<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
OncorMed, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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 transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
(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:
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<PAGE> 2
ONCORMED, INC.
205 Perry Parkway
Gaithersburg, Maryland 20877
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 24, 1997
The Annual Meeting of Stockholders of OncorMed, Inc. (the "Company") will
be held at the Bethesda Marriott, 5151 Pooks Hill Road, Bethesda, Maryland
20814, telephone number (301) 897-9400 on June 24, 1997, at 9:00 a.m. (eastern
standard time) for the following purposes:
(1) To elect six directors to serve until the next Annual Meeting of
Stockholders or until their respective successors shall have been duly
elected and qualified;
(2) To ratify the selection of Arthur Andersen LLP, independent public
accountants, as auditors of the Company for fiscal year ending December 31,
1997; and
(3) To transact such other business as may properly come before the
Annual Meeting.
Only stockholders of record at the close of business on April 29, 1997 will
be entitled to notice of, and to vote at, the Annual Meeting of Stockholders. A
list of stockholders eligible to vote at the meeting will be available for
inspection at the meeting and for a period of ten days prior to the meeting
during regular business hours at the corporate headquarters at the address
above.
Whether or not you expect to attend the Annual Meeting, your proxy vote is
important. To assure your representation at the meeting, please sign and date
the enclosed proxy card and return it promptly in the enclosed envelope, which
requires no additional postage if mailed in the United States or Canada.
By Order of the Board of Directors
/s/ L. ROBERT JOHNSTON, JR.
L. Robert Johnston, Jr.
Secretary
May 15, 1997
- --------------------------------------------------------------------------------
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD
BE COMPLETED AND RETURNED PROMPTLY
- --------------------------------------------------------------------------------
<PAGE> 3
ONCORMED, INC.
PROXY STATEMENT
MAY 15, 1997
This Proxy Statement is furnished to stockholders of record of OncorMed,
Inc. (the "Company") as of April 29, 1997 in connection with the solicitation of
proxies by the Board of Directors of the Company (the "Board of Directors" or
"Board") for use at the Annual Meeting of Stockholders to be held on June 24,
1997 (the "Annual Meeting").
Shares cannot be voted at the meeting unless the owner is present in person
or by proxy. All properly executed and unrevoked proxies in the accompanying
form that are received in time for the meeting will be voted at the meeting or
any adjournment thereof in accordance with instructions thereon, or if no
instructions are given, will be voted "FOR" the election of the named nominees
and "FOR" the ratification of Arthur Andersen LLP, independent public
accountants, as auditors of the Company for the fiscal year ending December 31,
1997, and will be voted in accordance with the best judgment of the persons
appointed as proxies with respect to other matters which properly come before
the Annual Meeting. Any person giving a proxy may revoke it by written notice to
the Company at any time prior to exercise of the proxy. In addition, although
mere attendance at the Annual Meeting will not revoke the proxy, a stockholder
who attends the meeting may withdraw his or her proxy and vote in person.
Abstentions and broker non-votes will be counted for purposes of determining the
presence or absence of a quorum for the transaction of business at the Annual
Meeting. Abstentions will be counted in tabulations of the votes cast on each of
the proposals presented at the Annual Meeting, whereas broker non-votes will not
be counted for purposes of determining whether a proposal has been approved.
The Annual Report of the Company (which does not form a part of the proxy
solicitation material), including the Annual Report on Form 10-K with the
financial statements of the Company for the fiscal year ended December 31, 1996,
is being distributed concurrently herewith to stockholders.
The mailing address of the principal executive offices of the Company is
205 Perry Parkway, Gaithersburg, Maryland 20877. This Proxy Statement and the
accompanying form of proxy are being mailed to the stockholders of the Company
on or about May 15, 1997.
VOTING SECURITIES
The Company has only one class of voting securities outstanding, its common
stock, par value $0.01 per share (the "Common Stock"). At the Annual Meeting,
each stockholder of record at the close of business on April 29, 1997 will be
entitled to one vote for each share of Common Stock owned on that date as to
each matter presented at the Annual Meeting. On April 29, 1997, 7,814,022 shares
of Common Stock were outstanding. A list of stockholders eligible to vote at the
Annual Meeting will be available for inspection at the Annual Meeting and for a
period of ten days prior to the Annual Meeting during regular business hours at
the principal executive offices of the Company at the address specified above.
ELECTION OF DIRECTORS
Unless otherwise directed, the persons appointed in the accompanying form
of proxy intend to vote at the Annual Meeting for the election of the six
nominees named below as directors of the Company to serve until the next Annual
Meeting or until their successors are duly elected and have qualified. If any
nominee is unable to be a candidate when the election takes place, the shares
represented by valid proxies will be voted in favor of the remaining nominees.
The Board of Directors does not currently anticipate that any nominee will be
unable to be a candidate for election.
The Board of Directors currently has six members, all of whom are nominees
for re-election.
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<PAGE> 4
STOCKHOLDER APPROVAL
The affirmative vote of a plurality of the Company's outstanding Common
Stock represented and voting at the Annual Meeting is required to elect the
directors.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THESE
NOMINEES.
INFORMATION REGARDING NOMINEES FOR ELECTION AS DIRECTORS
The Board of Directors currently has six members. The following information
with respect to the principal occupation or employment, other affiliations and
business experience of each of the six nominees during the last five years has
been furnished to the Company by such nominee. Except as indicated, each of the
nominees has had the same principal occupation for the last five years.
John W. Colloton, 66, has been a director of the Company since April 1994.
Mr. Colloton currently serves as Vice President for Statewide Health Services
for The University of Iowa. Previously, he served as Director of The University
of Iowa Hospitals and Clinics from 1971 until 1993. Mr. Colloton serves on the
Boards of Directors of Baxter International, Inc., Iowa State Bank & Trust
Company and the MidAmerican Energy Company. He is also Chairman of the Board of
Blue Cross/Blue Shield of Iowa and South Dakota.
Douglas Dolginow, M.D., 43, joined the Company as President and Chief
Operating Officer in October 1993. Prior to joining the Company, he was Vice
President of regional operations for Nichols Institute, a clinical laboratory
company, from May 1991 to October 1993. From 1983 to 1991, he served as medical
director for multiple clinical laboratories including Highland General Hospital,
Oakland, California and Mt. Zion Hospital, San Francisco, California. Since
1984, he has been an active member of the Clinical Faculty at the University of
California, San Francisco. He has been a Director of the Company since May 1994.
John Pappajohn, 68, has been a director of the Company since its inception
in July 1993. Since 1969, Mr. Pappajohn has been the sole owner of Pappajohn
Capital Resources, a venture capital firm, and President of Equity Dynamics,
Inc., a financial consulting firm in Des Moines, Iowa. Mr. Pappajohn serves as a
director of the following public companies: CORE, Inc., Drug Screening Systems,
Inc., Fuisz Technologies, Inc., PACE Health Systems, Inc., GalaGen, Inc.,
HealthDesk Inc., Patient InfoSystems, United Systems Technology, Inc. and The
Care Group Inc.
Wayne C. Patterson, 61, has been a director of the Company since November
1996. Since June 1992, he has been the President of Green Mountain Associates,
Inc., a consulting firm. From March 1991 to June 1992, Mr. Patterson served as
the National Practice Head of the Individual Practice of King Chapman Broussard
& Gallagher, a management consulting firm. From 1980 to 1991, Mr. Patterson held
various positions at Nichols Institute, a clinical laboratory company, including
President/Chief Operating Officer of Nichols Institute Laboratories from 1989 to
1991.
Timothy J. Triche, M.D., Ph.D., 52, joined the Company as Chief Executive
Officer and Chairman of the Board of Directors in May 1994. Dr. Triche has
served as Pathologist-in-Chief for The Children's Hospital of Los Angeles in Los
Angeles, California, and Professor of Pathology and Pediatrics at, and Vice
Chairman of, the University of Southern California School of Medicine, Los
Angeles, California, since 1988. Prior to June 1988, he was Chief of the
Ultrastructural Laboratory of the Division of Pathology at the National Cancer
Institute of the National Institutes of Health in Bethesda, Maryland. He is a
director of Health Management Inc. and Oncor, Inc. ("Oncor"), and serves on
Oncor's Scientific Advisory Board. He has been a director of the Company since
April 1994.
Stephen Turner, 52, has been a director of the Company since its inception
in July 1993. Until May 1994, when Dr. Triche joined the Company, Mr. Turner
served as the Company's Chief Executive Officer and Chairman of the Board of
Directors. Mr. Turner has also been Chairman of the Board of Directors and Chief
Executive Officer of Oncor since 1983. From 1976 to 1983, Mr. Turner was the
founder and Chairman of the
2
<PAGE> 5
Board of Bethesda Research Laboratories, Inc. ("BRL"), now a division of Life
Technologies, Inc. BRL is a biotechnology company engaged in the business of
molecular biology. Prior to joining BRL, Mr. Turner was employed by Becton,
Dickinson and Company, a health care company. Mr. Turner is a director of Drug
Screening Systems, Inc.
COMMITTEES OF THE BOARD
The Audit Committee comprises Messrs. John W. Colloton, John Pappajohn,
Wayne C. Patterson and Stephen Turner, and its functions include recommending to
the Board of Directors the selection of the Company's auditors and reviewing
with such auditors the plan and results of their audit and the adequacy of the
Company's systems of internal accounting controls and management information
systems. In addition, the Audit Committee reviews the independence of the
auditors and their fees for services rendered to the Company.
The Compensation Committee comprises Messrs. John W. Colloton, John
Pappajohn, Wayne C. Patterson and Stephen Turner, and advises the Chief
Executive Officer and the Board of Directors on matters of the Company's
compensation philosophy and the compensation of executive officers. The
Compensation Committee's functions also include reviewing and setting the
compensation of the Chief Executive Officer and Directors. The Committee
administers all plans relating to the compensation of officers, including the
Company's Restated 1993 Stock Option Plan.
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
During 1996, the Board of Directors held five meetings and acted 15 times
by unanimous written consent, the Audit Committee met twice and the Compensation
Committee met once. During 1996, each director attended all meetings of the
Board of Directors except for John W. Colloton who missed one meeting.
COMPLIANCE WITH REPORTING REQUIREMENTS
Under the securities laws of the United States, the Company's directors,
executive (and certain other) officers, and any persons holding more than ten
percent of the Company's Common Stock are required to report their ownership of
the Company's Common Stock and any changes in that ownership to the Securities
and Exchange Commission. Specific due dates for these reports have been
established and the Company is required to report in this Proxy Statement any
failure to file by these dates during 1996. Based solely on its review of such
forms received by it from such persons for their 1996 transactions, the Company
believes that all filing requirements applicable to such directors, executive
(and certain other) officers and greater than ten percent beneficial owners were
complied with.
COMPENSATION OF DIRECTORS
Cash Compensation. Directors do not receive a fee for attending Board or
committee meetings, but are reimbursed for expenses incurred in connection with
performing their duties as directors of the Company.
Stock Option Automatic Grant. Pursuant to an automatic grant program
contained in the Company's Restated 1993 Stock Option Plan (the "Plan"), each
individual who first becomes a non-employee Board member after the effective
date of the Plan, whether through election by the Company's stockholders or
appointment by the Board, will receive, at the time of such initial election or
appointment, an automatic option grant to purchase 50,000 shares of Common
Stock. Each option granted under the automatic grant program will have an
exercise price equal to 100% of the fair market value of the Common Stock on the
automatic grant date and a maximum term of 10 years, subject to earlier
termination upon the optionee's cessation of Board service. The grant will
become exercisable in three equal annual installments beginning on the date of
the grant. None of the nominees for the Board are eligible to receive such
automatic grants.
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<PAGE> 6
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE OFFICERS
The executive officers of the Company on March 31, 1997 were the following:
<TABLE>
<CAPTION>
NAME AGE POSITION
-------------------------------------------- --- --------------------------------------
<S> <C> <C>
Timothy J. Triche, M.D., Ph.D. ............. 52 Chief Executive Officer
Douglas Dolginow, M.D. ..................... 43 President and Chief Operating Officer
Lee Robert Johnston, Jr. ................... 37 Chief Financial Officer, Secretary,
Treasurer and Vice President
Leslie M. Alexandre, Dr.P.H. ............... 39 Vice President, Corporate Affairs
</TABLE>
INFORMATION CONCERNING EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Lee Robert Johnston, Jr. joined the Company as Chief Financial Officer and
Vice President in June 1994 and was elected Secretary and Treasurer in August
1994. Prior to joining the Company, he was Assistant Treasurer/Manager of
Finance of American Mobile Satellite Corporation, a telecommunications company,
from 1992 to June 1994 and Manager of Finance from February 1990 to 1992. Mr.
Johnston was an Assistant Vice President of Sovran Bank/Maryland from 1989 to
1990.
Leslie M. Alexandre, Dr.P.H. joined the Company as Vice President,
Corporate Affairs in February 1995. Prior to joining the Company, Dr. Alexandre
was Government Affairs Representative, Health Policy for EDS, Inc., an
information technology company, from February 1992 to January 1995. From May
1991 to January 1992, she was the Senior Health Legislative Assistant to U.S.
Senator David Durenberger and from January 1990 to April 1991, she was
Professional Staff on the U.S. Senate Special Committee on Aging. Dr. Alexandre
is a director of CORE, Inc.
4
<PAGE> 7
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation paid
by the Company during 1994, 1995 and 1996 to the Company's Chief Executive
Officer, the three most highly compensated executive officers of the Company and
two other individuals who were not serving as executive officers at the end of
the last completed fiscal year whose total compensation during 1996 exceeded
$100,000 (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION(1) SECURITIES
-------------------- UNDERLYING OTHER
SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR $ ($) (#)(2) ($)
------------------------------ ---- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Timothy J. Triche, M.D.,
Ph.D. ...................... 1996 $180,000 $50,000 -- $2,870(3)
Chief Executive Officer 1995 180,000 -- -- 2,840(3)
1994 117,000 -- 225,000 1,914(3)
Douglas Dolginow, M.D. ....... 1996 200,000 50,000 -- 1,173(3)
President and Chief Operating 1995 200,000 25,000 -- 1,267(3)
Officer 1994 200,000 -- 118,000 854(3)
Lee Robert Johnston, Jr. ..... 1996 131,420 25,000 30,000 --
Vice President and Chief 1995 110,351 -- 10,000 --
Financial Officer 1994 58,884 5,000 40,000 --
Nancy E. Wetherbee............ 1996 121,976(4) -- -- --
Former Vice President, Sales 1995 28,554 -- 40,000 --
and Marketing 1994 -- -- -- --
Patricia D. Murphy, Ph.D. .... 1996 112,500(5) -- -- --
Former Vice President, 1995 150,000 -- 5,000 --
Director of Laboratory 1994 73,864 -- 40,000 --
Operations
Leslie M. Alexandre,
Dr.P.H. .................... 1996 83,434 16,667 -- --
Vice President, Corporate 1995 73,979 -- 60,000 --
Affairs 1994 -- -- -- --
</TABLE>
- ---------------
(1) Other annual compensation in the form of perquisites and other personal
benefits have been omitted as the aggregate amount of such perquisites and
other personal benefits constituted the lesser of $50,000 or 10% of the
total annual salary and bonuses for each Named Executive Officer in 1994,
1995 and 1996.
(2) The Company did not grant any stock appreciation rights or make any
long-term incentive plan payments to any Named Executive Officers in 1994,
1995 or 1996.
(3) Represents life insurance premiums paid by the Company.
(4) In November 1996, Ms. Wetherbee accepted a new position within the Company
in a non-executive officer capacity.
(5) Represents amounts received by Dr. Murphy prior to her leaving the Company
in September 1996.
RESTATED 1993 STOCK OPTION PLAN
All of the stock option grants to Named Executive Officers in 1996 were
made pursuant to the Plan which was originally adopted by the Board of Directors
in September 1993 and amended and restated in June 1994. The Plan was approved
by the Company's stockholders in July 1994. On October 25, 1995, the Board
approved and on November 27, 1995, the stockholders approved an increase in the
number of shares authorized for issuance under the Plan from 1,500,000 to an
aggregate of 2,250,000 shares of Common Stock.
The Plan is administered by the Compensation Committee (the "Plan
Administrator") and contains two separate option grant programs: (i) a
discretionary option grant program (the "Discretionary Program"),
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<PAGE> 8
under which key employees (including officers and directors) and consultants
may, at the discretion of the Plan Administrator, be granted options to purchase
shares of Common Stock at an exercise price determined by the Plan Administrator
at the time of grant, and (ii) an automatic option grant program (the "Automatic
Program"), under which option grants will automatically be made to the
non-employee members of the Board upon their election or appointment to purchase
shares of Common Stock at an exercise price equal to 100% of the fair market
value of the option shares on the grant date. The options granted under the
Discretionary Program may be either incentive stock options designed to meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended, or
nonstatutory options not intended to satisfy such requirements. All grants under
the Automatic Program will be nonstatutory options.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows, with respect to the Named Executive Officers,
certain information concerning the grant of stock options in 1996. No stock
appreciation rights were granted during 1996.
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
------------------------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
TOTAL STOCK PRICE
NUMBER OF OPTIONS INITIAL APPRECIATION FOR
SECURITIES GRANTED TO EXERCISE OPTION TERM(1)
UNDERLYING EMPLOYEES IN PRICE EXPIRATION ------------------
NAME OPTIONS GRANTED FISCAL YEAR ($/SHARE) DATE 5% 10%
- -------------------------------- --------------- ------------ --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Timothy J. Triche, M.D.,
Ph.D. ........................ -- -- -- -- -- --
Douglas Dolginow, M.D. ......... -- -- -- -- -- --
Lee Robert Johnston, Jr. ....... 15,000 7.0% $ 7.50 3/5/06 $70,751 $179,296
15,000 7.0 6.875 6/24/06 64,855 164,355
Nancy E. Wetherbee.............. -- -- -- -- -- --
Patricia D. Murphy, Ph.D. ...... -- -- -- -- -- --
Leslie M. Alexandre, Dr.P.H. ... -- -- -- -- -- --
------- ------ --------- ---------- ------- --------
</TABLE>
- ---------------
(1) The options vest in three equal annual installments.
(2) Potential realizable value is based on the assumption that the price per
share of the Common Stock appreciates at the assumed annual rate of stock
appreciation for the option term. The assumed 5% and 10% annual rates of
appreciation (compounded annually) over the term of the option are set forth
in accordance with the rules and regulations adopted by the Securities and
Exchange Commission and do not represent the Company's estimate of stock
price appreciation.
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<PAGE> 9
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to the
Named Executive Officers regarding stock option values at December 31, 1996. No
stock options were exercised by such persons in 1996. No stock appreciation
rights were exercised by any Named Executive Officer during 1996 and no stock
appreciation rights were outstanding at December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END AT FISCAL YEAR END(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Timothy J. Triche, M.D., Ph.D. ................ 145,000 80,000 $ 517,500 $ 345,000
Douglas Dolginow, M.D. ........................ 243,000 0 940,125 0
Lee Robert Johnston, Jr. ...................... 29,999 40,001 48,332 24,168
Nancy E. Wetherbee............................. 13,333 26,667 0 0
Patricia D. Murphy, Ph.D. ..................... 18,332 26,668 0 0
Leslie M. Alexandre, Dr.P.H. .................. 45,000 15,000 0 0
</TABLE>
- ---------------
(1) Amounts calculated by subtracting the exercise price of the options from the
market value of the underlying Common Stock using the closing bid price on
the American Stock Exchange of $4.8125 per share of Common Stock on December
31, 1996.
EMPLOYMENT ARRANGEMENTS
In the event the employment agreement of Timothy J. Triche, M.D., Ph.D.,
Chief Executive Officer of the Company, is terminated by the Company other than
for cause, he is entitled to receive his salary for nine months from the date of
termination.
In the event the employment agreement of Douglas Dolginow, M.D., President
and Chief Operating Officer of the Company, is terminated, he is entitled to
receive a severance payment equal to six months' salary. In addition, Dr.
Dolginow is eligible to receive his salary for up to an additional six months,
payable monthly, in the event he is not gainfully employed at the end of six
months following his termination date.
In the event the employment agreement of Leslie M. Alexandre, Dr.P.H., Vice
President, Corporate Affairs of the Company, is terminated by her for cause or
by the Company other than for cause, she is entitled to receive her salary and
benefits for one year from the date of termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Messrs. John W. Colloton,
John Pappajohn, Wayne C. Patterson and Stephen Turner. Prior to June 1994, Mr.
Pappajohn and Mr. Turner performed the duties of the Compensation Committee.
Until May 1994, Mr. Turner served as the Company's Chief Executive Officer. In
addition, Timothy J. Triche, M.D., Ph.D. served on the Compensation Committee of
Oncor. Mr. Turner is the Chief Executive Officer and Chairman of the Board of
Directors of Oncor.
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<PAGE> 10
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors is responsible for
establishing the base salary and incentive cash bonus programs for the Company's
executive officers and administering certain other compensation programs for
such individuals, subject in each instance to review by the full Board. The
Compensation Committee also is responsible for the administration of the
Company's Restated 1993 Stock Option Plan under which grants may be made to
executive officers. Prior to the appointment of the Compensation Committee in
June 1994, Mr. Turner and Mr. Pappajohn performed the duties of the Compensation
Committee. The Compensation Committee has reviewed and ratified the compensation
paid to executive officers in 1996.
General Compensation Policy. The fundamental policy of the Compensation
Committee is to provide the Company's executive officers with competitive
compensation opportunities based upon their contribution to the development and
financial success of the Company and their personal performance. It is the
Compensation Committee's objective to have a portion of each executive officer's
compensation contingent upon the Company's performance as well as upon his own
level of performance. Accordingly, the compensation package for each executive
officer is comprised of two elements: (i) base salary which reflects individual
performance and is designed primarily to be competitive with salary levels in
the industry and (ii) long-term stock-based incentive awards which strengthen
the mutuality of interests between the executive officers and the Company's
stockholders.
Factors. The principal factors which the Compensation Committee considered
in ratifying the components of each executive officer's compensation package for
1996 are summarized below. The Compensation Committee may, however, in its
discretion apply entirely different factors in setting executive compensation
for future years.
- Base Salary. The base salary for each executive officer is determined on
the basis of the following factors: experience; personal performance; the salary
levels in effect for comparable positions within and without the industry; and
internal base salary comparability considerations. The weight given to each of
these factors differs from individual to individual, as the Compensation
Committee deems appropriate.
For purposes of the stock price performance graph which appears later in
this proxy statement, the Company has selected a peer group of companies in
industries which are similar or related to the Company's industry. Several of
the companies included in the peer group index were also among the companies
which the Committee and the Committee's predecessors surveyed as part of the
peer group for comparative compensation purposes. However, in selecting
companies to survey for such compensation purposes, the Compensation Committee
and the Committee's predecessors considered many factors including geographic
location, growth rate, annual revenue and profitability and market
capitalization. The Compensation Committee and the Committee's predecessors also
considered companies outside the industry which may compete with the Company in
recruiting executive talent. For this reason, the number of companies surveyed
for compensation data was substantially less than the number of companies
included in the peer group index.
While it is the general policy of the Company not to award
performance-based cash bonuses, from time to time, the Committee has authorized
cash bonuses when such bonuses have been deemed to be in the best interest of
the Company. The circumstances for such awards vary but have included bonus
payments pursuant to the terms of negotiated employment arrangements. The actual
bonus paid for the year to each of the Named Executive Officers is indicated in
the Bonus column of the Summary Compensation Table.
- Long-Term Incentive Compensation. Long-term incentives are provided
through stock option grants. The grants are designed to align the interests of
each executive officer with those of the stockholders and provide each
individual with a significant incentive to manage the Company from the
perspective of an owner with an equity stake in the Company. Each grant allows
the individual to acquire shares of the Company's Common Stock at a fixed price
per share (generally, the market price on the grant date) over a specified
period of time (up to 10 years). Each option generally becomes exercisable in
installments over a three or four-year period, contingent upon the executive
officer's continued employment with the Company. Accordingly, the option will
provide a return to the executive officer only if the executive officer remains
employed by
8
<PAGE> 11
the Company during the vesting period, and then only if the market price of the
underlying shares appreciates over the option term.
The number of shares subject to each option grant is set at a level
intended to create a meaningful opportunity for stock ownership based on the
officer's current position with the Company, the base salary associated with
that position, the size of comparable awards made to individuals in similar
positions within the industry, the individual's potential for increased
responsibility and promotion over the option term and the individual's personal
performance in recent periods. The Compensation Committee also considers the
number of unvested options held by the executive officer in order to maintain an
appropriate level of equity incentive for that individual. However, the
Compensation Committee does not adhere to any specific guidelines as to the
relative option holdings of the Company's executive officers. There were 30,000
stock options granted to executive officers in 1996.
CEO Compensation. In setting the compensation payable to the Company's
Chief Executive Officer, the Compensation Committee seeks to achieve two
objectives: (i) establish a level of base salary competitive with that paid by
companies within the industry which are of comparable size to the Company and by
companies outside of the industry with which the Company competes for executive
talent, and (ii) make a significant percentage of the total compensation package
contingent upon the Company's performance and stock price appreciation.
The base salary established for Dr. Triche on the basis of the foregoing
criteria was intended to provide a level of stability and certainty each year.
Accordingly, this element of compensation was not affected to any significant
degree by Company performance factors.
Compliance with Internal Revenue Code Section 162(m). As a result of
Section 162(m) of the Internal Revenue Code of 1986, as amended, which was
enacted into law in 1993, the Company will not be allowed a federal income tax
deduction for compensation paid to certain executive officers, to the extent
that compensation exceeds $1 million per officer in any one year. This
limitation will apply to all compensation paid to the covered executive officers
which is not considered to be performance based. Compensation which does qualify
as performance-based compensation will not have to be taken into account for
purposes of this limitation. The Restated 1993 Stock Option Plan contains
certain provisions which are intended to assure that any compensation deemed
paid in connection with the exercise of stock options granted under that plan
with an exercise price equal to the market price of the option shares on the
grant date will qualify as performance-based compensation.
The Compensation Committee does not expect that the compensation to be paid
to the Company's executive officers for 1997 will exceed the $1 million limit
per officer. Accordingly, until final Treasury regulations are issued with
respect to the new $1 million limitation, the Company will defer any decision on
whether or not to restructure one or more components of the compensation paid to
the executive officers so as to qualify those components as performance-based
compensation that will not be subject to the $1 million limitation.
The Compensation Committee
Mr. John W. Colloton
Mr. John Pappajohn
Mr. Wayne C. Patterson
Mr. Stephen Turner
9
<PAGE> 12
PERFORMANCE GRAPH
Set forth below is a graph comparing the annual percentage change in the
Company's cumulative total stockholder return on its Common Stock from September
27, 1994 (the date of the Company's initial public offering) to present with the
cumulative total return of the Standard & Poor's ("S&P") SmallCap Market and a
group of peer issuers in a line of business similar to the Company during the
same period.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
ONCORMED, INC., STANDARD & POORS SMALLCAP AND PEER GROUP
(PERFORMANCE RESULTS THROUGH 12/31/96)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) 3/14/94 1994 1995 1996
<S> <C> <C> <C> <C>
ONCORMED, INC. 100.00 133.33 100.00 80.22
STANDARD & POORS SMALLCAP 100.00 97.03 126.11 152.99
PEER GROUP 100.00 72.86 78.54 69.34
</TABLE>
Assumes $100 invested on 9/28/94 in the initial offering price of $6.00 per
share in OncorMed, Inc. Common Stock, Standard & Poors SmallCap Index and the
Peer Group.
*Cumulative total return assumes reinvestment of dividends.
The Peer Group consists of Dianon Systems, Inc., Meris Laboratories, Inc.,
Myriad Genetics, Inc., and PharmChem Labs, Inc.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, which might incorporate future filings made by
the Company under those statutes, the preceding Compensation Committee Report on
Executive Compensation and the Company Stock Performance Graph will not be
incorporated by reference into any of those prior filings, nor will such report
or graph be incorporated by reference into any future filings made by the
Company under those statutes.
10
<PAGE> 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 1, 1997 by (i) each director
and nominee for director, (ii) each of the Named Executive Officers, (iii) each
person known by the Company to be the beneficial owner of more than 5% of the
Company's Common Stock and (iv) all executive officers and directors as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNERS BENEFICIALLY OWNED(2) OUTSTANDING(1)(2)
- ------------------------------------------------------ --------------------- -----------------
<S> <C> <C>
Timothy J. Triche, M.D., Ph.D. ....................... 195,100(3) 2.4%
Douglas Dolginow, M.D. ............................... 243,750(4) 3.0
Lee Robert Johnston, Jr. ............................. 48,333(5) *
Patricia D. Murphy, Ph.D. ............................ 18,332(6) *
Nancy E. Wetherbee.................................... 13,333(7) *
Leslie M. Alexandre, Dr.P.H. ......................... 46,000(8) *
John W. Colloton...................................... 50,000(9) *
John Pappajohn........................................ 329,667(10) 4.2
Wayne C. Patterson.................................... 16,666(11) *
Stephen Turner........................................ 202,500(12) 2.5
Oncor, Inc. .......................................... 2,035,787(13) 25.9
209 Perry Parkway
Gaithersburg, MD 20877
Mellon Bank Corporation............................... 989,000 12.7
One Mellon Bank Center
Pittsburgh, PA 15258-0001
Edgewater Private Equity.............................. 420,966 5.4
666 Grand Avenue
Suite 200
Des Moines, IA 50309
All executive officers and directors as a group (8
persons)............................................ 1,132,016(14) 13.1
</TABLE>
- ---------------
* Less than one percent
(1) Percent ownership is based upon 7,814,022 shares of Common Stock issued and
outstanding.
(2) Gives effect to the shares of Common Stock issuable within 60 days after
March 1, 1997 upon the exercise of all options and other rights
beneficially owned by the indicated stockholder on that date. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and includes voting and investment power with respect
to shares.
(3) Includes 185,000 shares of Common Stock issuable upon exercise of stock
options.
(4) Includes 243,000 shares of Common Stock issuable upon exercise of stock
options.
(5) Includes 48,333 shares of Common Stock issuable upon exercise of stock
options.
(6) Includes 18,332 shares of Common Stock issuable upon exercise of stock
options.
(7) Includes 13,333 shares of Common Stock issuable upon exercise of stock
options.
(8) Includes 45,000 shares of Common Stock issuable upon exercise of stock
options.
(9) Includes 50,000 shares of Common Stock issuable upon exercise of stock
options.
(10) Includes (i) 142,167 shares of Common Stock owned by Mr. Pappajohn, (ii)
50,000 shares of Common Stock owned by Thebes Ltd., a company owned by Mr.
Pappajohn's wife, as to which Mr. Pappajohn disclaims beneficial ownership,
(iii) 50,000 shares of Common Stock owned by Halkis Ltd., as to which Mr.
Pappajohn has sole voting and investment power, and (iv) 87,500 shares of
Common Stock issuable upon exercise of stock options.
(11) Includes 16,666 shares of Common Stock issuable upon exercise of stock
options.
(12) Includes 162,500 shares of Common Stock issuable upon exercise of stock
options.
(13) Includes 35,787 shares of Common Stock issuable upon conversion of a
convertible note held by a wholly-owned subsidiary of Oncor.
(14) Includes 837,999 shares of Common Stock issuable upon exercise of stock
options.
11
<PAGE> 14
CERTAIN TRANSACTIONS
On July 12, 1993, the Company and Oncor entered into a technology license
agreement ("Oncor License") pursuant to which the Company was charged by Oncor a
semi-annual fee based on gross revenues, subject to certain minimum payment
obligations. In June 1994, the parties agreed to amend and restate the Oncor
License. In February, 1997 the Company and Oncor recently agreed to certain
changes to the Oncor License. For the year ended December 31, 1996, the Company
was charged approximately $200,000 by Oncor under the Oncor License.
In June 1994, the Company and Oncor converted certain amounts payable to
Oncor from the Company aggregating $715,751 into a convertible note (the
"Convertible Note"). The Convertible Note has a principal amount of $715,751,
bears interest at an annual rate of 7% and is convertible into Common Stock at
the option of the holder at a conversion price of $20 per share. Under the terms
of the Convertible Note, the Company is obligated to pay interest on a quarterly
basis and to pay the entire principal amount at maturity in June 1999. The
quarterly interest payments are approximately $12,700. During the fourth quarter
of 1994, Oncor assigned the Convertible Note to its wholly-owned subsidiary,
Oncor Finance, Inc.
During the second quarter of 1995, the Company finalized a services
agreement with Oncor and Codon Pharmaceuticals, Inc. ("Codon", a 41.6 percent
owned affiliate of Oncor), whereby the Company agreed to pay for laboratory
supplies and equipment provided by Oncor and Codon (the "Services Agreement").
The Services Agreement also provides that the Company will perform certain
experiments for Oncor and Codon at specified rates. During 1996, the company
incurred expenses totaling $72,000 and earned revenues of $5,700 under the
Services Agreement. In addition, the Company agreed to reimburse Oncor
approximately $77,000 for certain consultant expenses.
On March 5, 1996, the Company granted options to purchase 15,000 shares of
Common Stock to Lee Robert Johnston, Jr., Chief Financial Officer, Secretary,
Treasurer and Vice President of the Company, with an exercise price of $7.50
per share for no consideration. On June 24, 1996, Mr. Johnston was granted
additional options to purchase 15,000 shares of Common Stock, with an exercise
price of $6.875 per share for no consideration.
CERTAIN AFFILIATIONS
Stephen Turner, a director and the former Chief Executive Officer of the
Company, serves as the Chairman, Chief Executive Officer and a director of
Oncor. Timothy J. Triche, M.D., Ph.D., the current Chairman and Chief Executive
Officer and a director of the Company, is a director of Oncor. Pursuant to the
Oncor License referred to above, the Company made payments to Oncor exceeding
five percent of the Company's gross revenues for the fiscal year ended December
31, 1996.
INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors
appointed Arthur Andersen LLP, independent public accountants and auditors of
the Company since the Company's inception, as auditors of the Company to serve
for the year ending December 31, 1997, subject to the ratification of such
appointment by the stockholders at the Annual Meeting. A representative of
Arthur Andersen LLP will attend the Annual Meeting of Stockholders with the
opportunity to make a statement if he or she so desires and will also be
available to answer inquiries.
STOCKHOLDER APPROVAL
The affirmative vote of a plurality of the Company's outstanding Common
Stock represented and voting at the Annual Meeting is required to ratify the
appointment of Arthur Andersen LLP as auditors of the Company to serve for the
year ending December 31, 1997.
12
<PAGE> 15
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP.
STOCKHOLDER PROPOSALS
In accordance with regulations issued by the Securities and Exchange
Commission, stockholder proposals intended for presentation at the 1998 Annual
Meeting of Stockholders must be received by the Secretary of the Company no
later than January 2, 1998, if such proposals are to be considered for inclusion
in the Company's Proxy Statement.
OTHER MATTERS
Management knows of no matters that are to be presented for action at the
meeting other than those set forth above. If any other matters properly come
before the meeting, the persons named in the enclosed form of proxy will vote
the shares represented by proxies in accordance with their best judgment on such
matters.
Proxies will be solicited by mail and may also be solicited in person or by
telephone by some regular employees of the Company. The Company may also
consider the engagement of a proxy solicitation firm. Costs of the solicitation
will be borne by the Company.
By Order of the Board of Directors
/s/ LEE ROBERT JOHNSTON, JR.
Lee Robert Johnston, Jr.
Secretary
Gaithersburg, Maryland
May 15, 1997
13
<PAGE> 16
- --------------------------------------------------------------------------------
(FORM OF PROXY)
ONCORMED, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS -- JUNE 24, 1997
(THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY)
The undersigned stockholder of OncorMed, Inc. hereby appoints Douglas
Dolginow, M.D. and L. Robert Johnston, Jr., and each of them, with full
power of substitution, proxies to vote the shares of stock which the
undersigned could vote if personally present at the Annual Meeting of
Stockholders of OncorMed, Inc. to be held at the Bethesda Marriott, 5151
Pooks Hill Road, Bethesda, Maryland 20814, on June 24, 1997, telephone
number (301) 897-9400, at 9:00 A.M. (eastern standard time), or any
adjournment thereof.
1. ELECTION OF DIRECTORS (FOR TERMS AS DESCRIBED IN THE PROXY STATEMENT)
<TABLE>
<S> <C>
[ ] FOR all nominees below (except as marked to the contrary) [ ] WITHHOLD AUTHORITY to vote for all nominees below
</TABLE>
John W. Colloton, Douglas Dolginow, M.D., John Pappajohn, Wayne C.
Patterson, Timothy J. Triche, M.D., Ph.D., and Stephen Turner.
INSTRUCTION: To withhold authority to vote for an individual nominee,
write the nominee's name in the space provided below.
--------------------------------------------------------------------------
2. RATIFICATION OF ACCOUNTANTS
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN WITH RESPECT TO
</TABLE>
Proposal to ratify the selection of Arthur Andersen LLP, independent
public accountants, as auditors of the Company as described in the Proxy
Statement.
(Continued on other side)
- --------------------------------------------------------------------------------
<PAGE> 17
- --------------------------------------------------------------------------------
(Continued from other side)
3. IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
THE PERSONS NOMINATED BY MANAGEMENT AS DIRECTORS AND FOR PROPOSAL 2.
PLEASE MARK, DATE, SIGN AND MAIL PROMPTLY.
<TABLE>
<S> <C>
Dated: ------------------------------ , 1997
---------------------------------------------
Signature of Stockholder
---------------------------------------------
PLEASE DATE AND SIGN EXACTLY AS YOUR NAME
APPEARS ON THE ENVELOPE IN WHICH THIS MATERIAL
WAS MAILED. IF SHARES ARE HELD JOINTLY, EACH
STOCKHOLDER SHOULD SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEES, ETC. SHOULD USE FULL
TITLE AND, IF MORE THAN ONE, ALL SHOULD SIGN.
IF THE STOCKHOLDER IS A CORPORATION, PLEASE
SIGN FULL CORPORATE NAME BY AN AUTHORIZED
OFFICER.
</TABLE>
- --------------------------------------------------------------------------------
