IGEN International, Inc.
16020 Industrial Drive
Gaithersburg, Maryland 20877
September 5, 2001
Supplement to Proxy Statement
for
Annual Meeting of Stockholders
To Be Held on September 13, 2001
This Supplement to Proxy Statement supplements the information set forth in
the Proxy Statement of IGEN International, Inc. ("IGEN" or the "Company") dated
July 30, 2001. In the July 30 Proxy Statement, the Company noted that it was,
through an independent committee of its Board of Directors, negotiating the
terms under which it might continue Meso Scale Diagnostics, LLC ("MSD"), its
joint venture with Meso Scale Technologies LLC. ("MST") formed in 1995. The
Company has now entered into amended agreements with MST continuing MSD.
The amended agreements were negotiated by an independent committee of IGEN's
board of directors acting on IGEN's behalf. The independent committee was
comprised of three members of IGEN's board of directors -- Joop Sistermans,
Robert Salsmans and Anthony Rees -- who are not members of IGEN's management
and who are not related to any member of IGEN's management. The independent
committee was formed by unanimous action of the Board in August 2000. The
resolutions adopted by the Board delegated to the committee the exclusive power
and authority to review and investigate the matters identified in certain
demand letters and to determine what measures or actions, if any, should be
undertaken on behalf of the Company in response to the demand letters. The
committee was also authorized to address any other issues raised as a result of
the committee's investigation and to effect any such measures or actions on
behalf of the Company with the full power and authority of the Board, subject
only to the requirements of Delaware law and the Company's governing documents.
The committee's mandate specifically included the power and authority to
negotiate, approve, execute and deliver any documents that the committee deemed
necessary to respond to the demand letters and address the results of the
committee's investigation.
Under the amended agreements, IGEN holds a 31% voting equity interest in the
joint venture. In addition, IGEN is entitled to a preferred return, payable out
of a portion of both future profits and certain third-party financings before
any payments are made to other equity holders, on $21 million of the funds it
has previously invested in the venture and on additional funds it invests. The
preferred return is 5% on investments made prior to January 1, 2001 and the
prime rate plus 0.5% on investments made after January 1, 2001.
IGEN and MST each hold one seat on MSD's two-member board of managers.
IGEN's representative on the board is Richard J. Massey, IGEN's President and
Chief Operating Officer, and MST's representative is Jacob Wohlstadter, who is
the sole owner of MST and serves as President and Chief Executive Officer of
MSD. Under most circumstances, significant governance matters require the
approval of both IGEN and MST (and/or their representatives on the Board of
Managers of MSD). Neither Dr. Massey nor any other executive officer or
director of IGEN has any ownership interest in MST or MSD, other than through
ownership of interests in IGEN.
Under the terms of the revised joint venture agreement, IGEN agreed, subject
to certain conditions, to fund the joint venture through November 30, 2003.
IGEN's funding commitment may be satisfied in part through in-kind
contributions of scientific and administrative personnel and shared facilities.
The Company's funding commitment for the next 12 months is $19.5 million and
may not be increased without the Company's consent. Thereafter, the Company's
funding commitment would be determined on the basis of an annual budget
prepared by MSD and submitted to a committee of IGEN's board of directors for
approval. If the committee fails to approve the annual budget submitted by MSD,
IGEN would still be required to provide MSD with transitional funding for an
additional six months. If the committee fails to approve a budget submitted by
MSD, MSD and MST have the right to terminate the joint venture unless the
budget calls for funding that exceeds 110% of the prior 12 months' funding and
the committee makes a reasonable good faith determination for the rejection.
The term of the joint venture is through November 30, 2003. MST and MSD will
have the right to terminate the joint venture under other circumstances
including (1) breach of IGEN's obligations, including its funding obligations
to MSD, (2) MSD's termination of Jacob Wohlstadter's employment (other than for
cause or
disability), (3) if Mr. Wohlstadter is entitled to terminate his employment
agreement for good reason (as defined in the agreement), or (4) upon a change
in control of IGEN as defined in the joint venture agreement. Change in control
includes, among other things, the acquisition, by any person or group (other
than Samuel Wohlstadter and his affiliates), of 30% or more of the beneficial
ownership of any class of voting securities of IGEN, or 15% or more of the
beneficial ownership if combined with the right to nominate one or more
directors of IGEN. Upon termination, expiration or non-renewal of the joint
venture agreement, MSD and MST jointly have the right to repurchase IGEN's
interest in MSD at its fair market value, less a discount of 7.5% to 15%
depending on the cause of termination or non-renewal.
Under the terms of the revised agreements, MSD has a worldwide, perpetual,
exclusive license (with certain exceptions) to IGEN's technology for use in
MSD's programs. If IGEN ceases to be a member of the joint venture, IGEN will
receive royalty payments from MSD on all products developed and sold by MSD
using IGEN's technology. MST holds a worldwide, perpetual, non-exclusive
license for certain non-diagnostic applications of IGEN's technology. IGEN will
receive royalty payments from MST on any products developed and sold by MST
that use this technology.
Under the revised agreements, IGEN and Jacob Wohlstadter revised the terms
of his consulting arrangement with IGEN to provide for a term running through
August 15, 2004. Pursuant to the consulting agreement, Mr. Wohlstadter will be
entitled to receive such fees as the Company and Mr. Wohlstadter agree to when
particular services are requested by the Company. In addition, MSD entered into
an employment contract with Mr. Wohlstadter that provides for a term running
concurrent with the joint venture agreement. Mr. Wohlstadter has agreed to
serve as President and CEO of MSD for an initial annual salary of $250,000. Mr.
Wohlstadter will be eligible to receive, at the discretion of an independent
committee of the IGEN Board, an annual cash bonus in an amount not to exceed
20% of his annual salary. If MSD terminates the employment agreement without
cause, or Mr. Wohlstadter terminates the employment agreement for good reason
(which includes a change in control of IGEN as described above), Mr.
Wohlstadter shall be entitled to receive, in addition to salary and pro rata
bonus and adjustments earned through the 60th day following the notice of
termination, an amount equal to from 3 to 12 times (depending on the reason for
the termination) the monthly pro rata salary, bonus and adjustments in effect
at the time of the termination. In addition, upon such a termination, MSD and
MST shall have a joint right to repurchase IGEN's interest in MSD on the terms
described above. IGEN is responsible for all amounts payable, costs incurred
and other obligations under the employment agreement, which is expected to be
paid out of IGEN's capital contribution to MSD. The Company has also agreed to
indemnify Mr. Wohlstadter against certain liabilities, including liability from
the joint venture.
The independent committee has also issued a report dated August 24, 2001,
summarizing its findings with respect to the demand letters and derivative
lawsuits subsequently filed by Brown Simpson Strategic Growth Fund L.P. and
Lawrence Paskowitz. The independent committee concluded that the actions
undertaken by the committee completely address the demands made in the demand
letters and by the complaints as they relate to the derivative actions,
including those claims directed at the MSD joint venture. In particular, with
respect to the MSD joint venture, in the committee's view, certain terms in the
original 1995 joint venture documents exceeded the board mandate but Dr.
Massey, who negotiated and executed the agreements on behalf of the Company,
acted in good faith and with the subjective belief that his actions were duly
authorized and in the best interests of the Company and its stockholders. The
committee also concluded that, notwithstanding any errors that may or may not
have occurred in this regard, Dr. Massey has provided critical direction for
and management of the Company's business. The committee found that it is not in
the best interest of the Company or its stockholders to pursue any of the
demands contained in the demand letters and, on behalf of the Company, refused
the demands made in the demand letters and the lawsuits and urged the court to
dismiss the derivative claims in the lawsuits.
* * * *
Any person giving a proxy pursuant to the Company's solicitation has the
power to revoke or change such proxy at any time before it is exercised. A
proxy may be revoked or changed by filing with the Secretary of the Company at
the Company's principal executive office, 16020 Industrial Drive, Gaithersburg,
Maryland 20877 (telecopy 301-208-3798), a written notice of revocation or a
duly executed proxy bearing a later date, or it may be revoked by attending the
Annual Meeting and voting in person. Attendance at the Annual Meeting will not,
by itself, revoke a proxy.