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.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
1) Amount Previously Paid:
- --------------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
3) Filing Party:
- --------------------------------------------------------------------------------
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
[Graphic: Epitope logo]
EPITOPE
8505 S.W. Creekside Place
Beaverton, Oregon 97008
January 11, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of
Shareholders to be held on TUESDAY, FEBRUARY 16, 1999, 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 three Class II
directors to serve on the Board of Directors until the Annual Meeting of
Shareholders in the year 2002; 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,
/s/ John W. Morgan
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 16, 1999
--------------
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 16, 1999, at 9:00 a.m. to elect three Class II directors, and to
consider such other business as may properly come before the meeting or any
adjournments thereof. Additional information relevant to the meeting is included
in the proxy statement accompanying this Notice.
Only holders of Common Stock of record at the close of business on
December 15, 1998, 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 11, 1999
Beaverton, Oregon
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
<PAGE>
EPITOPE, INC.
8505 S.W. Creekside Place
Beaverton, Oregon 97008
-----------
PROXY STATEMENT
This proxy statement is being mailed on or about January 11, 1999, 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 16, 1999, 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 expenses 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 15, 1998, the record date for determining shareholders
entitled to vote at the Annual Meeting, the Company had outstanding and entitled
to vote at the meeting 13,609,961 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 28, 1998,
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 as a group.
<TABLE>
Amount and Nature of Percent
Beneficial Owner Beneficial Ownership (1) (2) of Class
- -------------------------------------------------------------- ------------------------------------------- ------------
<S> <C> <C>
Putnam Investments, Inc., One Post Office Square, Boston, MA 02109 912,700(3) 6.7%
W. Charles Armstrong 89,540(4) *
Charles E. Bergeron 146,985(4) 1.1%
Edward V. Collom, Jr. 440 *
J. Richard George, Ph.D. 64,365 *
Andrew S. Goldstein 447,509 3.2%
Margaret H. Jordan 51,000 *
John W. Morgan 165,215(4)(5) 1.2%
Michael J. Paxton 72,052 *
Roger L. Pringle 152,177(4) 1.1%
G. Patrick Sheaffer 95,000 *
Robert J. Zollars 20,000 *
All directors and executive officers as a group (11 persons) 1,304,283(4) 8.9%
- ---------
*Less than 1%
</TABLE>
(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 28, 1998, as follows: Mr. Armstrong, 85,000 shares; Mr.
Bergeron, 144,832 shares; Dr. George, 63,332 shares;
2
<PAGE>
Mr. Goldstein, 200,250 shares; Ms. Jordan, 50,000 shares; Mr. Morgan,
155,546 shares; Mr. Paxton, 70,552 shares; Mr. Pringle, 115,552 shares;
Mr. Sheaffer, 82,500 shares; Mr. Zollars, 20,000 shares; and all
directors and executive officers as a group, 987,564 shares.
(3) Putnam Investments, Inc., a wholly owned subsidiary of Marsh & McLennan
Companies, Inc., filed a Schedule 13G report on January 20, 1998,
reporting that it had shared voting power as to 20,200 shares and
shared dispositive power over 892,500 shares as a result of its
ownership of two registered investment advisers.
(4) Includes shares as to which the individual has shared voting and
dispositive power as follows: Mr. Armstrong, 165 shares; Mr. Bergeron,
2,153 shares; Mr. Morgan, 5,000 shares; Mr. Pringle, 1,500 shares; and
all directors and executive officers as a group, 8,818 shares.
(5) Does not include 33,554 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 1998 fiscal
year, all Reporting Persons complied with all applicable filing requirements,
except that Roger L. Pringle, Chairman of the Board of the Company, filed one
report reporting one transaction one month late due to a misunderstanding of the
applicable transaction date.
ELECTION OF DIRECTORS
At the Annual Meeting, shareholders will vote on the election of three
Class II directors. The Nominating Committee of the Board of Directors has
nominated Andrew S. Goldstein, G. Patrick Sheaffer, and Robert J. Zollars for
election as Class II directors, for terms expiring at the Annual Meeting of
Shareholders in 2002. The nominees for election as directors are presently
members of the Board; Mr. Zollars was appointed to the Board in February 1998 to
fill the vacancy occasioned by the resignation of R. Douglas Norby.
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. Abstentions and
shares as to which a broker or other nominee has indicated on a duly executed
and returned proxy or otherwise advised the Company that it lacks voting
authority will have no effect on the required vote.
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 in 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. The Nominating Committee of the Board has not yet
identified a candidate to fill a vacant position in Class III of the Board of
Directors created by the resignation of Richard K. Donahue in February 1998.
Proxies may only be voted for Class II directors at the Annual Meeting. The
Nominating Committee intends to
3
<PAGE>
continue to seek a qualified individual to fill the remaining vacancy prior to
the Annual Meeting of Shareholders in 2000.
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
- -------------------------------------------------------------------------------------------------------------------
Class I (Directors Whose Terms of Office Expire in 2000):
<S> <C> <C> <C>
W. Charles Armstrong Former Chairman and Chief Executive 54 1989
Officer of Bank of America Oregon
John W. Morgan President and Chief Executive 39 1998
Officer of the Company
Roger L. Pringle President of The Pringle Company, 58 1989
a management consulting firm,
Portland, Oregon
Class II (Nominees for Terms of Office to Expire in 2002):
Andrew S. Goldstein Senior Vice President of Advanced 50 1981
Technology Development of the
Company
G. Patrick Sheaffer Chairman, President and Chief 59 1983
Executive Officer of Riverview
Savings Bank, Camas, Washington
Robert J. Zollars Executive Vice President and Group 41 1998
President of Cardinal Health, Inc., a
pharmaceutical service provider,
Dublin, Ohio
Class III (Directors Whose Terms of Office Expire in 2001):
Margaret H. Jordan President of The Margaret Jordan 56 1995
Group, L.L.C., a management consulting
firm for the health care organization
industry, Addison, Texas
Michael J. Paxton President of First Alert, a manufacturer 52 1995
and distributor of residential safety
equipment, Aurora, Illinois
</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, Inc., which was a subsidiary of the Company until its spin-off in
December 1997.
4
<PAGE>
Andrew S. Goldstein is 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 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 President of First Alert, a division of
Sunbeam Corporation, in August 1998. He was previously Chairman, President and
Chief Executive Officer of O'Cedar Holdings, Inc., beginning 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 is also a director of
Agritope, Inc., and 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.
Robert J. Zollars has been Executive Vice President and Group President
of Cardinal Health, Inc., Dublin, Ohio, since January 1997. Prior to that, he
served as Group Vice President of Allegiance Corporation since October 1996 and
was previously a corporate officer of Baxter Healthcare, Inc., most recently as
President, U.S. Distribution. Mr. Zollars has nearly 20 years of health care
industry experience.
D I R E C T O R S' M E E T I N G S
The Board held 12 meetings during the fiscal year ended September 30,
1998. Each of the directors listed above attended more than 75 percent of the
combined total of meetings of the Board and of committees of the Board
5
<PAGE>
on which the director served during the year, except Michael J. Paxton and
Robert J. Zollars, who attended 64 percent and 71 percent, respectively, 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 twice during the
fiscal year ended September 30, 1998. 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 Robert J. Zollars, 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 five times during the
fiscal year ended September 30, 1998.
The Audit Committee of the Board reviews the performance and
independence of the Company's outside auditors. Members of the Audit Committee
are G. Patrick Sheaffer, Chairman, and Roger L. Pringle. The Audit Committee met
once during fiscal year 1998 and recommended to the Board of Directors that no
change be made with regard to the outside auditors, and that no significant
changes in the Company's accounting practices were necessary.
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 met four times
during fiscal year 1998, recommending Robert J. Zollars for election to the
Board of Directors and reporting on progress in selecting candidates to fill a
vacancy on the Board.
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 39 President, Chief Executive
Officer, and Director
Edward V. Collom, Jr. 51 Vice President of Sales
and Marketing
Charles E. Bergeron 53 Chief Financial Officer
Andrew S. Goldstein 50 Senior Vice President of
Advanced Technology
Development, Secretary
and Director
J. Richard George, Ph.D. 57 Chief Scientific Officer
</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.
Edward V. Collom, Jr., has been Vice President of Sales and Marketing
since March 1998. Prior to accepting employment with the Company, Mr. Collom was
Vice President, Business Development with responsibility for sales and marketing
of forensic drug testing services and drugs-of-abuse and on-site drug screening
devices at PharmChem Laboratories, Menlo Park, California, since March 1996.
From 1993 to February 1996, Mr. Collom was the Business Unit Director for
Microgenics/Boehringer Mannheim's Immunoassay Unit. Mr. Collom has also worked
with Specialty Laboratories, Johnson & Johnson - Ortho Diagnostics and DuPont
Medical Products, where he gained experience with HIV, hepatitis, and Western
blot products.
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, 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 the
Company 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 1998 and the four other
most highly compensated individuals who were serving as executive officers of
the Company at September 30, 1998.
<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>
John W. Morgan (3) 1998 $238,404 - 350,000 $61,071(4)
President and Chief
Executive Officer
W. Charles Armstrong (3) 1997 - - 30,000(5) -
Interim President and
Chief Executive Officer
Edward V. Collom, Jr. (6) 1998 77,000 - 75,000 39,557(4)
Vice President of Sales
and Marketing
Charles E. Bergeron 1998 150,129 - 30,000 -
Chief Financial Officer 1997 129,567 - 134,000(5) -
1996 118,990 $15,000 - -
Andrew S. Goldstein 1998 150,000 - 25,000 3,653
Senior Vice President of 1997 149,163 - 94,000(5) 3,750
Advanced Technology 1996 128,510 30,000 - 3,206
Development
J. Richard George, Ph.D. 1998 130,000 - 30,000 2,406
Chief Scientific Officer 1997 128,654 - 70,000(5) 3,250
1996 95,192 - - 2,329
</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 presented.
(2) Except as otherwise noted in (4) below, represents amounts contributed
to the Company's 401(k) Profit Sharing Plan as employer matching
contributions in the form of Common Stock.
(3) Mr. Morgan joined the Company in October 1997. Mr. Armstrong served as
Interim President and Chief Executive Officer of the Company until
October 6, 1997, but did not receive any compensation as an officer of
the Company during fiscal 1998.
8
<PAGE>
(4) Includes $57,488 and $37,291 in relocation expenses for Mr. Morgan and
Mr. Collom, respectively, reimbursed by the Company, including moving
costs, realtor fees, closing costs, furniture storage costs, and other
miscellaneous expenses.
(5) Option grants during fiscal year 1997 consisted of replacement options
granted to effect the repricing of outstanding options, except for an
option to purchase 15,000 shares granted to Mr. Armstrong.
(6) Mr. Collom joined the Company in March 1998.
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)
-------------------------------------------------------------
Potential Realizable Value at Assumed
Annual Rates of Stock Price
Appreciation for Option Term (2)
Percent of -------------------------------------
Total
Number of Options Market
Securities Granted to Price
Underlying Employees Exercise on Date Expir-
Options in Fiscal Price Per of atio
Name Granted Year Share Grant Date 0% 5% 10%
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John W. Morgan 350,000 (3) 11.04% $3.16 $4.72 10/6/07 $546,560 $1,585,080 $3,178,630
Edward V. Collom, Jr. 75,000 2.37% 6.31 6.31 3/9/08 - 297,713 754,538
Charles E. Bergeron 30,000 (3) .95% 4.72 4.72 1/1/08 - 89,016 225,606
Andrew S. Goldstein 25,000 .79% 6.00 6.00 2/9/08 - 94,325 239,050
J. Richard George 30,000 (3) .95% 4.72 4.72 1/1/08 - 89,016 225,606
</TABLE>
(1) Options shown are nonqualified options with terms of ten years. Except
as otherwise noted in (3) below, options vest as to one-fourth one year
after the date of grant, with the remaining three-fourths vesting in
monthly installments over the following 36 months. Vesting ceases 90
days following termination of employment and is accelerated in case of
a change in control of the Company. 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 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
1998.
(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. There can be no assurance that the Common Stock will
appreciate at any particular rate or at all in future years.
(3) Vests as to one-third one year after the date of grant, with the
remaining two-thirds vesting in monthly installments over the following
24 months. Vesting continues for one year after termination of
employment without cause. Mr. Morgan may exercise his 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.
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>
John W. Morgan - 350,000 - $229,355
Edward V. Collom, Jr. - 75,000 - -
Charles E. Bergeron 134,000 30,000 - -
Andrew S. Goldstein 194,000 25,000 - -
J. Richard George 47,500 52,500 - -
</TABLE>
(1) The named executive officers neither exercised any options or SARs
during fiscal 1998 nor held any SARs at September 30, 1998.
(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
$3.81, 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,
1998, and the applicable exercise price.
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, Bergeron, and Collom 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
agreements with each of Mr. Collom and Dr. George make 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.
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, 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). Initial Options are 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
10
<PAGE>
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.
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 plan.
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, based on management's recommendation, did not increase executive
salaries for fiscal year 1998 other than in connection with promotions to a new
position. This action was consistent with management's decision not to increase
wages or salaries for the rest of the Company's employees in fiscal 1998, except
in the case of promotion, in order to help improve the Company's financial
position. Executives promoted during fiscal 1998 were Charles E. Bergeron and J.
Richard George, Ph.D.
The Committee established the salary level and overall compensation
package for John W. Morgan, the Company's new Chief Executive Officer, based on
its determination of the competitive requirements to attract a suitable
candidate with the abilities necessary to assist the Company in achieving its
strategic and financial goals.
11
<PAGE>
MERIT CASH BONUSES. No merit cash bonuses were awarded during fiscal
year 1998.
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.
In general, the size of individual option grants is determined by the
Committee based on 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
individual executive officers in making new grants. During fiscal year 1998,
additional stock options were granted to two executives who were promoted to new
positions and to Edward V. Collom, Jr., who was hired as the Company's Vice
President of Sales and Marketing. Stock options were also awarded to Andrew S.
Goldstein as part of the Company's practice of issuing additional options every
three years. John W. Morgan received stock options as one element of an overall
compensation package that the Committee determined was necessary to attract an
executive of the caliber required for the chief executive officer position at
the Company.
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.
EXECUTIVE COMPENSATION COMMITTEE:
W. Charles Armstrong, Chairman
G. Patrick Sheaffer
Robert J. Zollars
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
W. Charles Armstrong, G. Patrick Sheaffer, Robert J. Zollars, and R.
Douglas Norby served as members of the Compensation Committee during fiscal year
1998. Mr. Armstrong served as interim President and Chief Executive Officer of
the Company from May 1997 to October 6, 1997. He was appointed as chairman and a
member of the Committee after John W. Morgan joined the Company as President and
Chief Executive Officer in October 1997.
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, 1993, through September 30,
1998. The graph assumes that $100 was invested on September 30, 1993, 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.
12
<PAGE>
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>
9/93 $ 100 $ 100 $ 100
9/94 92 104 103
9/95 65 135 127
9/96 65 162 143
9/97 38 227 191
9/98 18 248 158]
</TABLE>
Note: The stock performance data for Epitope, Inc. used to generate the graph
above does not include any adjustment for the spin-off of the Company's former
subsidiary, Agritope, Inc., which was effected as a special stock dividend to
the Company's shareholders. In the spin-off, each shareholder of record of the
Company on December 26, 1997, received one share of Agritope, Inc., common stock
for each five shares of Epitope, Inc., common stock. The closing price of the
Agritope, Inc., common stock on a when-issued basis on The Nasdaq Stock Market
was $8.00 on January 7, 1998, the day before it began trading independently of
Epitope, Inc., common stock.
13
<PAGE>
ANNUAL REPORT
The Company's Annual Report to Shareholders for the fiscal year ended
September 30, 1998, 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, 1998, 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 15, 1998, 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
PricewaterhouseCoopers LLP, independent public accountants, examined
the financial statements of the Company for fiscal 1998. No change in
independent public accountants is contemplated for fiscal 1999. The Company
expects representatives of PricewaterhouseCoopers 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 Annual Meeting of Shareholders in the year
2000. 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 13, 1999.
The persons named as proxies for the 2000 Annual Meeting of
Shareholders will have discretionary authority to vote on any matter presented
by a shareholder for action at such meeting unless the Company receives notice
of the matter by November 27, 1999, in which case such persons will not have
discretionary voting authority except as provided in the Commission's rules
governing shareholder proposals.
BY ORDER OF THE BOARD OF DIRECTORS
Andrew S. Goldstein
Secretary
January 11, 1999
14
<PAGE>
PROXY
EPITOPE, INC.
1999 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 1999 Annual Meeting of Shareholders
of Epitope, Inc. (the "Company"), to be held on Tuesday, February 16, 1999, 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.
1999 ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, FEBRUARY 16, 1999
- 1 -
<PAGE>
Please mark your votes as indicated in this example [X]
1. Election of Directors FOR WITHHOLD
Class II (Term Expiring 2002) [ ] [ ]
Andrew S. Goldstein
G. Patrick Sheaffer
Robert J. Zollars
(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: ----------------, 1999
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.
1999 ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, FEBRUARY 16, 1999
-2-
