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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Neoprobe Corporation
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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1999 ANNUAL MEETING OF STOCKHOLDERS
April 6, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of Neoprobe Corporation which will be held at 8:30 a.m., Eastern Daylight Time,
on May 19, 1999 at Columbus Marriott Northwest, 5805 Blazer Parkway, Dublin,
Ohio 43017. The matters on the meeting agenda are described in the Notice of
1999 Annual Meeting of Stockholders and Proxy Statement which accompany this
letter.
We hope you will be able to attend the meeting, but whatever your plans, we
ask that you please complete, execute, and date the enclosed proxy card and
return it in the envelope provided so that your shares will be represented at
the meeting.
Very truly yours,
/s/ David C. Bupp
David C. Bupp
Chief Executive Officer and President
NEOPROBE CORPORATION
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1999
TO THE STOCKHOLDERS OF
NEOPROBE CORPORATION:
The Annual Meeting of the Stockholders of Neoprobe Corporation, a Delaware
corporation (the "Company"), will be held at Columbus Marriott Northwest, 5805
Blazer Parkway, Dublin, Ohio 43017 at 8:30 a.m., Eastern Daylight Time, for the
following purposes:
1. To elect one director to serve for a term of three years or until
his successor is duly elected and qualified;
2. To approve the issuance of securities which are convertible into,
or which are exercisable for, shares of common stock representing
more than 20% of the outstanding common stock;
3. To consider and vote upon alternative proposals to amend the
Company's Restated Certificate of Incorporation to combine the
shares of Common Stock; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 1, 1999 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting and any adjournment thereof. A list of
stockholders will be available for examination by any stockholder at the Annual
Meeting and for a period of 10 days before the Annual Meeting at the executive
offices of the Company.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN, DATE,
AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED.
By Order of the Board of Directors
/s/ David C. Bupp
David C. Bupp
Chief Executive Officer and President
Dublin, Ohio
April 6, 1999
NEOPROBE CORPORATION
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1999 ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1999
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PROXY STATEMENT
DATED APRIL 6, 1999
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GENERAL INFORMATION
Solicitation. This Proxy Statement is furnished to the stockholders of
Neoprobe Corporation, a Delaware corporation (the "Company" or "Neoprobe"), in
connection with the solicitation by the Board of Directors of the Company (the
"Board of Directors") of proxies to be voted at the 1999 Annual Meeting of
Stockholders of the Company (the "Annual Meeting") to be held on May 19, 1999
and any adjournment thereof. This Proxy Statement and the accompanying proxy
card are first being mailed to stockholders on or about April 6, 1999.
Company Address. The mailing address of the Company's principal executive
offices is 425 Metro Place North, Suite 300, Dublin, Ohio 43017.
Voting Rights. Stockholders of record at the close of business on April 1,
1999 are entitled to notice of and to vote at the Annual Meeting. As of that
date, there were 22,966,017 shares of common stock of the Company, par value
$.001 per share ("Common Stock"), outstanding. Each holder of Common Stock of
record on April 1, 1999 is entitled to one vote per share held with respect to
all matters which may be brought before the Annual Meeting. On April 1, 1999,
there were 30,000 shares of 5% Series B Convertible Preferred Stock, par value
$.001 per share, stated value $100 per share ("Series B Preferred Stock"), of
the Company outstanding. Each share of Series B Preferred Stock is convertible
into 97 shares of Common Stock. Owners of shares of Series B Preferred Stock
have the right to vote with holders of Common Stock as one class on all matters
submitted to a vote of stockholders of the Company. Each share of Series B
Preferred Stock entitles its owner to cast a number of votes equal to the number
of shares of Common Stock into which the share of Series B Preferred Stock may
be converted. However, no share of Series B Preferred Stock may be voted if said
vote would cause the owner of the share to exercise, together with its
affiliates, more than 4.9% of the voting power of the Company. All of the owners
of Series B Preferred Stock as of April 1, 1999 are affiliated. Therefore,
holders of Series B Preferred Stock will be entitled to cast an aggregate of
1,125,334 votes on all matters which may be brought before the Annual Meeting.
Authorization. All shares represented by properly executed proxies received
by the Company pursuant to this solicitation will be voted in accordance with
the stockholder's directions specified on the proxy card. If no directions have
been specified by marking the appropriate squares on the accompanying proxy
card, the shares represented by such proxy will be voted in accordance with the
recommendation of the Board of Directors, which is FOR the election of Michael
P. Moore as a director to serve for a term of three years, FOR the approval of
the issuance of securities which are convertible into, or which are exercisable
for, shares of Common Stock representing more than 20% of the outstanding Common
Stock, and FOR the approval of alternative proposals to amend the Company's
Restated Certificate of Incorporation to combine the shares of Common Stock. The
proxy will also be voted at the discretion of the persons acting under the proxy
to transact such other business as may properly come before the Annual Meeting
and any adjournment thereof.
Revocation. Any stockholder returning the accompanying proxy has the power
to revoke it at any time before its exercise by giving notice of revocation to
the Company, by duly executing and delivering to the Company a proxy card
bearing a later date, or by voting in person at the Annual Meeting.
Tabulation. Under Section 216 of the General Corporation Law of the State
of Delaware ("GCL") and the By-laws of the Company, a quorum must be present at
the Annual Meeting in order for any valid action, including the election of
directors and voting on the other matters presented to the meeting, other than
adjournment, to be taken thereat. Section 216 of the GCL and the By-laws of the
Company provide that a quorum consists of a majority of the shares entitled to
vote at the Annual Meeting present in person or represented by proxy. Shares
represented by signed proxies that are returned to the Company will be counted
toward the quorum in all matters even though they are marked as "Abstain,"
"Against" or "Withhold Authority" on one or more or all matters or they are not
marked at all (see "General Information-Authorization"). Broker/dealers, who
hold their customers' shares in street name, may, under the applicable rules of
the exchanges and other self-regulatory organizations of which such
broker/dealers are members, sign and submit proxies for such shares and may vote
such shares on routine matters, which, under such rules, typically include the
election of directors, but broker/dealers may not vote such shares on other
matters without specific instructions from the customer who owns such shares.
Proxies signed and submitted by broker/dealers which have not been voted on
certain matters as described in the previous sentence are referred to as broker
non-votes. Such proxies count toward the establishment of a quorum.
Under Section 216 of the GCL and the By-laws of the Company, directors are
elected by a plurality of the votes for the respective nominees. Therefore,
proxies that are marked "Withhold Authority" and broker non-votes, if any, will
not affect the election of the director.
Under Rule 4310 (c)(25)(H) of the National Association of Securities
Dealers, Inc. the issuance of securities by the Company which are convertible
into, or which are exercisable for, shares of Common Stock representing more
than 20% of the Company's outstanding Common Stock must be approved by a
majority of the total stockholder votes cast on the issue in person or by proxy.
A proxy marked "Abstain" will be regarded as a vote against approval. Broker
non-votes are disregarded in determining the number of shares voted for approval
and in determining the total number of shares as to which the majority is
determined in such matter.
Under Section 242 of the GCL, the alternative proposals to amend the
Restated Certificate of Incorporation must be approved by a majority of the
total stockholder votes entitled to be cast on the issue. For the purposes of
Section 242 of the GCL, proxies marked "Abstain" and broker non-votes have the
same effect as votes against approval.
ELECTION OF DIRECTOR
NOMINEE FOR ELECTION AS DIRECTORS
The Company presently has seven directors on its Board of Directors,
comprised of three directors in each of two classes and one director in a third
class, with terms expiring at the Annual Meeting in 2000, 2001 and 1999,
respectively. At the Annual Meeting, the nominee to the Board of Directors
receiving the highest number of votes will be elected as a director to a term of
three years expiring in 2002. Michael P. Moore has been nominated as a director
to serve for a term of three years.
The Company has no reason to believe that the nominee will not stand for
election or serve as a director. In the event that the nominee fails to stand
for election, the proxies will be voted for the election of another person
designated by the persons named in the proxy. See "General
Information-Tabulation."
THE BOARD OF DIRECTORS HAS NOMINATED THE FOLLOWING PERSON TO SERVE AS A DIRECTOR
OF THE COMPANY UNTIL THE 2002 ANNUAL MEETING:
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MICHAEL P. MOORE, M.D., PH.D., age 48, has served as a director of the
Company since May 1994. Dr. Moore has been Attending Physician, Breast Surgery,
Columbia Presbyterian Medical Center since June 1986. Dr. Moore has a B.S.
degree from Boston College, a Ph.D. degree from Loyola University of Chicago,
and an M.D. degree from The Loyola Stritch School of Medicine.
DIRECTORS WHOSE TERMS CONTINUE UNTIL THE 2000 ANNUAL MEETING:
MELVIN D. BOOTH, age 54, has served as a director of the Company since May
1997. He has been President, Chief Operating Officer and a director of Human
Genome Sciences, Inc. since July 1995. Mr. Booth was with Syntex Corporation and
its subsidiaries from 1975 to 1995. Mr. Booth was the President of Syntex
Laboratories, Inc. from 1993 to 1995 and served as a Vice President of Syntex
Corporation from 1992 to 1995. From 1992 to 1993 he served as the President of
Syntex Pharmaceuticals Pacific. From 1991 to 1992 he served as an area Vice
President of Syntex, Inc. From 1986 to 1991 he served as the President of
Syntex, Inc., Canada. Mr. Booth also serves as a director of Medimmune, Inc. He
has been active in U.S. pharmaceutical industry organizations and is also a past
Chairman of the Pharmaceutical Manufacturers Association of Canada. Mr. Booth
has a B.S. degree from Northwest Missouri State University and holds a Certified
Public Accountant certificate.
JOHN S. CHRISTIE, age 49, has been President of JMAC, Inc., an investment
holding company, since September 1995. Effective June 1999, Mr. Christie will be
the President and Chief Operating Officer of Worthington Industries, Inc. From
August 1988 until September 1995, he was a Senior Vice President of Battelle
Memorial Institute. Mr. Christie also serves as a director of Karrington Health,
Inc. Mr. Christie has a B.S. degree in Business Administration from Miami
University and an MBA from Emory University.
J. FRANK WHITLEY, JR., age 56, has served as a director of the Company
since May 1994. Mr. Whitley was Director of Mergers, Acquisitions and Licensing
at The Dow Chemical Company ("Dow"), a multinational chemical company, from June
1993 until his retirement in June 1997. After joining Dow in 1965, Mr. Whitley
served in a variety of marketing, financial, and business management functions.
Mr. Whitley has a B.S. degree in Mathematics from Lamar State University.
DIRECTORS WHOSE TERMS CONTINUE UNTIL THE 2001 ANNUAL MEETING:
DAVID C. BUPP, age 49, has served as President and a director of the
Company since August 1992 and as Chief Executive Officer since February 1998.
From August 1992 to May 1993, Mr. Bupp served as Treasurer of the Company. In
addition to the foregoing positions, from December 1991 to August 1992, he was
Acting President, Executive Vice President, Chief Operating Officer and
Treasurer, and from December 1989 to December 1991, he was Vice
President--Finance and Chief Financial Officer. From 1982 to December 1989, Mr.
Bupp was Senior Vice President, Regional Manager for AmeriTrust Company National
Association, a nationally chartered bank holding company, where he was in charge
of commercial banking operations throughout Central Ohio. Mr. Bupp has a B.A.
degree in Economics from Ohio Wesleyan University. Mr. Bupp completed a course
of study at Stonier Graduate School of Banking.
JULIUS R. KREVANS, M.D., age 74, has served as a director of the Company
since May 1994 and as Chairman of the Company since February 1999. Dr. Krevans
served as Chancellor of the University of California, San Francisco from July
1982 until May 1993, and now serves on the faculty of that institution's School
of Medicine. Prior to his appointment as Chancellor, Dr. Krevans served as a
Professor of Medicine and Dean of the School of Medicine at the University of
California, San Francisco from 1971 to 1982. Dr. Krevans is a member of the
Institute of Medicine, National Academy of Sciences, and led its committee for
the National Research Agenda on Aging until 1991. He is Chairman of the Bay Area
Economic Forum, a member of the Medical Panel of A.P. Giannini Foundation, and a
member of the Board of Directors of the Bay Area BioScience Center. Dr. Krevans
has a B.S. degree and an M.D. degree, both from New York University.
JAMES F. ZID, age 65, has served as a director of the Company since
November 1993. Mr. Zid also serves as a director of the Net Med Corporation. Now
retired, Mr. Zid was a partner from September 1981 until September 1993
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(and served as managing partner of the Columbus, Ohio office from September 1981
to September 1992) of Ernst & Young and its predecessors. Mr. Zid has a B.S.
degree in Accounting from St. Joseph's College.
BOARD OF DIRECTORS MEETINGS
The Board of Directors held eight meetings in fiscal 1998 and each of the
directors attended at least 75 percent of the aggregate number of meetings of
the Board of Directors and committees (if any) on which he served.
COMMITTEES
The Company has a standing Audit Committee and a standing Compensation
Committee. The Company does not have a committee whose functions include
nominating directors.
The Audit Committee (comprised of James F. Zid, John S. Christie and J.
Frank Whitley, Jr.) recommends the firm to be employed by the Company as its
independent auditors; consults with the firm so chosen to be the independent
auditors with regard to the plan of audit; reviews, in consultation with the
independent auditors, their report of audit, or proposed report of audit and the
accompanying management letter, if any; and consults with the independent
auditors with regard to the adequacy of the internal accounting controls. The
Audit Committee held three meetings in fiscal 1998.
The Compensation Committee (comprised of Melvin D. Booth, Julius R. Krevans
and Michael P. Moore) establishes the compensation of all employees and
consultants of the Company, administers and interprets the Company's Amended and
Restated Stock Option and Restricted Stock Purchase Plan and the 1996 Stock
Incentive Plan and takes any action that is permitted to be taken by a committee
of the Board of Directors under the terms of such plan, including the granting
of options. The Compensation Committee held three meetings in fiscal 1998.
APPROVAL OF ISSUANCE OF SECURITIES
On February 16, 1999, Neoprobe entered into agreements under which Neoprobe
sold securities for $3 million in order to meet Neoprobe's immediate need for
operating capital. Neoprobe's Board of Directors is asking stockholders to
approve this sale and any future sales of securities under these agreements, all
of which are described in more detail below. If stockholders do not give their
approval, Neoprobe must redeem these securities for $3.6 million, which would
deplete Neoprobe's cash. If this happened, Neoprobe might not be able to
continue operations.
THE TRANSACTIONS UNDER WHICH SECURITIES WERE SOLD
General Description of the Sales. On February 16, 1999, Neoprobe entered
into a Preferred Stock and Warrant Purchase Agreement with The Aries Master
Fund, a Cayman Island exempted Company, and The Aries Domestic Fund, L.P.
(collectively "Aries") and a Financial Advisory Agreement with Paramount
Capital, Inc., an affiliate of Aries. Under the Purchase Agreement, Neoprobe
sold preferred stock and warrants to Aries on February 16, 1999 for $3,000,000;
see "Approval of Issuance of Securities-The Transaction Under Which Securities
Were Sold; First Sale of Securities." This sale was the first of two possible
sales by Neoprobe to Aries and is referred to as the First Sale, and February
16, 1999 is referred to as the First Sale Date. If the conditions in the
Purchase Agreement are satisfied, Neoprobe has the option of requiring Aries to
purchase more securities for an additional $3,000,000; see "Approval of Issuance
of Securities-The Transaction Under Which Securities Were Sold; Second Sale of
Securities". This sale is referred to as the Second Sale and the date on which
this sale may occur is referred to as the Second Sale Date.
First Sale of Securities. On the First Closing Date, Aries paid Neoprobe
$3,000,000 and Neoprobe issued to Aries 30,000 shares of Series B Preferred
Stock and warrants to purchase an additional 2,912,621 shares of Common Stock.
Also, on the First Closing Date, Neoprobe entered into the Advisory
Agreement with Paramount Capital. Under the Advisory Agreement, Paramount
Capital will help Neoprobe find future sources of capital, Neoprobe agreed to
pay
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Paramount Capital $150,000 and Neoprobe issued 1.5 Option Units to Paramount
Capital as payment for Paramount Capital's services; see "Approval of Issuance
of Securities-Option Units."
Second Sale of Securities. Neoprobe has the right to require Aries to
purchase another 30,000 shares of Series B Preferred Stock and warrants to
purchase an additional 2,912,621 shares of Common Stock from Neoprobe for an
additional $3,000,000 if:
o Stockholders give the approval requested here;
o A registration statement to register the shares of Common Stock
issuable through securities sold under the Purchase Agreement and the
Advisory Agreement is effective;
o Neoprobe's sales for any two consecutive quarters in the period from
the second quarter of 1999 through the third quarter of 2000 are at
least 90% of Neoprobe's forecast; and
o The market value of a share of Common Stock is not less than $1.236 on
the day Neoprobe exercises its right or on the day that Aries is
required to buy the additional shares of Series B Preferred Stock.
Reasons for the Sales of Securities. Neoprobe sold securities to Aries
because Neoprobe needed working capital. Neoprobe's board of directors
unanimously approved the sale of securities and determined that any significant
delay in selling the securities would seriously jeopardized the financial
viability of Neoprobe.
Meaning of "Market Value". The Purchase Agreement, Advisory Agreement and
Certificate of Designations employ a variety of methods for calculating the
market value of shares. Each method is intended to approximate the fair market
value of a share on a specific day. However, the application of different
methods may result in different numbers in similar situations.
TERMS OF THE SERIES B PREFERRED STOCK
Certificate of Designations. The Certificate of Designations of Series B
Preferred Stock of Neoprobe Corporation dated February 16, 1999, which has been
filed as part of Neoprobe's Certificate of Incorporation and with the SEC, is
the legal instrument that states the terms of the Series B Preferred Stock.
Dividend Rights and Preferences. Owners of Series B Preferred Stock are
entitled to receive dividends. The dividends accrue daily and are payable on
each six-month and one-year anniversary of the First Sale Date. Neoprobe has the
option of paying these dividends either in cash or in shares of Common Stock.
The annual dividend rate on a share of Series B Preferred Stock is 5% of
$100 plus all previously accrued but currently unpaid dividends on the share. On
any day that Common Stock trades below $0.55 per share, the annual rate will be
10%.
Before Neoprobe may declare a dividend on classes of stock that are junior
to the Series B Preferred Stock, including Common Stock and Series A Preferred
Stock, Neoprobe must pay a special dividend of $100 per share to owners of
Series B Preferred Stock, pay all accrued and but unpaid dividends on the Series
B Preferred Stock which have been declared and declare a dividend on the Series
B Preferred Stock which is identical to the dividend being declared on the other
class of stock.
Liquidation Preference. If Neoprobe liquidates, sells substantially all of
its assets, or is involved in a merger which terminates its existence or in
which more than half of the outstanding Common Stock is exchanged for cash,
property or securities of another company, then owners of shares of Series B
Preferred Stock must be paid before owners of shares of other classes.
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The per share amount of this payment will be: $100 PLUS the amount of any
unpaid dividends on the share PLUS the excess of any redemption amount due on
the share over the sum of $100 plus the amount of unpaid dividends due or
declared on the share LESS the amount of any dividend previously paid on the
share so that a dividend could be paid on a junior class of shares.
Redemption. Neoprobe is obligated to redeem the outstanding shares of
Series B Preferred Stock for $120 per share if:
o Neoprobe is unable to commence its annual meeting of stockholders by
May 28, 1999 and obtain the stockholder approval requested here within
30 days of the commencement of the meeting;
o Neoprobe does not file the registration statement with the SEC by
May 18, 1999;
o Neoprobe does not amend the registration statement within 30 days after
the Second Sale Date to include the shares of Common Stock issuable
through any securities sold in the Second Sale;
o Neoprobe does not keep the registration statement effective for at
least 3 years;
o Neoprobe commits a material breach of the Purchase Agreement which
continues for more than 20 days after Neoprobe is notified of the
breach;
o NASDAQ delists the Common Stock;
o Neoprobe fails to properly deliver any of the securities sold under the
Purchase Agreement;
o Neoprobe's auditors materially qualify their opinion on Neoprobe's
financial statements;
o Neoprobe is liquidated;
o Neoprobe sells substantially all of its assets; or
o Neoprobe is merged out of existence or more than half of the
outstanding Common Stock is exchanged for cash, property or securities
of another company.
Conversion. Generally, each share of Series B Preferred Stock may be
converted, at the option of the owner, into the number of shares of Common Stock
calculated by dividing the sum of $100 and any accrued and unpaid dividends on
the share of Series B Preferred Stock by the conversion price. The initial
conversion price for the shares of Series B Preferred Stock sold in the First
Sale is $1.03 per share of Common Stock. If on February 16, 2000 the market
value of Common Stock is less than $1.03, the conversion price will be reset to
equal the market value of a share of Common Stock on February 16, 2000, but not
less than $0.515.
If the market value of Common Stock is less than $1.03, the conversion
price will be the average of the three lowest closing bid prices for a share of
Common Stock during the previous 10 trading days. But the Company may refuse to
convert a share of Series B Preferred Stock that the Company sold in the First
Sale if the share's conversion price is less than $0.55. However, if the
conversion price of a share of Series B Preferred Stock which the Company sold
in the First sale is less than $0.55 for more than 60 trading days in any
12-month period, then the Company must either convert the share at the share's
conversion price or pay the owner cash. The amount of the cash payment per share
of Series B Preferred Stock would be the highest closing price for Common Stock
during the period from the date of the owner's conversion request until the
payment date MULTIPLIED BY the number of shares of Common Stock into which the
share of Series B Preferred Stock is convertible.
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The conversion price will be adjusted to prevent the dilution of the
economic interests of the owners of Series B Preferred Stock each time:
o Shares of Common Stock are sold by the Company for less than the
conversion price;
o Shares of Common Stock are sold by the Company for less than market
value;
o Shares of Common Stock are issued by the Company as dividends on Common
Stock;
o Shares of Common Stock are subdivided or combined; or
o The Company enters into a binding contract to sell shares of Common
Stock for a price less than the conversion price or the market value of
Common Stock.
If the Common Stock is reclassified or Neoprobe merges with another company
and is not the continuing entity, the owners of shares of Series B Preferred
Stock may choose to either receive the same payments as the owners of Common
Stock on an as converted basis or convert their shares of Series B Preferred
Shares into an economically comparable number of the other company's shares of
common stock. The proposed successor company in any merger must agree to these
terms in writing before the merger may occur.
Any shares of Series B Preferred Stock sold in the Second Sale will have
terms which are similar to the terms of the shares sold in the First Sale. The
terms of the shares of Series B Preferred Stock sold in the Second Sale include:
o The conversion price will be the market value of a share of Common
Stock on the Second Closing Date;
o The conversion price will be adjusted in the same manner as the shares
of Series B Preferred Stock sold in the First Sale;
o The Company may refuse to convert these shares if the conversion price
is less than half of the market value of a share of Common Stock on the
Second Closing Date; and
o If the conversion price of these shares is less than half of the market
value of a share of Common Stock on the Second Closing Date for more
than 60 trading days in any 12-month period, then the Company must
either convert the shares at the conversion price or pay the owner cash
in an amount calculated as described above for shares sold in the First
Sale.
Conversion Limitations. An owner of Series B Preferred Stock may not
convert its shares into shares of Common Stock if the conversion would cause the
owner to own more than 4.9% of Neoprobe's outstanding Common Stock. An owner may
waive this restriction by giving notice to Neoprobe 61 days before the
conversion.
The rules of the National Association of Securities Dealers, Inc. do not
allow Neoprobe to issue shares of Common Stock representing more than 20% of the
total number of outstanding shares of Common Stock without stockholder approval.
Under the Purchase Agreement and the Advisory Agreement, Neoprobe is not
obligated to issue more than 4,539,582 shares of Common Stock upon conversion of
shares of Series B Preferred Stock if the issuance would violate the rules of
the National Association of Securities Dealers. If further issuances of shares
of Common Stock upon conversion of shares of Series B Preferred Stock would
violate those rules, then Neoprobe will convert the shares for cash instead of
for shares of Common Stock.
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Mandatory Conversion. Neoprobe may require an owner of Series B Preferred
Stock to convert its shares if:
o The shares have been outstanding for more than one year;
o The registration statement has been effective for more than one year;
and
o For 20 trading days during any 30 day period ending on the day Neoprobe
demands conversion, the market value of Common Stock has been more than
300% of the market value of Common Stock on the one-year anniversary of
the date Neoprobe issued the owner's shares of Series B Preferred
Stock.
Voting Rights. Each share of Series B Preferred Stock entitles its owner to
cast the same number of votes the owner would be entitled to cast if the owner
had converted the share on the record date. Owners of shares of Series B
Preferred Stock have the right to vote with owners of Common Stock as a single
class. However, no owner of a share of Series B Preferred Stock may exercise
more than 4.9% of Neoprobe's voting power, but an owner may waive this
restriction by giving Neoprobe notice 61 days in advance.
Neoprobe may not, without the consent of the owners of a majority of the
shares of Series B Preferred Stock,:
o Amend or repeal any provision of Neoprobe's Certificate of
Incorporation or Bylaws in a way that adversely affects the rights of
the owners of Series B Preferred Stock;
o Change the rights of the Series B Preferred Stock;
o Authorize any security with rights superior or equal to those of the
Series B Preferred Stock or
o Approve the incorporation of any subsidiary of Neoprobe.
ARIES' WARRANTS
General Terms. Aries received warrants to purchase 2,912,621 shares of
Common Stock in the First Sale and may receive warrants to purchase an
additional 2,912,621 shares of Common Stock in the Second Sale. The warrants
expire seven years after the date of their issuance.
Exercise of the Warrants. Aries may purchase the shares available under the
warrants by exercising the warrants and paying the exercise price. Aries also
has the option of making a "cashless" exercise of the warrants. The number of
shares of Common Stock Aries would receive upon a cashless exercise of a warrant
is the number of shares available under the warrant multiplied by the excess of
the market value of Common Stock on the date of exercise over the exercise
price, and divided by the market value of Common Stock on the date of exercise.
Exercise Price. Initially, the exercise price per share of the warrants
issued in the first sale is $1.03. If the market value of Common Stock on
February 16, 2000 is less than $1.03 then the exercise price will be reset to
the market value of Common Stock on February 16, 2000, but not less than $0.515,
and the number of shares issuable upon the exercise of a warrant will be
increased to the aggregate pre-reset exercise price of the warrant divided by
the per share reset exercise price.
If the exercise price of a warrant sold in the First Sale is, and has been
for 60 or more trading days in any 12-month period, less than $0.62, the Company
will effect an exercise by either delivering shares of Common Stock or making a
cash payment. The cash payment would equal the number of shares for which the
warrant is exercised multiplied by the highest closing trade price of Common
Stock during the period from the date of exercise and the date of payment.
8
The exercise price will be adjusted to prevent the dilution of the economic
interests of warrant owners each time:
o Shares of Common Stock are sold by the Company for less than the
exercise price;
o Shares of Common Stock are sold by the Company for less than market
value;
o Shares of Common Stock are issued by the Company as dividends on Common
Stock;
o Shares of Common Stock are subdivided or combined; or
o The Company enters into a binding contract to sell shares of Common
Stock for a price less than the exercise price or the market value of
Common Stock.
If the exercise price of a warrant is adjusted, the number of shares issuable
upon the exercise of the warrant will be adjusted to the aggregate
pre-adjustment exercise price of the warrant divided by the per share adjusted
exercise price.
Initially, the exercise price of the warrants sold in the Second Sale will
be the market value of Common Stock on the Second Sale Date. The exercise price
of these warrants will be adjusted in the same manner as the warrants sold in
the First Sale.
If the Common Stock is reclassified, Neoprobe sells substantially all of
its assets or Neoprobe merges with another company and is not the continuing
entity, the owners of warrants will be entitled to the cash, securities and
property they would have received if they had exercised the warrants immediately
prior to the reclassification, sale or merger.
Mandatory Exercise. Neoprobe may require Aries to exercise the warrants if:
(A) the warrants have been outstanding for more than one year and (B) the market
value of Common Stock has been more than 300% of the warrant exercise price for
20 trading days during any 30 day period ending on the day Neoprobe demands
exercise.
Exercise Limitations. Aries may not exercise a warrant if the exercise
would cause Aries to own more than 4.9% of Neoprobe's outstanding Common Stock.
Aries may waive this restriction by giving notice to Neoprobe at least 61 days
before the exercise.
OPTION UNITS
General Terms. Paramount received 1.5 Option Units in the First Sale. Each
Option Unit entitles Paramount Capital to purchase, for an exercise price of
$100,000, 1,000 shares of Series B Preferred Stock and 97,087 Class L Warrants.
Paramount Capital has the option of making a "cashless" exercise of the Unit
Options. In a cashless exercise, Paramount Capital would receive the number of
shares of Series B Preferred Stock and the number of Class L Warrants available
under the Unit Option LESS the total number available under the Unit Option
multiplied by the exercise price and divided by the market value of the Unit
Option.
Expiration. The Unit Options expire on February 16, 2004.
Class L Warrants. The owner of a Class L Warrant may receive one share of
Common Stock by exercising the Class L Warrant and paying the exercise price of
$1.03 per share of Common Stock.
Price Adjustment. The Unit Options contain provisions to protect Paramount
Capital from the dilution of its interests in Series B Preferred Stock and
Common Stock. These provisions are similar to those which protect owners of
Series B Preferred Stock and owners of warrants from the dilution of their
interests.
9
Reclassification or Merger. If the Common Stock is reclassified, Neoprobe
sells substantially all of its assets or Neoprobe merges with another company
and is not the continuing entity, the owners of Unit Options will be entitled to
the cash, securities and property they would have received if they had exercised
the Unit Options immediately prior to the reclassification, sale or merger.
Exercise Limitations. Paramount Capital may not exercise a Unit Option or
Class L Warrant, and may not convert a share of Series B Preferred Stock, if the
exercise or conversion would cause Paramount Capital to own more than 4.9% of
Neoprobe's outstanding Common Stock. Paramount Capital may waive these
restrictions by giving Neoprobe notice at least 61 days in advance.
RESTRICTIONS UNDER THE PURCHASE AGREEMENT
Right to Nominate a Board Member. Aries may nominate a candidate for
Neoprobe's board of directors. Neoprobe's existing board of directors will
support the nominee by creating a new position on the board of directors and
electing the nominee to fill the vacancy, nominating the nominee for election by
stockholders and using its best efforts to ensure that stockholders elect the
nominee.
Registration Rights. Not later than 30 days after the First Closing Date,
Neoprobe will file with the SEC a shelf registration statement for the resale
of:
o The shares of Common Stock issuable upon the exercise of Aries'
warrants;
o The shares of Common Stock issuable upon the exercise of Class L
Warrants;
o The shares of Common Stock issuable upon conversion of Series B
Preferred Stock;
o Any shares of Common Stock issued to pay dividends on the Series B
Preferred Stock; and
o Any other shares of Common Stock owned by Aries and Paramount Capital.
Use of Proceeds; Restrictions on Use of Cash. The Purchase Agreement
requires Neoprobe to use the net proceeds for general corporate purposes.
Neoprobe may not use any of the proceeds to repay its debts or repurchase its
own securities. Neoprobe may not make a payment in excess of $25,000 without
Aries' approval. If the registration statement is effective and Neoprobe has at
least $1,000,000 of cash, this limit will be increased to $100,000.
Neoprobe must escrow $1,000,000 in cash from the proceeds of the Purchase
Agreement until the stockholders give the approval requested here and the
registration statement becomes effective.
Limitations on Merger or Sale of Assets. Neoprobe may not merge or sell
substantially all of its assets without Aries' approval.
Limitations on Acquisitions. Neoprobe may not acquire any interest in any
business without Aries' approval. But, Neoprobe may acquire 1% or less of any
class of publicly traded securities.
Limitations on Dividends and Repurchases. Neoprobe may not pay any
dividends on its stock or repurchase any shares of its stock, without Aries'
approval.
Restriction on Securities. Until August 16, 2000, Neoprobe may not, without
Aries' approval, sell any of its securities. However Neoprobe may, so long as it
honors Aries' right of first refusal, sell a maximum of 1,700,000 shares of
Common Stock and 500,000 warrants to purchase shares of Common Stock for a
maximum of $1,500,000. Also, Neoprobe may issue shares of Common Stock upon
conversion or exercise of outstanding securities or in an offering with
Paramount Capital acting as placement agent.
10
Until February 16, 2002, Neoprobe may not, without Aries' approval, extend
the expiration date or lower the exercise price of any options or take any
similar action affecting any convertible securities.
Restrictions on debt. Neoprobe may not incur debt except:
o To Aries and Paramount Capital;
o Under equity lease financings;
o Customary accounts receivable and inventory financing in the ordinary
course of business;
o Debt for borrowed money disclosed to Aries at the time of the Purchase
Agreement; and
o Amounts less than $25,000 incurred in the ordinary course of business
(if the registration statement is effective and Neoprobe has at least
$1,000,000 in cash, this limit will be increased to $100,000).
Other Public Sales and Registrations. Until at least 180 days after the
effective date of the registration statement, Neoprobe will not make a public
offering of its securities except to its employees.
Additional Common Stock Issuable to Purchasers. If Neoprobe does not file
the registration statement by March 31, 1999 or if the SEC does not declare the
registration statement effective within the time constraints established in the
Purchase Agreement, Neoprobe will immediately issue warrants to Aries to
purchase a number of additional shares of Common Stock and pay a cash penalty to
Aries.
The number of shares of Common Stock available under these additional
warrants would be 1.5% of shares of Common Stock available under Aries' warrants
issued in the First Sale.
The amount of the cash payment would be 1.5% of the total liquidation
preference of Aries' shares of Series B Preferred Stock.
Amendment to Rights Agreement. The Company and Continental Stock Transfer &
Trust Company entered into a Rights Agreement on July 18, 1995. Generally, the
Rights Agreement provides that if a person acquires over 15% of the outstanding
Common Stock, the Company will issue securities which dilute such person's
interests in the Company. The purpose of the Rights Agreement is to encourage
prospective acquirors of the Company to negotiate with the Company's Board of
Directors so that the Company's Board of Directors would have an opportunity to
protect and enhance stockholder value. The Company amended the Rights Agreement
on February 16, 1999 to exempt the issuance of securities discussed above under
the heading "Approval of Issuance of Securities" and the purchase of up to an
additional 1,000,000 shares of Common Stock by Aries and Aries' affiliates, even
though the issuance and additional purchases, if any, may involve more than 15%
of the outstanding Common Stock.
VOTE REQUIRED FOR APPROVAL
This proposal must be approved by a majority of the votes cast at the
Annual Meeting; see "General Information-Tabulation."
CONSEQUENCES OF STOCKHOLDER DISAPPROVAL
IF STOCKHOLDERS DO NOT APPROVE THESE TRANSACTIONS, NEOPROBE WILL BE
REQUIRED BY THE PURCHASE AGREEMENT TO REDEEM THE SERIES B PREFERRED STOCK FOR
$120 PER SHARE. AS OF THE DATE OF THIS PROXY STATEMENT, THERE ARE 30,000 SHARES
OF SERIES B PREFERRED STOCK OUTSTANDING. THE TOTAL REDEMPTION PRICE FOR THESE
SHARES WOULD BE $3.6 MILLION, WHICH WOULD DEPLETE NEOPROBE'S CASH. IF THIS
HAPPENED, NEOPROBE MIGHT NOT BE ABLE TO CONTINUE OPERATIONS.
11
BOARD OF DIRECTORS' RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
THE ISSUANCE OF SECURITIES WHICH ARE CONVERTIBLE INTO, OR WHICH ARE EXERCISABLE
FOR, SHARES OF COMMON STOCK REPRESENTING MORE THAN 20% OF THE OUTSTANDING COMMON
STOCK.
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
The Company's Board of Directors has unanimously approved, and recommended
that stockholders approve, alternative amendments to the Company's Restated
Certificate of Incorporation to combine the shares of Common Stock in the ratios
of one for two, one for three and one for four, respectively.
THE BOARD OF DIRECTORS MAY EFFECT AN AMENDMENT IF THE AMENDMENTS ARE
APPROVED BY STOCKHOLDERS AT THE ANNUAL MEETING AND THE BOARD DETERMINES THAT A
SHARE COMBINATION IS IN THE BEST INTERESTS OF THE COMPANY AND THE STOCKHOLDERS.
THE BOARD WILL SELECT ONE OF THE AMENDMENTS BASED ON ITS DETERMINATION OF HOW
MANY SHARES OF COMMON STOCK ARE LIKELY TO BECOME ISSUABLE PURSUANT TO EXISTING
INSTRUMENTS AND AGREEMENTS, ON ITS DETERMINATION OF WHICH AMENDMENT WOULD RESULT
IN THE GREATEST MARKETABILITY AND LIQUIDITY OF THE COMMON STOCK, ON THE LIKELY
EFFECT OF THE AMENDMENT ON THE MARKET PRICE OF THE COMMON STOCK AND ON OTHER
RELEVANT FACTORS. THE REMAINING ALTERNATIVE AMENDMENTS WOULD BE ABANDONED BY THE
BOARD PURSUANT TO SECTION 242(c) OF THE GCL WITHOUT FURTHER ACTION BY THE
STOCKHOLDERS.
Stockholders may either approve all of the amendments or disapprove all of
them. If approved by stockholders, the Board of Directors may implement one of
the amendments before the Company's next Annual Meeting of Stockholders. Any
amendment that has not been implemented before the Company's next Annual Meeting
of Stockholders will expire.
REASONS FOR A SHARE COMBINATION
The Common Stock is listed on The Nasdaq Stock Market, Inc. whose rules
require that the Common Stock have a minimum bid price of $1. If the Common
Stock trades on 120 business days without complying with the minimum bid price
requirement for at least 10 consecutive business days, the Common Stock is
subject to being delisted from Nasdaq. The Board of Directors believes that
delisting would adversely affect the ability of the Company to attract new
investors.
During 1998, Common Stock traded under $1 for more than 120 days and Nasdaq
notified the Company that the Common Stock was subject to delisting.
Subsequently, the minimum bid price of Common Stock rose above $1 and the Common
Stock is not currently subject to delisting. If the stockholders approve the
amendments, the Board of Directors may implement an amendment in an attempt to
increase the minimum bid price of Common Stock and avoid delisting.
The increase in the portion of authorized shares that would be unissued
after a share combination could be used for any proper corporate purpose
approved by the Board of Directors of the Company. These additional unissued
shares will provide the Company with increased flexibility to issue additional
shares in connection with future financings, for employee benefit plans and in
connection with acquisitions by the Company. The Company has no current plans to
use these shares except for the Purchase Agreement with Aries.
ANTI-TAKEOVER EFFECTS
Because a share combination will result in an increase in the number of
unissued shares, it may be construed as having an anti-takeover effect, although
neither the Board of Directors nor the management of the Company views this
proposal in that perspective. However, the Company could use these unissued
shares to frustrate persons seeking to effect a takeover or otherwise gain
control of the Company by, for example, privately placing shares with purchasers
who might side with the Board of Directors in opposing a hostile takeover bid.
Shares of Common Stock could also be
12
issued to a holder that would thereafter have sufficient voting power to assure
that any proposal to amend or repeal the Company's Bylaws or certain provisions
of the Amended and Restated Certificate of Incorporation would not receive the
requisite vote. These uses of the Common Stock may complicate, or discourage, an
attempt to acquire control of the Company, if the Board of Directors opposes the
acquisition.
VOTE REQUIRED
In accordance with the provisions of Section 242 of the GCL, the
affirmative vote of the holders of a majority of the shares of Common Stock
entitled to be cast at the Annual Meeting is required for the adoption of the
proposed alternative amendments.
BOARD OF DIRECTORS RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ADOPTION OF
THE PROPOSED ALTERNATIVE AMENDMENTS TO THE RESTATED CERTIFICATE OF
INCORPORATION.
13
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS,
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table sets forth, as of February 28, 1999, certain
information with respect to the beneficial ownership of shares of Common Stock
by (i) each person known to the Company to be the beneficial owner of more than
5 percent of the outstanding shares of Common Stock, (ii) each Director or
nominee for Director of the Company, (iii) each of the Named Executives (see
"Compensation of Management--Summary Compensation Table"), and (iv) the
Company's Directors and executive officers as a group.
NUMBER OF
SHARES
BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED(*) OF CLASS
------------------------------------------- ---------------- ------------
Melvin D. Booth 6,917(a) (m)
Matthew F. Bowman 109,808(b) (m)
David C. Bupp 420,538(c) 1.8%
John S. Christie 3,617(d) (m)
Patricia A. Coburn 41,548(e) (m)
Julius R. Krevans 13,517(f) (m)
Michael P. Moore 17,517(g) (m)
John L. Ridihalgh 276,436(h) 1.2%
J. Frank Whitley, Jr. 7,517(i) (m)
James F. Zid 18,783(j) (m)
All directors and officers as a group 673,978(k) 2.6%
(10 persons)
Kenneth R. McGuire 1,567,100(l) 6.9%
(*) Unless otherwise indicated, the beneficial owner has sole voting and
investment power over these shares subject to the spousal rights, if any,
of the spouses of those beneficial owners who have spouses.
(a) This amount includes 2,917 shares issuable upon exercise of options which
are exercisable within 60 days, but does not include 22,083 shares issuable
upon exercise of options which are not exercisable within 60 days.
(b) This amount includes 69,210 shares issuable upon exercise of options which
are exercisable within 60 days and 598 shares in Mr. Bowman's account in
the Neoprobe Corporation 401(k) Plan (the "401(k) Plan"), but does not
include 144,890 shares issuable upon exercise of options which are not
exercisable within 60 days.
(c) This amount includes 329,567 shares issuable upon exercise of options which
are exercisable within 60 days, 2,271 shares in Mr. Bupp's account in the
401(k) Plan and 2,200 shares held by Mr. Bupp's wife and daughters, as to
which latter shares he disclaims beneficial ownership, but it does not
include 131,033 shares issuable upon exercise of options which are not
exercisable within 60 days. Mr. Bupp is one of three trustees of the 401(k)
Plan and may, as such, share investment power over Common Stock held in
such plan. The 401(k) Plan holds an aggregate total of 29,092 shares of
Common Stock. Mr. Bupp disclaims any beneficial ownership of shares held by
the 401(k) Plan that are not allocated to his personal account.
(d) This amount includes 2,917 shares issuable upon exercise of options which
are exercisable within 60 days, but does not include 22,083 shares issuable
upon exercise of options which are not exercisable within 60 days.
(e) This amount includes 20,900 shares issuable upon exercise of options which
are exercisable within 60 days and 648 shares in Ms. Coburn's account in
the 401(k) Plan, but does not include 50,900 shares issuable upon exercise
of options which are not exercisable within 60 days. Ms. Coburn is one of
three trustees of the 401(k) Plan and may, as such, share investment power
over Common Stock held in such plan. The 401(k) Plan holds an aggregate
total of 29,092 shares of Common Stock. Ms. Coburn disclaims any beneficial
ownership of shares held by the 401(k) Plan that are not allocated to her
personal account.
(f) This amount includes 11,517 shares issuable upon exercise of options which
are exercisable within 60 days, but does not include 22,083 shares issuable
upon exercise of options which are not exercisable within 60 days.
(g) This amount includes 11,517 shares issuable upon exercise of options which
are exercisable within 60 days, but does not include 22,083 shares issuable
upon exercise of options which are not exercisable within 60 days.
14
(h) This amount includes 135,000 shares issuable upon exercise of options which
are exercisable within 30 days, but which expire on March 31, 1999 if not
exercised, 2,245 shares held in Dr. Ridihalgh's account in the 401(k) Plan
and 14,750 shares held by Dr. Ridihalgh's wife, as to which latter shares
he disclaims beneficial ownership.
(i) This amount includes 6,517 shares issuable upon exercise of options which
are exercisable within 60 days, but does not include 22,083 shares issuable
upon exercise of options which are not exercisable within 60 days.
(j) This amount includes 13,183 shares issuable upon exercise of options which
are exercisable within 60 days and 1,600 shares held in Mr. Zid's IRA, but
does not include 22,917 shares issuable upon exercise of options which are
not exercisable within 60 days.
(k) This amount includes 481,477 shares issuable upon exercise of options which
are exercisable within 60 days and 4,001 shares held in the Company's
401(k) Plan. This amount does not include 511,623 shares issuable upon the
exercise of options which are not exercisable within 60 days. Certain
executive officers of the Company are the trustees of the 401(k) Plan and
may, as such, share investment power over Common Stock held in such plan.
Each trustee disclaims any beneficial ownership of shares held by the
401(k) Plan that are not allocated to his personal account. The 401(k) Plan
holds an aggregate total of 29,092 shares of Common Stock.
(l) Mr. McGuire's address is 3000 North Clybourn, Hangar 34, Burbank,
California 91505. This amount includes 17,600 shares held by Mr. McGuire as
custodian under the Uniform Transfer to Minors Act of California for his
four children.
(m) Less than 1 percent.
The following table sets forth, as of February 28, 1999, the beneficial
ownership of all of the outstanding shares of Series B Preferred Stock:
Number of Shares
Beneficial Owner Beneficially Owned Percent of Class
- -------------------------------------------------------- ----------------------- --------------------
The Aries Master Fund (a) 21,000 70.0%
The Aries Domestic Fund, L.P. (a) 9,000 30.0%
(a) The address of both funds is 787 Seventh Avenue, 48th Floor, New York, New
York 10019.
15
COMPENSATION OF MANAGEMENT
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the annual
and long-term compensation of the chief executive officer of the Company and the
Company's other four most highly compensated executive officers during the last
fiscal year (the "Named Executives") for the Company's last three fiscal years.
ANNUAL COMPENSATION LONG TERM
----------------------- COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS COMPENSATION
- --------------------------- ---- ------ ----- -------- ------------
John L. Ridihalgh, Ph.D., 1998 $275,500 $ 0 25,000 $165,181(f)
Chairman and Chief Scientific 1997 270,433 0 27,000 3,654(b)
Officer(a) 1996 250,000 95,000 20,000 1,500(b)
David C. Bupp, 1998 $275,500 $ 0 30,000 $2,000(b)
President and Chief 1997 248,115 0 25,600 3,381(b)
Executive Officer 1996 236,250 90,000 20,000 1,500(b)
Matthew F. Bowman, 1998 $204,690 $ 0 136,900 $1,992(b)
Senior Vice President, 1997 161,163 28,000 7,200 1,973(b)
Marketing and Operations(c) 1996 85,846 36,156 40,000 0(b)
Patricia A. Coburn, 1998 $127,662 $ 0 33,400 $1,421(b)
Vice President, 1997 117,832 14,394 8,400 588(b)
General Counsel(d) 1996 39,205 9,960 10,000 0(b)
Lauren V. Vitek 1998 $140,925 $ 0 66,500 $24,359(g)
Vice President, 1997 135,628 17,395 20,000 0(b)
Clinical Research and
Medical Director(e)
(a) Dr. Ridihalgh was the Company's Chief Executive Officer until February,
1998 when he became the Company's Chief Scientific Officer. Dr. Ridihalgh
ended his employment with the Company on December 31, 1998.
(b) Amounts of matching contribution under the Company's 401(k) Plan. Eligible
employees may make voluntary contributions and the Company may, but is not
obligated to, make matching contributions based on 20 percent of the
employee's contribution, up to five percent of the employee's salary.
Contributions by employees are invested by an independent plan
administrator in mutual funds and contributions, if any, by the Company are
made in the form of shares of Common Stock. The 401(k) Plan is intended to
qualify under section 401 of the Code, which provides that employee and
Company contributions and income earned on contributions are not taxable to
the employee until withdrawn from the plan, and that Company contributions
will be deductible by the Company when made.
(c) Mr. Bowman began his employment with the Company in June, 1996.
(d) Ms. Coburn began her employment with the Company in August, 1996.
(e) Ms. Vitek began her employment with the Company in January, 1997 and ended
her employment with the Company in October, 1998.
(f) This amount consists of an accrued separation payment of $137,750, a
$25,431 payment representing Dr. Ridihalgh's vacation accrued as of his
date of separation and a matching contribution to Dr. Ridihalgh's 401(k)
account of $2,000. See "Compensation of Management-Compensation of Dr.
Ridihalgh; Separation Agreement" for a discussion of Dr. Ridihalgh's
separation agreement. See footnote (b) to this table for a discussion of
matching contributions.
(g) This amount includes payments to Dr. Vitek relating to her separation from
the Company of $15,417 for severance and $7,061 for accrued vacation; see
"Compensation of Management-Departure of Named Executives." The remaining
$1,875 was a matching contribution to Dr. Vitek's 401(k) account; see
footnote (b) to this table.
16
OPTION GRANTS IN LAST FISCAL YEAR
The following table presents certain information concerning stock options
granted to the Named Executives during the last fiscal year (1998).
INDIVIDUAL GRANTS GRANT DATE VALUE
------------------------------------------------------------------ ----------------
PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS GRANTED
UNDERLYING OPTIONS TO EMPLOYEES IN EXERCISE PRICE EXPIRATION GRANT DATE
NAME GRANTED (SHARES) FISCAL YEAR PER SHARE DATE PRESENT VALUE $
---- ---------------- ----------- --------- ---- ---------------
John L. Ridihalgh 25,000(b) 2.8% $5.625 01/28/07(b) $5.59(a)(b)
David C. Bupp 30,000(c) 3.4% $5.625 01/28/08(d) $5.59(a)
Matthew F. Bowman 58,000(c) 6.7% $5.625 01/28/08(d) $5.59(a)
78,900(c) 9.0% $1.500 09/28/08(d) $0.88(e)
Patricia A. Coburn 8,400(c) 1.0% $5.625 01/28/08(d) $5.59(a)
25,000(c) 2.8% $1.500 09/28/08(d) $0.88(e)
Lauren V. Vitek 38,000(f) 4.3% $5.625 01/28/08(d) $5.59(a)
25,000(g) 2.8% $1.500 09/28/08(d) $0.88(e)
(a) The per share weighted average fair value of these stock options during
1998 was $5.59 on the date of grant using the Black Scholes option pricing
model with the following assumptions: an expected life of 4 years, an
average risk-free interest rate of 5.52%, volatility of 103% and no
expected dividend rate.
(b) Dr. Ridihalgh resigned effective December 31, 1998 and these options were
canceled without vesting.
(c) Vests as to one-third of these shares on each of the first three
anniversaries of the date of grant.
(d) The options terminate on the earlier of the Expiration Date, nine months
after death or disability, 90 days after termination of employment without
cause or by resignation or immediately upon termination of employment for
cause.
(e) The per share weighted average fair value of these stock options during
1998 was $0.88 on the date of grant using the Black Scholes option pricing
model with the following assumptions: an expected life of 4 years, an
average risk-free interest rate of 4.42%, volatility of 103% and no
expected dividend rate.
(f) Dr. Vitek ended her employment with the Company effective October 31, 1998.
These options were canceled without vesting.
(g) Dr. Vitek ended her employment with the Company effective October 31, 1998.
Of these options, 833 were vested at that date but expired on January 31,
1999 without being exercised and 24,167 of these options were canceled
without vesting.
17
FISCAL YEAR END OPTION NUMBERS AND VALUES
The following table sets forth certain information concerning the number
and value of unexercised options held by the Named Executives at the end of the
last fiscal year (December 31, 1998).
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END: AT FISCAL YEAR-END:
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------
John L. Ridihalgh 135,000/0 0/0
David C. Bupp 329,567/131,033 0/0
Matthew F. Bowman 69,210/144,890 0/0
Patricia A. Coburn 20,900/50,900 0/0
Lauren V. Vitek 833/0 0/0
LONG-TERM INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR
The following table sets forth certain information concerning restricted
stock awards to Named Executives during fiscal year 1998.
Number of Shares Units Performance or Other Period
Name or Other Rights Until Maturation or Payout
----------------------------------------- ------------------------- ------------------------------
John L. Ridihalgh --- ---
David C. Bupp (a) 45,000 05/20/08
Matthew F. Bowman (a) 40,000 09/28/08
Patricia A. Coburn(a) 20,000 09/28/08
Lauren V. Vitek(a)(b) 20,000 09/28/08
(a) These awards are shares of restricted stock which the grantees purchases
for $.001 per share. Grantees may not transfer or sell their shares unless
and until such shares vest. Each grantee forfeits his unvested shares on
the earliest of the termination of his employment for any reason unless the
Company is, at the time of termination for death or disability, actively
engaged in negotiations that could reasonably be expected to lead to a
change in control of the Company or the tenth anniversary of the date of
grant. The restricted shares that have not been previously forfeited will
vest if and when there is a change in control of the Company. Except for
these restrictions on transfer and possibilities of forfeiture, the
grantees have all other rights with respect to their restricted shares,
including the right to vote such shares and receive cash dividends.
(b) Ms. Vitek's employment with the Company ended on October 31, 1998 and her
restricted shares were forfeited without vesting.
18
COMMON SHARE PERFORMANCE
The following graph compares the cumulative total return on the Company's
Common Stock to the cumulative total returns of the Nasdaq Stock Market Index
(U.S.), the Nasdaq Pharmaceutical Index (an index of pharmaceutical and
biotechnology companies the securities of which are traded on the Nasdaq
National Market) and the Nasdaq Medical Device Manufacturers Index (an index of
medical device manufacturers the securities of which are traded on the Nasdaq
National Market) since December 31, 1993. The graph is based upon an assumed
investment of $100.00 in each of the Company's Common Stock, the Nasdaq Stock
Market Index (U.S.), the Nasdaq Pharmaceutical Index and the Medical Device
Manufacturers Index on December 31, 1993 and dividend reinvestment thereafter.
The Company has decided to use the Medical Device Manufacturers Index instead of
the Nasdaq Pharmaceutical Index in future comparisons of cumulative total return
and the Nasdaq Pharmaceutical Index will not appear in future comparisons. This
change is being made because the Company's current business is more similar to
the business of the companies whose securities are included in the Medical
Device Manufacturers Index than to the business of the companies whose
securities are included in the Nasdaq Pharmaceutical Index.
[GRAPH]
DATA POINTS FOR COMMON STOCK PERFORMANCE GRAPH
- ------------------------------ ---------------------- --------------------- ---------------------- --------------------
Date Neoprobe Corporation Nasdaq Stock Market Nasdaq Nasdaq Medical
Common Stock Index (U.S.) Pharmaceuticals Index Device
Manufacturers Index
- ------------------------------ ---------------------- --------------------- ---------------------- --------------------
12/31/93 100.00 100.00 100.00 100.00
- ------------------------------ ---------------------- --------------------- ---------------------- --------------------
12/31/94 24.00 97.75 75.26 106.36
- ------------------------------ ---------------------- --------------------- ---------------------- --------------------
12/31/95 258.00 138.26 138.04 161.41
- ------------------------------ ---------------------- --------------------- ---------------------- --------------------
12/31/96 246.00 170.01 138.43 151.19
- ------------------------------ ---------------------- --------------------- ---------------------- --------------------
12/31/97 96.00 208.30 142.98 173.21
- ------------------------------ ---------------------- --------------------- ---------------------- --------------------
12/31/98 11.50 293.52 182.77 195.81
- ------------------------------ ---------------------- --------------------- ---------------------- --------------------
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Background. Prior to 1998, the Company was considered to be in the
development stage of growth within the biotechnology industry and was unable to
set compensation policies based on traditional statistical measures of growth
and profitability such as sales, net earnings and return on assets. Based on
changes in the Company's strategic direction that occurred during 1998, the
management of the Company believes that the principal operations of a
restructured medical device company have begun as evidenced by a second year of
significant sales of the Company's line of hand-held gamma detection
instruments. The purpose of the Company's compensation philosophy is to attract
and provide proper incentives to high-quality, experienced managers and
employees who will continue to support achievement of the Company's near term
sales and profitability goals.
The Company's previous biotechnology focus was dependent on attracting and
retaining a high proportion of highly-trained and qualified personnel with
doctorate and other advanced degrees in the sciences as well as physicians and
surgeons. While the Company's current medical device focus does not require such
backgrounds as a high proportion of its personnel, the Company's success is
still dependent on the retention of qualified personnel. In order to attract and
hold these employees, the Company must provide them with a sufficient base of
cash
19
compensation, as well as opportunities to participate in the Company's growth.
This leads the Company to a compensation philosophy oriented towards the
continued use of variable compensation and long-term incentives. It is the
Company's philosophy that this program be offered to all employees commensurate
with their responsibilities. To make the compensation of key personnel
worthwhile to the stockholders, a high proportion of annual compensation should
be at risk against the attaining of near term sales and profitability targets
and a high portion of the total compensation must be at risk against the return
to the long-term stockholders of the Company who have funded its growth.
Base Salary. Base pay is only one element of key personnel's compensation
package and it is targeted to be at or below the midpoint of a representative
list of small growing medical device companies similar to the Company (the "Peer
Group").
Variable Compensation. Variable compensation has an important role in the
Company's compensation philosophy. It is used to create incentives to attain key
sales, profitability and growth targets to place a portion of compensation at
risk against the attaining of those targets. The Committee sets a total amount
of variable compensation based on a percentage of base salary. The total amount
available is targeted above the midpoint of the variable compensation of the
Peer Group but the amount paid is based on the elements of corporate financial
performance established in advance by the Compensation Committee.
Long-Term Incentive Compensation. Stock options provide the principal
vehicle for long-term incentive compensation. Options are issued under the
Company's Amended and Restated Stock Option and Restricted Stock Purchase Plan
and the 1996 Stock Incentive Plan. The target levels for option grants are set
at or above the midpoint of the Peer Group. By their nature, options directly
compensate employees to the extent that long-term investors achieve high rates
of return. Options are also a key element in being able to obtain and retain
experienced and skilled employees. All options are granted at or above the
market price of the Company's Common Stock as of the date of grant. The options
are granted to all levels of employees in order to provide incentives and to
minimize cash compensation.
Chief Executive Officer Compensation. Dr. Ridihalgh was the Chief Executive
Officer of the Company until February, 1998 when he became the Chief Scientific
Officer of the Company. Dr. Ridihalgh's employment with the Company ceased on
December 31, 1998. Mr. Bupp was named the Chief Executive Officer of the Company
in February, 1998.
Dr. Ridihalgh is a stockholder in Cira Technologies, Inc. ("Cira") which is
developing a process for treating chronic infectious diseases using activated
cellular therapy. The Company waived any claim that the stock ownership of Dr.
Ridihalgh in Cira and his participation in the management thereof were
violations of the employment agreement.
Dr. Ridihalgh's 1998 employment compensation consisted of base salary paid
under an employment agreement dated January 1, 1996 and options to purchase
25,000 shares of Common Stock, all in accordance with the philosophy outlined
above. See the discussion under "Compensation of Management-Compensation of Dr.
Ridihalgh; Employment Compensation" for more details about Dr. Ridihalgh's base
salary and stock option grants. Dr. Ridihalgh received compensation upon his
separation from the Company under a separation agreement which is described in
more detail under the heading "Compensation of Management-Compensation of Dr.
Ridihalgh; Separation Agreement."
Mr. Bupp's 1998 compensation consisted of base salary, stock options and
restricted shares of Common Stock. Effective January 1, 1998, Mr. Bupp entered
into a new employment agreement, the terms of which are described under the
heading "Compensation of Management-Compensation of Mr. Bupp." Mr. Bupp's base
salary under the employment agreement was set in line with the philosophy
described above. During 1998, Mr. Bupp was granted options to purchase 30,000
shares of Common Stock and 45,000 shares of restricted stock in accordance with
the
20
philosophy described above, the terms of which are described under the heading
"Compensation of Management-Compensation of Mr. Bupp."
Internal Revenue Code Provisions. Under Section 162(m) of the Code,
compensation paid by the Company to a Named Executive which is in excess of
$1,000,000 in a year will be nondeductible by the Company for purposes of
determining its federal taxable income unless such compensation is paid under a
performance-based plan which is approved by the stockholders of the Company.
Under the Internal Revenue Service regulations promulgated under Section 162(m),
the Company's Amended and Restated Stock Option and Restricted Stock Purchase
Plan and the 1996 Stock Incentive Plan should be deemed to be performance-based
compensation plans and amounts realized by the Named Executives under such plans
should continue to be deductible by the Company. Because of the favorable
treatment of the Company's plans and the remoteness of the possibility that base
compensation and cash variable compensation levels will exceed $1,000,000 during
fiscal 1998 and the years thereafter, the Committee did not consider the impact
of Section 162(m) on its decisions concerning compensation.
Compensation Committee: Melvin D. Booth, Julius R. Krevans and Michael P.
Moore.
COMPENSATION OF DR. RIDIHALGH
Employment Compensation. John L. Ridihalgh was employed under a three-year
employment agreement effective January 1, 1996. The agreement provided for a
base salary of $250,000, $262,500 and $275,500 for the calendar years 1996, 1997
and 1998, respectively. The employment agreement provides for a two year
non-competition agreement which became effective on December 31, 1998, the date
of Dr. Ridihalgh's separation from the Company.
In January 1998, Dr. Ridihalgh was granted options to purchase 25,000
shares of Common Stock at an exercise price of $5.625 per share. None of these
options vested and they were canceled upon Dr. Ridihalgh's separation from the
Company on December 31, 1998 along with all other unvested options owned by Dr.
Ridihalgh.
Separation Agreement. Under a separation agreement, Dr. Ridihalgh resigned
as an employee and director of the Company and delivered a general release to
the Company and the Company agreed to pay Dr. Ridihalgh separation payments
totaling $137,750 in 12 semi-monthly installments of $11,479.17 and Dr.
Ridihalgh's accrued vacation totaling $25,431. Dr. Ridihalgh's unvested options
were canceled without vesting and his restricted stock and vested options
expired in accordance with their terms.
COMPENSATION OF MR. BUPP
Employment Agreement. David C. Bupp is employed under a two-year employment
agreement effective January 1, 1998. The employment agreement provides for a
base salary of $275,500 and $290,000 for calendar years 1998 and 1999,
respectively.
The Compensation Committee of the Board of Directors will, on an annual
basis, review the performance of the Company and of Mr. Bupp and will pay a
bonus to Mr. Bupp as it deems appropriate, in its discretion. Such review and
bonus will be consistent with any bonus plan adopted by the Compensation
Committee which covers the executive officers of the Company generally. The
Company did not pay a bonus to Mr. Bupp relating to fiscal year 1998.
If a change in control occurs with respect to the Company and the
employment of Mr. Bupp is concurrently or subsequently terminated (i) without
cause (cause is defined as any willful breach of a material duty by Bupp in the
course of his employment or willful and continued neglect of his duty as an
employee), (ii) the term of Mr. Bupp's employment agreement expires or (iii) Mr.
Bupp resigns because his authority, responsibilities or compensation have
materially diminished, a material change occurs in his working conditions or the
Company breaches the agreement, Mr. Bupp will be paid a severance payment equal
to twice his annual base salary (less amounts paid as Mr. Bupp's
21
salary and benefits that continue for the remaining term of the agreement if his
employment is terminated without cause). A change in control includes (a) the
acquisition, directly or indirectly, by a person (other than the Company or an
employee benefit plan established by the Board of Directors) of beneficial
ownership of 15 percent or more of the Company's securities with voting power in
the next meeting of holders of voting securities to elect the Directors; (b) a
majority of the Directors elected at any meeting of the holders of the Company's
voting securities are persons who were not nominated by the Company's then
current Board of Directors or an authorized committee thereof; (c) the
stockholders of the Company approve a merger or consolidation of the Company
with another person, other than a merger or consolidation in which the holders
of the Company's voting securities outstanding immediately before such merger or
consolidation continue to hold voting securities in the surviving or resulting
corporation (in the same relative proportions to each other as existed before
such event) comprising eighty percent (80%) or more of the voting power for all
purposes of the surviving or resulting corporation; or (d) the stockholders of
the Company approve a transfer of substantially all of the assets of the Company
to another person other than a transfer to a transferee, eighty percent (80%) or
more of the voting power of which is owned or controlled by the Company or by
the holders of the Company's voting securities outstanding immediately before
such transfer in the same relative proportions to each other as existed before
such event. Mr. Bupp waived his rights to claim that the issuance of securities
described under the heading "Approval of Issuance of Securities" was a "change
of control."
Mr. Bupp's compensation will continue for the full term of the agreement if
his employment is terminated without cause.
Restricted Stock. On May 20, 1998, the Company and Mr. Bupp entered into a
restricted stock purchase agreement under which Mr. Bupp purchased 45,000 shares
of Common Stock for a purchase price of $0.001 per share. Mr. Bupp may not
transfer or sell any of the restricted shares unless and until they vest. Mr.
Bupp will forfeit any portion of the restricted shares that has not vested (and
the Company will refund the purchase price paid) on the earlier of the date of
the termination of his employment under his employment agreement with the
Company for any reason unless the Company is, at the time of termination for
death or disability, actively engaged in negotiations that could reasonably be
expected to lead to a change of control, and May 20, 2008. Restricted shares
that have not previously been forfeited will vest if and when there is a change
in control of the Company. Except for these restrictions on transfer and
possibilities of forfeiture, Mr. Bupp has all other rights with respect to the
restricted shares, including the right to vote such shares and receive cash
dividends.
The term "change of control" has the same meaning under Mr. Bupp's
restricted stock agreement as it does under Mr. Bupp's employment agreement; see
the definition of "change of control" under the heading "Compensation of
Management-Compensation of Mr. Bupp; Employment Agreement."
The Company has not recognized any expense under the restricted stock
agreement due to the contingent nature of the vesting provisions and the risk of
forfeiture.
Stock Options. On January 29, 1998, Mr. Bupp was granted options to
purchase 30,000 shares of Common Stock at an exercise price of $5.625 (the then
current market price). Such options terminate on the earlier of 10 years after
the date of grant, nine months after death, six months after termination of
employment due to disability or two years after any other termination of
employment. These options vest as to one-third of the underlying shares on each
of the first three anniversaries of the date of grant. All previously unvested
option shares will vest if there is a change of control of the Company.
The term "change of control" has the same meaning under Mr. Bupp's stock
options as it does under Mr. Bupp's employment agreement; see the definition of
"change of control" under the heading "Compensation of Management-Compensation
of Mr. Bupp; Employment Agreement."
22
RESTRICTED AWARDS TO OTHER NAMED EXECUTIVE OFFICERS
On September 28, 1998, the Company entered into restricted stock purchase
agreements with each of Matthew F. Bowman, Patricia A. Coburn and Lauren V.
Vitek. Under these agreements, Mr. Bowman purchased 45,000 restricted shares of
Common Stock, Ms. Coburn purchased 20,000 restricted shares of Common Stock and
Ms. Vitek purchased 20,000 restricted shares of Common Stock for a purchase
price of $0.001 per share.
Ms. Vitek's employment with the Company ended on October 31, 1998 and her
restricted shares were forfeited without vesting.
Mr. Bowman and Ms. Coburn may not transfer or sell their restricted shares
unless and until the shares vest. Mr. Bowman and Ms. Coburn will forfeit any
portion of their respective restricted shares that has not vested (and the
Company will refund the purchase price paid) on the earlier of the date of the
termination of employment for any reason unless the Company is, at the time of
termination for death or disability, actively engaged in negotiations that could
reasonably be expected to lead to a change of control, and September 28, 2008.
The restricted shares that have not previously been forfeited will vest if and
when there is a change in control of the Company. The term "change of control"
has the same meaning under these restricted stock agreements as it does under
Mr. Bupp's employment agreement; see "Compensation of Management-Compensation of
Mr. Bupp; Employment Agreement." Except for these restrictions on transfer and
possibilities of forfeiture, Mr. Bowman and Ms. Vitek have all other rights with
respect to their respective shares, including the right to vote such shares and
receive cash dividends.
DEPARTURE OF NAMED EXECUTIVES
Dr. Ridihalgh ended his employment with the Company effective December 31,
1998. See the discussion under the heading "Compensation of
Management-Compensation of Dr. Ridihalgh; Separation Agreement" for the details
of Dr. Ridihalgh's compensation relating to his separation from the Company.
Ms. Vitek ended her employment with the Company effective October 31, 1998.
The Company paid Ms. Vitek $15,417 in severance and $7,067 for accrued vacation.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
Non-employee Directors who are not affiliated with a principal stockholder
of the Company received a quarterly retainer of $2,500 and a fee of $1,000 for
each board meeting attended in fiscal year 1998, as well as reimbursement for
travel expenses incurred in connection with attending meetings. In 1998, each
non-employee Director was also granted an option to purchase 5,000 shares of
Common Stock which vest over a four-year period and have an exercise price equal
to no less than the market price of Common Stock at the time of grant.
Non-employee Directors have agreed to forego any cash compensation for
serving as Directors in fiscal year 1999. On February 11, 1999, each
non-employee Director was granted an option to purchase 15,000 shares of Common
Stock which vests over a four-year period and has an exercise price equal to the
market price of Common Stock at the time of grant.
In fiscal year 1998, members of committees of the Board of Directors
received $500 per committee meeting for committee meetings held in conjunction
with regular board meetings, and $800 per committee meeting for committee
meetings not held in conjunction with regularly scheduled board meetings.
Members of committees of the Board of Directors have agreed to forego any cash
compensation for serving on committees in fiscal year 1999.
Directors who are also officers or employees of the Company do not receive
any compensation for their services as Directors.
23
CERTAIN TRANSACTIONS
Dr. Richard Olsen, an emeritus professor of veterinary pathobiology at OSU,
and Dr. John Ridihalgh, an officer and director of the Company until December
31, 1999, invented a process for treating chronic infectious and autoimmune
diseases using activated cellular therapy, conducted tests of their invention on
animals and filed an application for a United States patent thereon.
In March 1996, Dr. Ridihalgh and the Company, represented by a committee of
independent directors, agreed to form Cira to develop the process. The Company
received 10% of the originally issued shares of Cira common stock and an option
to buy another 15%. In April 1998, the Company and Cira entered into a Restated
Subscription and Option Agreement under which the Company purchased an
additional 5% ownership interest in Cira for a nominal price and released its
option. Under Cira's Restated Stockholders Agreement dated April 17, 1998, Cira
has a right of first refusal on the sale of any shares of Cira.
In April 1998, the Company and Cira entered into a License and Option
Agreement under which (A) Cira granted the Company (1) an exclusive,
royalty-bearing license to produce and sell licensed pharmaceuticals which are
based on Cira's technology and which are used to treat human immunodeficiency
virus, (2) an option to acquire a worldwide, royalty-bearing, exclusive license
to produce and sell licensed pharmaceuticals which are based on Cira's
technology and which are used to treat hepatitis in humans and (3) an option to
acquire a royalty-bearing, exclusive license to produce and sell, in the Far
East, licensed pharmaceuticals which are based on Cira's technology and which
are used to treat human diseases not covered by the Company's other licenses;
and the Company (1) agreed to pay Cira a 3% to 10% royalty, depending upon the
presence or absence of patent rights and whether the Company was selling the
pharmaceuticals as part of a joint venture, on the Company's sales of
pharmaceuticals under the agreement, (2) agreed to pay Cira 50% of any
sublicensing revenue received by the Company under sublicenses allowed under the
agreement, (3) agreed to fund and oversee the clinical research necessary to
pursue a license for pharmaceuticals which are based on Cira's technology and to
submit a research plan to Cira for the obtaining of such licenses, (4) granted
the Company's option to use Cira's technology to treat chronic viral conditions
back to Cira, and (5) agreed to fund preclinical laboratory studies conducted by
Cira up to a maximum of $50,000.
In connection with the Technology Option Agreement and the License and
Option Agreement, the Company has incurred expenses of approximately $125,000,
$239,000 and $337,000 for the years ended December 31, 1996, 1997 and 1998,
respectively. No royalties are due to Cira until the Company recovers up to $2
million of its out-of-pocket expenditures. The Company and Cira are currently
negotiating revisions to the License and Option Agreement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
This disclosure relates to events occurring in 1998. Four transactions in
Company securities were reported to the Securities and Exchange Commission on an
untimely Form 4 for Trudie Seeger. Ms. Seeger was the Company's Vice-President -
Regulatory Affairs until April 15, 1998.
The Company does not know of any other failures to make filings required by
Section 16 on a timely basis by any of its directors, executive officers or
beneficial owners of 10% or more of its equity securities.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers ("PWC") was the Company's principal accountant and
audited the Company's financial statements for the fiscal years ended December
31, 1996 and December 31, 1997. On December 1, 1998, after discussions between
the Company and PWC, the parties agreed that PWC would not conduct the Company's
1998 fiscal year-end audit. Discussions between the parties were initiated by
PWC; however, during the Company's two most recent fiscal years and subsequent
interim periods, no reports or financial statements issued by PWC contained
24
an adverse opinion or disclaimer of opinion or were qualified or modified as to
uncertainty, audit scope or accounting principles. Further, during the Company's
two most recent fiscal years and subsequent interim periods there were no
disagreements between the Company's management and PWC on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure which disagreements, if not resolved to the satisfaction of
PWC, would have caused PWC to make reference to the subject matter of the
disagreements in connection with PWC's reports.
KPMG LLP was engaged as the Company's principal accountant on December 7,
1998 and has audited the Company's financial statements for the fiscal year
ended December 31, 1998. At the suggestion of management, the Audit Committee
has recommended the retention of KPMG LLP as the Company's independent
accountant for the 1999 fiscal year.
A representative of KPMG LLP is expected to be present at the Annual
Meeting. The representative will have an opportunity to make a statement if he
so desires and is expected to be available to respond to appropriate questions
of stockholders.
OTHER BUSINESS
The Board of Directors does not intend to present, and has no knowledge
that others will present, any other business at the Annual Meeting. If, however,
any other matters are properly brought before the Annual Meeting, it is intended
that the persons named in the enclosed proxy will vote the shares represented
thereby in accordance with their best judgment.
COST OF SOLICITATION OF PROXIES
The cost of this solicitation will be paid by the Company. The Company may
request persons holding shares in their names for others to forward soliciting
materials to their principals to obtain authorization for the execution of
proxies, and the Company will reimburse such persons for their expenses in so
doing.
STOCKHOLDER PROPOSALS
A stockholder proposal intended for inclusion in the proxy statement and
form of proxy for the Annual Meeting of Stockholders of the Company to be held
in 1999 must be received by the Company before December 8, 1999, at its
executive offices, Attention: Brent Larson.
A stockholder who wishes to nominate a candidate for election to the Board
of Directors must follow the procedures set forth in Article III, Section 2 of
the Company's By-Laws. A copy of these procedures is available upon request from
the Company at 425 Metro Place North, Suite 300, Dublin, Ohio 43017-1367,
Attention: Brent Larson. In order for a stockholder to nominate a candidate for
the Board of Directors election at the 2000 Annual Meeting, notice of the
nomination must be delivered to the Company's executive offices, Attention:
Brent Larson, before December 8, 1999.
INCORPORATED BY REFERENCE
The following information is hereby incorporated by reference into this
Proxy Statement from the Company's 1999 Annual Report to Stockholders:
o The Company's financial statements for the fiscal years ended
December 31, 1996, December 31, 1997 and December 31, 1998 under the
heading "Financial Statements."
o The information under the heading "Supplementary Financial Information."
25
o The information under the heading "Management's discussion and Analysis
of Financial Condition and Results of Operations."
o The information under the heading "Quantitative and Qualitative
Disclosures About Market Risk."
NEOPROBE CORPORATION THIS PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS
The undersigned hereby appoints DAVID C. BUPP, PATRICIA A. COBURN and
BRENT L. LARSON, and each of them, severally, with full power of
P substitution, as proxies for the undersigned, and hereby authorizes
R them to represent and to vote, as designated below, all of the shares
O of Common Stock, par value $.001 per share, of NEOPROBE CORPORATION
X held of record by the undersigned on April 1, 1999, at the Annual
Y Meeting of Stockholders to be held on May 19, 1999, or any adjournment
thereof, with all the power the undersigned would possess if present
in person.
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF THE NOMINEE AND
ADOPTION OF ALL OF THE PROPOSALS.
1. To elect as director the nominee named below for a term of three
years and until his successor is duly elected and qualified.
NOMINEE: MICHAEL P. MOORE
[ ]FOR the nominee listed above [ ]WITHHOLD AUTHORITY
(except as marked to the contrary) to vote for the nominee listed above
2. Approval of the issuance of securities which are convertible into,
or which are exercisable for, shares of Common Stock representing
more than 20% of Neoprobe Corporation's outstanding Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the alternative proposals to amend Neoprobe
Corporation's Restated Certificate of Incorporation to combine the
shares of Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, to be dated and signed, on the other side)
(Continued from the other side)
In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Annual Meeting of
Stockholders or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEE LISTED
ABOVE AND IN FAVOR OF ALL PROPOSALS.
The undersigned hereby acknowledges receipt with this Proxy of a
copy of the Notice of Annual Meeting and Proxy Statement dated April
6, 1999, and a copy of the Company's 1999 Annual Report to
Stockholders.
Date: , 1999
-------------------
------------------------------
Signature
------------------------------
Signature (if held jointly)
IMPORTANT: Please sign
exactly as name or names
appear to the left. When
shares are held by joint
tenants, both should sign.
When signing as attorney,
executor, administrator,
trustee or guardian, please
give full title as such.
Corporations should sign in
their full corporate name by
their president or other
authorized officer. If a
partnership, please sign in
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authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Proxy Card