SCHEDULE 14A INFORMATION
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 Section 240.14a-11(c) or Section 240.14a-12
MGI PHARMA, 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:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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[_] 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
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Notes:
[LOGO]
MGI PHARMA, INC.
6300 West Old Shakopee Road
Suite 110
Bloomington, Minnesota 55438-2318
________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 9, 2000
TO THE SHAREHOLDERS OF MGI PHARMA, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of MGI
PHARMA, INC. ("MGI" or the "Company") will be held on Tuesday, May 9, 2000, at
the Hilton Towers, 1001 Marquette Avenue, Minneapolis, Minnesota, at 3:30 p.m.,
Central time, for the following purposes:
1. To elect a Board of eight directors to serve for the ensuing year and
until their successors are elected;
2. To amend the Company's 1997 Stock Incentive Plan to increase the
number of shares available for awards granted under the Plan by
1,500,000 shares;
3. To ratify the appointment of KPMG LLP as independent auditors for the
Company for the fiscal year ending December 31, 2000; and
4. To consider and act upon any other matters that may properly come
before the meeting or any adjournment thereof.
Only holders of record of MGI Common Stock at the close of business on
March 14, 2000 will be entitled to receive notice of and to vote at the meeting
or any adjournment thereof.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO
BE PERSONALLY PRESENT AT THE MEETING, HOWEVER, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU LATER
DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS EXERCISED.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ William C. Brown
William C. Brown
Secretary
March 30, 2000
[LOGO]
MGI PHARMA, INC.
6300 West Old Shakopee Road
Suite 110
Bloomington, Minnesota 55438-2318
________________________________
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 9, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of MGI PHARMA, INC. ("MGI" or the "Company")
for use at the annual meeting of shareholders (the "Annual Meeting") to be held
on Tuesday, May 9, 2000, at the Hilton Towers, 1001 Marquette Avenue,
Minneapolis, Minnesota, at 3:30 p.m., Central time, and at any adjournment
thereof, for the purposes set forth in the Notice of Annual Meeting of
Shareholders. This Proxy Statement and the form of proxy enclosed are being
mailed to shareholders commencing on or about March 31, 2000. A copy of the
Company's Annual Report to Shareholders for the year ended December 31, 1999 is
being furnished to each shareholder with this Proxy Statement.
All holders of the Company's Common Stock whose names appear of record on
the Company's books at the close of business on March 14, 2000 will be entitled
to vote at the Annual Meeting. As of that date, a total of 15,381,092 shares of
such Common Stock were outstanding, each share being entitled to one vote. There
is no cumulative voting. The affirmative vote of a majority of the shares of
Common Stock present and entitled to vote at the Annual Meeting is necessary to
elect the nominees for director named in the Proxy Statement and to amend the
Company's 1997 Stock Incentive Plan. Shares of Common Stock represented by
proxies in the form solicited will be voted in the manner directed by a
shareholder. If no direction is given, the proxy will be voted for the election
of the nominees for director named in this Proxy Statement, for the amendment of
the Company's 1997 Stock Incentive Plan and for the ratification of the
appointment of KPMG LLP ("KPMG") as the Company's independent auditors. If a
shareholder abstains (or indicates a "withhold vote for" as to directors) from
voting as to any matter, then the shares held by such shareholder shall be
deemed present at the Annual Meeting for purposes of determining a quorum and
for purposes of calculating the vote with respect to such matter, but shall not
be deemed to have been voted in favor of such matter. If a broker returns a
"non-vote" proxy, indicating a lack of authority to vote on such matter, then
the shares covered by such non-vote shall be deemed present at the Annual
Meeting for purposes of determining a quorum but shall not be deemed to be
represented at the Annual Meeting for purposes of calculating the vote with
respect to such matter.
So far as the management of the Company is aware, no matters other than
those described in this Proxy Statement will be acted upon at the Annual
Meeting. In the event that any other matters properly come before the Annual
Meeting calling for a vote of shareholders, the persons named as proxies in the
enclosed form of proxy will vote in accordance with their best judgment on such
other matters. A proxy may be revoked at any time before being exercised, by
delivery to the Secretary of the Company of a written notice of termination of
the proxy's authority or a duly executed proxy bearing a later date.
Expenses in connection with the solicitation of proxies will be paid by the
Company. Proxies are being solicited primarily by mail, although employees of
the Company (including officers) who will receive no extra compensation for
their services may solicit proxies by telephone, telegraph, facsimile
transmission or in person. In addition, the Company has retained Georgeson &
Company, Inc. to assist in the solicitation of proxies, and has agreed to pay
such firm approximately $6,500, plus reasonable expenses incurred, for its
services.
ELECTION OF DIRECTORS
The Company's Restated Articles of Incorporation provide that the Board of
Directors shall consist of no fewer than three members and require that a
majority of the members shall be persons who are not employed by, or rendering
consulting or professional services for compensation to, the Company, or any
corporation controlled by, controlling or under common control with the Company
(or related to or directly or indirectly controlled by any of the foregoing).
For such purposes, "control" is defined as direct or indirect beneficial
ownership of more than 25% of a corporation's voting stock.
Eight directors have been nominated for election to the Company's Board of
Directors at the Annual Meeting to hold office until the next annual meeting of
shareholders or until their successors are duly elected and qualified (except in
the case of earlier death, resignation or removal).
The Board of Directors recommends that you vote FOR each of the nominees
named below. The affirmative vote of a majority of the shares of Common Stock
present and entitled to vote at the Annual Meeting is necessary to elect the
nominees for director named below. It is intended that the persons named as
proxies in the enclosed form of proxy will vote the proxies received by them for
the election as directors of the nominees named below. Each of the nominees is
currently serving on the Board of Directors. Each nominee has indicated a
willingness to serve, but in case any nominee is not a candidate at the Annual
Meeting, for reasons not now known to the Company, the persons named as proxies
in the enclosed form of proxy may vote for a substitute nominee in their
discretion. Information regarding the nominees is set forth below:
-2-
Principal occupation and
business experience
Name Age Director since for past five years
- ------------------------ --- -------------- -------------------------------
Charles N. Blitzer 59 April 1996 President and Chief Executive
Officer of MGI; prior to joining
the Company in April 1996,
President and Chief Executive
Officer of Oncologix, Inc.
(pharmaceuticals) since July
1992, and a variety of
management positions with Marion
Merrell Dow Pharmaceuticals,
Inc. and Marion Laboratories,
Inc. (pharmaceuticals) since
1977.
Andrew J. Ferrara 60 May 1998 President and Chief Executive
Officer, Boston Healthcare
(healthcare consulting firm);
prior to founding Boston
Healthcare in 1993, founded
Molecular Simulations, Inc.
(f/k/a Polygen Corporation)
(computer software company) in
1984.
Joseph S. Frelinghuysen 58 November 1997 President of J. S. Frelinghuysen
& Co. (private investment firm);
prior to founding J. S.
Frelinghuysen & Co. in 1989,
Managing Director in investment
banking at The First Boston
Corporation (investment
bank).(1)
Michael E. Hanson 52 May 1998 President of Internal Medicine
Business Unit, Eli Lilly &
Company (life sciences) from
July 1994 until retirement in
December 1997; held a variety of
management and marketing
positions at Eli Lilly & Company
since 1973.
Hugh E. Miller 64 October 1992 Retired corporate executive;
prior to retirement in December
1990, Vice Chairman and Director
of ICI Americas Inc. (chemicals,
pharmaceuticals, agricultural,
consumer and specialty
products).(2)
Timothy G. Rothwell 49 November 1996 Executive Vice President,
President of Pharmaceutical
Operations, Pharmacia & Upjohn,
Inc. (pharmaceuticals); prior to
joining Pharmacia & Upjohn in
January 1998, President of
Rhone-Poulenc Rorer Inc.
(worldwide pharmaceuticals) and
Chief Executive Officer and
President of the U.S.
pharmaceuticals business of
Sandoz Pharmaceuticals.
-3-
Principal occupation and
business experience
Name Age Director since for past five years
- ------------------------ --- -------------- -------------------------------
Lee J. Schroeder 71 May 1989 President and Director, Lee
Schroeder & Associates, Inc.
(pharmaceutical industry
consultants); prior to
retirement in April 1985,
President and Chief Operating
Officer of Foxmeyer Drug Co.
(wholesale drug company) and
Executive Vice President of
Sandoz, Inc.
(pharmaceuticals).(3)
Arthur L. Weaver, M.D. 63 July 1998 Practicing Rheumatologist and
Director of Clinical Research at
the Arthritis Center of Nebraska
since 1988, and medical director
of Lincoln Mutual Life Insurance
Company; clinical professor in
the Department of Medicine,
University of Nebraska Medical
Center since 1995.
- -----------------------------
(1) Mr. Frelinghuysen is also a director of Big V Supermarkets, Inc.
(2) Mr. Miller is also a director of Wilmington Trust Co., Inc.
(3) Mr. Schroeder is also a director of Ascent Pediatrics, Inc., Interneuron
Pharmaceuticals, Inc. and Celgene Corporation.
During 1999, the Board of Directors had the following committees: (i) an
audit committee consisting of Messrs. Frelinghuysen, Ferrara, and, beginning in
March 1999, Michael E. Hanson; (ii) a compensation committee consisting of
Messrs. Miller, Schroeder and Weaver; and (iii) a nominating committee
consisting of Messrs. Miller, Schroeder and Blitzer. The audit committee reviews
and makes recommendations to the Board of Directors with respect to designated
financial and accounting matters. The compensation committee reviews and makes
certain determinations with respect to designated matters concerning
remuneration of employees and officers. The nominating committee considers and
makes recommendations to the Board with respect to the number and qualifications
of the members of the Board of Directors and the persons to be nominated for
election to the Board of Directors. During 1999, the audit committee held two
meetings and the compensation committee held two meetings. The nominating
committee carries out its duties without holding any formal meetings. In
evaluating persons to be nominated for election or appointment to the Board of
Directors, the members of the nominating committee meet on an informal basis to
identify and present such persons for consideration by the Board of Directors.
Shareholder recommendations of potential nominees to the Board of Directors are
welcomed at any time and should be made in writing, accompanied by pertinent
information regarding nominee background and experience, to the Secretary of the
Company.
During 1999, the Board of Directors held eight meetings. Each incumbent
director attended all of the meetings of the Board of Directors and committees
on which he served that were held during the period he was a member of the Board
of Directors or such committees, except that Mr. Rothwell attended four meetings
of the Board of Directors in 1999. The Company's Board of Directors and the
committees thereof also act from time to time by written action in lieu of
meetings.
-4-
Compensation payable to nonemployee directors for service on the Board of
Directors and committees thereof for the next term of office is established each
year by the Board of Directors. During the current term, each nonemployee
director receives an annual retainer of $10,000, payable quarterly, plus $2,000
for each meeting of the Board attended in person, $1,000 for each meeting of the
Board attended by telephone, with the Chairman receiving an additional $500 per
meeting attended in person and $250 for attending by telephonic connection, also
payable quarterly. Additionally, each director receives $250 for each committee
meeting attended. The nonemployee directors also are able to elect prior to July
1 each year to receive shares of Common Stock in lieu of their annual retainer.
These shares would be issued on the last business day of each quarter pursuant
to awards under the 1997 Stock Incentive Plan and would be valued as of the
close of business on the date of issuance.
In addition to the fees described above, each new nonemployee director
receives an option to purchase 10,000 shares of Common Stock upon such
director's initial election or appointment to the Board of Directors. Each
nonemployee director also receives an option to purchase 7,500 shares of Common
Stock on the day of such director's reelection to the Board of Directors. The
exercise price of all such options granted is the fair market value of the
Common Stock on the date of grant. Messrs. Ferrera, Frelinghuysen, Hanson,
Miller, Rothwell, Schroeder and Weaver each received options to purchase 7,500
shares of Common Stock at an exercise price of $11.6875 in May 1999.
-5-
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company, who serve at the pleasure of the
Board of Directors, are as follows:
Principal occupation and
business experience
Name Age for past five years
- ------------------------ --- -----------------------------------------------
Charles N. Blitzer 59 President and Chief Executive Officer of MGI;
prior to joining the Company in April 1996,
President and Chief Executive Officer of
Oncologix, Inc. (pharmaceuticals) since July
1992, and a variety of management positions with
Marion Merrell Dow Pharmaceuticals, Inc. and
Marion Laboratories, Inc. (pharmaceuticals)
since 1977.
Leon O. Moulder, Jr. 42 Executive Vice President since September 14,
1999; prior to joining the Company in September
1999, Vice President of Business Development and
Commercial Affairs at Eligix, Inc.
(pharmaceuticals) since November 1997 and a
variety of sales, sales management, marketing
and business development positions at Hoechst
Marion Roussel, Inc., Marion Merrell Dow
Pharmaceuticals, Inc. and Marion Laboratories,
Inc. (pharmaceuticals) since September 1981.
William C. Brown 44 Chief Financial Officer and Secretary since
September 14, 1999; formerly Vice President,
Finance since November 1997, Director, Finance
and Planning since 1996 and Controller from 1986
to 1996.
-6-
EXECUTIVE COMPENSATION
Report of Compensation Committee on Executive Compensation
Overview
The Board of Directors has delegated to the compensation committee (the
"Committee") the authority and responsibility to establish and make certain
decisions with respect to the compensation of the Company's executive officers,
as well as various aspects of other compensation and fringe benefit matters
applicable to all of the Company's employees, including executive officers. In
addition, the Committee administers the Company's stock option and stock based
incentive programs. The Committee is composed entirely of independent, outside
directors of the Company.
Through its executive compensation policies, the Company seeks to attract
and retain highly qualified executives who will contribute positively to the
Company's continued progress. To achieve these goals, the Company emphasizes
compensation arrangements that are tied to Company performance and which provide
key employees the opportunity to acquire a significant ownership interest in the
Company primarily through stock options and stock purchases. The Committee also
believes that the availability of certain benefits is important to its goal of
retaining high quality leadership and motivating executive performance
consistent with shareholder interest. Accordingly, the Company makes available a
range of benefit programs to its employees (including its executive officers),
including life and disability insurance, a 401(k) savings plan, a defined
contribution retirement plan, an employee stock purchase plan and other benefit
programs.
Process
In preparation for its annual compensation decisions, the Committee reviews
the progress the executive officers have made in leading the Company towards
both short- and long-term goals. In order to match the executive officers' goals
with shareholder goals, the Committee's general policy has been to hold base
salary adjustments to increments that reflect changes in the cost-of-living
(once the officer has reached a reasonable level of compensation as determined
by the Committee), to reward past performance with cash bonuses and stock option
grants and also to use stock option grants as a means of motivating executive
officers to perform at the highest possible level in the future. The Committee
intends to make the total compensation package for executive officers
competitive with the marketplace, with emphasis on compensation in the form of
equity ownership, the value of which is contingent on the Company's longer-term
market performance.
In 1999, the Company retained an independent consulting firm, Frederick W.
Cook & Co., Inc. (the "Compensation Consultant"), to review and make
recommendations regarding the Company's compensation practices with respect to
its executive officers. Based on original work done for the Company in 1993, and
updated recommendations in 1998, the Compensation Consultant provided updated
recommendations regarding the Company's compensation practices with respect to
its executive officers. As part of its work in 1998, as updated in 1999, the
Compensation Consultant compared the Company's compensation practices to a peer
group of
-7-
companies, which included sixteen companies that were similar to the Company in
market capitalization, business characteristics and, in some cases, business
strategy. In making determinations with respect to 1999 compensation for the
Chief Financial Officer and the Executive Vice President (both new positions in
1999), and the 1999 bonuses, 2000 base salaries and stock options for all
executive officers, the compensation decisions were based in part on the
Compensation Consultant's recommendations.
In making compensation decisions regarding the Company's executive
officers, the Committee first meets with the Company's Chief Executive Officer,
who presents his recommendations with respect to compensation for the other
executive officers. The Committee, with the Chief Executive Officer not present,
then reviews his recommendations related to the other executive officers and
makes its own independent determination with respect to each executive officer,
as well as with respect to the Chief Executive Officer.
Executive Compensation Program
The components of the Company's executive compensation program which are
subject to the discretion of the Committee on an individual basis include (a)
base salaries, (b) stock incentive compensation and (c) performance-based,
incentive bonuses. The Committee makes determinations with respect to these
components based on a subjective evaluation of each officer, after consideration
of both Company and individual performance objectives.
At its meeting in January 1999, the Committee set 1999 base salaries for
and made stock option grants to the executive officers. Mr. Adam, the Company's
Chief Operating Officer, was awarded a base salary increase of $15,000 to
$195,000. Mr. Adam retired from his position of Chief Operating Officer as of
August 31, 1999.
In January 1999, Mr. Brown was awarded a salary increase of $8,500 to
$133,500, representing an increase of 6.8%.
In January 1999, Mr. Adam was awarded options to purchase 35,000 shares of
Company Common Stock, which represented an increase of 10,000 shares from 1998.
The options vest over a four-year period and are exercisable at the fair market
value of the Common Stock on the date of grant, as set forth in the table
entitled "Option Grants During Year Ended December 31, 1999," which follows this
report.
In September 1999, Mr. Brown was promoted to an executive officer position
as Chief Financial Officer and Secretary. He was awarded a salary increase of
$36,500 to $170,000, representing an increase of 27.3%.
In September 1999, Mr. Leon O. Moulder, Jr. joined the Company as Executive
Vice President. Mr. Moulder received an annualized base salary of $205,000, and
a $30,000 signing bonus.
In September 1999, Mr. Brown was awarded options to purchase an aggregate
of 15,000 shares of Company Common Stock. Mr. Moulder was awarded options to
purchase an aggregate of 50,000 shares of Company Common Stock. The options vest
over a four-year period and are
-8-
exercisable at the fair market value of the Common Stock on the date of grant,
as set forth in the table entitled "Option Grants During Year Ended December 31,
1999," which follows this report. The size of the option grants was also based
on the Committee's subjective judgment that these amounts were appropriate to
retain these highly qualified officers and to provide an incentive for continued
high quality performance.
Cash incentive bonuses for 1999 were awarded in January 2000. Mr. Brown was
awarded a cash bonus of $42,000 for 1999, equal to 24.7% of his 1999 base
salary. Mr. Moulder was awarded a guaranteed cash bonus of $30,000 for 1999. The
bonus compensation program for executive officers in 1999 was a continuation of
the program adopted by the Committee in 1993. Under the bonus program, base cash
compensation coupled with up to a 30% cash bonus was considered by the Committee
to be a fair payment for good performance by the Company's executive officers,
other than the Chief Executive Officer. This determination was based primarily
on a review of compensation data from comparable companies and the Committee's
conclusion that a 30% bonus would place the compensation of the executive
officers on a par with the middle tier of such comparable companies. The
Compensation Consultant's recommendations in the last quarter of 1998 also
confirmed the conclusions of the Committee that the bonus program was
appropriate for the Company's executive officers, other than the Chief Executive
Officer. At its meeting in January 2000, the Committee awarded cash bonuses to
the executive officers, other than the Chief Executive Officer, for 2000 in the
range of 0% to 110% of 1999 base salaries. In awarding the 1999 cash bonuses,
the Committee considered the individual accomplishments of the executive
officers and of the operating groups reporting to each executive officer during
1999.
Compensation of the Chief Executive Officer
In 1999, Mr. Blitzer received a base salary increase of $13,000 to
$325,000, and an option to purchase 65,000 shares of the Company's Common Stock.
The increase in his base salary was intended to approximate the increase in the
cost of living in 1999, plus a base salary adjustment based on market
conditions. The size of the option grant was based on the Committee's subjective
judgment that this amount was appropriate to retain Mr. Blitzer and to provide
an incentive for continued high performance. This option vests over a four year
period and is exercisable at a price equal to the fair market value of Company
Common Stock on the date of grant.
In January 2000, the Committee awarded Mr. Blitzer a cash bonus for 1999 of
$135,000 or 41.5% of his 1999 base salary. This represented a continuation of
the bonus compensation program adopted by the Committee in 1993. Based partially
on the Compensation Consultant's recommendations in 1998, a combination of 1999
base salary and up to a 45% bonus were considered to be a fair payment for good
performance by the Chief Executive Officer. In awarding Mr. Blitzer's 1999 cash
bonus, the Committee considered the continued strong growth of Salagen(R) Tablet
sales, completion of co-promotional agreements for three rheumatology products
with Pharmacia & Upjohn Company and Connetics Corporation, the advance of
irofulven well into phase II studies, record net income of $4.7 million, and the
strengthening of talent on the executive team during 1999.
-9-
Section 162(m) of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally limits the corporate deduction for compensation paid to
executive officers named in this Proxy Statement to one million dollars, unless
the compensation is performance-based. The Committee has considered the
potential long-term impact of this tax code provision on the Company and has
concluded that it is in the best interests of the Company and its shareholders
to attempt to qualify the Company's long-term incentives as performance-based
compensation within the meaning of the Code and thereby preserve the full
deductibility of long-term incentive payments to the extent they might ever be
impacted by this legislation. The Company has included provisions in its 1994
Stock Incentive Plan and the 1997 Stock Incentive Plan intended to preserve the
full deductibility of certain performance-based compensation under the Code.
HUGH E. MILLER,
LEE J. SCHROEDER and
ARTHUR L. WEAVER, M.D.
The Members of the Compensation Committee
-10-
Summary Compensation Table
The following table sets forth the cash and noncash compensation awarded to
or earned by the Chief Executive Officer and the other named executive officers
of the Company.
Annual Long Term
Compensation Compensation
------------------------- -----------------
Awards:
Securities
Underlying All Other
Name and Principal Position Year Salary Bonus Options Compensation (1)
----------------------------- ---- --------- --------- ----------------- --------------------
Charles N. Blitzer 1999 $ 325,000 $135,000 65,000 $93,599
President and Chief Executive 1998 312,000 120,000 50,000 92,147
Officer 1997 300,000 100,000 125,000 41,762
Leon O. Moulder, Jr.(2) 1999 $ 54,404 $ 60,000(3) 50,000 $19,000
Executive Vice President
William C. Brown(4) 1999 $ 144,146 $ 42,000 25,000 $22,699
Chief Financial Officer and 1998 125,000 28,200 10,000 19,461
Secretary 1997 112,360 14,000 10,000 17,730
James V. Adam (5) 1999 $ 195,000 $ 0 35,000 $16,838
Chief Operating Officer 1998 180,000 47,000 25,000 27,116
1997 157,000 35,000 22,000 23,216
- ----------------------------------
(1) These amounts represent the Company's contributions to the Company's
Retirement Savings Plan, MGI Funded Retirement Trust (formerly known as the
Money Purchase Retirement Plan) and split dollar insurance plan.
Company contributions under the Retirement Savings Plan are made in the
form of MGI Common Stock. The amounts included under this column
attributable to Company contributions to the Retirement Savings Plan
represent the fair market value of MGI Common Stock on the date of the
Company's contribution. For 1999, Company contributions were as follows:
Mr. Blitzer, $12,799; Mr. Moulder, $0; Mr. Brown, $12,799 and Mr. Adam,
$4,800.
Company contributions under the MGI Funded Retirement Trust (formerly known
as the Money Purchase Retirement Plan) are made annually following the end
of each calendar year. For 1999, Company contributions were as follows: Mr.
Blitzer, $8,659; Mr. Moulder, $0; Mr. Brown, $8,659; and Mr. Adam, $8,659.
The Company pays a portion of the premium on the split dollar life
insurance plan and proceeds payable under, or the cash surrender value of
such plan, are first payable to the Company up to the amount of premiums
paid by the Company. For 1999, Company payments were as follows: Mr.
Blitzer, $72,141; Mr. Moulder, $19,000; Mr. Brown, $1,241; and Mr. Adam,
$3,379.
(2) Mr. Moulder joined the Company as Executive Vice President in September
1999. His base salary, on an annualized basis, is $205,000.
-11-
(3) Bonuses awarded to Mr. Moulder included a $30,000 signing bonus and a
$30,000 guaranteed performance bonus.
(4) Mr. Brown was promoted to Chief Financial Officer and Secretary of the
Company in September 1999, at an annualized salary of $170,000.
(5) James V. Adam retired from his position of Chief Operating Officer as of
August 31, 1999.
None of the Company's executive officers currently has a written employment
agreement. Each of Mr. Blitzer, Mr. Moulder and Mr. Brown does, however, have a
termination agreement with the Company providing that, following a "Change in
Control" (as defined) of the Company, if such officer is terminated by the
Company without "Cause" (as defined) or leaves for "Good Reason" (as defined),
then (i) the officer will be entitled to receive a lump sum cash payment equal
to 24 times such officer's monthly base salary (as in effect at the time of the
Change in Control or the termination, whichever is higher), which as of this
date, would amount to $700,000 for Mr. Blitzer, $410,000 for Mr. Moulder, and
$340,000 for Mr. Brown, and payment of legal fees and expenses relating to the
termination, and (ii) any noncompetition arrangement between such officer and
the Company will terminate. The termination agreements provide that if the
officer receives payments under the agreement that would subject the officer to
any federal excise tax due under Sections 280G and 4999 of the Code, then the
officer will also receive a cash "gross-up" payment so that the officer will be
in the same net after-tax position that the officer would have been in had such
excise tax not been applied. Sections 280G and 4999 of the Code provide that if
"parachute payments" (compensatory payments contingent on a change in control)
made to a covered individual equal or exceed three times such individual's "base
amount" (average annual compensation over the five taxable years preceding the
taxable year in which the change in control occurs), the excess of such
parachute payments over such individual's base amount will be subject to a 20%
excise tax and will not be deductible by the Company. Under the termination
agreements, "Change in Control" is defined to include a change in control of the
type required to be disclosed under Securities and Exchange Commission proxy
rules, an acquisition by a person or group of 35% of the outstanding voting
stock of the Company, a proxy fight or contested election which results in
Continuing Directors (as defined) not constituting a majority of the Board of
Directors or another event which the majority of the Continuing Directors
determines to be a change in control; "Cause" is defined as willful and
continued failure to perform duties and obligations or willful misconduct
materially injurious to the Company; and "Good Reason" is defined to include a
change in the officer's responsibility or status, a reduction in salary or
benefits or a mandatory relocation.
In addition to his Termination Agreement, Mr. Moulder is also covered by a
Severance Agreement during his first two years of employment with MGI. If his
employment is terminated by the Company for any reason other than for cause
during his first two years of employment, he will be provided with 24
installments of severance pay at his normal semi-monthly rate of pay. Also, if
there is any material detrimental change by the Company in his pay, position or
status, or benefits, he has the right to notify the Company, give MGI 30 days to
cure, and if not cured, he may leave the Company for Good Reason and qualify for
the above severance benefit. This severance benefit will not pay in addition to
benefits under the Termination Agreement. Instead, it covers circumstances not
included in the Termination Agreement.
-12-
Stock Options
The following table summarizes stock option grants made by the Company to
each of its executive officers named in the Summary Compensation Table above as
a part of such person's 1999 base compensation.
Option Grants During Year Ended December 31, 1999
Potential Realizable
Individual Grants Value at Assumed
-------------------------------------------------------------- Annual Rates of
Number of % of Total Stock Price
Securities Options Granted Exercise Appreciation for
Underlying to Employees in or Base Option Term (3)
Options Fiscal Year Price) Expiration -------------------------
Name Granted (1) 1999 ($/share) Date (2) 5% 10%
- ------------------------- --------------- ------------------ -------------------------- ---------- -------------
Charles N. Blitzer 65,000 13.04 $11.875 1/19/09 $485,428 $ 1,230,170
Leon O. Moulder, Jr. 50,000 10.03 $12.00 9/27/09 $377,337 $ 956,245
William C. Brown 10,000 2.00 $11.875 1/19/09 $ 74,681 $ 189,257
15,000 3.01 $13.25 9/14/09 $124,993 $ 316,756
------ ----- -------- -----------
25,000 5.01 $199,674 $ 506,013
James V. Adam(4) 35,000 7.02 $11.875 1/19/09 $261,384 $ 662,399
- -------------------------------
(1) All options were granted with an exercise price equal to the closing price
of the Common Stock on the Nasdaq National Market on the date of grant. All
options granted to executive officers were granted in tandem with limited
stock appreciation rights, (each a "Limited Right"). Each Limited Right is
exercisable for cash in lieu of such associated options only upon the
occurrence of certain changes in control. Upon the occurrence of certain
defined accelerating events, these options would become immediately
exercisable.
(2) The options which expire on January 19, 2009 are exercisable as to 25% of
the underlying option shares as of January 19, 2000, 50% of such option
shares as of January 19, 2001, 75% of such option shares as of January 19,
2002 and 100% of such option shares as of January 19, 2003.
(3) These amounts represent certain assumed annual rates of appreciation only.
Potential realizable value is calculated assuming 5% and 10% appreciation
in the price of the Common Stock from the date of grant. Actual gains, if
any, on stock option exercises are dependent on the future performance of
the Common Stock, and overall stock market conditions. The amounts
reflected in this table may not necessarily be achieved. Assuming
14,979,640 shares of Common Stock are outstanding, a beginning stock price
of $11.875 per share and 5% and 10% annual appreciation in the price of the
Common Stock over 10 years, the aggregate market value of the Company's
outstanding Common Stock would increase from $177,883,225 to $289,753,029,
assuming 5% annual appreciation, and to $461,383,274, assuming 10% annual
appreciation.
(4) James V. Adam retired from his position of Chief Operating Officer as of
August 31, 1999.
-13-
The following table summarizes stock option exercises during the year ended
December 31, 1999 by the executive officers named in the Summary Compensation
Table above, and the values of the options held by such persons at December 31,
1999.
Aggregated Option Exercises During Year Ended December 31, 1999
and Value of Options Held at December 31, 1999
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options Held at December Held at December 31,
Acquired on Value 31, 1999 (Exercisable/ 1999 (Exercisable/
Name Exercise Realized (1) Unexercisable) Unexercisable) (1)
- -------------------- ----------- ------------ ------------------------ ---------------------
Charles N. Blitzer 0 0 225,000/165,000 $1,636,719/$762,656
Leon O. Moulder, Jr. 0 0 0/50,000 $0/$0
William C. Brown 0 0 48,790/39,685 $ 224,775/$115,245
James V. Adam(2) 44,236 $273,434 81,514/64,750 $ 417,328/$236,406
- --------------------------
(1) "Value" has been determined based upon the difference between the per share
option exercise price and the market value of the Common Stock at the date
of exercise or December 31, 1999.
(2) James V. Adam retired from his position of Chief Operating Officer as of
August 31, 1999.
-14-
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total shareholder return on MGI's
Common Stock with the cumulative total return on the Nasdaq National Market
(U.S. Companies) Index and on The Nasdaq Pharmaceutical Stock Index for the last
five fiscal years (assuming the investment of $100 in each on December 31, 1994
and the reinvestment of all dividends).
[LINE GRAPH]
Cumulative Total Return
------------------------------------------------
12/94 12/95 12/96 12/97 12/98 12/99
----- ----- ----- ----- ----- -----
MGI PHARMA, INC. 100.00 71.00 68.00 61.00 156.00 191.01
NASDAQ STOCK MARKET (U.S.) 100.00 141.33 173.89 213.07 300.25 542.43
NASDAQ PHARMACEUTICALS 100.00 183.41 183.98 189.98 241.68 451.62
-15-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of March 14, 2000, certain information
with respect to all shareholders known to the Company to have been beneficial
owners of more than five percent of its Common Stock, and information with
respect to Common Stock beneficially owned by directors of the Company, the
executive officers of the Company named in the Summary Compensation Table above,
and all directors and executive officers as a group. Except as otherwise
indicated, the shareholders listed in the table have sole voting and investment
power with respect to the Common Stock owned by them.
Amount and Nature of Percent
Name of Beneficial Owners Beneficial Ownership of Class
------------------------------------------------ -------------------- --------
Avenir Corporation (1) 916,814 6.0%
1725 K Street, NW, Suite 410
Washington, D.C. 20006
Charles N. Blitzer (2) (3) 276,190 1.8%
Andrew J. Ferrara(2) 4,375 *
Joseph S. Frelinghuysen (2) (4) 83,625 *
Michael E. Hanson(2) 7,276 *
Hugh E. Miller (2) 45,875 *
Timothy G. Rothwell (2) 18,751 *
Lee J. Schroeder (2)(5) 44,073 *
Arthur L. Weaver, M.D.(2) 4,375 *
Leon O. Moulder, Jr. (2) (3) 0 *
William C. Brown (2) (3) 96,983 *
James V. Adam (2) (3)(6) 0 *
All directors and executive officers as a group 581,523 3.7%
(11 persons) (2) (3) (4) (5) (6)
--------------------------
*Less than 1%
(1) Disclosure is made in reliance upon a statement on Schedule 13G,
dated as of February 14, 2000, filed with the Securities and
Exchange Commission.
(2) Includes the following number of shares which could be acquired
within 60 days of March 14, 2000 through the exercise of stock
options: Mr. Blitzer, 270,542 shares; Mr. Ferrara, 4,375 shares;
Mr. Frelinghuysen, 8,125 shares; Mr. Hanson, 6,875 shares; Mr.
Miller, 41,875 shares; Mr. Rothwell, 18,751 shares; Mr.
Schroeder, 5,626 shares; Dr. Weaver, 4,375 shares; Mr. Moulder, 0
shares; Mr. Brown, 57,071 shares; Mr. Adam, 0 shares, and all
directors and executive officers, 417,615 shares.
(3) Includes the following number of shares beneficially owned as of
December 31, 1999 through the Company's Retirement Savings Plan:
Mr. Blitzer, 5,648 shares; Mr. Moulder, 0 shares; Mr. Brown,
9,676 shares; and Mr. Adam, 0 shares.
(4) Includes 5,000 shares owned by Mr. Frelinghuysen and held in
trust.
(5) Includes 12,696 shares owned by Mr. Schroeder's spouse and
disclaimed by Mr. Schroeder.
(6) James V. Adam retired from his position of Chief Operating
Officer as of August 31, 1999.
-16-
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and all persons who beneficially own more than
10 percent of the outstanding shares of the Company's Common Stock to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of such Common Stock. Directors, executive officers and
such beneficial owners are also required to furnish the Company with copies of
all Section 16(a) reports they file. To the Company's knowledge, based solely
upon 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
December 31, 1999, all Section 16(a) reporting requirements applicable to the
Company's directors, executive officers and such beneficial owners were complied
with.
PROPOSAL TO AMEND THE 1997 STOCK INCENTIVE PLAN
The Board of Directors has adopted, subject to shareholder approval, an
amendment to the Company's 1997 Stock Incentive Plan (the "Plan") to increase by
1,500,000 the number of shares of Common Stock available for issuance pursuant
to awards granted under the Plan. As of March 1, 2000, only 324,647 shares
remained available for grant under the Plan. The market value of a share of
Common Stock on March 1, 2000 was $38.875 per share.
The Board of Directors believes that stock options have been, and will
continue to be an important compensation element in attracting, motivating and
retaining key employees. The granting of incentive stock options to employees is
consistent with the Company's past practices, with practices in the industry,
and is a factor in promoting the long-term development of the Company. The Board
of Directors believes that the increase in authorized shares is necessary
because of the need to continue to make awards under the Plan to attract,
motivate and retain key employees.
Summary of the Plan
The Plan provides for the granting of (a) stock options, including
"incentive stock options" ("Incentive Stock Options") meeting the requirements
of Section 422 of the Code, and stock options that do not meet such requirements
("Nonqualified Stock Options"), (b) restricted stock and restricted stock units,
(c) performance awards, (d) dividend equivalents, (e) stock appreciation rights
("SARs") and (f) other stock-based awards. The Plan authorizes the issuance of
1,200,000 shares of the Company's Common Stock, plus any shares that are
represented by awards granted under the Company's 1994 Stock Incentive Plan, the
1984 Stock Option Plan and the 1982 Incentive Stock Option Plan (the "Prior
Plans") which are forfeited, expire or are canceled without delivery of shares
or which result in the forfeiture of shares back to the Company. As of March 1,
2000, an aggregate of 707,795 shares were subject to outstanding awards under
the Prior Plans. If the proposed amendment is approved by the shareholders, the
Company will have increased the number of reserved shares of Common Stock
issuable under the Plan by 1,500,000. The Plan is administered by a Committee of
the Board of Directors (the "Committee"). The Committee has the authority to
establish rules for the administration of the Plan; to select the key
individuals to whom awards are granted; to determine the types of awards to be
granted and the number of shares of Common Stock covered by such awards; and to
set the
-17-
terms and conditions of such awards. Awards may provide that upon the grant or
exercise thereof the holder will receive shares of Common Stock, cash or any
combination thereof, as the Committee shall determine.
In order to meet the requirements of Section 162(m) of the Code, the Plan
contains a limitation on the number of options that may be granted to any single
optionee in any three consecutive calendar years.
The exercise price per share under any stock option, the grant price of any
SAR, and the purchase price of any security which may be purchased under any
other stock-based award may not be less than 100% of the fair market value of
the Company's Common Stock on the date of the grant of such option, SAR or
stock-based award. Options must be exercised by payment in full of the exercise
price, either in cash or, at the discretion of the Committee, in whole or in
part by the tendering of shares of Common Stock or other consideration having a
fair market value on the date the option is exercised equal to the exercise
price.
The holder of an SAR is entitled to receive the excess of the fair market
value (calculated as of the exercise date or, if the Committee shall so
determine, as of any time during a specified period before or after the exercise
date) of a specified number of shares over the grant price of the SAR.
The holder of restricted stock may have all of the rights of a shareholder
of the Company, including the right to vote the shares subject to the restricted
stock award and to receive any dividends with respect thereto, or such rights
may be restricted. Restricted stock may not be transferred by the holder until
the restrictions established by the Committee lapse. Holders of restricted stock
units have the right, subject to any restrictions imposed by the Committee, to
receive shares of Common Stock (or a cash payment equal to the fair market value
of such shares) at some future date. Upon termination of the holder's employment
during the restriction period, restricted stock and restricted stock units shall
be forfeited, unless the Committee determines otherwise.
Any shares that are used by a Plan participant as full or partial payment
to the Company of the purchase price relating to an award, or in connection with
the satisfaction of tax obligations relating to an award in accordance with the
provisions relating to tax withholding under the Plan, will again be available
for the granting of awards under the Plan.
The Board of Directors may amend, alter or discontinue the Plan at any
time, provided that without such shareholder approval no such change shall be
made that (i) would violate any rules or regulations of the National Association
of Securities Dealers, Inc. or any securities exchange applicable to the
Company, or (ii) would cause the Company to be unable, under the Code, to grant
Incentive Stock Options under the Plan.
Federal Income Tax Consequences
The following is a summary of the principal federal income tax consequences
generally applicable to awards under the Plan. The grant of an option or SAR is
not expected to result in any taxable income for the recipient. The holder of an
Incentive Stock Option generally will
-18-
have no taxable income upon exercising the Incentive Stock Option (except that a
liability may arise pursuant to the alternative minimum tax), and the Company
will not be entitled to a tax deduction when an Incentive Stock Option is
exercised. Upon exercising a Nonqualified Stock Option, the optionee must
recognize ordinary income equal to the excess of the fair market value of the
shares of Common Stock acquired on the date of exercise over the exercise price,
and the Company will be entitled at that time to a tax deduction for the same
amount. Upon exercising an SAR, the amount of any cash received and the fair
market value on the exercise date of any shares of Common Stock received are
taxable to the recipient as ordinary income and deductible by the Company. The
tax consequence to an optionee upon a disposition of shares acquired through the
exercise of an option will depend on how long the shares have been held and upon
whether such shares were acquired by exercising an Incentive Stock Option or by
exercising a Nonqualified Stock Option or SAR. Generally, there will be no tax
consequence to the Company in connection with the disposition of shares acquired
under an option, except that the Company may be entitled to a tax deduction in
the case of a disposition of shares acquired under an Incentive Stock Option
before the applicable Incentive Stock Option holding periods set forth in the
Code have been satisfied.
With respect to other awards granted under the Plan that are payable in
cash or shares of Common Stock that are either transferable or not subject to
substantial risk of forfeiture, the holder of such an award must recognize
ordinary income equal to the excess of (a) the cash or the fair market value of
the shares of Common Stock received (determined as of the date of such receipt)
over (b) the amount (if any) paid for such shares of Common Stock by the holder
of the award, and the Company will be entitled at that time to a deduction for
the same amount. With respect to an award that is payable in shares of Common
Stock that are restricted as to transferability and subject to substantial risk
of forfeiture, unless a special election is made pursuant to the Code, the
holder of the award must recognize ordinary income equal to the excess of (i)
the fair market value of the shares of Common Stock received (determined as of
the first time the shares become transferable or not subject to substantial risk
of forfeiture, whichever occurs earlier) over (ii) the amount (if any) paid for
such shares of Common Stock by the holder, and the Company will be entitled at
that time to a tax deduction for the same amount.
Under the Plan, the Committee may permit participants receiving or
exercising awards, subject to the discretion of the Committee and upon such
terms and conditions as it may impose, to surrender shares of Common Stock
(either shares received upon the receipt or exercise of the award of shares
previously owned by the optionee) to the Company to satisfy federal and state
withholding tax obligations. In addition, the Committee may grant, subject to
its discretion and such rules as it may adopt, a bonus to a participant in order
to provide funds to pay all or a portion of federal and state taxes due as a
result of the receipt or exercise of (or lapse of restrictions to) an award. The
amount of such bonus will be taxable to the participant as ordinary income, and
the Company will have a corresponding deduction equal to such amount (subject to
the usual rules concerning reasonable compensation).
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock represented at the meeting and entitled to vote on this
matter is necessary for approval of the proposed amendment to the Plan. Proxies
will be voted in favor of such proposal unless otherwise specified. THE BOARD OF
DIRECTORS AND MANAGEMENT RECOMMEND THAT YOU VOTE FOR THE AMENDMENT TO THE PLAN.
-19-
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed KPMG as independent auditors for the
Company for the fiscal year ending December 31, 2000. A proposal to ratify that
appointment will be presented at the Annual Meeting. KPMG has served as the
Company's auditors since the Company's incorporation and has no relationship
with the Company other than that arising from its employment as independent
auditors. Representatives of KPMG are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if they desire to do so,
and will be available to respond to appropriate to questions from shareholders.
If the appointment of KPMG is not ratified by the shareholders, the Board of
Directors is not obligated to appoint other auditors, but the Board of Directors
will give consideration to such unfavorable vote. THE BOARD OF DIRECTORS AND
MANAGEMENT RECOMMEND THAT YOU VOTE FOR RATIFICATION OF THE APPOINTMENT OF KPMG
AS THE COMPANY'S INDEPENDENT AUDITORS.
PROPOSALS FOR THE NEXT ANNUAL MEETING
Any shareholder proposals to be considered for inclusion in the Company's
proxy material for the 2001 Annual Meeting of Shareholders must be received at
the Company's principal executive office at Suite 110, 6300 West Old Shakopee
Road, Bloomington, Minnesota 55438-2318, no later than November 22, 2000. In
connection with any matter to be proposed by a shareholder at the 2001 Annual
Meeting, but not proposed for inclusion in the Company's proxy materials, the
proxy holders designated by the Company for that meeting may exercise their
discretionary voting authority with respect to that shareholder proposal if
appropriate notice of that proposal is not received by the Company at its
principal executive office by November 22, 2000.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ William C. Brown
William C. Brown
Secretary
March 30, 2000
-20-
[GRAPHIC]
MGI PHARMA, INC.
ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, MAY 9, 2000
3:30 P.M. CENTRAL TIME
HILTON TOWERS
1001 MARQUETTE AVENUE
MINNEAPOLIS, MINNESOTA
MGI PHARMA, INC.
6300 WEST OLD SHAKOPEE ROAD, SUITE 110
BLOOMINGTON, MN 55438-2318 PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
By signing this proxy, you revoke all prior proxies and appoint Charles N.
Blitzer and William Brown, or either one of them, as Proxies, each with the
power to appoint his substitute and to act without the other, and authorize
each of them to represent and to vote, as designated herein, all shares of
common stock of MGI PHARMA, INC. held of record by the undersigned on March 14,
2000, at the Annual Meeting of Shareholders of the Company to be held on May 9,
2000 or any adjournment thereof.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" ITEMS 1, 2 AND 3.
SEE REVERSE FOR VOTING INSTRUCTIONS.
Please mark, sign and date your proxy card and return it in the postage-paid
envelope provided.
[GRAPHIC]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
1. Election of 01 Charles N. Blitzer 02 Andrew J. Ferrara
directors: 03 Joseph S. Frelinghuysen 04 Michael E. Hanson
05 Hugh E. Miller 06 Timothy G. Rothwell
07 Lee J. Schroeder 08 Arthur Weaver
[_] Vote FOR [_] Vote WITHHELD
all nominees from all nominees
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE,
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)
2. Proposal to amend the MGI PHARMA, INC. 1997 Stock Incentive Plan.
[_] For [_] Against [_] Abstain
3. Ratification of KPMG Peat Marwick as independent auditors of the
company for year ending December 31, 2000.
[_] For [_] Against [_] Abstain
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting of Shareholders.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED FOR EACH PROPOSAL.
Address Change? Mark Box [_]
Indicate changes below:
Date_____________________________________
Signature(s) in Box
Please sign exactly as your name(s)
appear on Proxy. If held in joint
tenancy, all persons must sign.
Trustees, administrators, etc., should
include title and authority.
Corporations should provide full name of
corporation and title of authorized
officer signing the Proxy.
__________________________________________
__________________________________________