgan for
relocation expenses, and to pay up to an additional $50,000 to cover realtor
fees, closing costs, furniture storage costs and other miscellaneous expenses
relating to his relocation.
11
<PAGE>
Mr. Morgan has been granted an option to purchase 350,000 shares of
Common Stock, one-third of which vests after one year and the remainder of which
vests in monthly installments over the following 24 months. Vesting is
accelerated in case of a change in control of the Company and continues for one
year after termination of Mr. Morgan's employment without cause. Mr. Morgan may
exercise the option prior to vesting under an agreement giving the Company an
option upon termination of Mr. Morgan's employment to repurchase any shares for
which the option has been exercised but as to which the option is not vested at
the termination date.
C O M P E N S A T I O N O F D I R E C T O R S
Under the Company's 1991 Stock Award Plan ("Plan"), nonemployee
directors of the Company are eligible to receive nonqualified stock options.
Such options have been granted to nonemployee directors on the basis described
below. The Board may decide to grant options on other terms and in other amounts
at any time.
Initial Options. Each person who becomes a nonemployee director has
been granted a stock option to purchase 50,000 shares of Common Stock (an
"Initial Option"). A newly-elected Chairman of the Board has been entitled to
receive an Initial Option to purchase an additional 25,000 shares (75,000 shares
if not previously a nonemployee director). Until December 1994, Initial Options
were granted at an exercise price equal to 75 percent of the fair market value
of a share of Common Stock on the date of grant; beginning in December 1994,
Initial Options have been granted at an exercise price equal to the fair market
value of a share on the date of grant minus the lesser of (a) $2.00 or (b) 25
percent of such fair market value. Each Initial Option becomes exercisable in
annual installments based upon continued service as a director and expires at
the end of five years following the director's retirement or one year following
the director's death, disability or cessation of service as a director for any
other reason. An Initial Option will generally become fully exercisable by the
date of the fourth annual meeting of shareholders through which the director has
served on the Board. Initial Options become exercisable in full immediately upon
the occurrence of a change in control of the Company. A change in control of the
Company would occur on the happening of such events as the beneficial ownership
by a person or group of 30 percent or more of the outstanding common stock,
certain changes in Board membership affecting a majority of positions, certain
mergers or consolidations, a sale or other transfer of all or substantially all
the Company's assets, or approval by the shareholders of a plan of liquidation
or dissolution of the Company, as well as any change in control required to be
reported by the proxy disclosure rules of the Commission.
Payment of the exercise price may be made in cash or by delivery of
previously acquired shares of Common Stock having a fair market value equal to
the aggregate exercise price. To the extent that payment is made in previously
acquired shares, the director is automatically granted a replacement ("reload")
option for a number of shares equal to the number delivered upon exercise with
an exercise price equal to the fair market value of a share of Common Stock on
the date of exercise. Reload options become exercisable in full six months after
the grant date.
Renewal Options. Additional nonqualified stock options have been
granted to each nonemployee director to purchase 15,000 shares of Common Stock
("Renewal Options") as of the December 15 prior to the annual meeting of
shareholders at which the options most recently granted to such nonemployee
director fully vest. Renewal Options vest in three equal annual installments
beginning with the second annual meeting of shareholders following the date of
grant, subject to acceleration of vesting upon the occurrence of a change in
control of the Company. The other terms of Renewal Options are comparable to
those of Initial Options, except that Renewal Options do not provide for reload
options.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The following report of the Executive Compensation Committee of the
Board (the "Committee") shall not be deemed to be incorporated by reference into
any previous filing by the Company under either the Securities Act of 1933
("Securities Act") or the Securities Exchange Act of 1934 ("Exchange Act") that
incorporates future Securities Act or Exchange Act filings in whole or in part
by reference.
12
<PAGE>
GENERAL. The Committee, which is composed of independent, nonemployee
directors, is responsible for establishing and administering the Company's
policies that govern executive compensation and benefit practices. The Committee
evaluates the performance of the executive officers and determines their salary,
merit cash bonus and related benefits. The Committee also grants certain awards
under the Company's stock option plans.
COMPENSATION PHILOSOPHY. The Company's executive compensation programs
are designed to (i) align the interests of executive management with the
long-term interests of the shareholders, (ii) motivate Company executives to
achieve the strategic business goals of the Company and recognize their
individual contributions, and (iii) provide compensation opportunities which are
competitive with those offered by other national biotechnology companies similar
in size and performance to the Company. In furtherance of these goals, the
components of executive compensation include base salary, merit cash bonuses,
stock option grants and other benefits and are linked to individual performance.
BASE SALARY. At least annually, the Committee sets the salary for all
executive officers. The Committee receives and considers management
recommendations concerning salary adjustments for executive officers, as well as
compensation data regarding other national biotechnology companies. The
Committee decided to increase the salaries of executive officers, including the
chief executive officer, for fiscal year 1997 based on events occurring at the
time that indicated a substantial improvement in the Company's business
prospects. These events included initial implementation of the targeted stock
proposal and the plan to acquire Andrew and Williamson Sales, Co.
MERIT CASH BONUSES. No merit cash bonuses were awarded during fiscal
year 1997.
STOCK OPTION GRANTS. As previously noted, an important goal of the
Company's compensation program is to align the interests of the executive
officers and other key employees with the long-term interests of the Company's
shareholders. In furtherance of this goal, the Board of Directors adopted the
1991 Stock Award Plan pursuant to which the Company may grant stock-based awards
to directors, officers, and employees of, and consultants and advisers to, the
Company. The Plan was approved by the shareholders of the Company.
During the Company's fiscal year ended September 30, 1997, the
Committee authorized the repricing of outstanding options held by employees, as
described below. The Committee authorized the grant of options for 40,000 shares
of Common Stock to Dr. Ferro to replace options that were expiring, and options
for 15,000 shares of Common Stock to Mr. Armstrong, who was then serving as
interim President and Chief Executive Officer. No other options were granted
under the Plan to executive officers during the fiscal year. In general, the
size of individual option grants is determined by the Committee based upon the
executive's duties and the levels of option grants for executives with
comparable positions at other biotechnology companies. The Committee does not
consider the amount and terms of options already held by executive officers in
making new grants.
OTHER COMPENSATION VEHICLES. The Company also has a 401(k) Profit
Sharing Plan (the "401(k) Plan") which allows participants to defer compensation
pursuant to Section 401(k) of the Internal Revenue Code. All employees of the
Company, including executives, are eligible to participate in the 401(k) Plan
provided certain qualifications are met. In addition to amounts which
participants may elect to contribute to the 401(k) Plan, the Company makes
matching contributions to the 401(k) Plan in Common Stock of the Company, which
are allocated to all participants. Payments of benefits accrued for 401(k) Plan
participants will be made upon retirement or upon termination of employment
prior to retirement provided certain conditions have been met by the employee
prior to termination.
OPTION REPRICING. As noted above, the Committee authorized the
repricing of options held by all employees, including executive officers, in
July 1997. The Committee believed that, as a result of a decline in the price of
the Common Stock, outstanding options were ineffective to serve the purposes for
which they were granted under the Plan, namely to align the interests of option
holders with the long-term interests of the Company's
13
<PAGE>
shareholders. The Committee authorized the repricing of outstanding employee
options using a price equal to fair market value, in order to restore the
utility of the options as effective incentives.
EXECUTIVE COMPENSATION COMMITTEE:
W. Charles Armstrong, Chairman
R. Douglas Norby
G. Patrick Sheaffer
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
W. Charles Armstrong served as chairman and a member of the Executive
Compensation Committee through May 1997. Beginning in June 1997, Mr. Armstrong
served as interim President and Chief Executive Officer of the Company. When
John W. Morgan joined the Company as President and Chief Executive Officer in
October 1997, Mr. Armstrong was reappointed as chairman and a member of the
Committee.
R. Douglas Norby and G. Patrick Sheaffer served as members of the
Committee throughout fiscal year 1997.
14
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total returns to investors
in the Company's Common Stock, the Standard & Poors 500 Stock Index, and the
Russell 2000 Index for the period from October 1, 1992, through September 30,
1997. The graph assumes that $100 was invested on September 30, 1992, in the
Company's Common Stock and in each of the above-mentioned indices and that all
dividends were reinvested. The Russell 2000 Index is an index of companies with
market capitalizations similar to the Company. It has been selected because the
Company has been unable to identify a peer group of companies for comparison. No
single public or private company has a comparable mix of technologies under
development or products which serve the same markets as the Company. The
Company's management believes that an index of companies with similar market
capitalizations provides a reasonable basis for comparing total shareholder
returns. Shareholders are cautioned that the graph shows the returns to
investors only as of the dates noted and may not be representative of the
returns for any other past or future period.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG EPITOPE INC., THE S & P 500 INDEX AND THE RUSSELL 2000 INDEX
[GRAPHICAL CHART CONTAINING THE FOLLOWING INFORMATION:
<TABLE>
DATE EPITOPE, INC. S&P 500 RUSSELL 2000
- ---- -------------- ------- ------------
<S> <C> <C> <C>
9/92 $ 100 $ 100 $ 100
9/93 129 113 133
9/94 120 117 137
9/95 84 152 169
9/96 83 183 191
9/97 50 254 254]
</TABLE>
15
<PAGE>
CERTAIN TRANSACTIONS
In connection with the December 1987 merger of Agricultural Genetic
Systems, Inc. ("AGS"), with and into Agritope, Dr. Ferro, as an executive
officer and principal shareholder of AGS, was granted a royalty equal to 4
percent of net sales of products resulting from the technology transferred to
Agritope pursuant to the merger; royalties with respect to a particular product
were to be paid for a period equal to the life of the patent on the product or
an equivalent period if a patent is not issued. On November 11, 1996, Dr. Ferro
agreed to accept a one-time payment of $590,000 in lieu of the royalties that
would otherwise be due him.
ANNUAL REPORT
The Company's Annual Report to Shareholders for the fiscal year ended
September 30, 1997, accompanies this proxy statement. On written request, the
Company will provide, without charge, a copy of its Annual Report on Form 10-K
for the fiscal year ended September 30, 1997, filed with the Commission
(including a list briefly describing the exhibits thereto), to any record holder
or beneficial owner of the Company's Common Stock on December 22, 1997, the
record date for the Annual Meeting, or to any person who subsequently becomes
such a record holder or beneficial owner. Requests should be directed to the
attention of the Secretary of the Company at the address of the Company set
forth in the Notice of Annual Meeting of Shareholders immediately preceding this
proxy statement.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, independent public accountants, examined the
financial statements of the Company for fiscal 1997. No change in independent
public accountants is contemplated for fiscal 1998. The Company expects
representatives of Price Waterhouse LLP to be present at the Annual Meeting and
to be available to respond to appropriate questions from shareholders. The
accountants will have the opportunity to make a statement at the meeting if they
desire to do so.
DEADLINE FOR SHAREHOLDER PROPOSALS
Shareholders of the Company may submit proposals for inclusion in the
proxy material for the Company's 1999 Annual Meeting of Shareholders. Any such
proposals must meet the shareholder eligibility and other requirements imposed
by rules issued by the Commission and must be received by the Company at 8505
S.W. Creekside Place, Beaverton, Oregon 97008, Attention: Secretary, not later
than September 18, 1998.
BY ORDER OF THE BOARD OF DIRECTORS
Andrew S. Goldstein
Secretary
January 16, 1998
16
<PAGE>
PROXY
EPITOPE, INC.
1998 ANNUAL MEETING OF SHAREHOLDERS
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John W. Morgan and Charles E. Bergeron, and each
of them, proxies with full power of substitution, to vote all of the shares
which the undersigned is entitled to vote at the 1998 Annual Meeting of
Shareholders of Epitope, Inc. (the "Company"), to be held on Tuesday, February
17, 1998, and at any further adjournment or adjournments thereof, with all the
powers the undersigned would possess if personally present, with respect to the
matters listed on the reverse side.
THE SHARES REPRESENTED BY THIS PROXY, IF PROPERLY EXECUTED, WILL BE VOTED AS
SPECIFIED ON THE REVERSE SIDE OR, IF NO SPECIFICATION IS MADE, WILL BE VOTED FOR
THE ELECTION OF THE NOMINEES LISTED ON THE REVERSE SIDE AS DIRECTORS. If any
other business properly comes before the meeting, the proxies named above will
have discretionary authority to vote thereon in accordance with their best
judgment.
PLEASE MARK, DATE, SIGN, AND RETURN THE PROXY CARD PROMPTLY.
(Continued and to be signed on reverse side.)
FOLD AND DETACH HERE
EPITOPE, INC.
1998 Annual Meeting of Shareholders
Tuesday, February 17, 1998
<PAGE>
Please mark your votes as indicated in this example [X]
1. Election of Directors FOR WITHHOLD
Class I (Term Expiring 2000) [ ] [ ]
John W. Morgan
Class III (Term Expiring 2001)
Margaret H. Jordan
Michael J. Paxton
(Instruction: To withhold authority to vote for any individual nominee, mark FOR
and strike a line through the nominee's name in the list above. To withhold
authority to vote for all nominees, mark WITHHOLD.)
Signature(s) ------------------------------------ Dated: -----------------, 1998
Please date and sign exactly as your name appears on this Proxy. If signing for
estates, trusts, partnerships or corporations, title or capacity should be
stated. If shares are held jointly, each holder should sign.
FOLD AND DETACH HERE
EPITOPE, INC.
1998 ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, FEBRUARY 17, 1998