UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X] Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
(AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-12
IGI, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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[_] 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.
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Last update: 02/22/2002
IGI, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 2003
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of IGI,
Inc., a Delaware corporation (the "Company"), will be held on Tuesday, May 20,
2003 at 12:00 p.m. at the Four Points Sheraton Hotel at the Philadelphia
Airport, 4101 Island Avenue, Philadelphia, Pennsylvania (the "Meeting"), for the
purpose of considering and voting upon the following matters:
1. To elect seven (7) directors to serve until the next Annual Meeting of
Stockholders.
2. To ratify the appointment of KPMG LLP as independent auditors of the
Company for the current fiscal year.
3. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the Meeting.
The Board of Directors has fixed the close of business on March 24,
2003 as the record date for the determination of stockholders entitled to notice
of and to vote at the Meeting and at any adjournments thereof.
A copy of the Company's Annual Report to Stockholders for the year
ended December 31, 2002, which contains financial statements and other
information of interest to stockholders, accompanies this Notice and the
enclosed Proxy Statement.
By Order of the Board of Directors,
John F. Ambrose,
President & CEO
April 16, 2003
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE.
NO POSTAGE NEEDS TO BE AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
IGI, INC.,
105 Lincoln Avenue
Buena, New Jersey 08310
_______________________________
PROXY STATEMENT
For Annual Meeting of Stockholders
To Be Held May 20, 2003
_________________________
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of IGI, Inc. (the "Company") for use at the
Annual Meeting of Stockholders to be held on Tuesday, May 20, 2003 at 12:00 p.m.
at the Four Points Sheraton Hotel at the Philadelphia Airport, 4101 Island
Avenue, Philadelphia, Pennsylvania, and at any adjournments thereof (the
"Meeting").
All proxies will be voted in accordance with the instructions of the
stockholder. If no choice is specified, the proxies will be voted in favor of
the proposals set forth in the accompanying Notice of Meeting. Any proxy may be
revoked by a stockholder at any time before its exercise by delivery of a
written revocation to the Secretary of the Company at 105 Lincoln Avenue, Buena,
New Jersey 08310. Attendance at the Meeting will not itself be deemed to revoke
a Proxy unless the stockholder gives affirmative notice at the Meeting that the
stockholder intends to revoke the Proxy and vote in person.
Only the record holders of shares of common stock, $.01 par value per
share, of the Company (the "Common Stock") at the close of business on March 24,
2003 may vote at the Meeting. Each share entitles the record holder to one vote
on each of the matters to be voted upon at the Meeting. On March 24, 2003, there
were 11,385,803 shares of Common Stock outstanding.
The Notice of Meeting, Proxy Statement, the enclosed Proxy and the
Company's Annual Report for the year ended December 31, 2002 are being mailed to
stockholders on or about April 20, 2003.
Beneficial Ownership of Common Stock
The following table sets forth information as of March 24, 2003 with
respect to the beneficial ownership of shares of Common Stock by (i) each person
known to the Company to own beneficially more than 5% of the outstanding shares
of Common Stock, (ii) the directors of the Company, (iii) the Chief Executive
Officer and the executive officers of the Company listed in the "Summary
Compensation Table" below (collectively, the "Named Executive Officers"), and
(iv) the
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directors and executive officers of the Company as a group. Unless otherwise
noted, the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
Name of Beneficial Owner Number of Shares Percent of Class (1)
- ------------------------ ---------------- --------------------
5% Stockholders
Stephen J. Morris 2,610,500 (2) 22.7%
66 Navesink Avenue
Rumson, New Jersey 07760
Frank Gerardi 973,700 (3) 8.5%
c/o Univest. Mgt. Inc. EPSP
149 West Village Way
Jupiter, Florida 33458
Edward B. Hager, M.D. 1,546,632 (4) 13.2%
Pinnacle Mountain Farms
Lyndeboro, NH 03082
Jane E. Hager 1,454,645 (5) 12.6%
Pinnacle Mountain Farms6
Lyndeboro, NH 03082
Other Directors and Executive Officers
Constantine L. Hampers, M.D. 251,506 (6) 2.2%
Terrence O'Donnell 283,571 (7) 2.4%
John F. Ambrose 400,500 (8) 3.4%
Domenic N. Golato 345,000 (9) 2.9%
Donald W. Joseph 75,829 (10) *
Earl R. Lewis 323,119 (11) 2.8%
All executive officers and directors,
as a group (8 Persons) 5,263,725 (12) 40.6%
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* Less than 1% of the Common Stock outstanding.
(1) Percentage of beneficial ownership for each person listed is based on
11,385,803 shares of Common Stock outstanding as of March 24, 2003, and
includes the shares of Common Stock underlying options, or other rights,
held by such persons that are exercisable within 60 days after March 24,
2003.
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(2) Includes 816,300 shares which Mr. Morris owns jointly with his wife and 200
shares owned directly by his wife. Also includes 154,460 shares, which are
held in an account on behalf of Mr. Morris' children, over which Mr. Morris
has voting and investment control, and 42,000 shares held in a building
fund on behalf of St. George Greek Orthodox Church of Asbury Park, New
Jersey, over which Mr. Morris has voting and investment control. Includes
95,000 shares which Mr. Morris may acquire pursuant to stock options
exercisable within 60 days after March 24, 2003.
(3) Includes 876,400 shares which are held by the Univest Management, Inc.
Employee Profit Sharing Plan ("Univest EPSP") for the benefit of Mr.
Gerardi and his wife as fully vested participants thereunder, over which
Mr. Gerardi has voting and investment control as the Trustee of the Univest
EPSP and as the sole shareholder and President of the Univest Management,
Inc. Includes 47,300 shares which are held by Univest Partners, L.P., Ltd.,
over which Mr. Gerardi has voting and investment control as the sole
limited partner and sole shareholder of the corporate general partner,
Univest Management, Inc. Includes 50,000 shares which may be acquired
pursuant to stock options exercisable within 60 days after March 24, 2003.
(4) Includes 300,000 shares which Dr. Hager may acquire pursuant to stock
options exercisable within 60 days after March 24, 2003, and 639,815 shares
beneficially owned by Dr. and Mrs. Hager as co-trustees of the Hager Family
Trust, who share voting and investment power.
(5) Includes 639,815 shares beneficially owned by Dr. and Mrs. Hager, as
co-trustees of the Hager Family Trust, who share voting and investment
power. Includes 155,000 shares which Mrs. Hager may acquire pursuant to
stock options exercisable within 60 days after March 24, 2003.
(6) Includes 195,000 shares which may be acquired pursuant to stock options
exercisable within 60 days after March 24, 2003.
(7) Includes 220,000 shares which may be acquired pursuant to stock options
exercisable within 60 days after March 24, 2003.
(8) Includes 400,000 shares which may be acquired pursuant to stock options
exercisable within 60 days after March 24, 2003.
(9) Includes 345,000 shares which may be acquired pursuant to stock options
exercisable within 60 days after March 24, 2003.
(10) Includes 45,000 shares which may be acquired pursuant to stock options
exercisable within 60 days after March 24, 2003.
(11) Includes 245,000 shares which may be acquired pursuant to stock options
exercisable within 60 days after March 24, 2003.
(12) Includes 1,595,000 shares which may be acquired pursuant to stock options
exercisable within 60 days after March 24, 2003 included in Notes (2), (3)
and (6) through (11) above.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's Common Stock ("Reporting Persons") to
file with the Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Based
solely on its review of copies of reports filed by Reporting Persons furnished
to the Company, the Company believes that, except as set forth below, during
2002 its officers, directors and holders of more than 10% of the Company's
Common Stock complied with all Section 16(a) filing requirements.
Number of
Transactions Not
Name Number of Late Reports Timely Reported
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John F. Ambrose (1) 1 1
Frank Gerardi (2) 1 1
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(1) Mr. Ambrose purchased 500 shares of IGI, Inc. common stock on May 24, 2002,
which was subsequently reported by Mr. Ambrose on a Form 4 filed on October
1, 2002.
(2) Mr. Gerardi was appointed as a Director of the Company on December 20,
2002. While a Form 8-K was timely filed by the Company on December 27,
2002, announcing Mr. Gerardi's appointment as a Director, Mr. Gerardi's
Form 3 was subsequently filed on February 7, 2003.
Votes Required
The holders of a majority of the shares of Common Stock outstanding shall
constitute a quorum for the transaction of business at the Meeting. Shares of
Common Stock present in person or represented by proxy (including shares which
abstain or do not vote with respect to one or more of the matters presented for
stockholder approval) will be counted for purposes of determining whether a
quorum exists at the Meeting.
The affirmative vote of the holders of a plurality of the shares of Common
Stock voted at the Meeting is required for the election of directors (Proposal
1). The affirmative vote of the holders of a majority of the shares of Common
Stock voted at the Meeting is required to ratify the appointment of KPMG LLP as
independent auditors of the Company (Proposal 2).
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter, will not be counted as votes cast in favor of such matter, and also will
not be counted as shares voting on such matter. Accordingly, abstentions and
"broker non-votes" will have no effect on the voting on a matter that requires
the affirmative vote of the holders of a certain percentage of the shares of
Common Stock voting on a matter.
5
PROPOSAL 1 - ELECTION OF DIRECTORS
Nominees for Election as Directors
The persons named as proxies in the accompanying Proxy intend (unless
authority to vote therefore is specifically withheld) to vote for the election
of the persons named below as directors to hold office until the next Annual
Meeting of Stockholders and until their respective successors are elected and
qualified. Each nominee has consented to being named in this Proxy Statement and
to serve if elected. If any of the nominees becomes unavailable to serve as a
director, the persons named as proxies in the accompanying Proxy may vote the
Proxy for substitute nominees. The Board of Directors has no reason to believe
that any of the nominees will be unable to serve if elected. The table below
sets forth certain information with respect to the nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
LISTED BELOW.
Principal Occupation,
Other Business
Experience During
Director Past Five Years and
Name Age Since Other Directorships
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Terrence O'Donnell 59 1993 Executive Vice President and General Counsel,
Textron Inc., a producer of aircraft, automotive
products and industrial products, since March
2000; Member of the Law Firm of Williams &
Connolly, Washington, D.C. since April 1992 and
from March 1977 to October 1989; General Counsel
of Department of Defense from October 1989 to
March 1992; Special Assistant to President Ford
from August 1974 to January 1977; Deputy Special
Assistant to President Nixon from May 1972 to
August 1974; Director of ePlus, Inc. (formerly
MLC Holdings).
Constantine L.
Hampers, M.D. 70 1994 Chief Executive Officer of MDL Consulting
Associates, LLC, a medical consulting firm,
since 1996; Chairman of the Board of Directors
and Chief Executive Officer of National Medical
Care, Inc., a provider of in-center and home
kidney dialysis services and products, from 1968
to 1996; Executive Vice President and Director
of W.R. Grace & Co., a supplier of specialty
chemical, construction and container products,
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from 1986 to 1996; Director of Artificial
Kidney Services at Peter Bent Brigham Hospital
and Assistant Professor of Medicine at Harvard
University School of Medicine prior to 1968
and for several years thereafter.
Donald W. Joseph 65 2000 Group Vice President of Baxter International Inc.,
a medical products and services company, from
November 1993 to July 2000; President, Renal
Business of Baxter International Inc. from
October 1981 to November 1993; Director of
Sales and Marketing for the renal division of
Baxter International Inc. from December 1972
to October 1981; Joined Baxter International
Inc. as Sales Representative in July 1966,
where Mr. Joseph held various sales management
positions from July 1966 to December 1972.
Stephen J. Morris 70 1999 Co-founder and General Manager of John Morris
& Sons, Inc., a hotel and restaurant enterprise,
which Mr. Morris owned and managed from July
1958 to December 1998; Co-founder and Advisor of
International Scientific Communications, a
scientific publishing company.
Earl R. Lewis 59 2000 Chairman of the Board, President and Chief
Executive Officer of FLIR Systems, an infrared
imaging technology company, from November 1,
2000 to the present; Chief Executive Officer
of Thermo Instrument Systems, Inc., which
produces tools for measurement and analysis,
from January 1998 to July 2000; Chief
Operating Officer of Thermo Instrument
Systems, Inc. from January 1996 to January
1998; President of Thermo Instrument Systems,
Inc. from March 1997 to July 2000; Director of
FLIR Systems; Director of Spectra-Physics
Laser Inc., a commercial laser company;
Director of SpectRx, Inc., which produces
optical systems for medical applications;
Director of Harvard Bioscience, Inc., a
medical instrument and supply company.
John F. Ambrose 63 May 2002 President and Chief Executive Officer of IGI,
Inc., April 2001 to present; President and
Chief Operating Officer of IGI, Inc. September
2000 to
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April 2001; Vice President of Sales and
Marketing at Digitrace Care Services of Boston
from November 1997 to September 2000; Vice
President of Field Operations at NMC Homecare
from July 1990 to November 1996.
Frank Gerardi 58 Dec. 2002 President of Univest Management, Inc., a
management consulting company since 1986;
member of the New York Stock Exchange from
1969 to 1986.
For information relating to shares of the Company owned by each of the
directors, see "Beneficial Ownership of Common Stock."
Board and Committee Meetings
The Board of Directors met eleven (11) times during 2002. Each of the
current directors attended at least 75% of the meetings of the Board of
Directors and the committees on which he or she served. The Board of Directors
has an Executive Committee, an Audit Committee, a Nominating and Board
Governance Committee, and a Human Resources and Compensation Committee. The
present composition of the committees of the Board of Directors are set forth
below. Membership of the committees may change at the time of the Meeting due to
the election of new directors.
The Executive Committee, whose members are John Ambrose (Chairman), Stephen
Morris and Terrence O'Donnell, has the authority to exercise the powers of the
Board of Directors between Board meetings. The Audit Committee, whose members
are Mr. O'Donnell (Chairman), Mr. Morris and Constantine Hampers, M.D., reviews
the audit of the Company's accounts, monitors the effectiveness of the audit and
evaluates the scope of the audit. The Human Resources and Compensation
Committee, whose members are Dr. Hampers (Chairman) and Messrs. Lewis, Joseph
and Morris, reviews and recommends salaries and other compensatory benefits for
the principal officers of the Company and grants stock options to key employees
of the Company and its subsidiaries. The Nominating and Board Governance
Committed, whose members are Dr. Hampers (Chairman) and Messrs. Lewis and
O'Donnell, is responsible for overseeing matters of corporate governance,
including the evaluation of the performance and practices of the Board of
Directors. In addition, the Nominating and Board Governance Committee reviews
possible candidates for the Board of Directors and recommends the nominees for
directors to the Board of Directors for approval.
During 2002, the Audit Committee met four (4) times, the Human Resources
and Compensation Committee met once and the Nominating and Board Governance
Committee once. The Executive Committee did not meet during 2002.
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Director Compensation and Stock Options
Director Options. In September 1999, the Board of Directors adopted the
1999 Director Stock Option Plan (the "1999 Plan"). Under the 1999 Plan, on
January 2 of each year, beginning with January 2000 (i) each non-employee
director is granted a stock option for 15,000 shares, and (ii) each of the
Chairmen of the Audit Committee and the Human Resources and Compensation
Committee is granted additional stock options for 15,000 and 10,000 shares,
respectively. Additionally, under the 1999 Plan, each newly elected director
will receive a stock option grant of 15,000 shares at the time of his/her
election. All of such options will be granted at an exercise price equal to the
closing price of the Common Stock on the American Stock Exchange on the date of
grant. All options granted under the 1999 Plan become 100% vested twelve months
after the date of grant.
During 2002, the following number of options were granted under the 1999
Plan on the dated indicated to each of the following directors listed below:
Option Number of
Name of Director Grant Date Options Granted
- ----------------------------------------------------------------------------------------
American Capital Strategies Ltd. (resigned 7/29/02) 1/2/02 15,000
Frank Gerardi 12/20/02 15,000
Jane E. Hager (served as Director until 5/15/02) 1/2/02 15,000
Constantine L. Hampers, M.D. 1/2/02 25,000
Donald W. Joseph 1/2/02 15,000
Earl R. Lewis 1/2/02 15,000
Stephen J. Morris 1/2/02 15,000
Terrence O'Donnell 1/2/02 30,000
Director Fees. The Board of Directors adopted the 1998 Directors Stock Plan
(the "1998 Plan") in October 1998 to provide each outside director with the
right to receive shares of the Company's Common Stock as director compensation
in lieu of cash payments of director fees, thereby encouraging ownership in the
Company by the directors. Each non-employee director receives $2,000 in value of
Common Stock for each meeting of the Board he or she attends in person, $1,000
in value of Common Stock for each telephonic meeting of the Board attended, $500
in value of Common Stock for each Committee meeting attended which is held on
the same day as a Board meeting, $1,000 in value of Common Stock for each
Committee meeting attended which is not held on the same day as the Board
meeting, and up to $5,000 in value of Common Stock annually for the Chairman of
certain of the Board Committees. The fees are payable quarterly and the number
of shares of Common Stock issued to each director is determined by dividing the
fees payable for the quarter by the closing price of the Company's Common Stock
on the American Stock Exchange on the last business day of the applicable
quarter.
For the first and second quarters of 2002, each director received the full
amount of compensation payable under the 1998 Plan.
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At a Board meeting held on July 19, 2002, the Directors unanimously
expressed their willingness to accept a significant reduction in the amount of
the share grants to be received under the 1998 Plan as compensation for service
on the Board in an effort to provide the Company with their personal support,
commitment and assistance at a pivotal time in its growth and development. On
July 19, 2002, the Members of the Board collectively agreed to a 50% reduction
in the amount of the share grant compensation payable to each Director under the
1998 Plan for the third and fourth quarters of 2002.
From the Fourth Quarter 2001 through the Third Quarter 2002, the
following number of shares of the Company's Common Stock were received by each
of the directors listed below under the 1998 Plan:
Name of Director Number of Shares Received
- ---------------------------------------------------------------------------------------------
American Capital Strategies, Ltd. (resigned 7/29/02) 5,464
Jane E. Hager (served as Director until 5/15/02) 7,763
Constantine L. Hampers, M.D. 7,577
Donald W. Joseph 9,178
Earl R. Lewis 13,447
Stephen J. Morris 14,151
Terrence O'Donnell 12,742
John Ambrose (elected as Director on 5/15/02) 0 (1)
Frank Gerardi (appointed as Director on 12/2002) 0 (2)
- ----------------------------
(1) Mr. Ambrose is the President and Chief Executive Officer of the Company,
and, as such, does not receive any director compensation under the 1998
Plan. The 1998 Plan provides for the payment of compensation to only
non-employee directors.
(2) Mr. Gerardi did not serve as a member of the Board of Directors until his
appointment on December 20, 2002.
These shares represented a total value at the time of issuance of $48,000.
Legal Proceedings
While no judgment or findings have been entered, Dr. Hampers is currently
a party in an SEC administrative cease and desist proceeding styled, In the
Matter of Jean-Paul Bolduc, et al, File No. 3-9793 (December 22, 1998). The
complaint arises out of accounting practices followed at W.R. Grace & Company
("Grace") from 1991 to 1996 in connection with the booking of reserves at
National Medical Care, Inc. ("NMC"), then a wholly-owned subsidiary of Grace.
The case is currently stayed by order of the SEC. Dr. Hampers has denied any
wrongdoing because the accounting treatment of the reserves at issue was
separately approved by the financial staffs of Grace and NMC and by the Audit
Committee of the Grace's Board of Directors. In addition,
10
Grace's independent auditors, Price Waterhouse LLP, annually reviewed the
practices, and in each of the subject fiscal years approved Grace's financial
statements with an unqualified opinion.
Certain Relationships and Related Transactions
IGI and its affiliates, IGEN, Inc., Immunogenetics, Inc. and Blood Cells,
Inc. (collectively, the "Company") entered into a Loan and Security Agreement
dated October 29, 1999, as amended, (the "Senior Debt Agreement") and certain
related agreements with Fleet Capital Corporation (the "Senior Lender"). The
Company also entered into a Note and Equity Purchase Agreement dated October 29,
1999, as amended, (the "Subordinated Debt Agreement") and certain related
agreements with American Capital Strategies, Ltd. ("ACS").
Under the Subordinated Debt Agreement, the Company issued to ACS
$7,000,000 in senior subordinated notes and Warrant No. W-1 (the "Warrants")
evidencing the right to acquire 1,907,543 shares (as adjusted from time to time
in accordance with the terms thereof) of the Company's Common Stock at an
exercise price of $0.01 per share. Among other things, under the terms of the
Subordinated Debt Agreement, as well as the Warrants, ACS had the right (the
"Put") to require the Company to repurchase the Warrants or the Common Stock
acquired upon exercise of the Warrants at their then fair market value.
Further, under the Subordinated Debt Agreement, as long as the Warrants
remained outstanding or ACS was the holder of any of the shares issued upon
exercise of the Warrants, ACS also had the right to designate for election to
the Company's Board of Directors that number of directors that bears the same
ratio to the total number of directors as the number equal to the sum of the
number of shares of Company Common Stock owned by ACS plus the number of shares
issuable upon exercise of the Warrants bears to the total number of outstanding
shares of Company Common Stock on a fully-diluted basis. In May 2001, ACS
exercised its director designation rights under the Subordinated Debt Agreement
appointing ACS Vice President John Freal to the ACS director seat. In January
2002, Mr. Freal resigned from his position with ACS, and ACS Principal Kenneth
E. Jones was appointed to fill the ACS director seat. Mr. Jones served as the
ACS designated and elected member to the Company's Board of Directors until his
resignation on July 29, 2002.
On April 12, 2000, ACS and the Company entered into Amendment No. 1 to
the Subordinated Debt Agreement, under the terms of which the Section 9.1 "Put
Provision" for the Warrants was replaced in its entirety with a "Make-Whole
Provision", which required the Company to compensate ACS in either Common Stock
or cash, at the option of the Company, only if the proceeds ultimately realized
by ACS upon sale of the Common Stock obtained upon exercise of the Warrants were
less than the fair value of the Common Stock upon exercise of the Warrants
multiplied by the number of shares of Common Stock obtained upon exercise. Fair
value of the Common Stock upon exercise was defined in the Subordinated Debt
Agreement, as amended, to mean the 30-day average value prior to notice of
exercise. Furthermore, under the terms thereof, ACS had to exercise must
exercise reasonable efforts to sell or place its shares obtained by exercise of
the Warrants in the marketplace over a 180-day period before it can invoke the
Company's payment obligations under the "Make-Whole Provision." The Make-Whole
feature did not become effective until the earlier to occur of: (i) October 29,
2004, (ii) the
11
date of the payment in full of the subordinated debt, (iii) the date of the
payment in full of the senior debt, or (iv) the sale by the Company of at least
30% of its assets in a single transaction or a series of related transactions
(unless ACS grants a waiver permitting the sale).
On February 11, 2000, ACS filed a Schedule 13G with the Commission
reporting beneficial ownership of 1,907,543 shares of Common Stock, all of which
were issuable upon exercise of the Warrants. ACS reported that it had sole
voting and dispositive power over all 1,907,543 shares.
Under the terms of the Subordinated Loan Agreement, the Company was
responsible for all required filings and registrations relating to the 1,907,543
shares of Common Stock issuable upon exercise of the Warrants. In accordance
therewith, on September 29, 2000, the Company filed the necessary Form 3
Registration Statement for the 1,907,543 shares of Common Stock to be issued
upon exercise of the Warrants.
On May 31, 2002, the Company sold to Vetoquinol U.S.A., Inc.
substantially all of the assets of the Company's Companion Pet Products
division. The transaction constituted a sale by the Company of at least 30% of
its assets in a single transaction, thereby putting into effect the "Make-Whole
Provision" of the Subordinated Debt Agreement. (As set forth below, on the same
date, the Company made payment in full of the Senior Debt and the Subordinated
Date, both of which events also triggered the "Make-Whole Provision.")
On May 31, 2002, the Company applied the proceeds from the sale of the
Companion Pet Products division to repay the full outstanding balance of the
Senior Debt to Fleet Capital Corporation in the amount of $4,182,713.23, and to
repay all of the outstanding balance of the Subordinated Debt to ACS in the
amount of $7,736,965.39 (excluding any amounts due under the "Make-Whole
Provision"). While all the Subordinated Debt was paid in full on May 31, 2002,
ACS still maintained its rights under the Warrants and the "Make-Whole
Provision" of the Subordinated Loan Agreement.
On May 31, 2002, the Company, its Affiliates, ACS and ACAS Business
Loan Trust 2002-1 entered into Amendment No. 5 to the Subordinated Debt
Agreement ("Amendment No. 5"). Amendment No. 5 made a number of changes to the
Subordinated Debt Agreement, including, without limitation, the security to
serve as collateral for any future obligations of the Company to ACS under the
"Make-Whole Provision."
On June 26, 2002, ACS exercised the Warrants in full (1,907,543 shares)
by delivering to the Company the necessary written notice and other documents
required under the terms of the Warrants to effectuate the exercise thereof. ACS
opted for a "Net Issue Exercise" under the terms of Section 1A(i)(d) of the
Warrants, and delivered to the Company a duly executed Exercise Agreement
designating it as a "Net Issue Exercise." Under Section 1A(i)(d) of the
Warrants, in lieu of a cash payment to the Company in an amount equal to the
Exercise Price ($.01 per share) times the number of shares to be acquired
thereunder (1,907,543), ACS could opt for a "Net Issue Exercise", as follows:
"[T]he Registered Holder may exercise this Warrant in whole or in part by the
surrender of this Warrant to the Company, with a duly executed Exercise
Agreement marked to reflect `Net Issue Exercise' and specify the number of
shares of
12
Common Stock to be purchased and upon such Net Issue Exercise, the Register
Holder shall be entitled to pay the exercise price for Common Stock purchased
hereunder by cancellation of shares of Common Stock to be purchased hereunder
valued at Fair Market Value less the Exercise Price."
For purposes of ACS' Net Issue Exercise of the Warrants, the Fair
Market Value (as defined in the Subordinated Loan Agreement) was $0.67. As such,
under the "Net Issue Exercise" of the Warrants, ACS was issued 1,878,640 shares
of IGI Common Stock, together with cancellation of the remaining 28,903 shares
purchased by ACS under the Warrants. In accordance with the terms of Section
1A(i)(d) of the Warrants, cancellation of such 28,903 shares constituted payment
in full by ACS of the Exercise Price to the Company for its purchase of the
shares (1,907,543) under the Warrants. The 1,878,640 shares purchased by ACS
under the "Net Issue Exercise" of the Warrants constituted approximately 14.3%
of the issued and outstanding Common Stock of the Company as of June 26, 2002.
On June 26, 2002, the Company also received from ACS the "Purchaser
Notice" under the terms of Section 9.1 of the Subordinated Loan Agreement of its
intention to sell the 1,878,640 shares of IGI Common Stock ("the Shares")
purchased by ACS under the "Net Issue Exercise" of the Warrants. Pursuant to the
terms of the Section 9.1 Make-Whole Provision, the Company had the option within
three (3) business days of receipt of the Purchaser Notice to elect to purchase
all or any part of such Shares from ACS.
On July 29, 2002, the Company purchased from ACS the 1,878,640 shares
of IGI Common Stock acquired under the Warrants ("the Shares") at the price of
$0.70 per share or $1,315,048.00. The Company has no further obligations or
liabilities of any kind whatsoever to ACS in conjunction with the Subordinated
Debt Agreement or otherwise. Furthermore, upon sale of the Shares to the
Company, ACS' right to designate a nominee for election to the Company's Board
of Directors permanently terminated. As such, on July 29, 2002, the ACS designee
to the IGI Board of Directors, Kenneth Jones, tendered his resignation from the
Board.
At December 31, 1999, accrued compensation totaling $115,000 was owed
to the Company's former Chief Executive Officer, which represented compensation
earned but not yet paid. The Company paid this amount in the first quarter of
2000 by issuing 63,448 shares of its Common Stock in satisfaction of the amount
owed.
In 2000, the Company's former Chief Executive Officer chose to defer
payment of 2000 and 1999 travel expenses amounting to $129,000 until the
Company's cash flow stabilized. On February 14, 2001, the Company agreed to pay
the Company's obligation using shares of Company Common Stock. Total payments
through December 31, 2001 resulted in the issuance of 125,625 shares valued at
$129,000.
13
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the cash and non-cash compensation for
each of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company, the most highly compensated executive officers of the
Company who received compensation in excess of $100,000 during 2002 and who were
serving as executive officers at the end of 2002 and the only one other existing
highly compensated officer of the Company who received compensation in excess of
$100,000 during 2002 but who were not serving as executive officers at the end
of 2002.
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
------------------- -------------
Securities
Other Annual Underlying All Other
Name/Principal Salary Bonus Compensation Options Compensation
Position (1) Year ($) ($) ($)(2) (#)(3) ($)(4)
- ---------------------------------------------------------------------------------------------------------------
John Ambrose
Chief Executive Officer 2002 192,500 25,000 9,000 50,000 17,458
& President 2001 185,769 0 8,250 250,000 13,265
Chief Operating Officer 2000 53,856 0 2,400 100,000 3,130
& President (5)
Domenic Golato 2002 185,460 20,000 9,000 45,000 17,960
Chief Financial Officer 2001 178,975 0 8,250 200,000 15,459
& Sr. Vice President 2000 82,973 0 3,600 100,000 5,073
Nadya Lawrence 2002 112,500 0 4,800 40,000 2768
V.P. of Operations
Michael Birman (6) 2002 111,537 3,998 (7) 6,000 0 1,010
V.P. of Business
Development
- -------------
(1) Lists the principal position with the Company as of December 31, 2002, with
the exception of Michael Birman, whose term as V.P. of Business Development
ended on September 20, 2002.
(2) The amounts shown in this column represent automobile allowances.
(3) The Company has never granted any stock appreciation rights.
(4) The amounts shown in this column represent premiums for group life
insurance and medical insurance paid by the Company and the Company's
contributions under its 401(k) Plan. In 2000, the Company paid (i) $378 and
$252 in group life insurance premiums for and Messrs. Golato
14
and Ambrose, respectively; (ii) $4,696 and $3,130 in medical insurance
premiums for each of Messrs. Golato and Ambrose, respectively. In 2001, the
Company paid (i) $756 and $756 in group life insurance premiums for Messrs.
Ambrose, and Golato, respectively; (ii) $12,509 and $12,509 in
medical insurance premiums for each of Messrs. Ambrose and Golato,
respectively; and (iii) $2,194 in 401(k) Plan contributions for Mr. Golato.
In 2002, the Company paid (i) $1,755, $1,691, $1,010 and $1,094 in group
life insurance premiums for Messrs. Ambrose, Golato and Birman and Ms.
Lawrence, respectively; (ii) $12,461 and $12,461 in medical insurance
premiums for each of Messrs. Ambrose and Golato, respectively; (iii) $942
and $942 in dental insurance premiums for both Messrs. Ambrose and Golato,
(iv) $108 and $108 in vision insurance premiums for both Messrs Ambrose and
Golato; and (v) $2,189, $2,755 and $1,674 in 401(k) Plan contributions for
Messrs. Ambrose and Golato and Ms. Lawrence, respectively.
(5) John F. Ambrose was appointed by the Board of Directors as the Company's
Chief Executive Officer as of April 30, 2001. Prior to his appointment, Mr.
Ambrose had been the Company's President and Chief Operating Officer since
September 2000. All compensation paid to Mr. Ambrose by the Company during
2000 was for his employment as the Company's President and Chief Operating
Officer.
(6) Michael Birman served as V.P. of Business Development from September, 2001
to September 20, 2002.
(7) The amount shown represents the combined total of commissions paid by the
Company in 2002 to Mr. Birman of $964, plus income of $3,034 realized by
Mr. Birman from the exercise of stock options during 2002.
Stock Options
The following tables set forth certain information concerning option
grants during the fiscal year ended December 31, 2002 to the Named Executive
Officers and the number and the value of the options held by such persons on
December 31, 2002. No options were exercised by Named Executive Officers during
2002.
15
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Individual Grants Value At Assumed
------------------------------------------------- Annual Rates
Number of Percent of of Stock Price
Securities Total Options Appreciation
Underlying Granted to Exercise or
for Option Term (1)
Options Employees in Base Price Per Expiration --------------------
Name Granted (#) Fiscal Year Share ($/sh) Date 5% 10%
(2) (3)
- ------------------------------------------------------------------------------------------------------------
John F. Ambrose 50,000 (4) 17.85% $.66 May 23, 2112 $18,000 $43,000
CEO/Pres.
Domenic Golato 45,000 (5) 16.07% $.66 May 23, 2112 $16,200 $38,700
CFO/Sr. V.P.
- ----------------
(1) This portion of the Table shows the potential realized value of the options
granted to each of the Named Executive Officers in 2002, assuming that the
market price of the underlying securities appreciate in value from the date
of the grant over the 10-year term of the option at annualized appreciate
rates of 5% and 10%. These gains are based on assumed rates of stock price
appreciation of 5% and 10% compounded annually from the date the respective
options were granted to their expiration date. Actual gains, if any, on
stock option exercises will depend on the future performance of the Common
Stock and the date on which the options are exercised. No gain to the
optionees is possible without an appreciation in stock price, which will
benefit all stockholders commensurately. The 5% and 10% rates of
appreciation are required to be disclosed by SEC rules and are not intended
to forecast possible future appreciation, if any, in the Company's stock
price.
(2) 280,000 options in total were granted to directors and employees in fiscal
year 2002.
(3) The exercise price for all stock option grants is the fair market value of
the Company's common stock on the date of the grant.
(4) Upon the closing of the sale of the Companion Pet Products division on May
31, 2002, all options held by all executive officers and directors of the
Company automatically vested in full resulting in the acceleration of
vesting of an aggregate of options to purchase approximately 795,000 shares
of IGI's common stock. This option for 50,000 shares was granted to Mr.
Ambrose on May 23, 2002, and, as such, automatically vested in full on May
31, 2002.
(5) This option for 45,000 shares was granted to Mr. Golato on May 23, 2002,
and, as such, automatically vested in full upon the closing of the
Companion Pet Products division on May 31, 2002.
16
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 2002 AND YEAR END 2002
OPTION VALUE
Name Shares Acquired Value No. of Shares Underlying Value of Unexercised
On Exercise Realized Unexercised Options In-The-Money Options
At Year End 2002 At Year End 2002
Exerciseable/Unexercisable Exercisable/Unexercisable
(2) (2)(3)
- ------------------------------------------------------------------------------------------------------------------
John F. Ambrose $ ----(1) $----(1) 100,000/0 @ $1.06 $ 0
CEO & President 100,000/0 @ $0.80 $ 0
150,000/0 @ $0.52 $3,000
50,000/0 @ $0.66 $ 0
Domenic Golato $ ----(1) $----(1) 60,000/0 @ $1.06 $ 0
CFO & Sr. V.P. 40,000/0 @ $0.50 $1,600
100,000/0 @ $0.80 $ 0
100,000/0 @ $0.52 $2,000
45,000/0 @ $0.66 $ 0
- ----------------------
(1) No options exercised during fiscal year 2002.
(2) All shares were fully vested and exercisable as of December 31, 2002.
(3) The value of unexercised "in-the-money" options is that amount by which the
fair market value of the underlying securities at year-end exceeds the
exercise price of the options. The values set forth are based on the fair
market value of the underlying securities using the average ($0.54 per
share) of the high and low trading price on December 31, 2002, minus the
exercise price.
Employment Agreements
In April 2001, John F. Ambrose was appointed by the Board of Directors as
the Company's new Chief Executive Officer. Prior thereto, Mr. Ambrose had been
the Company's President and Chief Operating Officer since September 2000. The
Company does not have an employment agreement with Mr. Ambrose.
On July 1, 2000, the Company entered into an employment agreement with
Domenic Golato, Senior Vice President and Chief Financial Officer of the
Company. The agreement provides for employment through June 30, 2001. Each year
beginning June 30, 2001, the term of the agreement shall automatically be
extended for an additional year unless either party gives written notice to the
other party by April 30 of that year that it does not wish to extend the term of
the agreement. No such notice was given by April 30, 2002, and Mr. Golato's term
was therefore automatically extended to June 30, 2003. Under the terms of the
agreement, Mr. Golato's base salary for the first year of the term thereof was
$168,000, subject to annual merit increase reviews. In April 2001, Mr. Golato's
base salary was increased to $185,460. All equity-based awards received by Mr.
Golato will vest fully upon a change of control of the Company or a change in
more than half of the members of the Board of Directors over a two-year period.
17
In the event that Mr. Golato's employment is terminated by the Company
with cause or Mr. Golato resigns, Mr. Golato will receive his base salary, bonus
and all other benefits which have accrued as of the date of termination. In the
event that Mr. Golato's employment is terminated by the Company without cause,
Mr. Golato is entitled to continuation of his annual salary and benefits for
twelve months, and all of his unvested options will fully vest and become
exercisable for a period of at least two years after the date of his
termination.
REPORT OF THE HUMAN RESOURCES AND COMPENSATION COMMITTEE
Overview and Philosophy
The Human Resources and Compensation Committee of the Board of Directors
("the Committee"), known prior to May 15, 2002 as the Compensation and Stock
Option Committee, is comprised of at least three non-employee directors and is
responsible for the development and administration of the Company's executive
compensation policies and programs, subject to the review and approval by the
full Board. The Committee reviews and recommends to the Board for its approval
the salaries and incentive compensation for the executive officers of the
Company and grants stock options to executives and other key employees of the
Company and its subsidiaries.
The objectives of the Company's executive compensation program are to:
* Support the achievement of strategic goals and objectives of the
Company.
* Attract and retain key executives critical to the long-term success
of the Company.
* Align the executive officers' interests with the success of the
Company.
Compensation Program
The Company's executive compensation program consists of three principal
elements -- base salary, annual cash incentive compensation and long-term
incentive compensation in the form of stock options.
The base salaries received by Mr. Golato in 2000, 2001 and 2002 were
established pursuant to the terms of his employment agreement with the Company.
See discussion set forth above under heading "Employment Agreements." Base
salary levels for the Company's executive officers are generally based on a
review of compensation for competitive positions in the market, the executives'
job skills and experience and judgments as to past and future contributions of
the executives to the Company's success. The Committee seeks to set the annual
base salaries of its executives at levels competitive with those paid to
executives in those businesses in which the Company is engaged; namely, consumer
products (with the discontinuation of the Companion Pet Products' operations in
the second quarter of 2002). It seeks, however, to provide its executives with
opportunities for substantially higher compensation through annual incentive
awards and stock options.
18
The Company has implemented a variable compensation plan for its top
executives. The purpose of the plan is to directly link management compensation
to Company performance. Present plans include expanding the application of the
variable compensation plan to more upper level managers. Long-term incentives
for executive officers and key managers are provided through stock options. The
objectives of this program are to align executive and stockholder long-term
interests by creating a strong and direct link between executive compensation
and stockholder return, and to enable executives to develop and maintain a
significant, long-term stock ownership position in the Company's Common Stock.
Stock options are granted at an option price equal to the fair market value of
the Company's Common Stock on the date of grant and will only have value if the
Company's stock price increases. In selecting executives eligible to receive
option grants and determining the amount of such grants, the Committee evaluates
a variety of factors including (i) the job level of the executive, (ii) option
grants awarded by competitors to executives at a comparable job level, and (iii)
past, current and prospective service to the Company rendered, or to be
rendered, by the executive. It has been the Company's practice to fix the
exercise price of option grants at 100% of the fair market value per share on
the date of grant.
Executive Officers' 2002 Compensation
Mr. Ambrose has been the Chief Executive Officer of the Company since
April 30, 2001 and currently holds that position. Mr. Golato became the Chief
Financial Officer and Senior Vice President of the Company in June 2000 and
currently holds such positions with the Company pursuant to the terms of his
employment agreement with the Company.
Mr. Ambrose does not have an employment agreement with the Company, but
receives base salary compensation in his position as the Company's Chief
Executive Officer to be reviewed annual for merit increases. In 2002, Mr.
Ambrose received a base salary compensation of $192,500 and a bonus of $25,000
as a reward for his efforts resulting in the successful sale of the Companion
Pet Product division asset sale on May 31, 2002. In 2002, the Committee awarded
Mr. Ambrose options to purchase 50,000 shares of the Company's Common Stock as
additional merit-based compensation. In 2002, the Company paid Mr. Golato's
annual compensation pursuant to the terms of his employment agreement with the
Company under which he received a base annual salary of $185,460, subject to
annual merit reviews. In 2002, Mr. Golato was also awarded a bonus in the amount
of $20,000 for his efforts in achieving the successful completion of the sale of
the Companion Pet Products division. In 2002, the Committee awarded Mr. Golato
options to purchase 45,000 shares of the Company's Common Stock as additional
merit-based compensation.
Tax Considerations
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a tax deduction to public companies for
compensation in excess of one million dollars paid to its chief executive
officer and its other four highest compensated officers. Qualified
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. While the Committee does not currently intend to
qualify its annual cash incentive compensation as qualified performance-based
compensation, it will continue to monitor the impact of Section 162(m) on the
Company. Based on the compensation received in 2002 by Messrs.
19
Ambrose and Golato as summarized above, it does not appear that the Section
162(m) limitation will have a significant impact on the Company in the near
term.
Human Resources and Compensation Committee
Constantine L. Hampers, M.D. (Chairman)
Earl R. Lewis
Donald W. Joseph
Stephen J. Morris
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors (the "Audit Committee")
consists of at least three non-employee directors and is responsible for
reviewing the audit of the Company's accounts, monitoring the effectiveness of
the audit and evaluating the scope of the audit. In accordance with the
Company's Audit Committee Charter, as well as the listing standards (Section
121(A)) of the American Stock Exchange, the members of the Company's Audit
Committee are "independent."
The Audit Committee reports to and acts on behalf of the Board of
Directors by providing oversight of the financial management, independent
auditors and financial reporting procedures of the Company. The Company's
management is response for preparing the Company's financial statements and the
independent auditor's are responsible for auditing those financial statements.
The Audit Committee is responsible for overseeing the conduct of these
activities by the Company's management and the independent auditors. In this
context, the Audit Committee has met and held discussions with management and
the independent auditors. Management has advised the Audit Committee that the
Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles, and the Committee has reviewed and
discussed the consolidated financial statements with management and the
independent auditors.
The Audit Committee has reviewed the financial statements prepared by the
Company and audited by KPMG LLP for the fiscal year ended December 31, 2002 and
has discussed these financial statements with the Company's management. The
Audit Committee has discussed with KPMG LLP the matters required to be discussed
by SAS 61 (Codification of Statements on Auditing Standards, AU (S)380), as may
be modified or supplemented. The Audit Committee has received the written
disclosures and the letter from KPMG LLP required by Independence Standards
Board Standard No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees), as modified or supplemented, and the
Committee and the independent auditors have discussed the auditors' independence
from the Company and its management. Additionally, the Committee considered all
audit, non-audit and other accounting services provided by the independent
auditors and the fees and costs billed and expected to be billed by the
independent auditors for those services. The Committee has discussed with
management the procedures for selection of consultants and the related
competitive bidding practices and fully consider whether those services provided
by the independent auditors are compatible with maintaining auditor
independence.
20
The Committee has discussed with the Company's independent auditors, with
and without management present, their evaluations of the Company's internal
accounting control and the overall quality of the Company's financial reports.
In reliance on the reviews and discussions with management and the
independent auditors referred to above, the Committee believes that the
non-audit services provided by the independent auditors fall within the exempted
category of "tax services" and are compatible with and did not impair auditor
independence.
Based on their review and discussions set forth above, the Audit Committee
recommended to the Board of Directors that the audited financial statements for
the fiscal year ended December 31, 2002 be included in the Company's Annual
Report on Form 10-K. The Audit Committee also recommended to the Board of
Directors, and the Board has approved, subject to shareholder ratification, the
selection of KPMG LLP as the Company's independent auditors for fiscal year
2003.
Audit Committee
Terrence O'Donnell (Chairman)
Stephen J. Morris
Constantine Hampers, M.D.
Compensation Committee Interlocks and Insider Participation
No member of the Human Resources and Compensation Committee was, during
fiscal year 2002, an officer or employee of the Company or any of its
subsidiaries, or was formerly an officer of the Company or any of its
subsidiaries. During fiscal year 2002, no executive officer of the Company
served as a director or member of the compensation committee (or other board
committee performing equivalent functions, or in the absence of such committee,
the entire board of directors) of another entity, one of whose executive
officers served as a member of the Human Resources and Compensation Committee,
or as a director of the Company.
Comparative Stock Performance
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total return on the AMEX Composite Index, a new peer group and an old peer group
over the same period (assuming the investment of $100 in the Company's Common
Stock, the AMEX Composite Index and the peer group on December 31, 1997, and
reinvestment of all dividends). The new peer group consists of Connetics Corp.,
Bradley Pharmaceutical Inc., ProCyte Corp., Allergan Inc., Lectec Corp. and Nu
Skin Enterprises, Inc. The old peer group consisted of AP Pharmaceutical
(formerly Advanced Polymer Systems, Inc.) and Imagistics International Inc. The
Company's Common Stock was suspended from trading on the American Stock Exchange
from March 31, 1998 to September 7, 1998 due to
21
delays in filing periodic reports under the Securities Exchange Act of 1934, as
amended, and resumed trading on September 8, 1998.
22
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG IGI, INC, THE AMEX COMPOSITE INDEX, A NEW PEER GROUP AND AN OLD
PEER GROUP
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG IGI, INC., THE AMEX COMPOSITE INDEX,
A NEW PEER GROUP AND AN OLD PEER GROUP
[GRAPH]
IGI INC
Cumulative Total Return
-----------------------------------------------------
12/97 12/98 12/99 12/00 12/01 12/02
IGI, INC. 100.00 48.44 48.45 15.63 15.00 13.00
AMEX COMPOSITE 100.00 99.99 132.80 126.49 119.31 100.66
NEW PEER GROUP 100.00 186.60 269.66 495.85 408.22 324.57
OLD PEER GROUP 100.00 81.13 51.89 35.85 42.26 58.27
* $100 invested on 12/31/97 in stock or index-including reinvestment of
dividends Fiscal year ending December 31.
23
PROPOSAL 2 - RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Board of Directors has selected KPMG LLP as auditors of the Company for
the fiscal year ending December 31, 2003, subject to ratification by
stockholders at the Meeting. If this proposal is not approved at the Meeting,
the Board of Directors will reconsider this selection. A representative of KPMG
LLP is expected to be present at the Meeting to respond to appropriate
questions, and to make a statement if he or she so desires.
Audit Fees
During fiscal years 2001 and 2002, KPMG LLP not only acted as the
independent auditors for the Company (work related to auditing the annual
financial statements for those fiscal year and reviewing the financial
statements included in the Company's Forms 10-Q but also rendered other audit
related and non-audit services falling in the exempted category of "tax
services." The aggregate amount the Company was billed by KPMG LLP as fees for
audit services rendered for the 2002 quarterly reviews and audit of the
Company's annual financial statements for 2002 was $102,000 plus expenses.
Financial Information Systems Design and Implementation Fees
KPMG LLP did not render any professional services to the Company in
connection with financial information systems design and implementation during
2002, therefore the Company was not billed for any services of that type.
All Other Fees
In addition to the services described above under the caption "Audit Fees",
KPMG LLP rendered other audit related services to the Company during 2002 with
respect to the Proxy statement for the sale of the Companion Pet Products
division and the closing balance sheet audit of the Pet Division. KPMG LLP
billed the Company $24,000 and $30,100, respectively for such professional
services rendered to the Company during 2002.
During 2002, KPMG LLP also provided the Company with non-audit services
falling under the exempt category of "tax services." The Company was billed by
KPMG LLP for a total amount of $4,120 for the tax related services rendered
during 2002.
Audit Committee Consideration of These Fees
The Company's Audit Committee has considered whether the provision of the
services covered under the categories of "Financial Information Systems Design
and Implementation Fees" and "All Other Fees" is compatible with maintaining the
independence of KPMG LLP.
24
Board Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITOR OF THE COMPANY FOR THE FISCAL
YEAR ENDING DECEMBER 31, 2003.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Any proposal that a stockholder intends to present at the 2004 Annual
Meeting of Stockholders must be submitted to the Secretary of the Company at its
offices, 105 Lincoln Avenue, Buena, New Jersey 08310, no later than December 29,
2003, in order to be considered for inclusion in the Proxy Statement relating to
that meeting.
If a stockholder of the Company wishes to present a proposal before the
2004 Annual Meeting and the Company has not received notice of such matter prior
to March 12, 2004, the Company shall have discretionary authority to vote on
such matter, if the Company includes a specific statement in the proxy statement
or form of proxy to the effect that it has not received such notice in a timely
fashion.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented
for consideration at the Meeting other than that described above. However, if
any other business should come before the Meeting, it is the intention of the
persons named in the enclosed Proxy to vote, or otherwise act, in accordance
with their best judgment on such matters.
The Company will bear the costs of soliciting proxies. In addition to
solicitations by mail, the Company's directors, officers and regular employees
may, without additional remuneration, solicit proxies by telephone, telegraph,
facsimile and personal interviews. The Company will also request brokerage
houses, custodians, nominees and fiduciaries to forward copies of the proxy
material to those persons for whom they hold shares and request instructions for
voting the Proxies. The Company will reimburse such brokerage houses and other
persons for their reasonable expenses in connection with this distribution.
25
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING. WHETHER
OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS APPRECIATED.
STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY EVEN THOUGH
THEY HAVE SENT IN THEIR PROXIES.
By Order of the Board of Directors,
John F. Ambrose,
President & CEO
April 16, 2003
26
ANNUAL MEETING OF STOCKHOLDERS OF
IGI, INC.
MAY 20, 2003
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
- ------- Please detach and mail in the envelope provided. -------
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS
AND "FOR" PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [x]
- --------------------------------------------------------------------------------
1. ELECTION OF DIRECTORS
NOMINEES
[_] FOR ALL NOMINEES ( ) Terrence O'Donnell
( ) Constantine L. Hampers, M.D
[_] WITHHOLD AUTHORITY ( ) Frank Gerardi
FOR ALL NOMINEES ( ) Stephen J. Morris
( ) Donald W. Joseph
[_] FOR ALL EXCEPT ( ) Earl R. Lewis
(See instructions below) ( ) John F. Ambrose
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you
wish to withhold, as shown here:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To change the address on your account, please check the
box at right and indicate your new address in the address
space above. Please note that changes to the registered [_]
name(s) on the account may not be submitted via this method.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. TO RATIFY THE APPOINTMENT OF KPMG LLP AS THE [_] [_] [_]
COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 2003.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES LISTED IN PROPOSAL 1
AND A VOTE "FOR" PROPOSAL 2.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN WITH RESPECT TO ANY PROPOSAL, THIS PROXY
WILL BE VOTED FOR SUCH PROPOSAL.
PLEASE VOTE, DATE, AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE
Signature of Stockholder_____________________________________ Date:____________
Signature of Stockholder_____________________________________ Date:____________
Note: This proxy must be signed exactly as the name appears hereon. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such.
If signer is a partnership, please sign in partnership name by
authorized person.
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IGI, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, having received notice of the meeting and the Proxy
Statement therefore, and revoking all prior proxies, hereby appoint(s) John F.
Ambrose and Domenic N. Golato, and each of them, attorneys or attorney of the
undersigned (with full power of substitution in them and each of them) for and
in the name(s) of the undersigned to attend the Annual Meeting of Stockholders
of IGI, Inc. (the "Company") to be held on Tuesday, May 20, 2003 at 12:00 p.m.
at the Four Points Sheraton Hotel at the Philadelphia Airport, 4101 Island
Avenue, Philadelphia, Pennsylvania, and at any adjourned sessions thereof, and
there to vote and act upon the following matters in respect of all shares of
stock of the Company which the undersigned will be entitled to vote or act upon,
with all the powers the undersigned would possess if personally present.
(Continued and to be signed on the reverse side)
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COMMENTS:
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