<PAGE>
SCHEDULE 14A
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 Section240.14a-11(c) or Section240.14a-12
IGEN INTERNATIONAL, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
IGEN INTERNATIONAL, INC.
16020 INDUSTRIAL DRIVE
GAITHERSBURG, MARYLAND 20877
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 23, 1998
To The Stockholders of IGEN International, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of IGEN International, Inc., a Delaware corporation (the "Company"),
will be held on September 23, 1998 at 10:00 a.m. local time at The Hyatt
Regency, 7400 Wisconsin Avenue, Bethesda, Maryland 20814 for the following
purposes:
1. To elect one director, for a three-year term (Proposal One).
2. To approve an increase in the number of shares of the Company's common
stock reserved for issuance upon the exercise of options granted pursuant
to the 1994 Stock Option Plan by 750,000 shares (Proposal Two).
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Pursuant to the Company's Bylaws, the Board of Directors has fixed the close
of business on July 31, 1998, as the record date for the Annual Meeting. Only
holders of the Company's common stock at the close of business on that date will
be entitled to notice of and to vote at the Annual Meeting or any adjournment or
postponement thereof. A complete list of stockholders entitled to vote at the
Annual Meeting will be open for examination by any stockholder, for any purpose
germane to the meeting, during ordinary business hours at 16020 Industrial
Drive, Gaithersburg, Maryland, 20877 from September 13, 1998 through September
22, 1998.
By Order of the Board of Directors
George V. Migausky
SECRETARY
Gaithersburg, Maryland
July 29, 1998
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE TO
ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING. A RETURN ENVELOPE (WHICH IS
POSTAGE PREPAID IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE.
EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND
THE ANNUAL MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD
BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE ANNUAL MEETING,
YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
IGEN INTERNATIONAL, INC.
16020 INDUSTRIAL DRIVE
GAITHERSBURG, MARYLAND 20877
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 23, 1998
------------------------
INTRODUCTORY STATEMENT
This Proxy Statement is being furnished to the stockholders of IGEN
International, Inc., a Delaware corporation (the "Company"), as part of the
solicitation of the enclosed proxy by its board of directors ("the Board of
Directors" or "Board") from holders of the outstanding shares of the Company's
common stock, par value $0.001 per share ("Common Stock"), for use at the Annual
Meeting of Stockholders to be held on September 23, 1998, at 10:00 a.m. local
time (the "Annual Meeting"), or at any adjournment or postponement thereof, for
the purposes set forth herein and in the accompanying Notice of Annual Meeting.
The Annual Meeting will be held at The Hyatt Regency, 7400 Wisconsin Avenue,
Bethesda, Maryland 20814. The Company intends to mail this Proxy Statement,
accompanying proxy card and the Company's Annual Report for the fiscal year
ending March 31, 1998 on or about August 7, 1998, to all stockholders entitled
to vote at the Annual Meeting.
SOLICITATION, VOTING, AND REVOCABILITY OF PROXIES
VOTING
Each outstanding share of Common Stock is entitled to one vote on all
matters as to which a vote is taken at the Annual Meeting. July 31, 1998, has
been fixed by the Board of Directors as the record date (the "Record Date") for
determination of stockholders entitled to notice of and to vote at the Annual
Meeting. The number of shares of Common Stock outstanding on the Record Date was
15,312,235. The presence, in person or by proxy, of at least a majority of the
shares of Common Stock outstanding on the Record Date (7,656,118 shares) is
necessary to constitute a quorum at the Annual Meeting. Abstentions and broker
non-votes will be treated as shares that are present and entitled to vote for
purposes of determining a quorum but are not counted for any purpose in
determining whether a matter is approved. Directors are elected (Proposal One)
by a plurality of the votes of shares present (in person or by proxy) and
entitled to vote. The affirmative vote of a majority of shares present in person
or by proxy at the meeting and entitled to vote is required to approve Proposal
Two.
At the Annual Meeting, stockholder votes will be tabulated by persons
appointed to act as inspectors of election. The inspectors of election will
separately tabulate affirmative and negative votes, abstentions and broker
non-votes.
All proxies in the enclosed form of proxy that are properly executed and
returned to the Company prior to commencement of voting at the Annual Meeting
will be voted at the Annual Meeting or any adjournments or postponements thereof
in accordance with the instructions thereon. EXECUTED BUT UNMARKED PROXIES WILL
BE VOTED FOR ALL PROPOSALS SET FORTH IN THIS PROXY STATEMENT.
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REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke such proxy at any time before it is voted. A proxy may be revoked by
filing with the Secretary of the Company at the Company's principal executive
office, 16020 Industrial Drive, Gaithersburg, Maryland 20877, 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.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies including
preparation, assembly, printing and mailing of this Proxy Statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
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<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board of Directors consists of six directors divided into three classes
designated as Class I, Class II and Class III, respectively. The term of office
of the Class II directors will expire at the Annual Meeting and Class II
directors will be elected for a three-year term. One Class II director position
is vacant. The terms of office of the Class III directors and Class I directors
will expire at the annual meetings of stockholders in 1999 and 2000,
respectively, and their successors will be elected for a three-year term.
The nominee listed below is currently a director of the Company and has
previously been elected by the stockholders.
It is the intention of the persons named in the proxy to vote the shares
represented by each properly executed proxy for the election as director of the
person named below as a nominee, if authority to do so is not withheld. The
Company's management believes that the nominee will stand for election and will
serve if elected as director. However, if the person nominated by the Board of
Directors fails to stand for election or will be unable to accept election, the
proxies will be voted for the election of such other person or persons as the
Company's management may propose.
The candidate receiving the highest number of affirmative votes cast at the
meeting will be elected a director of the Company. Proxies may not be voted for
a greater number of persons than the number of nominees named.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
IN FAVOR OF THE NAMED NOMINEE.
INFORMATION AS TO THE NOMINEE AND CONTINUING DIRECTORS
The following table sets forth, as of August 7, 1998, the name of the Board
of Directors' nominee for election as director and those directors who will
continue to serve after the Annual Meeting. Also set forth is certain other
information with respect to each such person's age, principal occupation or
employment during the past five years, the periods during which he has served as
a director and positions currently held with the Company. One Class II director
position is vacant.
<TABLE>
<CAPTION>
DIRECTOR EXPIRATION POSITIONS HELD
NOMINEE FOR A THREE-YEAR TERM AGE SINCE OF TERM WITH THE COMPANY
- ------------------------------------------------------ --- ----------- ------------- ------------------------------
<S> <C> <C> <C> <C>
Richard J. Massey, Ph.D............................... 52 1990 1998 President, Chief Operating
Officer and Director
CONTINUING DIRECTORS
Robert Salsmans....................................... 53 1995 2000 Director
Edward B. Lurier(1)(2)................................ 67 1987 2000 Director
William J. O'Neill(1)(2).............................. 56 1984 1999 Director
Samuel J. Wohlstadter................................. 56 1982 1999 Chairman, Chief Executive
Officer and Director
</TABLE>
- ------------------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
Set forth below is certain biographical information regarding the directors
of the Company.
NOMINEE FOR A THREE-YEAR TERM
RICHARD J. MASSEY, Ph.D. is a founder of the Company, has been President and
Chief Operating Officer of the Company since February 1992, and has been a
Director of the Company since 1990. He served as Senior Vice President from 1985
to 1992. From 1981 until he joined IGEN in 1983, Dr. Massey
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<PAGE>
was a faculty member in the Microbiology and Immunology Department at Rush
Medical Center in Chicago. Prior to that, he was Senior Research Scientist at
the National Cancer Institute, Frederick Cancer Research Center.
CONTINUING DIRECTORS
CLASS III (TERM EXPIRES 1999)
WILLIAM J. O'NEILL has been a Director of the Company since 1984. He serves
as Executive Vice President and President of Corporate Development and
previously served as Chief Financial Officer of Polaroid Corporation, a
photographic equipment company, where he had been employed for more than 25
years.
SAMUEL J. WOHLSTADTER is a founder of the Company and has been Chairman of
the Board and Chief Executive Officer since its formation in 1982. Mr.
Wohlstadter has been a venture capitalist for more than 20 years and has
experience in founding, supporting and managing high technology companies,
including Amgen Inc., a biopharmaceutical company, and Applied Biosystems, Inc.,
a medical and biological research products company. Mr. Wohlstadter is also
Chief Executive Officer of Hyperion Catalysis International, an advanced
materials company, which he founded in 1981; of Pro-Neuron, Inc., a drug
discovery company, which he founded in 1985; of Proteinix Corporation, a
development stage company organized to conduct research in intracellular
metabolic processes, which he founded in 1988; and of Pro-Virus, Inc., a drug
discovery company, which commenced operations in 1994.
CLASS II (TERM EXPIRES 2000)
EDWARD B. LURIER is the founder and President of Lurier & Company, Inc.
which assists corporations with mergers and acquisitions, divestitures,
corporate finance and business evaluations. Until 1998, Mr. Lurier was a General
Partner of Gryphon Financial Partners, a venture capital fund, and Chairman of
Gryphon Management Co., Inc., a venture capital firm. Mr. Lurier has been a
Director of the Company since 1987. Mr. Lurier is also a Director of Energy
Biosystems Corp., a fossil fuel, biotechnology research and development company,
and several privately held companies.
ROBERT R. SALSMANS has served as President and Chief Executive Officer of
Organon Teknika B.V., a business unit that is part of the Pharma group of Akzo
Nobel N.V., a holding company with high technology operating units in the
biotechnology, medical, and pharmaceutical industries, in the Netherlands, since
September 1994. From October 1993 through August 1994, Mr. Salsmans served as
Managing Director of Organon Teknika B.V. and from 1990 through September 1993,
he served as Managing Director of Organon International B.V. Mr. Salsmans sits
on the Board pursuant to an agreement between Organon Teknika entered into as
part of the long-term license agreement and stock purchase agreement between the
parties in May 1993. Mr. Salsmans has been a Director of the Company since 1995.
CORPORATE GOVERNANCE AND OTHER MATTERS
The Board of Directors acts as nominating committee for selecting nominees
for election as directors. The Company's Bylaws permit stockholders eligible to
vote for the election of directors at the Annual Meeting to make nominations for
directors, but only if such nominations are made pursuant to timely notice in
writing to the Secretary of the Company. The Bylaws also permit stockholders to
propose other business brought before an annual meeting, provided that such
proposals are made pursuant to timely notice to the Secretary of the Company. To
be timely, notice must be received at the principal executive offices of the
Company no later than the date designated for receipt of stockholder proposals
in a prior public disclosure made by the Company. For the 1999 Annual Meeting,
such proposals must be received by the Company no later than the date specified
in this Proxy Statement for stockholder proposals, which is April 1, 1999.
4
<PAGE>
The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and to discuss the financial
statements; recommends to the Board the independent auditors to be retained; and
receives and considers the accountants' comments as to controls, adequacy of
staff and management performance and procedures in connection with audit and
financial controls. During fiscal 1998, the Audit Committee consisted of two
non-employee directors: Messrs. Lurier and O'Neill. It met once during the
fiscal year ended March 31, 1998; Messrs. Lurier and O'Neill both attended the
meeting.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans and otherwise determines compensation levels
and performs such other functions regarding compensation as the Board may
delegate. During fiscal 1998, the Compensation Committee was composed of two
non-employee directors: Messrs. Lurier and O'Neill. It met once during the
fiscal year ended March 31, 1998; Messrs. Lurier and O'Neill attended that
meeting.
During the fiscal year ended March 31, 1998, the Board of Directors held two
(2) meetings. All directors, except Mr. Salsmans, attended each meeting of the
Board and of the committees on which they served. Mr. Salsmans did not attend
either meeting of the Board.
5
<PAGE>
PROPOSAL TWO
TO APPROVE AN INCREASE IN THE NUMBER OF SHARES OF COMMON STOCK
RESERVED FOR THE 1994 STOCK OPTION PLAN BY 750,000 SHARES.
The essential features of the Company's 1994 Stock Option Plan, as amended
through July 24, 1998, are outlined below. This summary is qualified in its
entirety by reference to the full text of such plan. The full text of the
amendment subject to stockholder approval is attached as Exhibit A to this Proxy
Statement. The Plan has been renamed the IGEN International, Inc. 1994 Stock
Option Plan (the "1994 Plan"). The increase in total shares of Common Stock
reserved and authorized for issuance under the 1994 Plan is contingent on
stockholder approval at the Meeting.
PROPOSED AMENDMENT TO THE 1994 PLAN
As of July 31, 1998, options to purchase an aggregate of 932,780 shares of
Common Stock were outstanding. This amendment to the 1994 Plan will increase the
number of shares available under the Plan from 1,000,000 to 1,750,000. The Board
believes that this amendment is necessary to provide sufficient shares to meet
the needs of a competitive hiring environment in an industry that typically
offers stock-based compensation as an important incentive. The affirmative vote
of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote is required to approve this proposal.
GENERAL
The 1994 Plan provides for the grant of both incentive and nonstatutory
stock options. Incentive stock options granted under the 1994 Plan are intended
to qualify as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). Nonstatutory stock
options granted under the 1994 Plan are intended not to qualify as incentive
stock options under the Code. See "Federal Income Tax Information" for a
discussion of the tax treatment of incentive and nonstatutory stock options.
Assuming the stockholders approve the increase to the shares available under the
1994 Plan at the Meeting, the Company, under the 1994 Plan, will be able to
issue up to 1,750,000 shares of Common Stock as increased by the Board on July
24, 1998 from the previous limit of 1,000,000 shares.
PURPOSE
The 1994 Plan was adopted to provide a means by which selected officers and
other employees of and consultants to the Company and its affiliates would have
an opportunity to purchase the Common Stock of the Company, to assist in
retaining the services of employees holding key positions, to secure and retain
the services of persons capable of filling such positions and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
ADMINISTRATION
The 1994 Plan is administered by the Board of Directors of the Company or
its delegate. The Board has the power to construe and interpret the 1994 Plan
and, subject to the provisions of the 1994 Plan, to determine the persons to
whom and the dates on which options will be granted, the number of shares to be
subject to each option, the time or times during the term of each option within
which all or a portion of such option may be exercised, the exercise price, the
type of consideration and other terms of the option. The Board of Directors is
authorized to delegate administration of the 1994 Plan to a committee composed
of not fewer than two members of the Board. The Board amended the 1994 Plan to
remove references to "disinterested directors" in light of amendments to Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Board has delegated administration of the 1994 Plan to the
Compensation Committee of the Board. The 1994 Plan also provides for the
delegation of authority to a Non-Officer Stock Option Committee composed of Mr.
Wohlstadter, Dr. Massey and
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<PAGE>
Mr. Migausky with authority to grant stock options to persons who are not at the
time of the grant of options subject to Section 16 of the Exchange Act. As used
herein with respect to the 1994 Plan, the "Board" refers to the Compensation
Committee as well as to the Board of Directors itself.
The Company currently intends to limit the directors who may serve as
members of the Compensation Committee to those who are "outside directors" under
the tax rules.
ELIGIBILITY
Incentive stock options may be granted under the 1994 Plan only to selected
employees (including officers) of the Company and its affiliates. Selected
employees (including officers) and consultants are eligible to receive
nonstatutory stock options under the 1994 Plan. Directors who are not salaried
employees of or consultants to the Company or to any affiliate of the Company
participate in the Company's 1994 Non-Employee Director's Stock Option Plan and
are not eligible to participate in the 1994 Plan. As of July 31, 1998,
approximately one hundred and thirty seven (137) employees (excluding officers),
five (5) officers, and twenty-five (25) consultants of the Company and its
affiliates were eligible to be considered for stock options under the 1994 Plan.
No incentive stock option may be granted under the 1994 Plan to any person
who, at the time of the grant, owns (or is deemed to own) stock possessing more
than 10% of the total combined voting power of the Company or any affiliate of
the Company, unless the option exercise price is at least 110% of the fair
market value of the stock subject to the option on the date of grant, and the
term of the option does not exceed five years from the date of grant. For
incentive stock options granted under the 1994 Plan, the aggregate fair market
value, determined at the time of grant, of the shares of Common Stock with
respect to which such options are exercisable for the first time by an optionee
during any calendar year (under all such plans of the Company and its
affiliates) may not exceed $100,000.
In addition, no one may receive options within a twelve-month period for
more than 200,000 shares. The purpose of this limitation is to ensure that the
Company generally will continue to be able to deduct for tax purposes the
compensation attributable to the exercise of options granted under the 1994 Plan
and does not reflect either prior grant levels or future expectations.
FUTURE PLAN BENEFITS
The amount of future option grants under the 1994 Plan to (i) the Company's
Chief Executive Officer, (ii) the Company's four most highly compensated
executive officers (other than the Chief Executive Officer) who were serving as
executive officers on March 31, 1998, (iii) all current executive officers as a
group, (iv) all current directors, who are not executive officers, as a group,
and (v) all employees, including officers who are not executive officers, as a
group, are not determinable because, under the terms of the 1994 Plan, such
grants are made in the discretion of the Compensation Committee and the
Non-Officer Stock Option Committee. Future option exercise prices under the 1994
Plan are not determinable because they are based upon the fair market value of
the Company's Common Stock on the date of the grant.
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<PAGE>
OUTSTANDING OPTIONS UNDER THE 1994 PLAN
As of July 31, 1998, options to purchases an aggregate of 932,780 shares of
Common Stock were outstanding under the 1994 Plan. The options have been granted
as set forth below:
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
UNDERLYING OPTIONS UNDERLYING OPTIONS GRANTED
GRANTED SINCE DURING FISCAL YEAR ENDING
NAME AND PRINCIPLE POSITION INCEPTION OF 1994 PLAN MARCH 31, 1998
- ------------------------------------------------------------ ---------------------- ----------------------------
<S> <C> <C>
Samuel J. Wohlstadter....................................... 200,000 100,000
Chairman and Chief Executive Officer
Richard J. Massey, Ph.D..................................... 160,000 80,000
President and Chief Operating Officer
George V. Migausky.......................................... 100,000 50,000
Vice President and Chief Financial Officer, and Secretary
Herman H. Spolders, Ph.D.................................... 20,000(2) -0-
former Vice President, Business Development and Planning
(1)
Robert Connelly............................................. 60,000 30,000
Vice President, Marketing and Sales
All current executive officers as a group................... 570,000(3) 265,000
All current directors as a group............................ -0- -0-
Each associate of any such directors, executive officers or
nominees.................................................. -0- -0-
Each other person who received 5 percent of such options.... 180,000 180,000
All employees, including all current officers who are not
executive officers, as a group............................ 403,650(4) 131,350
</TABLE>
- ------------------------
(1) Dr. Spolders' employment terminated May 3, 1998.
(2) 8,000 shares underlying options granted since inception of 1994 Plan, net of
forfeitures.
(3) 558,000 shares underlying options granted since inception of 1994 Plan, net
of forfeitures.
(4) 194,780 shares underlying options granted since inception of 1994 Plan, net
of forfeitures.
STOCK SUBJECT TO THE 1994 PLAN
If options granted under the 1994 Plan expire or otherwise terminate without
being exercised, the Common Stock not purchased pursuant to such options again
becomes available for issuance under the 1994 Plan.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under the
1994 Plan. Individual option grants may be more restrictive as to any or all of
the permissible terms described below.
EXERCISE PRICE; PAYMENT. The exercise price of incentive stock options
under the 1994 Plan may not be less than the fair market value of the Common
Stock subject to the option on the date of the option grant, and in some cases
(see "Eligibility" above), may not be less than 110% of such fair market value.
The exercise price of nonstatutory options under the 1994 Plan may not be less
than 85% of the fair market value of the Common Stock subject to the option on
the date of the option grant. If the value of the Company's Common Stock
declines, the Board has the authority to offer employees the opportunity to
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<PAGE>
replace outstanding higher priced options, whether incentive or nonstatutory,
with new lower priced options, although through July 31, 1998 the Board has
never elected to reprice options. On July 27, 1998, the closing price of the
Company's Common Stock as reported on the Nasdaq National Market was $36.50 per
share.
The exercise price of options granted under the 1994 Plan must be paid
either: (a) in cash at the time the option is exercised; or (b) at the
discretion of the Board, (i) by delivery of other Common Stock of the Company,
(ii) pursuant to a deferred payment arrangement or (c) in any other form of
legal consideration acceptable to the Board.
OPTION EXERCISE. Options granted under the 1994 Plan may become exercisable
in cumulative increments ("vest") as determined by the Board. Options generally
vest 20% one year from the date of grant and 5% for each additional quarter
thereafter, with the effect that such shares are fully vested after five years
from the date of grant. The Board has the power to accelerate the time during
which an option may be exercised. In addition, nonstatutory options granted
under the 1994 Plan may permit exercise prior to vesting, but in such event the
optionee may be required to enter into an early exercise stock purchase
agreement that allows the Company to repurchase shares not yet vested at their
exercise price should the optionee leave the employ of the Company before
vesting. To the extent provided by the terms of an option, an optionee may
satisfy any federal, state or local tax withholding obligation relating to the
exercise of such option by a cash payment upon exercise, by authorizing the
Company to withhold a portion of the stock otherwise issuable to the optionee,
by delivering already-owned stock of the Company or by a combination of these
means.
TERM. The maximum term of options under the 1994 Plan is 10 years, except
that in certain cases (see "Eligibility") the maximum term is five years.
Options under the 1994 Plan terminate three months after the optionee ceases to
be employed by the Company or any affiliate of the Company, unless (a) the
termination of employment is due to such person's permanent and total disability
(as defined in the Code), in which case the option may, but need not, provide
that it may be exercised at any time within one year of such termination; (b)
the optionee dies while employed by the Company or any affiliate of the Company,
or within three months after termination of such employment, in which case the
option may, but need not, provide that it may be exercised (to the extent the
option was exercisable at the time of the optionee's death) within eighteen
months of the optionee's death by the person or persons to whom the rights to
such option pass by will or by the laws of descent and distribution; or (c) the
option by its terms specifically provides otherwise. Individual options by their
terms may provide for exercise within a longer period of time following
termination of employment or the consulting relationship. The option term may
also be extended if exercise of the option within these periods is prohibited
for specified reasons.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the 1994 Plan or subject to
any option granted under the 1994 Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the 1994 Plan and options
outstanding thereunder will be appropriately adjusted as to the class and the
maximum number of shares subject to such plan and the class, number of shares
and price per share of stock subject to such outstanding options.
EFFECT OF CERTAIN CORPORATE EVENTS
The 1994 Plan provides that, in the event of a dissolution or liquidation of
the Company, specified type of merger or other corporate reorganization, to the
extent permitted by law, any surviving corporation will be required to either
assume options outstanding under the 1994 Plan or substitute similar options for
those outstanding under such plan, or such outstanding options will continue in
full force and effect. If any surviving corporation declines to assume or
continue options outstanding under the 1994 Plan, or to
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<PAGE>
substitute similar options, then the time during which such options may be
exercised will be accelerated and the options terminated if not exercised during
such time.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the 1994 Plan without shareholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the 1994 Plan will terminate on July 10, 2004.
The Board may also amend the 1994 Plan at any time or from time to time.
However, no amendment will be effective unless approved by the stockholders of
the Company within twelve months before or after its adoption by the Board if
the amendment would: (a) modify the requirements as to eligibility for
participation (to the extent such modification requires stockholder approval for
the Plan to satisfy Section 422 of the Code, if applicable, or Rule 16b-3 of the
Exchange Act; (b) increase the number of shares reserved for issuance upon
exercise of options; or (c) change any other provision of the Plan in any other
way if such modification requires stockholder approval to comply with Rule 16b-3
of the Exchange Act or satisfy the requirements of Section 422 of the Code.
RESTRICTIONS ON TRANSFER
Under the 1994 Plan, an option may not be transferred by the optionee
otherwise than by will or by the laws of descent and distribution. During the
lifetime of an optionee, an option may be exercised only by the optionee. In
addition, shares subject to repurchase by the Company under an early exercise
stock purchase agreement may be subject to restrictions on transfer which the
Board deems appropriate.
FEDERAL INCOME TAX INFORMATION
INCENTIVE STOCK OPTIONS. Incentive Stock options under the 1994 Plan are
intended to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive stock
option for more than two years from the date on which the option is granted and
more than one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of such
stock will be long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (a) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(b) the optionee's actual gain, if any, on the purchase and sale. The optionee's
additional gain, or any loss upon the disqualifying disposition, will be a
capital gain or loss which will be long-term or short-term depending on whether
the stock was held for more than one year. Capital gains currently are generally
subject to lower tax rates than ordinary income. Slightly different rules may
apply to optionees who acquire stock subject to certain repurchase options or
who are subject to Section 16(b) of the Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and perhaps, in the future, the satisfaction of a withholding obligation) to a
corresponding business expense deduction in the tax year in which the
disqualifying disposition occurs.
NONSTATUTORY STOCK OPTIONS. Nonstatutory stock options granted under the
1994 Plan generally have the following federal income tax consequences:
10
<PAGE>
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the stock's fair market value on the date of exercise over the
option exercise price. Generally, with respect to employees, the Company is
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Subject to the requirement of
reasonableness, the provisions of Section 162(m) of the Code and the
satisfaction of any withholding obligation, the Company will generally be
entitled to a business expense deduction equal to the taxable ordinary income
realized by the optionee. Upon disposition of the stock, the optionee will
recognize a capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such stock plus any amount recognized
as ordinary income upon exercise of the option. Such gain or loss will be long
or short-term depending on whether the stock was held for more than one year.
Slightly different rules may apply to optionees who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Exchange
Act.
POTENTIAL LIMITATION ON COMPANY DEDUCTIONS. Code section 162(m) denies a
deduction to any publicly held corporation for compensation paid to certain
employees in a taxable year to the extent that compensation exceeds $1 million
for a covered employee. It is possible that compensation attributable to stock
options, when combined with all other types of compensation received by a
covered employee from the Company, may cause this limitation to be exceeded in
any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Code Section 162(m),
compensation attributable to stock options will qualify as performance-based
compensation, provided that: (i) the option plan contains a per-employee
limitation on the number of shares for which options may be granted during a
specified period; (ii) the per-employee limitation is approved by the
shareholders; (iii) the option is granted by a compensation committee comprised
solely of "outside directors"; and (iv) either the exercise price of the option
is no less than the fair market value of the stock on the date of grant, or the
option is granted (or exercisable) only upon the achievement (as certified by
the compensation committee) of an objective performance goal established by the
compensation committee while the outcome is substantially uncertain.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
IN FAVOR OF PROPOSAL TWO
11
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of July 31, 1998 (except as otherwise
footnoted below), certain information regarding the ownership of the Company's
Common Stock of: (i) each current director; (ii) each nominee for director;
(iii) each of the officers appearing in the table at page 15 (the "Named
Executive Officers"); and (iv) all executive officers and directors of the
Company as a group. As of July 31, 1998, none of the individuals identified in
the foregoing sentence owned any of the Company's Series B Convertible Preferred
Stock. The table also sets forth, as of July 31, 1998 (except as otherwise
footnoted below), certain information regarding the ownership of the Company's
Common Stock by all those known by the Company to be beneficial owners of more
than five percent (5%) of its outstanding Common Stock.
<TABLE>
<CAPTION>
TITLE OF CLASS NUMBER OF PERCENT
(1) NAME SHARES OF TOTAL
- ----------------- ------------------------------------------------------------------ ----------------- -----------
<S> <C> <C> <C>
Common Stock Samuel J. and Nadine Wohlstadter (2).............................. 4,247,062 26.83%
c/o IGEN International, Inc.
16020 Industrial Drive
Gaithersburg, MD 20877
Common Stock White Rock Capital Management, L.P. (3)........................... 1,602,349 10.25%
3131 Turtle Creek Boulevard
Dallas, TX 75219
Common Stock Richard J. Massey, Ph.D. (4)...................................... 1,200,500 7.68%
c/o IGEN International, Inc.
16020 Industrial Drive
Gaithersburg, MD 20877
Common Stock George V. Migausky (5)............................................ 158,375 1.03%
Common Stock Herman H. Spolders, Ph.D. (6)..................................... 51,500 *
Common Stock Robert Connelly (7)............................................... 40,500 *
Common Stock William J. O'Neill (8)............................................ 40,500 *
Common Stock Edward B. Lurier (9).............................................. 13,700 *
Common Stock Robert R. Salsmans (10)........................................... 6,000 *
Common Stock All directors and executive officers as a group (11).............. 5,775,387 35.37%
(9 persons)
</TABLE>
- ------------------------
* Less than 1%
(1) This table is based upon information supplied by officers, directors and
principal stockholders. Unless otherwise indicated in the notes to this
table and subject to the community property laws where applicable, each of
the stockholders named in this table has sole voting and investment power
with respect to the shares shown as beneficially owned by him. Percentage of
beneficial ownership of Common Stock is based on 15,312,235 shares
outstanding as of July 31, 1998, adjusted as required by rules promulgated
by the Securities and Exchange Commission.
(2) Includes 3,728,937 shares held by Mr. Wohlstadter and his wife and does not
include 128,100 shares held by Mr. Wohlstadter's adult children. Also
includes 518,125 shares issuable upon exercise of options held by Mr.
Wohlstadter that are currently exercisable or exercisable within sixty days.
Does not include 164,375 shares issuable upon exercise of options held by
Mr. Wohlstadter that are subject to certain vesting conditions expiring
ratably through March 2003.
(3) Based on information contained in the Schedule 13G/A filed with the
Securities and Exchange Commission on June 15, 1998. Also included in the
group covered by this filing are (i) Soros Fund Management LLC with
beneficial ownership of 792,583 shares, (ii) George Soros with beneficial
ownership of 792,583 shares, (iii) Stanley F. Druckenmiller with beneficial
ownership of 792,583
12
<PAGE>
shares, (iv) White Rock Capital Partners, L.P. with beneficial ownership of
166,133 shares, (v) White Rock Capital, Inc. with beneficial ownership of
1,602,349 shares, (vi) Thomas U. Barton with beneficial ownership of
1,609,049 shares, and (vii) Joseph U. Barton with beneficial ownership of
1,607,349 shares. The filing discloses (a) that Soros Fund Management LLC
and Messrs. Soros and Druckenmiller have no voting or dispositive power over
the shares beneficially owned by them; (b) that White Rock Capital Partners,
L.P., White Rock Capital Management, L.P., Thomas U. Barton and Joseph U.
Barton each have sole voting and dispositive power over 166,133 shares,
25,000 shares, 6,700 shares and 5,000 shares, respectively; (c) that White
Rock Capital, Inc., Thomas U. Barton and Joseph U. Barton share voting and
dispositive power over 1,609,049 shares; and (d) that White Rock Capital
Management, L.P. shares voting and dispositive power over 1,577,349 shares.
(4) Includes 323,500 shares issuable upon exercise of options held by Dr. Massey
that are currently exercisable or exercisable within sixty days. Does not
include 131,500 shares issuable upon exercise of options held by Dr. Massey
that are subject to certain vesting conditions expiring ratably through
March 2003.
(5) Includes 20,000 shares held by Mr. Migausky's minor children and does not
include 10,000 shares held by Mr. Migausky's adult child. Also includes
111,375 shares issuable upon exercise of options held by Mr. Migausky that
are currently exercisable or exercisable within sixty days. Does not include
81,625 shares issuable upon exercise of options held by Mr. Migausky that
are subject to certain vesting conditions expiring ratably through March
2003.
(6) Includes 1,000 shares issuable upon exercise of options held by Dr. Spolders
that are currently exercisable or exercisable within sixty days. Dr.
Spolders' employment terminated May 3, 1998.
(7) Includes 28,500 shares issuable upon exercise of options held by Mr.
Connelly that are currently exercisable or exercisable within sixty days.
Does not include 49,500 shares issuable upon exercise of options held by Mr.
Connelly that are subject to certain vesting conditions expiring ratably
through March 2003.
(8) Includes 9,000 shares issuable upon exercise of options held by Mr. O'Neill
that are currently exercisable or exercisable within sixty days. Does not
include 1,000 shares issuable upon exercise of options held by Mr. O'Neill
that are subject to certain vesting conditions expiring ratably through
April 1999.
(9) Includes 1,500 shares issuable upon exercise of options held by Mr. Lurier
that are currently exercisable or exercisable within sixty days. Does not
include 1,000 shares issuable upon exercise of options held by Mr. Lurier
that are subject to certain vesting conditions expiring ratably through
April 1999.
(10) Includes 6,000 shares issuable upon exercise of options held by Mr.
Salsmans that are currently exercisable or exercisable within sixty days.
Does not include 4,000 shares issuable upon exercise of options held by Mr.
Salsmans that are subject to certain vesting conditions expiring ratably
through August 2000. Also excludes 173,067 shares held of record by Organon
Teknika B.V. of which Mr. Salsmans disclaims beneficial ownership.
(11) Includes 1,014,750 shares issuable upon exercise of options that are
currently exercisable or exercisable within sixty days. See also Notes 2 and
4 through 10.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and greater than
ten
13
<PAGE>
percent stockholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended March 31, 1998, Herman
Spolders, a former officer of the Company, did not timely file a Form 4
(Statement of Changes in Beneficial Ownership) to report his exercise of stock
options and disposition of Common Stock; Gary Henrickson, a former officer of
the Company, did not timely file a Form 4 to report his exercise of stock
options; and Richard Pytelewski and George V. Migausky each did not timely file
a Form 4 to report their exercise of stock options. Each transaction was
subsequently reported on a Form 5 (Annual Statement of Changes in Beneficial
Ownership).
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Effective April 25, 1994, each non-employee director of the Company receives
a per meeting attendance fee of $1,000. In the fiscal year ended March 31, 1998,
the total compensation paid to non-employee directors (all directors except Mr.
Wohlstadter and Dr. Massey) was $2,000. In accordance with Company policy, all
members of the Board of Directors are eligible for reimbursement for their
expenses incurred in connection with attendance at Board meetings.
On April 25, 1994, each non-employee director of the Company then sitting on
the Board of Directors was granted an option to purchase 10,000 shares of the
Company's Common Stock under the 1994 Non-Employee Directors' Stock Option Plan
at a purchase price of $8.75 per share (the closing sales price reported in the
NASDAQ National Market System on the day prior to the date of grant). Mr.
Salsmans was granted an option to purchase 10,000 shares of the Company's Common
Stock under the 1994 Non-Employee Directors' Stock Option Plan at a purchase
price of $6.25 when he joined the Board effective on August 25, 1995 (the
closing price reported in the NASDAQ National Market System on the day prior to
the date of grant). The options vest over a period of five years with one-fifth
of the option becoming exercisable one year from the date of grant and an
additional one-twentieth becoming exercisable every three months thereafter.
Such vesting is conditioned upon continued service as a director of the Company.
14
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows for the fiscal years ending March 31, 1998, 1997
and 1996, compensation awarded or paid to, or earned by the Named Executive
Officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION OTHER ANNUAL AWARDS
SALARY BONUS COMPENSATION OPTIONS
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (# SHARES)
- --------------------------------------------- --------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Samuel J. Wohlstadter 1998 $ 287,500 $ 100,000 $ 224,000(1) 100,000
Chairman and Chief Executive Officer 1997 $ 260,000 $ -- $ -- 100,000
1996 $ 237,000 $ 50,000 $ -- --
Richard J. Massey, Ph.D. 1998 $ 239,500 $ 75,000 $ 66,928(3) 80,000
President and Chief Operating Officer 1997 $ 220,000 $ -- $ 8,750(2) 80,000
1996 $ 200,000 $ 40,000 $ 8,750(2) --
George V. Migausky 1998 $ 176,000 $ 50,000 $ 7,135(4) 50,000
Vice President and Chief Financial 1997 $ 165,000 $ -- $ -- 50,000
Officer, and Secretary 1996 $ 150,000 $ 30,000 $ -- --
Herman H. Spolders, Ph.D.(5) 1998 $ 187,500 $ -- $ -- --
former Vice President, 1997 $ 187,500 $ -- $ -- 20,000
Business Development and Planning 1996 $ 172,250 $ 25,000 $ -- --
Robert Connelly 1998 $ 145,000 $ 25,000 $ -- 30,000
Vice President, Marketing and Sales 1997 $ 140,000 $ -- $ -- 30,000
1996 $ 127,000 $ 20,000 $ -- --
</TABLE>
- ------------------------
(1) Consists of note forgiveness for subscribed stock.
(2) Consists of annual lease value of Company-provided automobile.
(3) Consists of note forgiveness for subscribed stock of $54,000, annual lease
value of Company-provided automobile of $11,750 and 401(K) match amount of
$1,178.
(4) Consists of note forgiveness for subscribed stock of $2,400 and 401(K) match
amount of $4,735.
(5) Dr. Spolders' employment terminated on May 3, 1998.
15
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The Company has granted options to its executive officers under its 1985
Stock Option Plan (the "1985 Plan") and its 1994 Plan (collectively, the
"Plans"). The 1994 Plan was adopted by the Board of Directors in July 1994 to
replace the 1985 Plan and was approved by the stockholders in September 1994.
Options for 265,000 shares of Common Stock were granted under the Plans to the
Named Executive Officers during the fiscal year ended March 31, 1998. Options
for 601,350 shares of Common Stock were granted under the Plans to all company
employees (including all executive officers and consultants) during the fiscal
year ended March 31, 1998. The Company is empowered to and from time to time
does repurchase shares of Common Stock in the open market for the purpose of
making shares available for issuance upon the exercise of options.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows for the fiscal year ended March 31, 1998, certain
information regarding options granted to the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR AND POTENTIAL
REALIZABLE VALUE AT ASSUMED RATE OF APPRECIATION
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL RATES
------------------------------------------------------------------ OF STOCK
NUMBER OF PRICE APPRECIATION
SECURITIES % OF TOTAL FOR
UNDERLYING OPTIONS GRANTED EXERCISE OR OPTION TERM (2)
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ----------------------------------------- --------------- --------------------- ------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Samuel J. Wohlstadter.................... 100,000 16.6% 20.625 3/02/08 1,297,095 3,287,094
Richard J. Massey, Ph.D.................. 80,000 13.3% 20.625 3/02/08 1,037,676 2,629,675
George V. Migausky....................... 50,000 8.3% 20.625 3/02/08 648,548 1,643,547
Herman H. Spolders, Ph.D................. -- -- -- -- -- --
Robert Connelly.......................... 30,000 5% 20.625 3/02/08 389,129 986,128
</TABLE>
- ------------------------
(1) These options were granted for Common Stock under the 1994 Plan on March 2,
1998. Unless otherwise noted, the options granted each person vest over a
period of five years with one-fifth of such person's options becoming
exercisable one year from the date of grant and an additional one-twentieth
of such options becoming exercisable every three months thereafter. The
options expire ten years after the date of their grant. Under the 1994 Plan,
the Compensation Committee or the Board of Directors may accelerate the time
of vesting or time of exercise of any option granted. The Compensation
Committee or the Board of Directors also has the authority, at any time and
from time to time, to effect the downward repricing of any outstanding
options and/or with the consent of the affected holders of options, the
cancellation of any outstanding options and the grant of new options
covering the same or different numbers of shares of Common Stock with an
exercise price as of the new grant date of not less than: (i) 85% of the
fair market value (as defined in the 1994 Plan) of the stock for options not
intended to qualify as incentive stock options under Section 422 of the
Internal Revenue Code of 1986, as amended and the regulations promulgated
thereunder, (ii) 100% of the fair market value for options intended to
qualify as incentive stock options, and (iii) 110% of the fair market value
for options held by a person holding more than 10% of the total combined
voting power of all classes of stock of the Company or any affiliates.
Subject to adjustments upon changes in stock, no person is eligible to be
granted options covering more than 200,000 shares of Common Stock in any
twelve month period.
(2) These amounts represent hypothetical gains that could be achieved for
options if they are exercised at the end of the option term. These gains are
based on assumed rates of stock price appreciation of 5% and 10% compounded
annually from the date the options are granted to the end of the option
term. Actual gains, if any, on stock option exercises are dependent on the
future performance of the Company's Common Stock and the optionee's
continued employment through the vesting period. There can be no assurance
that the amounts reflected in this table will be achieved.
16
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND STOCK OPTION VALUES AT
MARCH 31, 1998
The following table sets forth information related to options exercised by
the Named Executive Officers during the fiscal year ended March 31, 1998 and the
number and value of options held at year end.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE MARCH 31, 1998 MARCH 31, 1998
ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
NAME (#) ($)(1) (2) (3)
- ------------------------------------ ------------- ------------ ----------------------- -----------------------
<S> <C> <C> <C> <C>
Samuel J. Wohlstadter............... -0- -0- 501,875/180,625 $18,761,809/$5,129,766
Richard J. Massey, Ph.D............. -0- -0- 310,500/144,500 $11,583,320/$4,103,813
George V. Migausky.................. 4,700 $ 46,271 103,625/89,375 $3,847,714/$2,533,359
Herman H. Spolders, Ph.D............ 59,500 $ 1,950,108 0/13,000 $ 0/$485,875
Robert Connelly..................... 12,000 $ 180,187.50 22,500/55,500 $ 756,563/$1,583,063
</TABLE>
- ------------------------
(1) Based on the Fair Market Value of the Company's Common Stock on the date of
exercise (the closing price) minus the exercise price and multiplied by the
number of shares acquired.
(2) Includes both "in-the-money" and "out-of-the-money" options. "In-the-money"
options are options with exercise prices below the market price of the
Company's Common Stock on March 31, 1998.
(3) Based on the closing price of the Company's Common Stock on March 31, 1998
($42.375) minus the exercise price.
17
<PAGE>
CERTAIN TRANSACTIONS
The Company's Bylaws provide that the Company will indemnify its directors
and its officers, to the fullest extent permitted by Delaware law. The Company
is also empowered under its Bylaws to enter into indemnification contracts with
its directors and officers and to purchase insurance on behalf of any person
whom it is required or permitted to indemnify. Pursuant to these provisions, the
Company has entered into indemnity agreements with each of its directors and
executive officers and has obtained director and officer liability insurance in
the amount of $5,000,000.
In addition, the Company's Certificate of Incorporation provides that the
Company's directors shall not be liable for monetary damages for breach of the
directors' fiduciary duty of care as a director, except liability for (i) any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) any transaction from which a director derived an
improper personal benefit. If the Delaware General Corporation Law is amended
after approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware law.
The Company has entered into a long-term license agreement and stock
purchase agreement with Organon Teknika in May 1993. Robert Salsmans, the
current President and Chief Executive Officer of Organon Teknika, is one of the
Company's directors. During fiscal 1998, the Company recorded product sales of
approximately $917,000 with respect to Organon Teknika.
During fiscal year 1995 the Company entered into agreements to develop and
commercialize biomedical products utilizing advanced materials and a supply
agreement with Hyperion Catalysis International ("Hyperion"). Messrs. Lurier,
Massey and Wohlstadter are directors of Hyperion. In addition, Messrs. Lurier
and Wohlstadter are shareholders of Hyperion. Mr. Lurier owns less than five
percent of the outstanding common stock of Hyperion and Mr. Wohlstadter,
assuming conversion of all convertible debentures owned by him, would own in
excess of fifty percent of the outstanding common stock. Also, during fiscal
1996, the Company entered into a research and supply agreement under which the
Company prepaid $500,000 to Hyperion to ensure itself of sufficient supplies of
graphite fibrils.
Pro-Virus, Inc. ("Pro-Virus"), Proteinix Corporation ("Proteinix"), and
Pro-Neuron, Inc. ("Pro-Neuron") have a shared facilities arrangement and have
shared certain equipment and administrative services with the Company since
1994, 1992 and 1986, respectively. Pro-Virus, Proteinix and Pro-Neuron reimburse
the Company for their relative share of the services received. In June 1995, the
Company entered into a research and development agreement with Proteinix
pursuant to which the Company has paid the contractual amount of $950,000 under
the agreement. Mr. Wohlstadter is the principal stockholder and Chief Executive
Officer of Pro-Virus, Proteinix and Pro-Neuron.
During November 1995, the Company formed a Joint Venture for the development
and commercialization of advanced diagnostic products utilizing a proprietary
combination of multi-array technology together with the Company's ORIGEN
technology. Products based on these technologies would be used for high
throughput, multiparameter analysis for DNA sequencing. clinical chemistry and
immunodiagnostics. The joint venture is named Meso Scale Diagnostics, LLC
("MSD"), and was formed together with Meso Scale Technologies, LLC ("MST"), a
company based in Maryland. The Company has agreed to provide initial capital
contributions to MSD of $5 million over time, in exchange for its ownership
interest and to fund the organizational and certain ongoing (non-research)
operating expenses of MSD. The Company will also participate in a collaborative
research program. MST is a technology-based company established and operated by
Jacob Wohlstadter, the son of Samuel J. Wohlstadter, the Chief Executive Officer
of the Company. Nadine Wohlstadter, a member of MST, is the spouse of Samuel J.
Wohlstadter. During the period July 1, 1996 through March 31, 1998, Jacob
Wohlstadter received approximately $330,000 from his employment at MSD. For the
years ending March 31, 1999 and March 31, 2000, he will
18
<PAGE>
receive approximately $162,000 and $179,000, respectively. Thereafter, the
salary of Jacob Wohlstadter will be as mutually agreed by Jacob Wohlstadter and
MSD. The Company has agreed to indemnify Jacob Wohlstadter against liability
from the joint venture. Jacob Wohlstadter also serves as a consultant to IGEN.
He was granted options for 180,000 shares of IGEN International, Inc. Common
Stock on May 9, 1997, of which 99,000 are currently exercisable or exercisable
within sixty days. The options for the remaining 81,000 shares of Common Stock
are subject to certain vesting conditions expiring ratably through November
2001. In addition, Jacob Wohlstadter received compensation during the fiscal
year ended March 31, 1998 from the Company equal to $32,066, consisting of a
Company-provided apartment and a Company-provided automobile.
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans, between
the Company and its officers, directors and principal stockholders and their
affiliates will be approved by a majority of the Board of Directors, including a
majority of the independent and disinterested outside directors on the Board of
Directors, and will be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties.
Furthermore, the Company adopted in April 1988 a policy on conflicts of
interest requiring the Company's directors, officers and Scientific Advisory
Board members to provide detailed disclosure of any outside activities or
interest that might potentially conflict or appear to conflict with the
Company's best interests. The Company also adopted a policy on related party
transactions in January 1990 requiring review and approval by the Board of
Directors of transactions involving, among others, the Company's management,
principal stockholders or parties controlled by them when the value of the
transaction equals or exceeds $50,000 or its duration exceeds three months.
19
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION(1)
During the last fiscal year, the Compensation Committee of the Board of
Directors (the "Committee") was composed of Messrs. Lurier and O'Neill, neither
of whom has been an officer or employee of the Company. The Committee is
responsible for establishing the Company's compensation programs for executive
officers.
COMPENSATION PHILOSOPHY
The goals of the compensation program are to align compensation with
business objectives and performance and to enable the Company to attract, retain
and reward executive officers and other key employees who contribute to the
long-term success of the Company and to establish an appropriate relationship
between executive compensation and the creation of long-term stockholder value.
To meet these goals, the Committee has adopted a mix among the compensation
elements of salary, bonus and stock options.
BASE SALARY. The Committee annually reviews each executive officer's base
salary. When reviewing base salaries, the Committee considers individual
performance, levels of responsibility, prior experience, breadth of knowledge
and competitive pay practices, with emphasis on the latter. In general, the
salaries and stock option awards of executive officers are not determined by the
Company's achievement of specific corporate performance criteria. Instead the
Committee determines the salaries for executive officers based upon a review of
salary surveys of other emerging health care companies performed for the
Committee. To provide the Compensation Committee with more information for
making compensation comparisons, IGEN utilizes published salary surveys for the
life science industry and surveys a group of health care companies that have
recently made an initial public offering or are publicly traded. This group
includes diagnostic, biotechnology and pharmaceutical companies with public
capitalizations similar to that of the Company. Based upon such surveys, the
executive officers' salaries are set in the mid-range as compared to other
comparable health care companies.
BONUS. The bonus program is a variable pay program for executive officers
of the Company to earn additional annual compensation. The bonus award earned
depends on the extent to which Company and individual performance objectives are
achieved. The Company's objectives consist of operating, strategic and financial
goals that are considered to be critical to the Company's fundamental long-term
goal of building shareholder value. For fiscal 1998, these objectives were: (i)
effective implementation of the planned growth of the Company; (ii) continued
advances toward project goals in research and development programs; (iii)
expansion of technological capabilities; (iv) progress toward commercial goals
in development programs; (v) progress in connection with attainment of
collaborative relationships; and (vi) progress in certain financial and
administrative activities. The Committee awarded $250,000 in bonuses during
fiscal 1998.
OPTION PLANS
The Option Plans offered by the Company have been established to provide all
employees of the Company with an opportunity to share, along with stockholders
of the Company, in the long-term performance of the Company.
- ------------------------
(1) The material in this report is not "soliciting material," is not deemed
filed with the SEC, and is not to be incorporated by reference into any
filing of the Company under the 1933 Act or 1934 Act, whether made before or
after the date hereof and irrespective of any general incorporation language
contained in any such filing.
20
<PAGE>
Periodic grants of stock options are generally made to all eligible
employees, with additional grants being made to certain employees upon
commencement of employment and occasionally following a significant change in
job responsibilities, scope or title. Stock options granted generally have a
five-year vesting schedule and expire ten years from the date of grant. The
exercise price of options granted under the stock option plans is usually 100%
of fair market value of the underlying stock on the date of grant.
Guidelines for the number of stock options for each participant in the
periodic grant program generally are determined by a formula established by the
Compensation Committee whereby several factors are applied to the salary and
performance level of each participant and then related to the approximate market
price of the stock at the time of grant. In awarding stock options, the
Committee considers individual performance, overall contribution to the Company,
officer retention, the number of unvested stock options and the total number of
stock options to be awarded. In fiscal year 1998, after considering criteria
relating to awarding stock options, the Committee determined that grants be made
to certain officers of the Company. Those grants made to Named Executive
Officers are reflected in the table on page 16. Officer grants reflect an amount
equal to 43.2% of all grants in fiscal 1998.
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1 million of compensation paid to certain
Named Executive Officers in a taxable year. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code. The Compensation Committee believes that stock options granted under the
Company's 1994 Stock Option Plan with an exercise price at least equal to the
fair market value of the Company's Common Stock on the date of grant should be
treated as "performance-based compensation" and any compensation recognized by a
Named Executive Officer as a result of the grant of such a stock option is
deductible by the Company.
CEO COMPENSATION
The Committee uses the same procedures described above in setting the annual
salary, bonus and stock option awards for the CEO. The CEO's salary is
determined based on comparisons with other recently public health care companies
as described above. In awarding stock options, the Committee considered the
CEO's performance, overall contribution to the Company, retention, the number of
unvested options and the total number of options to be granted. A stock option
grant was made for 100,000 shares at $20.65 per share to the CEO in fiscal 1998.
In awarding bonuses, the Committee considers the Company's achievement of the
performance goals outlined above and the Committee's subjective evaluation of
the CEO's performance. The Committee awarded the CEO a bonus in fiscal year 1998
of $100,000. As described above, in determining where the CEO's total
compensation is set within the ranges and in light of the considerations
described above, the Committee by necessity makes certain subjective
evaluations. Compared to other health care companies surveyed by the Company,
the CEO's salary is in the mid range and his bonus and stock options are in the
low range. The Committee recognizes, however, that the CEO's overall equity
ownership of the Company accumulated over a 14-year period is in the high range.
CONCLUSION
Through the plans described above, a significant portion of the Company's
compensation program and the CEO's and the other executive officers'
compensation are contingent on Company performance, and realization of benefits
by the CEO and the other executive officers is closely linked to increases in
long-term stockholder value. The Company remains committed to this philosophy of
pay for performance, recognizing that the competitive market for talented
executives and the volatility of the Company's business may result in highly
variable compensation.
COMPENSATION COMMITTEE
Edward B. Lurier
William J. O'Neill
21
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON(1)
The following chart shows the value of an investment of $100 in February
1994 in cash of (i) the Company's Common Stock, (ii) the Wilshire 5000 Index and
(iii) the H&Q Health Care Sector Index. All values assume reinvestment of the
full amount of all dividends and are calculated as of March 31, 1998:
COMPARISON OF TOTAL CUMULATIVE RETURN ON INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS
<S> <C> <C>
IGEN INTERNATIONAL, INC. WILSHIRE 5000
2/03/94 100 100
3/94 84 93
3/95 42 106
3/96 44 140
3/97 44 161
3/98 357 239
* $100 INVESTED ON 2/03/94 IN STOCK OR ON 1/31/94
IN INDEX - INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING MARCH 31
<CAPTION>
DOLLARS
<S> <C>
HAMBRECHT & QUIST HEALTHCARE
2/03/94 100
3/94 82
3/95 105
3/96 162
3/97 157
3/98 216
* $100 INVESTED ON 2/03/94 IN STOCK OR ON 1/31/94
IN INDEX - INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING MARCH 31
</TABLE>
- ------------------------
(1) The material in this report is not "soliciting material," is not deemed
filed with the SEC, and is not to be incorporated by reference into any
filing of the company under the 1933 Act or 1934 Act, whether made before or
after the date hereof and irrespective of any general incorporation language
contained in any such filing.
22
<PAGE>
AUDITORS
The Company's independent auditor for the fiscal year ended March 31, 1998
was Deloitte & Touche, LLP. Representatives of Deloitte & Touche, LLP are
expected to be present at the meeting with the opportunity to make a statement
if they desire to do so and are expected to be available to respond to
appropriate questions. The Board of Directors has not selected an independent
auditor for the fiscal year ending March 31, 1999. Currently, management and the
Audit Committee are evaluating auditor services. After review of the services,
the Board of Directors, with consultation from the Audit Committee, will appoint
the auditor.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not know
of any other matters to present for action by the Stockholders at the Annual
Meeting. If, however, any other matters not now known are properly brought
before the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
STOCKHOLDER PROPOSALS
Any proposals intended to be presented by any stockholder for action at the
Company's 1999 Annual Meeting of Stockholders must be received by the Secretary
of the Company at 16020 Industrial Drive, Gaithersburg, Maryland 20877 not later
than April 1, 1999 to be included in the proxy statement and proxy relating to
the 1999 Annual Meeting. In addition, the Company's advance notice by-law
provision permits stockholders to propose business to be brought before an
annual meeting, see "Corporate Governance and Other Matters" at page 4.
FORM 10-K AVAILABILITY
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended March 31, 1998 accompanies this Proxy Statement. The Company has filed an
Annual Report for its fiscal year ended March 31, 1998 on Form 10-K with the
Securities and Exchange Commission. Stockholders may obtain, free of charge, a
copy of the Form 10-K by writing to George V. Migausky, Shareholder Relations,
at 16020 Industrial Drive, Gaithersburg, Maryland, 20877.
By Order of the Board of Directors
George V. Migausky
SECRETARY
July 29, 1998
23
<PAGE>
EXHIBIT A
AMENDMENT
TO
IGEN INTERNATIONAL, INC. 1994 STOCK OPTION PLAN
The following section of the IGEN International, Inc. 1994 Stock Option Plan
(the "1994 Plan") was amended effective July 24, 1998 (subject to shareholder
approval).
New language in the 1994 Plan is shown in double underline, deleted language
is shown in <#>strikeout</#>, and language that is unchanged is indicated by
plain text; PROVIDED, HOWEVER, that the deleted language and double underling
are for convenience only and are not part of the Plan as amended:
Section 4, as amended reads:
4. SHARES SUBJECT TO THE PLAN.
a. Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate <#>one million (1,000,000)</#> ONE MILLION SEVEN HUNDRED
FIFTY THOUSAND (1,750,000) shares of the Company's common stock. If any Option
shall for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the stock not purchased under such Option shall
revert to and again become available for issuance under the Plan.
24
<PAGE>
1199-PS-98
<PAGE>
APPENDIX A
IGEN INTERNATIONAL, INC.
1994 STOCK OPTION PLAN
AS AMENDED JULY 24, 1998.
THIS DOCUMENT IS SUBMITTED PURSUANT TO RULE 14A, ITEM 10, INSTRUCTION 3
AND WILL NOT BE DISTRIBUTED TO SHAREHOLDERS.
<PAGE>
IGEN INTERNATIONAL, INC,
1994 STOCK OPTION PLAN
AS AMENDED JULY 24, 1998
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees of and Consultants to the Company, and its Affiliates, may be given an
opportunity to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees of or Consultants to the Company or its
Affiliates, to secure and retain the services of new Employees and Consultants,
and to provide incentives for such persons to exert maximum efforts for the
success of the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan shall, in the
discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6.
2. DEFINITIONS
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance with
subsection 3(c) of the Plan.
(e) "COMPANY" means IGEN International, Inc., a Delaware corporation,
formerly known as IGEN, Inc.
(f) "CONSULTANT" means any Person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means the employment or
relationship as a Consultant is not interrupted or terminated. The Board, in its
sole discretion, may determine whether Continuous Status as an Employee or
Consultant shall be considered interrupted in the case of: (i) any leave of
absence approved by the Board, including sick leave, military leave, or any
other personal leave; or (ii) transfers between locations of the Company or
between the Company, Affiliates or their successors.
(h) "COVERED EMPLOYEE" means the Chief Executive Officer and the four (4)
other highest compensated officers of the Company.
(i) "DIRECTOR" means a member of the Board.
(j) [RESERVED]
(k) "EMPLOYEE" means any person, including Officers and Directors, employed
by the Company or any Affiliate of the Company. Neither service as a Director
nor payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
1
<PAGE>
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of the common stock
of the Company determined as follows:
(1) If the common stock is listed on any established stock exchange or a
national market system, including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a share of common
stock shall be the closing sales price for such stock (or the closing bid,
if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in common stock) on the last
market trading day prior to the day of determination, as reported in the
Wall Street Journal or such other source as the Board deems reliable;
(2) If the common stock is quoted on the NASDAQ System (but not on the
National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value
of a share of common stock shall be the mean between the bid and asked
prices for the common stock on the last market trading day prior to the day
of determination, as reported in the Wall Street Journal or such other
source as the Board deems reliable;
(3) In the absence of an established market for the common stock, the
Fair Market Value shall be determined in good faith by the Board.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(p) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "OPTION" means a stock option granted pursuant to the Plan.
(r) "OPTION AGREEMENT" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. Each
Option Agreement shall be subject to the terms and conditions of the Plan.
(s) "OPTIONEE" means an Employee or Consultant who holds an outstanding
Option.
(t) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (as defined in the
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an affiliated corporation receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an affiliated corporation at
any time, and is not currently receiving compensation for personal services in
any capacity other than as a Director, or (ii) is otherwise considered an
"outside director" for purposes of Section 162(m) of the Code.
(u) "PLAN" means this 1994 Stock Option Plan.
(v) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
2
<PAGE>
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible under
the Plan shall be granted Options; when and how each Option shall be
granted; whether an Option will be an Incentive Stock Option or a
Nonstatutory Stock Option; the provisions of each Option granted (which need
not be identical), including the time or times such Option may be exercised
in whole or in part; and the number of shares for which an Option shall be
granted to each such person.
(2) To construe and interpret the Plan and Options granted under it, and
to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission
or inconsistency in the Plan or in any Option Agreement, in a manner and to
the extent it shall deem necessary or expedient to make the Plan fully
effective.
(3) To amend the Plan as provided in Section 11.
(4) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board (and references in this Plan to the Board shall thereafter be to
the Committee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. Notwithstanding anything in this Section 3 to the
contrary, the Board or the Committee may delegate to a committee of one or more
members of the Board the authority to grant Options to eligible persons who (1)
are not then subject to Section 16 of the Exchange Act and/or (2) are either (i)
not then Covered Employees and are not expected to be Covered Employees at the
time of recognition of income resulting from such Option, or (ii) not persons
with respect to whom the Company wishes to comply with Section 162(m) of the
Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate One Million Seven Hundred Fifty Thousand (1,750,000)
shares of the Company's common stock. If any Option shall for any reason expire
or otherwise terminate, in whole or in part, without having been exercised in
full, the stock not purchased under such Option shall revert to and again become
available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees. Nonstatutory
Stock Options may be granted only to Employees and Consultants.
(b) Reserved.
(c) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Incentive Stock Option is at
least one hundred ten percent (110%) of the Fair Market Value of such stock at
the date of grant and the Option is not exercisable after the expiration of five
(5) years from the date of grant.
3
<PAGE>
(d) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options covering
more than two hundred thousand (200,000) shares of the Company's common stock in
any twelve (12) month period.
(e) Notwithstanding any other provision, Outside Directors are not eligible
to be granted Options under the Plan.
6. OPTION PROVISIONS
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85 %)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, either at the time of the grant or
exercise of the Option, (A) by delivery to the Company of other common stock of
the Company, (B) according to a deferred payment or other arrangement (which may
include, without limiting the generality of the foregoing, the use of other
common stock of the Company) with the person to whom the Option is granted or to
whom the Option is transferred pursuant to subsection 6(d), or (C) in any other
form of legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at the minimum rate of interest necessary
to avoid the treatment as interest, under any applicable provisions of the Code,
of any amounts other than amounts stated to be interest under the deferred
payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is granted only by such person. A Nonstatutory Stock Option shall not be
transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order satisfying the requirements of
Rule 16b-3 and the rules thereunder (a "QDRO"), and shall be exercisable during
the lifetime of the person to whom the Option is granted only by such person or
any transferee pursuant to a QDRO. The person to whom the Option is granted may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the Optionee,
shall thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that, from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
4
<PAGE>
(f) SECURITIES LAW COMPLIANCE. The Company may require any Optionee, or any
person to whom an Option is transferred under subsection 6(d), as a condition of
exercising any such Option, (1) to give written assurances satisfactory to the
Company as to the Optionee's knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably satisfactory to
the Company who is knowledgeable and experienced in financial and business
matters, and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Option; and (2)
to give written assurances satisfactory to the Company stating that such person
is acquiring the stock subject to the Option for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise of the Option has been registered under a then currently effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or (ii) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to comply
with applicable securities laws, including, but not limited to, legends
restricting the transfer of the stock.
(g) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A CONSULTANT. In the event
an Optionee's Continuous Status as an Employee or Consultant terminates (other
than upon the Optionee's death or disability), the Optionee may exercise his or
her Option (to the extent that the Optionee was entitled to exercise it at the
date of termination) but only within such period of time ending on the earlier
of (i) the date three (3) months after the termination of the Optionee's
Continuous status as an Employee or Consultant (or such longer or shorter period
specified in the Option Agreement), or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination, the Optionee
does not exercise his or her Option within the time specified in the Option
Agreement, the Option shall terminate, and the shares covered by such Option
shall revert to and again become available for issuance under the Plan.
(h) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status as
an Employee or Consultant terminates as a result of the Optionee's disability,
the Optionee may exercise his or her Option (to the extent that the Optionee was
entitled to exercise it at the date of termination), but only within such period
of time ending on the earlier of (i) the date twelve (12) months following such
termination (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, at the date of termination, the Optionee is not entitled
to exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(i) DEATH OF OPTIONEE. In the event of the death of an Optionee during, or
within a period specified in the Option after the termination of, the Optionee's
Continuous Status as an Employee or Consultant, the Option may be exercised (to
the extent the Optionee was entitled to exercise the Option at the date of
death) by the Optionee's estate, by a person who acquired the right to exercise
the Option by bequest or inheritance or by a person designated to exercise the
option upon the Optionee's death pursuant to subsection 6(d), but only within
the period ending on the earlier of (i) the date eighteen (18) months following
the date of death (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of such Option as set forth in
the Option Agreement. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
5
<PAGE>
(j) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee or Consultant to
exercise the Option as to any part or all of the shares subject to the Option
prior to the full vesting of the Option. Any unvested shares so purchased may be
subject to a repurchase right in favor of the Company or to any other
restriction the Board determines to be appropriate.
(k) WITHHOLDING. To the extent provided by the terms of an Option Agreement,
the Optionee may satisfy any federal, state or local tax withholding obligation
relating to the exercise of such Option by any of the following means or by a
combination of such means (1) tendering a cash payment; (2) authorizing the
Company to withhold shares from the shares of the common stock otherwise
issuable to the participant as a result of the exercise of the Option; or (3)
delivering to the Company owned and unencumbered shares of the common stock of
the Company.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available at all
times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; PROVIDED, HOWEVER,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is unable
to obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of
stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Options unless and until
such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute general
funds of the Company.
9. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which an Option
may first be exercised or the time during which an Option or any part thereof
will vest pursuant to subsection 6(e), notwithstanding the provisions in the
Option stating the time at which it may first be exercised or the time during
which it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(c) Throughout the term of any Option, the Company shall make available to
the holder of such Option, not later than one hundred twenty (120) days after
the close of each of the Company's fiscal years during the Option term, a
balance sheet and an income statement. This section shall not apply when
issuance is limited to key employees whose duties in connection with the Company
assure them access to equivalent information.
(d) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Consultant or Optionee any
right to continue in the employ of the Company or any Affiliate (or to continue
acting as a Consultant) or shall affect the right of the Company or any
Affiliate to terminate the employment or relationship as a Director or
Consultant of any Employee, Consultant or Optionee with or without cause.
6
<PAGE>
(e) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options granted
after 1986 are exercisable for the first time by any Optionee during any
calendar year under all plans of the Company and its Affiliates exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.
(f)
(1) The Board or the Committee shall have the authority to effect, at
any time and from time to time (i) the downward repricing of any outstanding
Options under the Plan and/or (ii) with the consent of the affected holders
of Options, the cancellation of any outstanding Options and the grant in
substitution therefor of new Options under the Plan covering the same or
different numbers of shares of Common Stock, but having an exercise price
per share not less than eighty-five percent (85%) of the Fair Market Value
(one hundred percent (100%) of the Fair Market Value in the case of an
Incentive Stock Option or, in the case of a ten percent (10%) stockholder
(as defined in subsection 5(c)), not less than one hundred and ten percent
(110%) of the Fair Market Value) per share of Common Stock on the new grant
date.
(2) Shares subject to an Option canceled under this subsection 9(f)
shall continue to be counted against the maximum award of Options permitted
to be granted pursuant to subsection 5(d) of the Plan. The repricing of an
Option under this subsection 9(f), resulting in a reduction of the exercise
price, shall be deemed to be a cancellation of the original Option and the
grant of a substitute Option; in the event of such repricing, both the
original and the substituted Options shall be counted against the maximum
awards of Options permitted to be granted pursuant to subsection 5(d) of the
Plan. The provisions of this subsection 9(f) shall be applicable only to the
extent required by Section 162(m) of the Code.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the Plan will be appropriately adjusted in the
class(es) and maximum number of shares subject to the Plan pursuant to
subsection 4(a) and the maximum number of shares subject to award to any person
during any twelve (12) month period pursuant to subsection 5(d), and the
outstanding Options will be appropriately adjusted in the class(es) and number
of shares and price per share of stock subject to such outstanding Options.
(b) In the event of: (1) a dissolution, liquidation or sale of substantially
all of the assets of the Company; (2) a merger or consolidation in which the
Company is not the surviving corporation; or (3) a reverse merger in which the
Company is the surviving corporation but the shares of the Company's common
stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise, then to the extent permitted by applicable law: (i) any surviving
corporation shall assume any Options outstanding under the Plan or shall
substitute similar Options for those outstanding under the Plan, or (ii) such
Options shall continue in full force and effect. In the event any surviving
corporation refuses to assume or continue such Options, or to substitute similar
options for those outstanding under the Plan, then, with respect to Options held
by persons then performing services as Employees, Directors or Consultants, the
time during which such Options may be exercised shall be accelerated and the
Options terminated if not exercised prior to such event.
7
<PAGE>
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(1) Increase the number of shares reserved for Options under the Plan;
(2) Modify the requirements as to eligibility for participation in the
Plan (to the extent such modification requires stockholder approval in order
for the Plan to satisfy the requirements of Section 422 of the Code); or
(3) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code or to comply with the requirements of Rule 16b-3.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations under any Option granted before amendment of the
Plan shall not be altered or impaired by any amendment of the Plan unless (i)
the Company requests the consent of the person to whom the Option was granted
and (ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on July 10, 2004, which shall be within ten
(10) years from the date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier. No Options may be granted
under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is in
effect shall not be impaired (or, for grants before July 24, 1998, altered) by
suspension or termination of the Plan, except with the consent of the person to
whom the Option was granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Options
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date of the Plan is adopted by the Board,
and, if required, an appropriate permit has been issued by the Commissioner of
Corporations of the State of California.
8
<PAGE>
IGEN INTERNATIONAL, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 23, 1998
The undersigned hereby appoints Samuel J. Wohlstadter
and George V. Migausky, and each of them, as attorneys and proxies
of the undersigned, with full power of substitution, to vote all
of the shares of stock of IGEN International, Inc. which the
undersigned may be entitled to vote at the Annual Meeting of
P Stockholders of IGEN International, Inc. to be held at The Hyatt
R Regency in Bethesda, Maryland on Wednesday, September 23, 1998
O at 10:00 a.m. local time, and at any and all postponements,
X continuations and adjournments thereof, with all powers that the
Y undersigned would possess if personally present, upon and in respect
of the following matters and in accordance with the
following instructions, with discretionary authority as to any
and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
THE NOMINEE LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2, AS MORE SPECIFICALLY
DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS
PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
- -------------------------------------------------------------------------------
/X/ Please mark votes as in this example.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEE FOR DIRECTOR LISTED BELOW AND FOR
PROPOSAL 2.
1. To elect a Class 2 director for a three year term and until his successor
is elected.
Nominees: Richard J. Massey, Ph.D
FOR WITHHELD
/ / / /
2. To approve an increase in the number of shares of IGEN
International, Inc.'s common stock reserved for the IGEN
International, Inc. 1994
Stock Option Plan by 750,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
MARK HERE FOR ADDRESS CHANGE AND
NOTE AT LEFT / /
Please vote, date and promptly return this proxy in the enclosed return envelope
which is postage prepaid if mailed in the United States.
Please sign exactly as your name appears hereon. If the stock is registered in
the names of two or more persons, each should sign. Executors, administrators,
trustees, guardians and attorneys-in-fact should add their titles. If signer is
a corporation, please give full corporate name and have a duly authorized
officer sign, stating title. If signer is a partnership, please sign in
partnership name by authorized person.
Signature: Date:
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Signature: Date:
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