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, INC.
8505 S.W. Creekside Place
Beaverton, Oregon 97008
January 11, 2000
Dear Shareholder:
You are cordially invited to attend the 2000 Annual Meeting of
Shareholders to be held on TUESDAY, FEBRUARY 15, 2000, 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 (i) elect three Class I
directors to serve on the Board of Directors until the Annual Meeting of
Shareholders in 2003 and one Class III director to serve on the Board of
Directors until the Annual Meeting of Shareholders in 2001; (ii) consider and
vote on a proposal to approve a new employee stock award plan; and (iii)
transact such other business as may properly come before the meeting or any
adjournments thereof.
Your Board of Directors unanimously recommends that you vote FOR
adoption of the new stock award plan. In addition, the Board of Directors has
approved the nominees for director and recommends that you vote FOR their
election to the board.
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/ Charles E. Bergeron
Charles E. Bergeron
Interim President and Chief Financial Officer
<PAGE>
[Graphic: Epitope logo]
EPITOPE, INC.
8505 S.W. Creekside Place
Beaverton, Oregon 97008
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 15, 2000
--------------
To the Shareholders of Epitope, Inc.:
The Annual Meeting of Shareholders of Epitope, Inc., an Oregon
corporation, will be held at the Oregon Convention Center, 777 N.E. Martin
Luther King Jr. Boulevard, Portland, Oregon 97232, on TUESDAY, FEBRUARY 15,
2000, at 9:00 a.m. for the following purposes:
1. To elect three Class I directors and one Class III director;
2. To consider and vote on a proposal to approve a new employee stock
award plan to be called the "Epitope, Inc. 2000 Stock Award Plan"; and
3. To consider such other business as may properly come before the meeting
or any adjournment thereof.
Additional information is included in the proxy statement accompanying
this notice. Only holders of Common Stock of record at the close of business on
December 15, 1999, 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, 2000
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, 2000, to
shareholders of Epitope, Inc., an Oregon corporation (the "Company"), in
connection with the solicitation of proxies ("Proxies") for use at the Annual
Meeting of Shareholders to be held on February 15, 2000, 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").
PROXIES
Shares represented by a properly executed Proxy will be voted in accordance with
the shareholder's instructions. If no instructions are given, the shareholder's
shares will be voted according to the recommendations of the Board of Directors
(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 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 $4,500 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.
- --------------------------------------------------------------------------------
EPITOPE, INC.
1
<PAGE>
VOTING SECURITIES
On December 15, 1999, the record date for determining shareholders entitled to
vote at the Annual Meeting, the Company had outstanding and entitled to vote at
the meeting 14,248,425 shares of Common Stock, no par value ("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 15, 1999, 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.
Amount and Nature of Percent
Beneficial Owner Beneficial Ownership (1)(2) of Class
- --------------------------------------------------------------------------------
Sawtooth Partners, L.P. 2,115,850(3) 14.8%
Sawtooth Capital Management, Inc.
Sawtooth Capital Management, L.P.
100 Wilshire Blvd., 15th Floor
Santa Monica, CA 90401
W. Charles Armstrong 89,705(4) *
Charles E. Bergeron 169,897(4) 1.2%
William D. Block 7,443 *
J. Richard George, Ph.D. 71,315(4) *
Andrew S. Goldstein 438,659 3.1%
Frank G. Hausmann - *
Margaret H. Jordan 51,000 *
John W. Morgan 275,117(4) 1.9%
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 1,442,365(4) 10.1%
officers as a group (11 persons)
- ---------
*Less than 1%
(1) Subject to community property laws where applicable, beneficial
ownership consists of sole voting and dispositive power except as
otherwise indicated.
EPITOPE, INC.
2
<PAGE>
(2) Includes shares subject to options exercisable within 60 days of
December 15, 1999, as follows: Mr. Armstrong, 85,000 shares; Mr.
Bergeron, 164,208 shares; Dr. George, 68,708 shares; Mr. Goldstein,
212,750 shares; Ms. Jordan, 50,000 shares; Mr. Morgan, 264,576 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, 1,133,846 shares.
(3) Sawtooth Partners, L.P. has sole voting and dispositive power as to
1,784,660 shares. Sawtooth Capital Management, Inc., as investment
advisor to Sawtooth Offshore Limited investment fund, has sole voting
and dispositive power as to 148,890 shares, and Sawtooth Capital
Management, L.P., as investment advisor to Polaris Prime Small Cap
Value Fund, has sole voting and dispositive power as to 182,300 shares.
Sawtooth Capital Management, Inc. is general partner of Sawtooth
Capital Management, L.P., which in turn is general partner of Sawtooth
Partners, L.P.
(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; Dr. George, 1,000 shares; Mr. Morgan, 5,000 shares; Mr.
Pringle, 1,500 shares; and all directors and executive officers as a
group, 9,818 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 1999 fiscal
year, all Reporting Persons complied with all applicable filing requirements.
ITEM 1 ELECTION OF DIRECTORS
At the Annual Meeting, shareholders will vote on the election of three Class I
directors and one Class III director. The Nominating Committee of the Board has
nominated W. Charles Armstrong, John W. Morgan, and Roger L. Pringle for
election as Class I directors, for terms expiring at the Annual Meeting of
Shareholders in 2003, and Frank G. Hausmann for election as a Class III
director, for a term 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 four 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. Mr. Hausmann was elected to the Board on December 21, 1999, to
fill a vacancy that occurred upon the resignation of Richard K. Donahue in
February 1998.
EPITOPE, INC.
3
<PAGE>
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.
Director
Name Principal Occupation Age Since
- --------------------------------------------------------------------------------
Class I (Nominees for Terms of Office to Expire in 2003):
- --------------------------------------------------------
W. Charles Armstrong Former Chairman and Chief Executive 55 1989
Officer of Bank of America Oregon
John W. Morgan President and Chief Executive Officer 40 1998
of Conway Stuart Medical, Inc., a developer
of treatments for digestive system disorders
Roger L. Pringle President of The Pringle Company, 59 1989
a management consulting firm
Class II (Directors Whose Terms of Office Expire in 2002):
- ----------------------------------------------------------
Andrew S. Goldstein Senior Vice President of Advanced 51 1981
Technology Development of the
Company
G. Patrick Sheaffer Chairman, President and Chief 60 1983
Executive Officer of Riverview
Community Bank
Robert J. Zollars Chairman, President and 42 1998
Chief Executive Officer of
Neoforma.com, Inc., an e-commerce
procurement company for health care
providers
Class III (Nominee and Directors Whose Terms of Office Expire in 2001):
- -----------------------------------------------------------------------
Frank G. Hausmann President and Chief Executive Officer of 42 1999
CenterSpan Communications Corporation,
a provider of Internet voice and text
messaging software designed primarily for
use with interactive games
Margaret H. Jordan President of The Margaret Jordan 57 1995
Group, L.L.C., a management consulting
firm for the health care industry
Michael J. Paxton President of First Alert, Inc., a division 53 1995
of Sunbeam Corporation that manufactures
and distributes residential safety equipment
W. Charles Armstrong, now a private investor and consultant, 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. Mr. Armstrong is a director of Agritope,
Inc., which was a subsidiary of the Company until its spin-off in December 1997,
and served on the board of Pacificorp, Inc. until December 1999.
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
EPITOPE, INC.
4
<PAGE>
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.
Frank G. Hausmann has been employed by CenterSpan Communications Corporation
(formerly known as Thrustmaster, Inc.) since July 1998 and has been its
President and Chief Executive Officer since October 1998. He served as Vice
President, Finance and Administration and Chief Financial Officer prior to that
time. From August 1997 to May 1998, Mr. Hausmann served as Vice President,
Finance and Chief Financial Officer of Atlas Telecom, Inc., a developer of
enhanced facsimile and voice-mail solutions, that was experiencing financial
difficulties and engaged Mr. Hausmann as part of its efforts to turn around the
company. In May 1998, an involuntary bankruptcy case was commenced against Atlas
Telecom. From September 1995 to July 1997, he served as Vice President,
Corporate Development and General Counsel of Diamond Multimedia Systems, Inc., a
designer and marketer of computer peripherals such as modems and graphics and
sound cards. Mr. Hausmann received B.S. degrees in economics and political
science from Willamette University and a J.D. degree from the University of
Oregon. He is a member of the Oregon State Bar. Mr. Hausmann is also a director
of CenterSpan Communications Corporation.
Margaret H. Jordan has been President of The Margaret Jordan Group, L.L.C., a
management consulting firm for the health care organization industry, since
October 1997. Prior to that time, she was President and Chief Executive Officer
of Dallas Medical Resource ("DMR") beginning in 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. 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 Conway Stuart
Medical, Inc. since November 1999. He was President and Chief Executive Officer
of the Company from October 1997 until his resignation in October 1999. Before
joining the Company, he was President-Americas of Regent Medical Products Group
since 1996. Prior to joining Regent, he held various positions with Baxter
Healthcare Corporation, where he worked for 13 years. Mr. Morgan received a B.S.
degree in public administration and economics from the University of Arizona in
1982. Mr. Morgan serves on the boards of directors of Conway Stuart Medical,
Inc., and Koch Supply, Inc.
Michael J. Paxton became President of First Alert, Inc., 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., a subsidiary 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 Community 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
Community Bank and Riverview Bancorp, a bank holding company. In December 1998,
Mr. Sheaffer became Chairman of Riverview Asset Management, Inc., a bank trust
company.
Robert J. Zollars has been Chairman, President and Chief Executive Officer of
Neoforma.com, Inc., since July 1, 1999. He was previously Executive Vice
President and Group President of Cardinal Health, Inc., beginning in January
1997. Prior to that, he served in various positions as a corporate officer of
Baxter Healthcare Corporation, most recently as President of Hospital Supply,
Scientific Products, and U.S. Distribution. Baxter Healthcare was spun off as
Allegiance Corporation in October 1996. Mr. Zollars has nearly 20 years of
health care industry experience. Mr. Zollars received a M.B.A. degree from John
F. Kennedy University and a B.S. degree in marketing from Arizona State
University.
EPITOPE, INC.
5
<PAGE>
DIRECTORS' MEETINGS
The Board held 12 meetings during the fiscal year ended September 30, 1999. Mr.
Hausmann was not a director until after the end of the fiscal year. Each of the
other directors listed above 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 during the year.
COMMITTEES OF THE BOARD
EXECUTIVE COMMITTEE. 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 did not meet
during the fiscal year ended September 30, 1999. 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.
EXECUTIVE COMPENSATION COMMITTEE. 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 stock award plans and
employee stock purchase plans, 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. The Executive Compensation
Committee met 11 times during the fiscal year ended September 30, 1999.
AUDIT COMMITTEE. 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, Margaret H. Jordan, and Roger L. Pringle. The
Audit Committee met twice during fiscal 1999. The Audit Committee 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.
NOMINATING COMMITTEE. 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
once during fiscal 1999.
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.
EPITOPE, INC.
6
<PAGE>
EXECUTIVE OFFICERS
The table below gives information about the executive officers of the Company as
of December 15, 1999.
Name Age Position
- --------------------------------------------------------------------------------
Charles E. Bergeron 54 Interim President and Chief
Financial Officer
William D. Block 38 Vice President of Sales
and Marketing
J. Richard George, Ph.D. 58 Chief Scientific Officer
Andrew S. Goldstein 51 Senior Vice President of
Advanced Technology
Development, Secretary
and Director
Officers of the Company hold office at the discretion of the Board.
Charles E. Bergeron has been Chief Financial Officer of the Company since
January 1998 and Interim President since October 1999. He served as Chief
Financial Officer of Epitope Medical Products from September 1997 to January
1998 at which point he became Chief Financial Officer for the Company. 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 M.S. degree in management science from Rensselaer
Polytechnic Institute, and a M.B.A. degree from Columbia University.
William D. Block has been Vice President of Sales and Marketing since May 1999.
Before joining the Company, he was Director of Institutional Sales for
McKessonAPS, a division of McKessonHBOC, since March 1997. Prior to joining
McKessonAPS, Mr. Block held various positions with Baxter International, Inc.'s
subsidiary Allegiance Corporation, where he worked for six years. His last
position with Allegiance was as a Senior Account Manager/General Manager for the
MidAmerica region where he oversaw sales of medical products and supplies. Mr.
Block is an Army ROTC graduate from Wake Forest University where he received a
B.A. degree in economics in 1983.
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 with 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.
For a biographical summary of Mr. Goldstein, see ELECTION OF DIRECTORS.
EPITOPE, INC.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation of the Company's Chief Executive
Officer and the four other most highly compensated individuals who were serving
as executive officers of the Company at September 30, 1999.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Annual Long-Term Compensation
Compen- Awards
sation --------------------------------
Securities
Restricted Underlying All Other
Name and Principal Position Year Salary Stock Awards Options (#)(1) Compensation (2)
- ------------------------------------------------------------------------------------------------------------------
Charles E. Bergeron (3) 1999 $155,769 $ - 60,000 $ -
Interim President and Chief 1998 150,129 - 30,000 -
Financial Officer 1997 129,567 - 134,000(4) -
William D. Block (5) 1999 49,038 29,996 112,500 58,725(6)
Vice President of Sales
and Marketing
J. Richard George, Ph.D. 1999 145,385 - 55,000 3,384
Chief Scientific Officer 1998 130,000 - 30,000 2,406
1997 128,654 - 70,000(4) 3,250
Andrew S. Goldstein 1999 153,846 - 35,000 2,957
Senior Vice President of 1998 150,000 - 25,000 3,653
Advanced Technology 1997 149,163 - 94,000(4) 3,750
Development
John W. Morgan (7) 1999 245,000 - 75,000 8,867(8)
Former President and Chief 1998 238,404 - 350,000 61,071(6)
Executive Officer
</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 (6) and (8) 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. Bergeron began serving as Interim President in October 1999, in
connection with the resignation of Mr. Morgan as President and Chief
Executive Officer.
(4) Option grants during fiscal year 1997 consisted of replacement options
granted to effect the repricing of outstanding options.
(5) Mr. Block joined the Company in May 1999. At December 15, 1999, Mr.
Block held 6,233 shares of restricted Common Stock with a dollar value
of $29,996, subject to future vesting or forfeiture. The restricted
shares vest in full on the first anniversary of Mr. Block's employment
date.
(6) Includes $57,488 and $57,307 in relocation expenses for Mr. Morgan and
Mr. Block, respectively, reimbursed by the Company, including moving
costs, realtor fees, closing costs, furniture storage costs, other
miscellaneous expenses, and federal and state income taxes on amounts
paid as expense reimbursement.
(7) Mr. Morgan joined the Company in October 1997. He resigned as President
and Chief Executive Officer of the Company effective October 31, 1999.
(8) Includes $3,770 in term life insurance premiums reimbursed to Mr.
Morgan in 1999.
EPITOPE, INC.
8
<PAGE>
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Individual Grants (1)
Percent of Potential Realizable Value at
Total Assumed Annual Rates of
Number of Options Stock Price
Securities Granted to Market Appreciation for Option Term (2)
--------------------------------
Underlying Employees Exercise Price on Expir-
Options in Fiscal Price Date of ation
Name Granted Year Per Share Grant Date 0% 5% 10%
- -------------------------------------------------------------------------------------------------------------------------
Charles E. Bergeron 30,000 4.88% $3.22 $3.22 10/20/08 $ - $60,729 $153,898
30,000 4.88% 6.84 6.84 9/21/09 - 129,121 327,218
William D. Block 100,000 16.27% 4.81 4.81 5/16/09 - 302,656 766,989
12,500 2.03% 6.84 6.84 9/21/09 - 53,800 136,341
J. Richard George 30,000 4.88% 3.22 3.22 10/20/08 - 60,729 153,898
25,000 4.07% 6.84 6.84 9/21/09 - 107,601 272,681
Andrew S. Goldstein 20,000 3.25% 3.22 3.22 10/20/08 - 40,486 102,599
15,000 2.44% 6.84 6.84 9/21/09 - 64,560 163,609
John W. Morgan 75,000(3) 12.20% 2.41 3.22 10/20/08 60,353 212,174 445,098
</TABLE>
(1) Except as otherwise noted or as required by law, options are qualified
as incentive stock options and 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 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
1999.
(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 in value 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 equal monthly installments over the
following 24 months. Option is a nonqualified stock option.
EPITOPE, INC.
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FISCAL YEAR-END OPTION VALUES (1)
<TABLE>
<S> <C> <C> <C> <C>
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
- ---------------------------------------------------------------------------------------------------------------------
Charles E. Bergeron 150,666 73,334 $225,325 $122,187
William D. Block - 112,500 - 168,750
J. Richard George 50,166 73,334 74,902 129,487
Andrew S. Goldstein 203,896 50,104 375,688 73,176
John W. Morgan 223,605 201,395 747,466 728,956
</TABLE>
(1) The named executive officers neither exercised any options or SARs
during fiscal 1999 nor held any SARs at September 30, 1999.
(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
$6.50, 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,
1999, and the applicable exercise price.
EMPLOYMENT AGREEMENTS
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. Bergeron and Block permit each of them to treat a change
in control and certain other events as a termination without cause. The
agreements with Messrs. Bergeron and Goldstein prohibit each from competing with
the Company for one year after termination unless he elects to waive the right
to amounts otherwise payable. A separate business protection agreement with Mr.
Block prohibits him from competing with the Company for one year after
termination. 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.
COMPENSATION OF DIRECTORS
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 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
EPITOPE, INC.
10
<PAGE>
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 or prior to the annual meeting of shareholders at which the
options most recently granted to such nonemployee director fully vest (the
"Renewal Year Meeting"). Renewal Options vest in three equal installments, on
the dates of the three annual meetings of shareholders following the Renewal
Year Meeting, 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 award 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 medical products 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 medical products companies. The Company generally tries to
maintain executive salaries near the median level paid by similarly situated
companies. The Committee approved increases in executive salaries (other than
the Chief Executive Officer) during fiscal year 1999 based on its belief that
the Company had demonstrated improvement in controlling costs and had taken
significant steps toward the execution of its business plan in 1998, and to
maintain salaries at competitive levels. The salary of Dr. George, Chief
Scientific Officer of the Company, was increased substantially for 1999 to bring
his compensation in line with other officers at the Company with similar levels
of responsibility.
The Committee originally established the salary level and overall compensation
package for its Chief Executive Officer based on its determination of the
competitive requirements to attract a suitable candidate. It conducted a survey
of executive salaries at similarly situated companies as part of that process.
The Chief Executive Officer's salary was not raised in 1999, but Mr. Morgan was
awarded 75,000 options in lieu of a salary increase. The Committee felt that an
option grant was the most effective means of providing competitive compensation
to the Chief Executive Officer while keeping the interests of management in line
with the long-term interests of shareholders of the Company.
MERIT CASH BONUSES. No merit cash bonuses were awarded during fiscal year 1999.
EPITOPE, INC.
11
<PAGE>
STOCK GRANTS. As previously noted, an important goal of the Company's
compensation program is to align the interests of the executive officers and
other 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 (the "1991 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 Board has adopted and is submitting for shareholder
approval at the 2000 annual meeting the Epitope, Inc. 2000 Stock Award Plan,
which will replace the 1991 Plan.
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 medical products 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 1999, stock options
and restricted stock were granted to William D. Block, who was hired as the
Company's Vice President of Sales and Marketing. The number of options and
shares of restricted stock were negotiated as part of Mr. Block's employment
offer, within limits set by the Committee. Stock options were awarded to John W.
Morgan in lieu of a pay raise, as described above. Stock options were awarded to
Charles E. Bergeron, J. Richard George and Andrew S. Goldstein as part of the
Company's practice of issuing additional options each year.
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 and Robert J. Zollars served as
members of the Executive Compensation Committee during fiscal year 1999. Mr.
Armstrong served as Interim President and Chief Executive Officer of the Company
from June 1997 until October 1997 while the Company conducted a search for a new
Chief Executive Officer. Mr. Armstrong left the Committee during the period he
served as an officer of the Company. He is not currently serving as an officer.
EPITOPE, INC.
12
<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, 1994, through September 30, 1999. The
graph assumes that $100 was invested on September 30, 1994, 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
[GRAPHIC OMITTED IN WHICH THE FOLLOWING DATA IS DEPICTED:]
DATE 9/94 9/95 9/96 9/97 9/98 9/99
---- ------ ------ ------ ------ ------ ------
EPITOPE $ 100 $ 70 $ 70 $ 42 $ 20 $ 35
S & P 500 100 130 156 219 239 306
RUSSELL 2000 100 123 140 186 154 177
Note: The stock performance data for the Company 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 the Company's Common Stock.
EPITOPE, INC.
13
<PAGE>
ITEM 2 APPROVAL OF 2000 STOCK AWARD PLAN
GENERAL
On November 16, 1999, the Board adopted, subject to shareholder approval, the
Epitope, Inc. 2000 Stock Award Plan (the "Plan"). The Plan covers a maximum of
2,500,000 shares of Common Stock, plus the number of shares that are available
for grant under the Epitope, Inc. 1991 Stock Award Plan (the "1991 Plan") on
February 15, 2000, or become available under the terms of the Plan thereafter.
This number of shares was selected based on the Board's estimation of the
Company's needs under the Plan for the foreseeable future. The shares subject to
grant have a market value equal to $5.25 per share based on the closing price of
the Common Stock on December 15, 1999.
The Plan is intended to replace the 1991 Plan. Incentive stock options cannot be
granted under the 1991 Plan after January 8, 2001. The 1991 Plan was originally
approved by the Company's shareholders at the 1991 annual meeting. Increases in
the number of shares available for issuance under the 1991 Plan were approved by
the shareholders at the annual meetings in 1993, 1994, 1995, and 1997.
Assuming that a quorum is present at the meeting, the Plan will be approved upon
the affirmative vote of the holders of a majority of the shares of Common Stock
present in person or by proxy. Shares represented by a Proxy which are not voted
for approval of the Plan (by voting no or abstaining) will have the effect of
voting against the Plan. Your Board recommends that shareholders vote FOR
approval of the Plan.
A summary description of certain terms and provisions of the Plan follows. This
summary is subject to the detailed terms and provisions of the Plan, a copy of
which is included as an exhibit to this Proxy Statement.
PURPOSE
The purpose of the Plan is to promote and advance the interests of the Company
and its shareholders by enabling the Company to attract, retain, and reward
employees, outside advisors, and directors of the Company and any subsidiaries.
The Plan is intended to strengthen the mutuality of interests between employees,
advisors, and directors and the Company's shareholders by offering equity-based
incentives to promote the long-term growth, profitability and financial success
of the Company.
AWARDS AND ELIGIBILITY
The Plan provides for stock-based awards to (i) employees of the Company and any
subsidiaries, (ii) members of advisory committees or other consultants to the
Company or its subsidiaries ("Advisors"), and (iii) nonemployee directors of the
Company. Persons who help the Company raise money by selling securities or who
maintain a market for the Company's securities are not eligible to participate
in the Plan as Advisors. In addition, only Advisors who, in the judgment of the
Committee (as defined below), are or will be contributors to the long-term
success of the Company will be eligible to receive Awards. As of December 15,
1999, the Company had 82 employees, four persons serving as Advisors, and seven
nonemployee directors, all of whom are eligible to receive Awards under the
Plan. Awards that may be granted under the Plan include stock options, stock
appreciation rights, restricted awards, performance awards, and other
stock-based awards (collectively, "Awards").
The Executive Compensation Committee of the Board (the "Committee") administers
the Plan and determines the persons who are to receive Awards and the types,
amounts, and terms of Awards. For example, the Committee may determine the
exercise price, the form of payment of the exercise price, the number of shares
subject to an Award, and the date or dates on which an Award becomes
exercisable. The Committee may delegate to one or more officers of the Company
the authority to determine the recipients of and the types, amounts and terms of
Awards granted to participants who are not Reporting Persons.
No Awards have been or will be granted under the Plan prior to the date of the
Annual Meeting. If approved at the Annual Meeting, the Plan will continue in
effect until Awards have been granted covering all available shares under the
Plan or the Plan is otherwise terminated by the Board. Termination of the Plan
will not affect outstanding Awards.
EPITOPE, INC.
14
<PAGE>
The Plan permits the Board to amend the Plan, subject to shareholder approval if
required by law or rules of a stock exchange or over-the-counter trading system.
In order to retain favorable treatment of Awards under tax laws, the Board
cannot increase the number of shares covered by the Plan without further
shareholder approval.
The following is a brief summary of the various types of Awards that may be
granted under the Plan.
OPTIONS. Options granted under the Plan may be either incentive stock options, a
tax-favored form of Award meeting the requirements of Section 422 of the
Internal Revenue Code ("ISOs"), or nonqualified options, which are not entitled
to special tax treatment. ISOs must expire no more than ten years from the date
of grant. The Plan does not limit the maximum term of nonqualified options. The
exercise price of any ISO granted under the Plan may not be less than the fair
market value of the Common Stock on the date of grant. The exercise price of any
nonqualified option generally may not be less than 75 percent of the fair market
value of the Common Stock on the date of grant. The Plan authorizes the
Committee to issue deferred compensation options with an option price
substantially less than the fair market value (but not less than $1 per share)
for the purpose of deferring a specified amount of income for a recipient.
The Committee, in its discretion, may provide in the agreement evidencing an
option that, to the extent that the option is exercised using previously
acquired shares of Common Stock, the option holder shall automatically be
granted a replacement ("reload") option for a number of shares of Common Stock
equal to the number of shares surrendered upon exercise with an option price
equal to the fair market value of Common Stock on the date of exercise and
subject to such other terms as the Committee determines.
In no event may options for more than 500,000 shares of Common Stock be granted
to any individual under the Plan during any fiscal year period.
STOCK APPRECIATION RIGHTS. A recipient of stock appreciation rights ("SARs")
will receive, upon exercise, a payment (in cash or in shares of Common Stock)
based on the increase in the price of a share of Common Stock between the date
of grant and the date of exercise. SARs may be granted in connection with
options or other Awards granted under the Plan or may be granted as independent
Awards.
RESTRICTED AWARDS. Restricted Awards may take the form of restricted shares or
restricted units. Restricted shares are shares of Common Stock that may be
subject to forfeiture if the recipient terminates employment or service as an
Advisor during a specified period (the "Restriction Period"). Stock certificates
representing restricted shares are issued in the name of the recipient, but are
held by the Company until the expiration of the Restriction Period. From the
date of issuance of restricted shares, the recipient is entitled to the rights
of a shareholder with respect to the shares, including voting and dividend
rights. Restricted units are Awards of units equivalent in value to a share of
Common Stock, which similarly may be subject to forfeiture if the recipient
terminates employment or service as an Advisor during a Restriction Period. At
the expiration of the Restriction Period, payment with respect to restricted
units is made in an amount equal to the value of the number of shares of Common
Stock covered by the restricted units. Payment may be in cash, unrestricted
shares of Common Stock, or any other form approved by the Committee.
PERFORMANCE AWARDS. Performance Awards are designated in units equivalent in
value to a share of Common Stock. A Performance Award is subject to forfeiture
if or to the extent that the Company, a subsidiary, an operating group, or the
recipient, as specified by the Committee in the Award, fails to meet performance
goals established for a designated performance cycle. Performance Awards earned
by attaining performance goals are paid at the end of a performance cycle in
cash, shares of Common Stock, or any other form approved by the Committee. The
number of shares of Common Stock issuable with respect to Performance Awards
granted to any individual executive officer may not exceed 150,000 shares for
any calendar year.
OTHER STOCK-BASED AWARDS. The Committee may grant other Awards that involve
payments or grants of shares of Common Stock or are measured by or in relation
to shares of Common Stock.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the principal anticipated federal income tax
consequences of Awards granted under the Plan to participants and to the
Company.
EPITOPE, INC.
15
<PAGE>
INCENTIVE STOCK OPTIONS. A recipient of an option does not realize taxable
income upon the grant or exercise of an ISO. If no disposition of shares occurs
within two years from the date of grant or within one year from the date of
exercise, then (a) upon the sale of the shares, any amount realized in excess of
the exercise price is taxed to the option recipient as long-term capital gain
and any loss sustained will be a long-term capital loss, and (b) no deduction is
allowed to the Company for federal income tax purposes. For purposes of
computing alternative minimum taxable income, an ISO is treated as a
non-qualified option.
If shares of Common Stock acquired upon the exercise of an ISO are disposed of
prior to the expiration of the two-year and one-year holding periods described
above, then (a) the recipient will realize ordinary income in the year of
disposition in an amount equal to the excess (if any) of the fair market value
of the shares at exercise (or, if less, the amount realized on a sale of the
shares) over the exercise price thereof and (b) the Company would be entitled to
deduct such amount. Any further gain realized is taxed as a short-term or
long-term capital gain, as applicable, and does not result in any deduction for
the Company. Any disqualifying disposition as described above will generally
avoid the alternative minimum tax consequences of the exercise of an ISO.
NONQUALIFIED OPTIONS. No income is realized by an option recipient at the time a
nonqualified option is granted. Upon exercise, (a) ordinary income is realized
by the option recipient in an amount equal to the difference between the
exercise price and the fair market value of the shares on the date of exercise
and (b) the Company receives a tax deduction for the same amount. Upon
disposition of the shares, appreciation or depreciation after the date of
exercise is treated as a short-term or long-term capital gain or loss, as
applicable, and will not result in any deduction to the Company.
PAYMENT OF EXERCISE PRICE IN SHARES. The Committee may permit participants to
pay all or a portion of the exercise price for an option using previously
acquired shares of Common Stock. If an option is exercised and payment is made
in previously held shares, there is no taxable gain or loss to the participant
other than any gain recognized as a result of exercise of the option, as
described above.
STOCK APPRECIATION RIGHTS. The grant of a SAR to a participant will not cause
the recognition of income by the participant. Upon exercise of a SAR, the
participant will realize ordinary income equal to the amount of cash payable to
the participant plus the fair market value of any shares of Common Stock
delivered to the participant. The Company will be entitled to a deduction equal
to the amount of ordinary income realized by the participant in connection with
the exercise of a SAR.
RESTRICTED AWARDS AND PERFORMANCE AWARDS. Generally, a participant will not
recognize any income upon issuance of a Restricted Award or Performance Award
that is subject to forfeiture. Generally, a participant will recognize ordinary
income upon the vesting of Restricted Awards or Performance Awards in an amount
equal to the amount of cash payable to the participant plus the fair market
value of shares of Common Stock delivered to the participant. Dividends paid
with respect to Awards during the period such Awards are subject to forfeiture
will be taxable as ordinary income to the participant. However, a participant
may elect to recognize compensation income upon the grant of restricted shares,
based on the fair market value of the shares of Common Stock subject to the
Award at the date of grant. If a participant makes such an election, dividends
paid with respect to the restricted shares will not be treated as ordinary
income, but rather as dividend income, and the participant will not recognize
additional income when the restricted shares vest. The Company will be entitled
to a deduction equal to the amount of ordinary income recognized by the
participant. If a participant who receives an Award of restricted shares makes
the special election described above, the Company will not be entitled to deduct
dividends paid with respect to the restricted shares.
LIMITATION ON DEDUCTIBILITY OF CERTAIN COMPENSATION. Section 162(m) of the
Internal Revenue Code generally makes nondeductible to the Company taxable
compensation paid to a single individual in excess of $1 million in any calendar
year if the individual is the Chief Executive Officer or one of the next four
highest-paid executive officers, unless the excess compensation is considered to
be "performance based." Among other requirements contained in Section 162(m),
the material terms of a compensation plan in which such officers participate
must be approved by shareholders for awards or compensation provided under the
plan to be considered "performance based." The Company may in the future
consider structuring Awards to attempt to meet the requirements of Section
162(m) if it determines the action to be advisable.
EPITOPE, INC.
16
<PAGE>
ANNUAL REPORT
The Company's Annual Report to Shareholders for the fiscal year ended September
30, 1999, 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, 1999, 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, 1999, 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 1999. No change in independent
public accountants is contemplated for fiscal 2000. 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
materials for the Company's Annual Meeting of Shareholders in 2001. 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, 2000.
For any proposal that is not submitted for inclusion in next year's proxy
materials, but instead is sought to be presented directly, the persons named as
proxies for the 2001 Annual Meeting of Shareholders will have discretionary
authority to vote proxies on any such proposal if the Company: (1) receives
notice of the proposal before the close of business on November 27, 2000, and
advises stockholders in the 2001 proxy materials about the nature of the matter
and how management intends to vote on such matter; or (2) has not received
notice of the proposal by the close of business on November 27, 2000. Notices of
intention to present proposals at the 2001 annual meeting should be forwarded to
the address listed above.
BY ORDER OF THE BOARD OF DIRECTORS
Andrew S. Goldstein
Secretary
January 11, 2000
EPITOPE, INC.
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EXHIBIT
EPITOPE, INC.
2000 STOCK AWARD PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 Establishment. Epitope, Inc. ("Corporation"), hereby establishes
the Epitope, Inc. 2000 Stock Award Plan (the "Plan"), effective as of February
15, 2000, subject to shareholder approval as provided in Article 17.
1.2 Purpose. The purpose of the Plan is to promote and advance the
interests of Corporation and its shareholders by enabling Corporation to
attract, retain, and reward employees, outside advisors, and directors of
Corporation and its subsidiaries. It is also intended to strengthen the
mutuality of interests between such employees, advisors, and directors and
Corporation's shareholders. The Plan is designed to meet this intent by offering
stock options and other equity-based incentive awards, thereby providing a
proprietary interest in pursuing the long-term growth, profitability, and
financial success of Corporation.
ARTICLE 2
DEFINITIONS
2.1 Defined Terms. For purposes of the Plan, the following terms have
the meanings set forth below:
"ADVISOR" means a natural person who is a consultant to or member
of an Advisory Committee of Corporation or a Subsidiary, who provides bona fide
services to Corporation and who is neither an employee of Corporation or a
Subsidiary nor a Non-Employee Director. "Advisor" excludes any person who
provides services to Corporation in connection with the offer or sale of
securities in a capital raising transaction or to promote or maintain a market
for Corporation's securities, and any other person excluded from the class of
persons to whom securities may be offered pursuant to a registration statement
on Form S-8 or any successor form of registration statement.
"ADVISORY COMMITTEE" means a scientific advisory committee to
Corporation or a Subsidiary.
"AWARD" means an award or grant made to a Participant of Options,
Stock Appreciation Rights, Restricted Awards, Performance Awards, or Other
Stock-Based Awards pursuant to the Plan.
"AWARD AGREEMENT" means an agreement as described in Section 6.4.
"BOARD" means the Board of Directors of Corporation.
"CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, or any successor thereto, together with rules,
regulations, and interpretations promulgated thereunder. Where the context so
requires, any reference to a particular Code section will be construed to refer
to the successor provision to such Code section.
"COMMITTEE" means the committee appointed by the Board to
administer the Plan as provided in Article 3 of the Plan.
"COMMON STOCK" means the Common Stock, no par value, of
Corporation or any security of Corporation issued in substitution, in exchange,
or in lieu of such stock.
"CONTINUING RESTRICTION" means a Restriction contained in
Sections 6.7, 6.8, and 16.4 of the Plan and any other Restrictions expressly
designated by the Committee in an Award Agreement as a Continuing Restriction.
"CORPORATION" means Epitope, Inc., an Oregon corporation, or any
successor corporation.
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"DEFERRED COMPENSATION OPTION" means a Nonqualified Option
granted with an option price less than Fair Market Value on the date of grant
pursuant to Section 7.9 of the Plan.
"DISABILITY" means the condition of being "disabled" within the
meaning of Section 422(c)(6) of the Code. However, the Committee may change the
foregoing definition of "Disability" or may adopt a different definition for
purposes of specific Awards.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended and in effect from time to time, or any successor statute. Where the
context so requires, any reference to a particular section of the Exchange Act,
or to any rule promulgated under the Exchange Act, shall be construed to refer
to successor provisions to such section or rule.
"FAIR MARKET VALUE" means with respect to Common Stock, on a
particular day, without regard to any restrictions (other than a restriction
which, by its terms, will never lapse), the mean between the reported high and
low sale prices, or, if there is no sale on such day, the mean between the
reported bid and asked prices, of Shares of the Common Stock on that day or, if
that day is not a trading day, the last prior trading day, on the securities
exchange or automated securities interdealer quotation system on which such
Shares have been traded.
"INCENTIVE STOCK OPTION" or "ISO" means any Option granted
pursuant to the Plan that is intended to be and is specifically designated in
its Award Agreement as an "incentive stock option" within the meaning of Section
422 of the Code.
"NON-EMPLOYEE DIRECTOR" means a member of the Board who is not an
employee of Corporation or any Subsidiary.
"NONQUALIFIED OPTION" or "NQO" means any Option, including a
Deferred Compensation Option, granted pursuant to the Plan that is not an
Incentive Stock Option.
"OPTION" means an ISO, an NQO, or a Deferred Compensation Option.
"OTHER STOCK-BASED AWARD" means an Award as defined in Section
11.1.
"PARTICIPANT" means an employee of Corporation or a Subsidiary,
an Advisor, or a Non-Employee Director who is granted an Award under the Plan.
"PERFORMANCE AWARD" means an Award granted pursuant to the
provisions of Article 10 of the Plan, the Vesting of which is contingent on
performance attainment.
"PERFORMANCE CYCLE" means a designated performance period
pursuant to the provisions of Section 10.3 of the Plan.
"PERFORMANCE GOAL" means a designated performance objective
pursuant to the provisions of Section 10.4 of the Plan.
"PLAN" means this Epitope, Inc. 2000 Stock Award Plan, as set
forth herein and as it may be amended from time to time.
"REPORTING PERSON" means a Participant who is subject to the
reporting requirements of Section 16(a) of the Exchange Act.
"RESTRICTED AWARD" means a Restricted Share or a Restricted Unit
granted pursuant to Article 9 of the Plan.
"RESTRICTED SHARE" means an Award described in Section 9.1(a) of
the Plan.
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"RESTRICTED UNIT" means an Award of units representing Shares
described in Section 9.1(b) of the Plan.
"RESTRICTION" means a provision in the Plan or in an Award
Agreement which limits the exercisability or transferability, or which governs
the forfeiture, of an Award or the Shares, cash, or other property payable
pursuant to an Award.
"RETIREMENT" means:
(a) For Participants who are employees, retirement from
active employment with Corporation and its Subsidiaries at or
after age 50, or such earlier retirement date as approved by the
Committee for purposes of the Plan;
(b) For Participants who are Non-Employee Directors,
termination of membership on the Board after attaining age 50, or
such earlier retirement date as approved by the Committee for
purposes of the Plan; and
(c) For Participants who are Advisors, termination of service
as an Advisor after attaining age 50, or such earlier retirement
date as approved by the Committee for purposes of the Plan.
However, the Committee may change the foregoing definition of "Retirement" or
may adopt a different definition for purposes of specific Awards.
"SHARE" means a share of Common Stock.
"STOCK APPRECIATION RIGHT" or "SAR" means an Award to benefit from
the appreciation of Common Stock granted pursuant to the provisions of Article 8
of the Plan.
"SUBSIDIARY" means any "subsidiary corporation" of Corporation
within the meaning of Section 424 of the Code, namely any corporation in which
Corporation directly or indirectly controls 50 percent or more of the total
combined voting power of all classes of stock having voting power.
"VEST" or "VESTED" means:
(a) In the case of an Award that requires exercise, to be or
to become immediately and fully exercisable and free of all
Restrictions (other than Continuing Restrictions);
(b) In the case of an Award that is subject to forfeiture, to
be or to become nonforfeitable, freely transferable, and free of
all Restrictions (other than Continuing Restrictions);
(c) In the case of an Award that is required to be earned by
attaining specified Performance Goals, to be or to become earned
and nonforfeitable, freely transferable, and free of all
Restrictions (other than Continuing Restrictions); or
(d) In the case of any other Award as to which payment is not
dependent solely upon the exercise of a right, election, exercise,
or option, to be or to become immediately payable and free of all
Restrictions (except Continuing Restrictions).
2.2 Gender and Number. Except where otherwise indicated by the
context, any masculine or feminine terminology used in the Plan shall also
include the opposite gender; and the definition of any term in Section 2.1 in
the singular shall also include the plural, and vice versa.
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ARTICLE 3
ADMINISTRATION
3.1 General. Except as provided in Section 3.7, the Plan will be
administered by a Committee composed as described in Section 3.2.
3.2 Composition of the Committee. The Committee will be appointed by
the Board from among its members in a number and with such qualifications as
will meet the requirements for approval by a committee pursuant to both Rule
16b-3 under the Exchange Act and Section 162m of the Code. The Board may from
time to time remove members from, or add members to, the Committee. Vacancies on
the Committee, however caused, will be filled by the Board. The initial members
of the Committee will be the members of Corporation's existing Executive
Compensation Committee. The Board may at any time replace the Executive
Compensation Committee with another Committee. In the event that the Executive
Compensation Committee ceases to satisfy the requirements of Rule 16b-3 or
Section 162m of the Code, the Board will appoint another Committee satisfying
such requirements.
3.3 Authority of the Committee. The Committee will have full
power and authority (subject to such orders or resolutions as may be issued or
adopted from time to time by the Board) to administer the Plan in its sole
discretion, including the authority to:
(a) Construe and interpret the Plan and any Award Agreement;
(b) Promulgate, amend, and rescind rules and procedures
relating to the implementation of the Plan;
(c) With respect to employees and Advisors:
(i) Select the employees and Advisors who
shall be granted Awards;
(ii) Determine the number and types of Awards
to be granted to each such Participant;
(iii) Determine the number of Shares, or Share
equivalents, to be subject to each Award;
(iv) Determine the option price, purchase
price, base price, or similar feature for any Award; and
(v) Determine all the terms and conditions of
all Award Agreements, consistent with the requirements
of the Plan.
Decisions of the Committee, or any delegate as permitted by the Plan, shall be
final, conclusive, and binding on all Participants.
3.4 Action by the Committee. A majority of the members of the
Committee will constitute a quorum for the transaction of business. Action
approved by a majority of the members present at any meeting at which a quorum
is present, or action in writing by all the members of the Committee, will be
the valid acts of the Committee.
3.5 Delegation. Notwithstanding the foregoing, the Committee may
delegate to one or more officers of Corporation the authority to determine the
recipients, types, amounts, and terms of Awards granted to Participants who are
not Reporting Persons.
3.6 Liability of Committee Members. No member of the Committee will be
liable for any action or determination made in good faith with respect to the
Plan, any Award, or any Participant.
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3.7 Awards to Non-Employee Directors. The Board or Committee may grant
Awards from time to time to Non-Employee Directors.
3.8 Costs of Plan. The costs and expenses of administering the Plan
will be borne by Corporation.
ARTICLE 4
DURATION OF THE PLAN AND SHARES SUBJECT TO THE PLAN
4.1 Duration of the Plan. The Plan is effective February 15, 2000,
subject to approval by Corporation's shareholders as provided in Article 17. The
Plan will remain in effect until Awards have been granted covering all the
available Shares or the Plan is otherwise terminated by the Board. Termination
of the Plan will not affect outstanding Awards.
4.2 Shares Subject to the Plan.
4.2.1 General. The shares which may be made subject to Awards
under the Plan are Shares of Common Stock, which may be either authorized and
unissued Shares or reacquired Shares. No fractional Shares may be issued under
the Plan.
4.2.2 Number of Shares. The maximum number of Shares for which
Awards may be granted under the Plan is 2,500,000 Shares, plus the number of
Shares that are available for grant under the Epitope, Inc., 1991 Stock Award
Plan (the "1991 Plan"), on February 15, 2000, subject to adjustment pursuant to
Article 14 of the Plan.
4.2.3 Availability of Shares for Future Awards. If an Award
under the Plan, the 1991 Plan, or the Corporation's Incentive Stock Option Plan
for Key Employees of Epitope, Inc. (the "ISOP"), is canceled or expires for any
reason prior to having been fully Vested or exercised by a Participant or is
settled in cash in lieu of Shares or is exchanged for other Awards, all Shares
covered by such Awards will be made available for future Awards under the Plan.
Furthermore, any Shares used as full or partial payment to Corporation by a
Participant of the option, purchase, or other exercise price of an Award and any
Shares covered by a Stock Appreciation Right which are not issued upon exercise
will become available for future Awards.
ARTICLE 5
ELIGIBILITY
5.1 Employees and Advisors. Officers and other employees of
Corporation and any Subsidiaries (who may also be directors of Corporation or a
Subsidiary) and Advisors who, in the Committee's judgment, are or will be
contributors to the long-term success of Corporation will be eligible to receive
Awards under the Plan.
5.2 Non-Employee Directors. All Non-Employee Directors will be
eligible to receive Awards as provided in Section 3.7 of the
Plan.
ARTICLE 6
AWARDS
6.1 Types of Awards. The types of Awards that may be granted under the
Plan are:
(a) Options governed by Article 7 of the Plan;
(b) Stock Appreciation Rights governed by Article 8 of the
Plan;
(c) Restricted Awards governed by Article 9 of the Plan;
(d) Performance Awards governed by Article 10 of the Plan;
and
(e) Other Stock-Based Awards or combination awards governed
by Article 11 of the Plan.
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In the discretion of the Committee, any Award may be granted alone, in addition
to, or in tandem with other Awards under the Plan.
6.2 General. Subject to the limitations of the Plan, the Committee may
cause Corporation to grant Awards to such Participants, at such times, of such
types, in such amounts, for such periods, with such option prices, purchase
prices, or base prices, and subject to such terms, conditions, limitations, and
restrictions as the Committee, in its discretion, deems appropriate. Awards may
be granted as additional compensation to a Participant or in lieu of other
compensation to such Participant. A Participant may receive more than one Award
and more than one type of Award under the Plan.
6.3 Nonuniform Determinations. The Committee's determinations under
the Plan or under one or more Award Agreements, including without limitation,
(a) the selection of Participants to receive Awards, (b) the type, form, amount,
and timing of Awards, (c) the terms of specific Award Agreements, and (d)
elections and determinations made by the Committee with respect to exercise or
payments of Awards, need not be uniform and may be made by the Committee
selectively among Participants and Awards, whether or not Participants are
similarly situated.
6.4 Award Agreements. Each Award will be evidenced by a written Award
Agreement between Corporation and the Participant. Award Agreements may, subject
to the provisions of the Plan, contain any provision approved by the Committee.
6.5 Provisions Governing All Awards. All Awards will be subject to the
following provisions:
(a) Alternative Awards. If any Awards are designated in
their Award Agreements as alternative to each other, the exercise of
all or part of one Award automatically will cause an immediate equal
(or pro rata) corresponding termination of the other alternative Award
or Awards.
(b) Rights as Shareholders. No Participant will have any
rights of a shareholder with respect to Shares subject to an Award
until such Shares are issued in the name of the Participant.
(c) Employment Rights. Neither the adoption of the Plan nor
the granting of any Award will confer on any person the right to
continued employment with Corporation or any Subsidiary or the right to
remain as a director of Corporation or a member of any Advisory
Committee, as the case may be, nor will it interfere in any way with
the right of Corporation or a Subsidiary to terminate such person's
employment or to remove such person as an Advisor or as a director at
any time for any reason or for no reason, with or without cause.
(d) Termination Of Employment. The terms and conditions
under which an Award may be exercised or will continue to Vest, if at
all, after a Participant's termination of employment or service as an
Advisor or as a Non-Employee Director will be determined by the
Committee and specified in the applicable Award Agreement.
(e) Change in Control. The Committee, in its discretion, may
provide in any Award Agreement that in the event of a change in control
of Corporation (as the Committee may define such term in the Award
Agreement), as of the date of such change in control:
(i) All, or a specified portion of, Awards
requiring exercise will become fully and immediately
exercisable, notwithstanding any other limitations on
exercise;
(ii) All, or a specified portion of, Awards
subject to Restrictions will become fully Vested; and
(iii) All, or a specified pOrtion of, Awards
subject to Performance Goals will be deemed to have been
fully earned.
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The Committee, in its discretion, may include change in control
provisions in some Award Agreements and not in others, may include
different change in control provisions in different Award Agreements,
and may include change in control provisions for some Awards or some
Participants and not for others.
(f) Service Periods. At the time of granting Awards, the
Committee may specify, by resolution or in the Award Agreement, the
period or periods of service performed or to be performed by the
Participant in connection with the grant of the Award.
6.6 Tax Withholding.
(a) General. Corporation will have the right to deduct from
any settlement, including the delivery or Vesting of Shares, made under
the Plan any federal, state, or local taxes of any kind required by law
to be withheld with respect to such payments or to take such other
action as may be necessary in the opinion of Corporation to satisfy all
obligations for the payment of such taxes. The recipient of any payment
or distribution under the Plan will make arrangements satisfactory to
Corporation for the satisfaction of any such withholding tax
obligations. Corporation will not be required to make any such payment
or distribution under the Plan until such obligations are satisfied.
(b) Stock Withholding. The Committee, in its sole
discretion, may permit a Participant to satisfy all or a part of the
withholding tax obligations incident to the settlement of an Award
involving payment or delivery of Shares to the Participant by having
Corporation withhold a portion of the Shares that would otherwise be
issuable to the Participant. Such Shares will be valued based on their
Fair Market Value on the date the tax withholding is required to be
made. Any stock withholding with respect to a Reporting Person will be
subject to such limitations as the Committee may impose to comply with
the requirements of the Exchange Act.
6.7 Annulment of Awards. Any Award Agreement may provide that the
grant of an Award payable in cash is provisional until cash is paid in
settlement thereof or that grant of an Award payable in Shares is provisional
until the Participant becomes entitled to the certificate in settlement thereof.
In the event the employment (or service as an Advisor or membership on the
Board) of a Participant is terminated for cause (as defined below), any Award
that is provisional will be annulled as of the date of such termination for
cause. For the purpose of this Section 6.7, the term "for cause" has the meaning
set forth in the Participant's employment agreement, if any, or otherwise means
any discharge (or removal) for material or flagrant violation of the policies
and procedures of Corporation or for other job performance or conduct which is
materially detrimental to the best interests of Corporation, as determined by
the Committee.
6.8 Engaging in Competition With Corporation. Any Award Agreement may
provide that, if a Participant terminates employment with Corporation or a
Subsidiary for any reason whatsoever, and within 18 months after the date
thereof accepts employment with any competitor of (or otherwise engages in
competition with) Corporation, the Committee, in its sole discretion, may
require such Participant to return to Corporation the economic value of any
Award that is realized or obtained (measured at the date of exercise, Vesting,
or payment) by such Participant at any time during the period beginning on the
date that is six months prior to the date of such Participant's termination of
employment with Corporation.
ARTICLE 7
OPTIONS
7.1 Types of Options. Options granted under the Plan may be in the
form of Incentive Stock Options or Nonqualified Options (including Deferred
Compensation Options). The grant of each Option and the Award Agreement
governing each Option will identify the Option as an ISO or an NQO. In the event
the Code is amended to provide for tax-favored forms of stock options other than
or in addition to Incentive Stock Options, the Committee may grant Options under
the Plan meeting the requirements of such forms of options.
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7.2 General. Options will be subject to the terms and conditions set
forth in Article 6 and this Article 7 and may contain such additional terms and
conditions, not inconsistent with the express provisions of the Plan, as the
Committee (or the Board with respect to Awards to Non-Employee Directors) deems
desirable.
7.3 Option Price. Each Award Agreement for Options will state the
option exercise price per Share of Common Stock purchasable under the Option,
which will not be less than:
(a) $1 per share in the case of a Deferred Compensation
Option;
(b) 75 percent of the Fair Market Value of a Share on the
date of grant for all other Nonqualified Options; or
(c) 100 percent of the Fair Market Value of a Share on the
date of grant for all Incentive Stock Options.
7.4 Option Term. The Award Agreement for each Option will specify the
term of each Option, which may be unlimited or may have a specified period
during which the Option may be exercised, as determined by the Committee.
7.5 Time of Exercise. The Award Agreement for each Option will
specify, as determined by the Committee:
(a) The time or times when the Option will become
exercisable and whether the Option will become exercisable in full or
in graduated amounts over a period specified in the Award Agreement;
(b) Such other terms, conditions, and restrictions as to
when the Option may be exercised as determined by the Committee; and
(c) The extent, if any, to which the Option will remain
exercisable after the Participant ceases to be an employee, Advisor, or
director of Corporation or a Subsidiary.
An Award Agreement for an Option may, in the discretion of the Committee,
provide whether, and to what extent, the Option will become immediately and
fully exercisable (i) in the event of the death, Disability, or Retirement of
the Participant, or (ii) upon the occurrence of a change in control of
Corporation.
7.6 Method of Exercise. The Award Agreement for each Option will
specify the method or methods of payment acceptable upon exercise of an Option.
An Award Agreement may provide that the option price is payable in full in cash
or, at the discretion of the Committee:
(a) In installments on such terms and over such period as
the Committee determines;
(b) In previously acquired Shares (including Restricted
Shares);
(c) By surrendering outstanding Awards under the Plan
denominated in Shares or in Share-equivalent units;
(d) By delivery (in a form approved by the Committee) of an
irrevocable direction to a securities broker acceptable to the
Committee:
(i) To sell Shares subject to the Option and
to deliver all or a part of the sales proceeds to Corporation
in payment of all or a part of the option price and
withholding taxes due; or
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(ii) To pledge Shares subject to the Option to
the broker as security for a loan and to deliver all or a
part of the loan proceeds to Corporation in payment of all or
a part of the option price and withholding taxes due; or
(e) In any combination of the foregoing or in any other
form approved by the Committee.
If Restricted Shares are surrendered in full or partial payment of an Option
price, a corresponding number of the Shares issued upon exercise of the Option
will be Restricted Shares subject to the same Restrictions as the surrendered
Restricted Shares.
7.7 Special Rules for Incentive Stock Options. In the case of an
Option designated as an Incentive Stock Option, the terms of the Option and the
Award Agreement must be in conformance with the statutory and regulatory
requirements specified in Section 422 of the Code, as in effect on the date such
ISO is granted. ISOs may be granted only to employees of Corporation or a
Subsidiary. ISOs may not be granted under the Plan after February 15, 2010,
unless the ten-year limitation of Section 422(b)(2) of the Code is removed or
extended.
7.8 Restricted Shares. In the discretion of the Committee, the Shares
issuable upon exercise of an Option may be Restricted Shares if so provided in
the Award Agreement.
7.9 Deferred Compensation Options. The Committee may, in its
discretion, grant Deferred Compensation Options with an option price less than
Fair Market Value to provide a means for deferral of compensation to future
dates. The option price will be determined by the Committee subject to Section
7.3(a) of the Plan. The number of Shares subject to a Deferred Compensation
Option will be determined by the Committee, in its discretion, by dividing the
amount of compensation to be deferred by the difference between the Fair Market
Value of a Share on the date of grant and the option price of the Deferred
Compensation Option. Amounts of compensation deferred with Deferred Compensation
Options may include amounts earned under Awards granted under the Plan or under
any other compensation program or arrangement of Corporation as permitted by the
Committee. The Committee may grant Deferred Compensation Options only if it
reasonably determines that the recipient of such an Option is not likely to be
deemed to be in constructive receipt for income tax purposes of the income being
deferred.
7.10 Reload Options. The Committee, in its discretion, may provide in
an Award Agreement for an Option that in the event all or a portion of the
Option is exercised by the Participant using previously acquired Shares, the
Participant will automatically be granted a replacement Option (with an option
price equal to the Fair Market Value of a Share on the date of such exercise)
for a number of Shares equal to (or equal to a portion of) the number of shares
surrendered upon exercise of the Option. Such reload Option features may be
subject to such terms and conditions as the Committee shall determine, including
without limitation, a condition that the Participant retain the Shares issued
upon exercise of the Option for a specified period of time.
7.11 Limitation on Number of Shares Subject to Options. In no event may
Options for more than 500,000 Shares be granted to any individual under the Plan
during any fiscal year period.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1 General. Stock Appreciation Rights will be subject to the terms
and conditions set forth in Article 6 and this Article 8 and may contain such
additional terms and conditions, not inconsistent with the express terms of the
Plan, as the Committee (or the Board with respect to Awards to Non-Employee
Directors) deems desirable.
8.2 Nature of Stock Appreciation Right. A Stock Appreciation Right is
an Award entitling a Participant to receive an amount equal to the excess (or if
the Committee determines at the time of grant, a portion of the excess) of the
Fair Market Value of a Share of Common Stock on the date of exercise of the SAR
over the base price, as described below, on the date of grant of the SAR,
multiplied by the number of Shares with respect to which the SAR has been
exercised. The base price will be designated by the Committee in the Award
Agreement for the SAR and may be the Fair Market Value of a Share on the grant
date of the SAR or such other higher or lower price as the Committee determines.
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8.3 Exercise. A Stock Appreciation Right may be exercised by a
Participant in accordance with procedures established by the Committee. The
Committee may also provide that an SAR will be automatically exercised on one or
more specified dates or upon the satisfaction of one or more specified
conditions. In the case of SARs granted to Reporting Persons, exercise of the
SAR will be limited by the Committee to the extent required to comply with the
applicable requirements of Rule 16b-3 under the Exchange Act.
8.4 Form of Payment. Payment upon exercise of a Stock Appreciation
Right may be made in cash, in installments, in Shares, by issuance of a Deferred
Compensation Option, or in any combination of the foregoing, or in any other
form as the Committee determines.
8.5 Limitation on Number of Shares Subject to SARs. In no event may
SARs for more than 500,000 Shares be granted to any individual under the Plan
during any fiscal year period.
ARTICLE 9
RESTRICTED AWARDS
9.1 Types of Restricted Awards. Restricted Awards granted under the
Plan may be in the form of either Restricted Shares or Restricted Units.
(a) Restricted Shares. A Restricted Share is an Award of
Shares transferred to a Participant subject to such terms and
conditions as the Committee deems appropriate, including, without
limitation, restrictions on the sale, assignment, transfer, or other
disposition of such Restricted Shares and may include a requirement
that the Participant forfeit such Restricted Shares back to Corporation
upon termination of Participant's employment (or service as an Advisor
or Non-Employee Director) for specified reasons within a specified
period of time or upon other conditions, as set forth in the Award
Agreement for such Restricted Shares. Each Participant receiving a
Restricted Share will be issued a stock certificate in respect of such
Shares, registered in the name of such Participant, and will be
required to execute a stock power in blank with respect to the Shares
evidenced by such certificate. The certificate evidencing such
Restricted Shares and the stock power will be held in custody by
Corporation until the Restrictions thereon will have lapsed.
(b) Restricted Units. A Restricted Unit is an Award of units
(with each unit having a value equivalent to one Share) granted to a
Participant subject to such terms and conditions as the Committee deems
appropriate, and may include a requirement that the Participant forfeit
such Restricted Units upon termination of Participant's employment (or
service as an Advisor or Non-Employee Director) for specified reasons
within a specified period of time or upon other conditions, as set
forth in the Award Agreement for such Restricted Units.
9.2 General. Restricted Awards will be subject to the terms and
conditions of Article 6 and this Article 9 and may contain such additional terms
and conditions, not inconsistent with the express provisions of the Plan, as the
Committee (or the Board with respect to Awards to Non-Employee Directors) deems
desirable.
9.3 Restriction Period. Restricted Awards will provide that such
Awards, and the Shares subject to such Awards, may not be transferred, and may
provide that, in order for a Participant to Vest in such Awards, the Participant
must remain in the employment (or remain as an Advisor or Non-Employee Director)
of Corporation or its Subsidiaries, subject to relief for reasons specified in
the Award Agreement, for a period commencing on the date of the Award and ending
on such later date or dates as the Committee designates at the time of the Award
(the "Restriction Period"). During the Restriction Period, a Participant may not
sell, assign, transfer, pledge, encumber, or otherwise dispose of Shares
received under or governed by a Restricted Award grant. The Committee, in its
sole discretion, may provide for the lapse of restrictions in installments
during the Restriction Period. Upon expiration of the applicable Restriction
Period (or lapse of Restrictions during the Restriction Period where the
Restrictions lapse in installments) the Participant shall be entitled to
settlement of the Restricted Award or portion thereof, as the case may be.
Although Restricted Awards will usually Vest based on continued employment (or
service as an Advisor or Non-Employee Director) and Performance Awards under
Article 10 shall usually Vest based on attainment of Performance Goals, the
Committee, in its discretion, may condition Vesting of Restricted Awards on
attainment of Performance
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Goals as well as continued employment (or service as an Advisor or Non-Employee
Director). In such case, the Restriction Period for such a Restricted Award will
include the period prior to satisfaction of the Performance Goals.
9.4 Forfeiture. If a Participant ceases to be an employee, Advisor of
Corporation or a Subsidiary or Non-Employee Director during the Restriction
Period for any reason other than reasons which may be specified in an Award
Agreement (such as death, Disability, or Retirement), the Award Agreement may
require that all non-Vested Restricted Awards previously granted to the
Participant be forfeited and returned to Corporation.
9.5 Settlement of Restricted Awards.
(a) Restricted Shares. Upon Vesting of a Restricted Share
Award, the legend on such Shares will be removed and the Participant's
stock power will be returned and the Shares will no longer be
Restricted Shares. The Committee may also, in its discretion, permit a
Participant to receive, in lieu of unrestricted Shares at the
conclusion of the Restriction Period, payment in cash, installments, a
Deferred Compensation Option equal to the Fair Market Value of the
Restricted Shares as of the date the Restrictions lapse, or in any
other manner or combination of such methods as the Committee, in its
sole discretion, determines.
(b) Restricted Units. Upon Vesting of a Restricted Unit
Award, a Participant will be entitled to receive payment for Restricted
Units in an amount equal to the aggregate Fair Market Value of the
Shares covered by such Restricted Units at the expiration of the
Applicable Restriction Period. Payment in settlement of a Restricted
Unit will be made as soon as practicable following the conclusion of
the applicable Restriction Period in cash, in installments, in Shares
equal to the number of Restricted Units, by issuance of a Deferred
Compensation Option, or in any other manner or combination of such
methods as the Committee, in its sole discretion, determines.
9.6 Rights as a Shareholder. A Participant will have, with respect to
unforfeited Shares received under a grant of Restricted Shares, all the rights
of a shareholder of Corporation, including the right to vote the Shares, and the
right to receive any cash dividends. Stock dividends issued with respect to
Restricted Shares will be treated as additional Shares covered by the grant of
Restricted Shares and will be subject to the same Restrictions.
ARTICLE 10
PERFORMANCE AWARDS
10.1 General. Performance Awards will be subject to the terms and
conditions set forth in Article 6 and this Article 10 and may contain such other
terms and conditions not inconsistent with the express provisions of the Plan,
as the Committee (or the Board with respect to Awards to Non-Employee Directors)
deems desirable.
10.2 Nature of Performance Awards. A Performance Award is an Award of
units (with each unit having a value equivalent to one Share) granted to a
Participant subject to such terms and conditions as the Committee deems
appropriate, including, without limitation, the requirement that the Participant
forfeit such Performance Award or a portion thereof in the event specified
performance criteria are not met within a designated period of time.
10.3 Performance Cycles. For each Performance Award, the Committee will
designate a performance period (the "Performance Cycle") with a duration to be
determined by the Committee in its discretion within which specified Performance
Goals are to be attained. There may be several Performance Cycles in existence
at any one time and the duration of Performance Cycles may differ from each
other.
10.4 Performance Goals. The Committee will establish Performance Goals
for each Performance Cycle on the basis of such criteria and to accomplish such
objectives as the Committee may from time to time select. Performance Goals may
be based on performance criteria for Corporation, a Subsidiary, or an operating
group, or based on a Participant's individual performance. Performance Goals may
include objective and subjective criteria. During any Performance Cycle, the
Committee may adjust the Performance Goals for such Performance Cycle as it
deems equitable in recognition of unusual or nonrecurring events affecting
Corporation, changes in applicable tax laws or accounting principles, or such
other factors as the Committee may determine.
EPITOPE, INC.
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10.5 Determination of Awards. As soon as practicable after the end of a
Performance Cycle, the Committee will determine the extent to which Performance
Awards have been earned on the basis of performance in relation to the
established Performance Goals.
10.6 Timing and Form of Payment. Settlement of earned Performance
Awards will be made to the Participant as soon as practicable after the
expiration of the Performance Cycle and the Committee's determination under
Section 10.5, in the form of cash, installments, Shares, Deferred Compensation
Options, or any combination of the foregoing or in any other form as the
Committee determines.
10.7 Performance Goals for Executive Officers. The performance goals
for Performance Awards granted to executive officers of Corporation may relate
to corporate performance, business unit performance, or a combination of both.
(a) Corporate performance goals will be based on financial
performance goals related to the performance of Corporation as a whole
and may include one or more measures related to earnings,
profitability, efficiency, or return to stockholders such as earnings
per share, operating profit, stock price, costs of production, or other
measures.
(b) Business unit performance goals will be based on a
combination of financial goals and strategic goals related to the
performance of an identified business unit for which a Participant has
responsibility. Strategic goals for a business unit may include one or
a combination of objective factors relating to success in implementing
strategic plans or initiatives, introductory products, constructing
facilities, or other identifiable objectives. Financial goals for a
business unit may include the degree to which the business unit
achieves one or more objective measures related to its revenues,
earnings, profitability, efficiency, operating profit, costs of
production, or other measures.
(c) Any corporate or business unit goals may be expressed as
absolute amounts or as ratios or percentages. Success may be measured
against various standards, including budget targets,
improvement over prior periods, and performance relative to other
companies, business units, or industry groups.
10.8 Award Limitations. The maximum number of Shares issuable with
respect to Performance Awards granted to any individual executive officer may
not exceed 150,000 Shares for any calendar year.
ARTICLE 11
OTHER STOCK-BASED AND COMBINATION AWARDS
11.1 Other Stock-Based Awards. The Committee (or the Board with respect
to Awards to Non-Employee Directors) may grant other Awards under the Plan
pursuant to which Shares are or may in the future be acquired, or Awards
denominated in or measured by Share equivalent units, including Awards valued
using measures other than the market value of Shares. Such Other Stock-Based
Awards may be granted either alone, in addition to, or in tandem with, any other
type of Award granted under the Plan.
11.2 Combination Awards. The Committee may also grant Awards under the
Plan in tandem or combination with other Awards or in exchange of Awards, or in
tandem or combination with, or as alternatives to, grants or rights under any
other employee plan of Corporation, including the plan of any acquired entity.
No action authorized by this section may reduce the amount of any existing
benefits or change the terms and conditions thereof without the Participant's
consent.
EPITOPE, INC.
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ARTICLE 12
DEFERRAL ELECTIONS
The Committee may permit a Participant to elect to defer receipt of the
payment of cash or the delivery of Shares that would otherwise be due to such
Participant by virtue of the exercise, earn-out, or Vesting of an Award made
under the Plan. If any such election is permitted, the Committee will establish
rules and procedures for such payment deferrals, including, but not limited to:
(a) payment or crediting of reasonable interest on such deferred amounts
credited in cash, (b) the payment or crediting of dividend equivalents in
respect of deferrals credited in Share equivalent units, or (c) granting of
Deferred Compensation Options.
ARTICLE 13
DIVIDEND EQUIVALENTS
Any Awards may, at the discretion of the Committee, earn dividend
equivalents. In respect of any such Award that is outstanding on a dividend
record date for Common Stock, the Participant may be credited with an amount
equal to the amount of cash or stock dividends that would have been paid on the
Shares covered by such Award, had such covered Shares been issued and
outstanding on such dividend record date. The Committee will establish such
rules and procedures governing the crediting of dividend equivalents, including
the timing, form of payment, and payment contingencies of such dividend
equivalents, as it deems appropriate or necessary.
ARTICLE 14
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
14.1 Plan Does Not Restrict Corporation. The existence of the Plan and
the Awards granted hereunder will not affect or restrict in any way the right or
power of the Board or the shareholders of Corporation to make or authorize any
adjustment, recapitalization, reorganization, or other change in Corporation's
capital structure or its business, any merger or consolidation of the
Corporation, any issue of bonds, debentures, preferred or prior preference
stocks ahead of or affecting Corporation's capital stock or the rights thereof,
the dissolution or liquidation of Corporation or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding.
14.2 Adjustments by the Committee. In the event of any change in
capitalization affecting the Common Stock of Corporation, such as a stock
dividend, stock split, recapitalization, merger, consolidation, split-up,
combination or exchange of shares or other form of reorganization, or any other
change affecting the Common Stock, such proportionate adjustments, if any, as
the Committee, in its sole discretion, may deem appropriate to reflect such
change, will be made with respect to the aggregate number of Shares for which
Awards in respect thereof may be granted under the Plan, the maximum number of
Shares which may be sold or awarded to any Participant, the number of Shares
covered by each outstanding Award, and the price per Share in respect of
outstanding Awards. The Committee may also make such adjustments in the number
of Shares covered by, and price or other value of any outstanding Awards in the
event of a spin-off or other distribution (other than normal cash dividends), of
Corporation assets to shareholders.
ARTICLE 15
AMENDMENT AND TERMINATION
The Board may amend, suspend, or terminate the Plan or any portion of
the Plan at any time, provided no amendment may be made without shareholder
approval if such approval is required by applicable law or the applicable
requirements of a stock exchange or over-the-counter stock trading system.
ARTICLE 16
MISCELLANEOUS
16.1 Unfunded Plan. The Plan will be unfunded and Corporation will not
be required to segregate any assets that may at any time be represented by
Awards under the Plan. Any liability of Corporation to any person
EPITOPE, INC.
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with respect to any Award under the Plan will be based solely upon any
contractual obligations that may be effected pursuant to the Plan. No such
obligation of Corporation will be deemed to be secured by any pledge of, or
other encumbrance on, any property of Corporation.
16.2 Payments to Trust. The Committee is authorized (but has no
obligation) to cause to be established a trust agreement or several trust
agreements whereunder the Committee may make payments of amounts due or to
become due to Participants in the Plan.
16.3 Other Corporation Benefit and Compensation Programs. Payments and
other benefits received by a Participant under an Award made pursuant to the
Plan will not be deemed a part of a Participant's regular, recurring
compensation for purposes of the termination indemnity or severance pay law of
any state or country and shall not be included in, or have any effect on, the
determination of benefits under any other employee benefit plan or similar
arrangement provided by Corporation or a Subsidiary unless expressly so provided
by such other plan or arrangements, or except where the Committee expressly
determines that an Award or portion of an Award should be included to accurately
reflect competitive compensation practices or to recognize that an Award has
been made in lieu of a portion of cash compensation. Awards under the Plan may
be made in combination with or in tandem with, or as alternatives to, grants,
awards, or payments under any other Corporation or Subsidiary plans,
arrangements, or programs. The Plan notwithstanding, Corporation or any
Subsidiary may adopt such other compensation programs and additional
compensation arrangements as it deems necessary to attract, retain, and reward
employees and directors for their service with Corporation and its Subsidiaries.
16.4 Securities Law Restrictions. No Shares may be issued under the
Plan unless counsel for Corporation is satisfied that such issuance will be in
compliance with applicable federal and state securities laws. Certificates for
Shares delivered under the Plan may be subject to such stop-transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Common Stock is then listed, and any
applicable federal or state securities law. The Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to such
restrictions.
16.5 Governing Law. Except with respect to references to the Code or
federal securities laws, the Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the state of Oregon.
ARTICLE 17
SHAREHOLDER APPROVAL
The Plan is expressly subject to the approval of the Plan by the
shareholders at the 2000 annual meeting of Corporation's shareholders.
EPITOPE, INC.
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PROXY
EPITOPE, INC.
2000 ANNUAL MEETING OF SHAREHOLDERS
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Charles E. Bergeron and Theodore R. Gwin, 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 2000 Annual Meeting of
Shareholders of Epitope, Inc. (the "Company"), to be held on Tuesday, February
15, 2000, and at any 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 AND FOR
ITEM 2. 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.
2000 ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, FEBRUARY 15, 2000
<PAGE>
Please mark your votes as indicated in this example [X]
FOR WITHHOLD
1. Election of Directors [ ] [ ]
Class III (Term Expiring 2001)
Frank G. Hausmann
Class I (Term Expiring 2003)
W. Charles Armstrong
Roger L. Pringle
John W. Morgan
(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.)
FOR AGAINST ABSTAIN
2. Approval of Epitope, Inc. 2000 Stock Award Plan [ ] [ ] [ ]
Signature(s) Dated: , 2000
------------------------------------ -------------
Please date and sign exactly as your name appears on this Proxy. If signing for
estates, trusts, partnerships or corporations, name and title or capacity should
be stated. If shares are held jointly, each holder should sign.
FOLD AND DETACH HERE
EPITOPE, INC.
2000 ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, FEBRUARY 15, 2000
