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.
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(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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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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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.
(1) Amount Previously Paid:
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Notes:
[LOGO OF MGI PHARMA, INC.]
MGI PHARMA, INC.
Suite 300E, Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
___________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 11, 1999
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 11, 1999, 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 consider and vote upon the adoption of the MGI PHARMA, INC. 1999
Nonemployee Director Stock Option Plan;
3. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the Company for the fiscal year ending December 31, 1999;
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 15, 1999 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
Assistant Secretary
March 26, 1999
[LOGO OF MGI PHARMA, INC.]
MGI PHARMA, INC.
Suite 300E, Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
___________________________
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 11, 1999
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 11, 1999, 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 26, 1999. A copy of the
Company's Annual Report to Shareholders for the year ended December 31, 1998 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 15, 1999 will be entitled
to vote at the Annual Meeting. As of that date, a total of 14,595,803 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 adopt the
MGI PHARMA, INC. 1999 Nonemployee Director Stock Option 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
adoption of the MGI PHARMA, INC. 1999 Nonemployee Director Stock Option Plan
and for the ratification of the appointment of KPMG Peat Marwick LLP ("KPMG Peat
Marwick") 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 proxies' 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:
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PRINCIPAL OCCUPATION AND BUSINESS
NAME AGE DIRECTOR SINCE EXPERIENCE FOR PAST FIVE YEARS
- ----------------------- ----- ---------------- -------------------------------------------------
Charles N. Blitzer 58 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 59 May 1998 Managing Partner, BioLicensing, L.L.C.
(biotechnology consulting company), President
and Chief Executive Officer, Boston Healthcare
(pharmaceutical and biotechnology consulting
firm); prior to founding Boston Healthcare in
1993 and Boston BioLicensing, L.L.C. in 1997,
founded Molecular Simulations, Inc. (f/k/a
Polygen Corporation) (computer software
company) in 1984
Joseph S. Frelinghuysen 57 November 1997 President of J. S. Frelinghuysen & Co. (private
investment banking advisory firm); prior to
founding J. S. Frelinghuysen & Co. in 1989,
Managing Director in investment banking
department at The First Boston Corporation
(investment bank)
Michael E. Hanson 51 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 63 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) /(1)/
Timothy G. Rothwell 48 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.
(pharmaceuticals) and Chief Executive Officer
and President of the U.S. pharmaceuticals
business of Sandoz Pharmaceuticals.
-3-
PRINCIPAL OCCUPATION AND BUSINESS
NAME AGE DIRECTOR SINCE EXPERIENCE FOR PAST FIVE YEARS
- ----------------------- ----- --------------- -------------------------------------------------
Lee J. Schroeder 70 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) /(2)/
Arthur Weaver, M.D. 62 July 1998 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 /(3)/
______________________
(1) Mr. Miller is also a director of Wilmington Trust Co., Inc.
(2) Mr. Schroeder is also a director of Ascent Pediatrics, Inc., MDS Harris
Laboratories, Interneuron Pharmaceuticals, Inc. and Celgene Corporation.
(3) Dr. Weaver was appointed to the Board of Directors in July 1998.
During 1998, the Board of Directors had the following committees: (i) an
audit committee consisting of Mssrs. Frelinghuysen, Miller (through May 1998)
and, beginning in May 1998, Mr. Ferrara, and, beginning in September 1998,
Rodolfo C. Bryce (resigned from the Board in January 1999); (ii) a compensation
committee consisting of Messrs. Hanson, Miller, Schroeder and, beginning in
September 1998, Mr. 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 1998, the audit committee held 2
meetings and the compensation committee held 5 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 1998, the Board of Directors held 6 meetings. Each incumbent
director attended at least 75% of the total number of meetings of the Board of
Directors and committees on which he
-4-
served that were held during the period he was a member of the Board of
Directors or such committees, except that Mr. Rothwell attended 4 meetings of
the Board of Directors in 1998. The Company's Board of Directors and the
committees thereof also act from time to time by written action in lieu of
meetings.
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 is receiving $1,000 for each meeting of the Board of Directors that he
attends either in person or telephonically. At its meeting on March 9, 1999,
after reviewing the results of a survey of director compensation practices done
for the Board by an independent consulting firm, Frederick W. Cook & Co., Inc.,
in November 1998, as well as follow up data provided by the consultant on March
5, 1999, the Board of Directors determined that, for the term commencing with
the Annual Meeting, each nonemployee director will receive 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 and $250
for each committee meeting attended. The nonemployee directors also will be 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. In
addition, each nonemployee director 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. Frelinghuysen, Miller,
Rothwell and Schroeder each received options to purchase 7,500 shares of Common
Stock at an exercise price of $7.75 in May 1998. Messrs. Ferrara and Hanson
each received options to purchase 10,000 shares of Common Stock at an exercise
price of $7.75 in May 1998 and Dr. Weaver received an option to purchase 10,000
shares of Common Stock at an exercise price of $8.00 in July 1998.
-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 FOR
NAME AGE PAST FIVE YEARS
- --------------------- ----- -------------------------------------------------------
Charles N. Blitzer 58 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.
James V. Adam 50 Chief Operating Officer since November 1997;
formerly Vice President, Chief Financial Officer since
March 1988.
Lori-jean Gille 47 Senior Vice President since November 1997;
Secretary and an executive officer of the Company
since July 1995; Vice President, General Counsel
since January 1992.
William C. Brown(1) 43 Vice President, Finance since November 1997;
formerly Director, Finance and Planning since 1996
and Controller from 1986 to 1996.
______________________
(1) Mr. Brown is considered an executive officer of the Company under the rules
of the Securities and Exchange Commission, but is not an executive officer
for purposes of the Company's compensation programs.
-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 money purchase
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 1998, the Company and the Committee 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. The Compensation Consultant updated its
recommendations to the Committee based on original work done for the Company in
1993. As part of its work in 1998, the Compensation Consultant compared the
Company's compensation practices to a peer group of companies, which included
sixteen companies that were similar to the Company in market capitalization,
business characteristics and,
-7-
in some cases, business strategy. The Committee met with the Compensation
Consultant on several occasions during the last quarter of 1998 in anticipation
of making determinations with respect to 1998 bonuses and 1999 base salaries and
stock options, which compensation decisions were based in part on the
Compensation Consultant's report.
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.
Although Mr. Brown, the Company's Vice President, Finance, is considered an
executive officer of the Company under the rules of the Securities and Exchange
Commission, the Company has not classified Mr. Brown as an executive officer for
the purpose of the Company's compensation programs. As a result, decisions
regarding Mr. Brown's compensation are not made by the Compensation Committee
but by the Company's executive officers as a group.
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 1998, the Committee set 1998 base salaries for
and made stock option grants to the executive officers. Mr. Adam was awarded a
base salary increase of $23,000 to $180,000, Ms. Gille was awarded an increase
of $20,000 to $165,000. These increases reflected the promotions of Mr. Adam to
the position of Chief Operating Officer and of Ms. Gille to Senior Vice
President.
During 1998, Mr. Adam and Ms. Gille were each awarded options to purchase
25,000 shares of Company Common Stock, which represented an increase of 3,000
shares from 1997 for both Mr. Adam and Ms. Gille. These stock option award
increases reflected the promotion given to each of these individuals. 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, 1998," 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 1998 were awarded in January 1999. The bonus
compensation program for executive officers in 1998 was a continuation of the
program adopted by the Committee
-8-
in 1993. Under the bonus program, base cash compensation coupled with 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 1999, the Committee awarded
cash bonuses to the executive officers, other than the Chief Executive Officer
and Mr. Brown, for 1998 in the range of 15% to 26% of 1998 base salaries. In
awarding the 1998 cash bonuses, the Committee also considered the individual
accomplishments of the executive officers and of the operating groups reporting
to each executive officer during 1998.
In January 1998, Mr. Brown was awarded a salary increase of $12,640 to
$125,000, representing an increase of 11.25%, which was based largely upon his
promotion to Vice President, Finance. During 1998, Mr. Brown was awarded
options to purchase an aggregate of 10,000 shares of Company Common Stock. 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, 1998," which follows this
report. The size of the option grants to Mr. Brown were based on the Company's
stock incentive program for an employee at Mr. Brown's grade level. In January
1999, Mr. Brown was awarded a cash bonus for 1998 equal to 22.6% of his 1998
base salary, the amount of which was based on the Company's guidelines for an
employee at Mr. Brown's grade level and on Mr. Brown's individual
accomplishments during 1998.
Compensation of the Chief Executive Officer
In 1998, Mr. Blitzer received a base salary increase of $12,000 to
$312,000, and an option to purchase 50,000 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 1997, 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 1999, the Committee awarded Mr. Blitzer a cash bonus for 1998 of
$120,000 or 38.5% of his 1998 base salary. This represented a continuation of
the bonus compensation program adopted by the Committee in 1993, with a
combination of 1998 base salary and a 45% bonus considered to be a fair payment
for good performance by the Chief Executive Officer. The Compensation
Consultant's recommendations in the last quarter of 1998 also confirmed the
Committee's conclusion that the bonus program was appropriate for the Chief
Executive Officer. In awarding Mr. Blitzer's 1998 cash bonus, the Committee
considered the FDA approval of a second indication for Salagen(R) Tablets for
the treatment of symptoms of dry mouth in Sjogren's syndrome patients in
February 1998, the launch of the new indication in April 1998, the continued
strong growth of Salagen(R) Tablet sales, the degree of success made in the
clinical trials for MGI 114
-9-
including completion of the initial Phase I safety trial and initation of three
Phase 2 clinical trials, and the attainment of profitability for the Company in
1998.
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 new 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 WEAVER
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(2) 1998 $ 312,000 $ 120,000 50,000 $ 92,147
President and Chief Executive 1997 300,000 100,000 125,000 41,762
Officer 1996 192,159 200,000(3) 150,000 29,951
James V. Adam 1998 $ 180,000 $ 47,000 25,000 $ 27,116
Chief Operating Officer 1997 157,000 35,000 22,000 23,216
1996 149,000 45,000 44,000 27,221
Lori-jean Gille 1998 $ 165,000 $ 44,750 25,000 $ 23,006
Senior Vice President and 1997 145,000 33,000 22,000 20,101
General Counsel 1996 137,352 34,000 64,000 18,806
William C. Brown(4) 1998 $ 125,000 $ 28,200 10,000 $ 19,461
Vice President, Finance 1997 112,360 14,000 10,000 17,730
__________________________
(1) These amounts represent the Company's contributions to the Company's
Retirement Savings Plan, 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 1998, Company contributions were as follows:
Mr. Blitzer, $11,200; Mr. Adam, $11,200; Ms. Gille, $11,200; and Mr. Brown,
$9,730.
Company contributions under the Money Purchase Retirement Plan are made
annually following the end of each calendar year. For 1998, Company
contributions were as follows: Mr. Blitzer, $8,806; Mr. Adam, $8,806; Ms.
Gille, $8,806; and Mr. Brown, $7,336.
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 1998, Company payments were as follows: Mr.
Blitzer, $72,141; Mr. Adam, $7,110; Ms. Gille, $3,000; and Mr. Brown,
$2,395.
(2) Mr. Blitzer joined the Company as President and Chief Executive Officer in
April 1996.
(3) Bonuses awarded to Mr. Blitzer included a $75,000 signing bonus and
$125,000 performance bonus pursuant to the Company's executive compensation
program discussed above.
(4) Mr. Brown was named Vice President, Finance of the Company in November
1997.
-11-
None of the Company's executive officers currently has a written employment
agreement. Each of Mr. Blitzer, Mr. Adam and Ms. Gille 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 $975,000 for Mr. Blitzer, $585,000 for Mr. Adam, and
$495,000 for Ms. Gille, 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.
Mr. Brown has a termination agreement with the Company which is identical
to the termination agreements with Mr. Blitzer, Mr. Adam and Ms. Gille except
that (i) he is entitled to a lump sum payment equal to 18 times his monthly base
salary (i.e., $400,500 as of this date), and (ii) instead of a "gross-up"
payment, the lump sum amount payable under Mr. Brown's termination agreement is
subject to reduction to avoid nondeductibility of any payment or benefit (under
the termination agreement or any other arrangement) solely by reason of Section
280G of the Code.
-12-
STOCK OPTIONS
The following table summarizes option grants made by the Company to each of
its executive officers named in the Summary Compensation Table above as a part
of such person's 1998 base compensation.
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1998
INDIVIDUAL GRANTS
------------------------------------------------------
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF
SECURITIES GRANTED TO EXERCISE STOCK PRICE
UNDERLYING EMPLOYEES IN OR BASE APPRECIATION FOR
OPTIONS FISCAL YEAR PRICE EXPIRATION OPTION TERM (3)
---------------------
NAME GRANTED (1) 1998 ($/SHARE) DATE (2) 5% 10%
- ------------------ -------------- -------------- ------------ ----------- --------- ----------
Charles N. Blitzer 50,000 11.98 $3.9375 1/14/08 $123,814 $313,768
James V. Adam 25,000 5.99 $3.9375 1/14/08 $ 61,907 $156,884
Lori-jean Gille 25,000 5.99 $3.9375 1/14/08 $ 61,907 $156,884
William C. Brown 10,000 2.40 $3.9375 1/14/08 $ 24,763 $ 62,754
_____________________________
(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, except for those granted to Mr. Brown, 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 14, 2008 are exercisable as to 25% of
the underlying option shares as of January 14, 1999, 50% of such option
shares as of January 14, 2000, 75% of such option shares as of January 14,
2001 and 100% of such option shares as of January 14, 2002.
(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
14,542,472 shares of Common Stock are outstanding, a beginning stock price
of $3.9375 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 $57,260,984 to $93,272,108,
assuming 5% annual appreciation and to $148,520,244, assuming 10% annual
appreciation.
-13-
The following table summarizes option exercises during the year ended
December 31, 1998 by the executive officers named in the Summary Compensation
Table above, and the values of the options held by such persons at December 31,
1998.
AGGREGATED OPTION EXERCISES DURING YEAR ENDED DECEMBER 31, 1998
AND VALUE OF OPTIONS HELD AT DECEMBER 31, 1998
VALUE OF
NUMBER OF SECURITIES EXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS
OPTIONS HELD AT HELD AT
SHARES DECEMBER 31, 1998 DECEMBER 31, 1998
ACQUIRED ON VALUE (EXERCISABLE/ (EXERCISABLE/
NAME EXERCISE REALIZED (1) UNEXERCISABLE) UNEXERCISABLE (1)
- ------------------- ------------ ------------- ---------------------- -------------------
Charles N. Blitzer 0 0 143,750/181,250 $723,438/$960,938
James V. Adam 17,000 $ 50,368 122,100/56,400 $381,854/$282,710
Lori-jean Gille 47,159 $217,127 53,109/49,875 $103,472/$276,610
William C. Brown 0 0 39,415/24,060 $107,108/$131,116
__________________
(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, 1998.
-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, 1993 and
the reinvestment of all dividends).
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN-
AMONG MGI PHARMA, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ PHARMACEUTICAL INDEX
[GRAPH APPEARS HERE]
12/93 12/94 12/95 12/96 12/97 12/98
----- ----- ----- ----- ----- -----
MGI PHARMA 100 42 30 29 26 66
NASDAQ PHARMACEUTICAL 100 75 138 138 143 183
NASDAQ STOCK MARKET (U.S.) 100 98 138 170 209 293
-15-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of March 15, 1999, 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)
1725 K Street, NW, Suite 410
Washington, D.C. 20006 884,206 6.1%
Dainippon Pharmaceutical Co., Ltd. (2)
6-8 Doshomachi, 2-Chome
Chuo-Ku, Osaka, 541 Japan 750,000 5.1%
Charles N. Blitzer (3) (4) 242,083 1.6%
Andrew J. Ferrara 2,500 *
Joseph S. Frelinghuysen (3) (5) 79,375 *
Michael E. Hanson 2,500 *
Hugh E. Miller (3) (6) 41,250 *
Timothy G. Rothwell (3) 10,626 *
Lee J. Schroeder (3) 48,947 *
Arthur Weaver, M.D. 0 *
James V. Adam (3) (4) 138,160 *
Lori-jean Gille (3) (4) 81,358 *
William C. Brown (3) (4) 86,233 *
All directors and executive officers as a group
(11 persons) (3) (4) (5) (6) 733,032 4.8%
_________________________________
*Less than 1%
(1) Disclosure is made in reliance upon a statement on Schedule 13G, dated
as of February 9, 1999, filed with the Securities and Exchange
Commission.
(2) Disclosure is made in reliance upon a statement on Schedule 13D, dated
as of April 28, 1995, filed with the Securities and Exchange
Commission.
(3) Includes the following number of shares which could be acquired within
60 days of March 15, 1999 through the exercise of stock options: Mr.
Blitzer, 218,750 shares; Mr. Ferrara, 2,500 shares; Mr.
Frelinghuysen, 4,375 shares; Mr. Hanson, 2,500 shares; Mr. Miller,
36,250 shares; Mr. Rothwell, 10,626 shares; Mr. Schroeder, 36,251
shares; Mr. Adam, 117,600 shares; Ms. Gille, 64,984 shares; Mr. Brown,
47,383 shares; and all directors and executive officers, 541,219
shares.
(4) Includes the following number of shares beneficially owned as of
December 31, 1998 through the company's Retirement Savings Plan: Mr.
Blitzer, 3,266 shares; Mr. Adam, 20,560 shares; Ms. Gille, 12,587
shares; and Mr. Brown, 8,614 shares.
(5) Includes 5,000 shares owned by Mr. Frelinghuysen and held in trust.
(6) Includes 1,000 shares owned by Mr. Miller's spouse and disclaimed by
Mr. Miller.
-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, 1998, all Section 16(a) reporting requirements applicable to the
Company's directors, executive officers and such beneficial owners were complied
with.
PROPOSAL TO ADOPT THE MGI PHARMA, INC. 1999 NONEMPLOYEE
DIRECTOR STOCK OPTION PLAN
On March 9, 1999, the Board of Directors adopted, subject to shareholder
approval, the MGI PHARMA, INC. 1999 Nonemployee Director Stock Option Plan (the
"1999 Director Plan") pursuant to which 200,000 shares of MGI Common Stock would
be reserved for issuance to outside directors. The Board of Directors has
determined that the 1999 Director Plan is necessary to make MGI Common Stock
options available to outside directors. These options will enhance the
Company's ability to attract and retain the services of experienced and
knowledgeable outside directors and provide additional incentive for such
directors to work toward the Company's long-term success and progress. The 1999
Director Plan will replace the Company's 1993 Director Plan relating to outside
directors. The following summary description of the 1999 Director Plan is
qualified in its entirety by reference to the full text of the 1999 Director
Plan, which is attached to this Proxy Statement as Exhibit A.
SUMMARY OF THE 1999 DIRECTOR PLAN
Under the 1999 Director Plan, nonemployee directors of the Company will be
granted an option to purchase shares of MGI Common Stock as follows: (i) an
option to purchase 10,000 shares of MGI Common Stock is granted on the date a
director first becomes a director by appointment by the Board; and (ii) an
option to purchase 7,500 shares of MGI Common Stock is granted on each date of a
director's election or re-election to the Board, beginning with the election of
directors at the 1999 Annual Meeting (if the plan is approved by the
shareholders). The option price will be equal to 100% of the fair market value
(as described in the 1999 Director Plan) of MGI's Common Stock on the date of
grant. Options granted under the 1999 Director Plan will terminate ten years
after the date of grant and will become exercisable in equal installments of 25%
commencing on the date one year after the date of grant and continuing on each
one year anniversary thereafter until all of the options have become
exercisable; provided, however, that if a director does not serve the full term
of his or her directorship, the options are exercisable as follows: (i) if the
director served on
-17-
the Board for five or more years, all outstanding options become immediately
exercisable on the date the director ceases being a director and remain
exercisable for a period of 36 months; (ii) if the director served on the Board
for fewer than five years, the options are exercisable, to the extent they were
exercisable at the date the director ceased being a director, for a period of 90
days; (iii) in the event of the death of a director, the options are
exercisable, to the extent they were exercisable by the director at the date of
death, by the director's legal representative for a period of 12 months; and
(iv) if a director ceases being a director due to an act of fraud, embezzlement
or other gross or willful misconduct, as determined by the Board, all options
granted to the director are immediately forfeited as of the date of the
misconduct. Options granted under the 1999 Director Plan will be nonqualified
stock options.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal federal income tax consequences
generally applicable to awards under the 1999 Director Plan. The grant of an
option is not expected to result in any taxable income for the recipient. Upon
exercising such a nonqualified stock option, the optionee must recognize
ordinary income equal to the excess of the fair market value of the shares of
MGI 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. 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. Generally, there will be no tax consequence to the Company in
connection with the disposition of shares acquired under an option.
The table below indicates the aggregate number of options that will be
granted to all nonemployee directors of the Company in 1999 assuming adoption of
the 1999 Director Plan. Under the terms of the proposed 1999 Director Plan,
each nonemployee director will receive an option to purchase 10,000 shares of
MGI Common Stock upon the director's appointment by the Board, and 7,500 shares
of MGI Common Stock upon the director's election or re-election to the Board.
No other persons will be eligible to participate in the 1999 Director Plan.
1999 NONEMPLOYEE DIRECTOR
STOCK OPTION PLAN (1)
---------------------------------------
NAME AND POSITION DOLLAR VALUE (1) NUMBER OF OPTIONS
------------------------------------------- ------------------ -------------------
Executive Group (2) N/A N/A
Non-Executive Director Group N/A 52,500
Non-Executive Officer Employee Group (2) N/A N/A
_____________________
(1) All of the options granted will have option exercise prices equal to
100% of the fair market value of MGI Common Stock on the date of
grant, as described in the 1999 Director Plan.
(2) Under the terms of the 1999 Director Plan, none of the Company's
executive officers or other employees other than nonemployee directors
are eligible to participate.
The affirmative vote of the holders of a majority of the shares of MGI
Common Stock represented at the meeting and entitled to vote on this matter is
necessary for approval of the 1999 Director 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 ADOPTION OF THE MGI PHARMA, INC. 1999
---
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN.
-18-
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed KPMG Peat Marwick as independent
auditors for the Company for the fiscal year ending December 31, 1999. A
proposal to ratify that appointment will be presented at the Annual Meeting.
KPMG Peat Marwick 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 Peat
Marwick 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 questions from shareholders. If the appointment of
KPMG Peat Marwick 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 PEAT MARWICK
---
AS THE COMPANY'S INDEPENDENT AUDITORS.
PROPOSALS FOR THE NEXT ANNUAL MEETING
Any proposal by a shareholder to be presented at the next annual meeting of
shareholders must be received at the Company's principal executive offices,
Suite 300E, Opus Center, 9900 Bren Road East, Minnetonka, Minnesota 55343, no
later than November 27, 1999.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ William C. Brown
William C. Brown
Assistant Secretary
March 26, 1999
-19-
EXHIBIT A
MGI PHARMA, INC.
1999 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE OF PLAN
This plan shall be known as the "MGI PHARMA, INC. 1999 Nonemployee Director
Stock Option Plan" and is hereinafter referred to as the "Plan." The purpose of
the Plan is to promote the interests of MGI PHARMA, INC., a Minnesota
corporation (the "Company"), by enhancing its ability to attract and retain the
services of experienced and knowledgeable outside directors and by providing
additional incentive for such directors to increase their interest in the
Company's long-term success and progress.
2. ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(the "Board"). Grants of stock options under the Plan and the amount and nature
of the awards to be granted shall be automatic as described in Section 6.
However, all questions of interpretation of the Plan or of any options issued
under it shall be determined by the Board and such determination shall be final
and binding upon all persons having an interest in the Plan. Any or all powers
and discretion vested in the Board under this Plan may be exercised by any
committee duly authorized by the Board.
3. PARTICIPATION IN THE PLAN
Each director of the Company shall be eligible to participate in the Plan
unless such director is an employee of the Company (a "Nonemployee Director").
4. STOCK SUBJECT TO THE PLAN
The stock to be subject to options under the Plan shall be authorized but
unissued shares of the Company's common stock, par value $.01 per share (the
"Common Stock"). Subject to the adjustment as provided in Section 12 hereof,
the maximum number of shares on which options may be exercised under this Plan
shall be 200,000 shares. If an option under the Plan expires, or for any reason
is terminated or unexercised with respect to any shares, such shares shall again
be available for options thereafter granted during the term of the Plan.
5. NONQUALIFIED STOCK OPTIONS
All options granted under the Plan shall be nonqualified stock options
which do not qualify as incentive stock options within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
A-1
6. GRANTS OF OPTIONS UNDER THE PLAN
All grants of options hereunder shall be automatic and nondiscretionary and
shall be made strictly in accordance with the following provisions:
(a) No person shall have any discretion to select which Nonemployee
Directors shall be granted options or to determine the number of shares of
Common Stock to be covered by options granted to Nonemployee Directors.
(b) Each Nonemployee Director shall automatically receive on the date
such person first becomes a director by appointment by the Board of
Directors, an option to purchase 10,000 shares of Common Stock.
(c) Each Nonemployee Director shall automatically receive, on each
date on which such person is elected or reelected as a director (beginning
with the election of directors at the 1999 annual meeting of shareholders
if the Plan becomes effective at such meeting), an option to purchase 7,500
shares of Common Stock.
(d) Each option granted hereunder shall be exercisable in equal
installments of 25% of the total number of options granted commencing on
the date which is one year after the date of grant and continuing on each
one year anniversary thereafter.
(e) The option exercise price per share for the shares covered by
each option shall be 100% of the fair market value of the Common Stock on
the date of the Company's annual meeting of shareholders to which the grant
relates, as determined in accordance with Section 10 of the Plan.
7. TERMS AND CONDITIONS OF OPTIONS
Each option granted under this Plan shall be evidenced by a written
agreement in such form as the Board shall from time to time approve, which
agreements shall comply with and be subject to the following terms and
conditions:
(a) Options Non-Transferable. No option granted under the Plan shall
be transferable by the optionee otherwise than by will, or by the laws of
descent and distribution as provided in Section 7(c)(iii) hereof. Except
as provided in Section 7(c)(iii) hereof with respect to disability of the
optionee, during the lifetime of the optionee, the options shall be
exercisable only by such optionee. No option or interest therein may be
transferred, assigned, pledged or hypothecated by the optionee during such
optionee's lifetime, whether by operation of law or otherwise, or be made
subject to execution, attachment or similar process.
(b) Period of Options. Options shall terminate upon the expiration
of 10 years from the date on which they were granted (subject to prior
termination as provided in Section 8 hereof).
A-2
(c) Exercise of Options
(i) The exercise of any option granted hereunder shall only be
effective at such time as counsel to the Company shall have determined
that the issuance and delivery of Common Stock pursuant to such
exercise will not violate any state or federal securities or other
laws. An optionee desiring to exercise an option may be required by
the Company, as a condition of the effectiveness of any exercise of an
option granted hereunder, to agree in writing that all Common Stock to
be acquired pursuant to such exercise shall be held for his or her own
account without a view to any further distribution thereof, that the
certificates for such shares shall bear an appropriate legend to that
effect and that such shares will not be transferred or disposed of
except in compliance with applicable federal and state securities
laws.
(ii) An optionee electing to exercise an option shall give
written notice to the Company of such election and of the number of
shares subject to such exercise. The full purchase price of such
shares shall be tendered with such notice of exercise. Payment shall
be made to the Company by delivery of (A) cash (including check, bank
draft or money order), (B) shares of Common Stock already owned by the
optionee having a fair market value on the date of exercise equal to
the full purchase price of the shares, (C) written authorization for
the Company to retain from the total number of shares of Common Stock
as to which the option is exercised that number of shares having a
fair market value on the date of exercise equal to the aggregate
exercise price of the options exercised, (D) irrevocable instructions
to a broker promptly to deliver to the Company the amount of sale
proceeds required to pay the exercise price, (E) any combination of
the foregoing methods of payment, or (F) such other form of
consideration as the Board may deem acceptable. For purposes of the
preceding sentence, the fair market value of the Common Stock tendered
shall be determined as provided in Section 9 as of the date of
exercise.
8. EFFECT OF TERMINATION OF MEMBERSHIP ON THE BOARD
The right to exercise an option granted under this Plan shall be limited as
follows:
(a) If an optionee ceases being a director of the Company for any
reason other than the reasons identified in subparagraph (b) of this
Section 8, the optionee shall have the right to exercise the options as
follows, subject to the condition that no option shall be exercisable after
the expiration of the term of the option:
(i) If the optionee was a member of the Board for five or more
years, all outstanding options become immediately exercisable upon the
date the optionee ceases being a director. The optionee may exercise
the options for a period of 36 months from the date the optionee
ceased being a director, provided that if the optionee dies before the
36 month period has expired, the options may be exercised by the
optionee's legal representative or any person who acquires the right
to exercise
A-3
an option by reason of the optionee's death for a period of 12 months
from the date of the optionee's death.
(ii) If the optionee was a member of the Board for less than
five years, the optionee may exercise the options, to the extent they
were exercisable at the date the optionee ceases being a member of the
Board, for a period of 90 days following the date the optionee ceased
being a director, provided that, if the optionee dies before the 90
day period has expired, the options may be exercised by the optionee's
legal representative, or any person who acquires the right to exercise
an option by reason of the optionee's death, for a period of 12 months
from the date of the optionee's death.
(iii) If the optionee dies while a member of the Board, the
options, to the extent exercisable by the optionee at the date of
death, may be exercised by the optionee's legal representative, or any
person who acquires the right to exercise an option by reason of the
optionee's death, for a period of 12 months from the date of the
optionee's death.
(iv) In the event any option is exercised by the executors,
administrators, legatees, or distributees of the estate of a deceased
optionee, the Company shall be under no obligation to issue stock
thereunder unless and until the Company is satisfied that the person
or persons exercising the option are the duly appointed legal
representatives of the deceased optionee's estate or the proper
legatees or distributees thereof.
(b) If an optionee ceases being a director of the Company due to an
act of
(i) fraud or intentional misrepresentation, or
(ii) embezzlement, misappropriation or conversion of assets or
opportunities of the Company or any affiliate of the Company, or
(iii) any other gross or willful misconduct,
as determined by the Board, in its sole and conclusive discretion, all
options granted to such optionee under this Plan shall immediately be
forfeited as of the date of the misconduct.
9. TIME FOR GRANTING OPTIONS
Unless the Plan shall have been discontinued as provided in Section 14
hereof, the Plan shall terminate upon the expiration of 10 years from the date
upon which it takes effect as provided in Section 13 hereof. No option may be
granted after such termination, but termination of the Plan shall not, without
the consent of the optionee, alter or impair any rights or obligations under any
option theretofore granted.
A-4
10. FAIR MARKET VALUE OF COMMON STOCK
For purposes of this Plan, the fair market value of the Common Stock on a
given date shall be (i) the average of the closing representative bid and asked
prices of the Common Stock as reported on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") on such date, if the Common Stock
is then quoted on NASDAQ; (ii) the last sale price of the Common Stock as
reported on the NASDAQ National Market System; or (iii) the closing price of the
Common Stock on such date on a national securities exchange, if the Common Stock
is then being traded on a national securities exchange. If on the date as of
which the fair market value is being determined the Common Stock is not publicly
traded, the Board shall make a good faith attempt to determine such fair market
value and, in connection therewith, shall take such actions and consider such
factors as it deems necessary or advisable.
11. LIMITATION OF RIGHTS
(a) No Right to Continue as a Director. Neither the Plan, nor the
granting of an option nor any other action taken pursuant to the Plan,
shall constitute, or be evidence of, any agreement or understanding,
express or implied, that the Company will retain a director for any period
of time, or at any particular rate of compensation.
(b) No Shareholder Rights for Options. An optionee shall have no
rights as a shareholder with respect to the shares covered by options until
the date of the issuance of such optionee of a stock certificate therefor,
and no adjustment will be made for dividends or other rights for which the
record date is prior to the date such certificate is issued.
12. ADJUSTMENTS TO COMMON STOCK
If there shall be any change in Common Stock through merger, consolidation,
reorganization, recapitalization, stock dividend (of whatever amount), stock
split or other changes in the corporate structure, appropriate adjustments to
the Plan and outstanding options shall be made. In the event of any such
changes, adjustments shall include, where appropriate, changes in the aggregate
number of shares subject to the Plan, the option exercise price, the number of
shares subject to outstanding options and the options' exercise prices thereof
in order to prevent dilution or enlargement of option rights.
13. EFFECTIVE DATE OF THE PLAN
The Plan shall take effect immediately upon its approval by the affirmative
vote of the holders of a majority of the shares present in person or by proxy
and voted at a duly held meeting of shareholders of the Company.
14. AMENDMENT OF THE PLAN
(a) The Board may suspend or discontinue the Plan or revise or amend
it in any respect whatsoever; provided, however, that without approval of
the shareholders no revision
A-5
or amendment shall change the number of shares subject to the Plan (except
as provided in Section 12 hereof), change the designation of the class of
directors eligible to receive options or materially increase the benefits
accruing to participants under the Plan. The Board shall not alter or
impair any option theretofore granted under the Plan without the consent of
the holder of the option. In addition, subject to section (b) below and to
the extent necessary and desirable to comply with any applicable law or
regulation, the Company shall obtain shareholder approval of any Plan
amendment in such a manner and to such a degree as required.
(b) The Board may, in its sole discretion, amend the vesting,
exercisability and other provisions of the Plan, including any outstanding
awards under the Plan, as necessary to avoid adverse accounting impact on
the Company of any changes in the accounting industry's interpretation of
APB No. 25.
15. GOVERNING LAW
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Minnesota and construed
accordingly.
A-6
Please mark, sign and date your proxy card and return it in the postage-paid
envelope provided.
-- Please detach here --
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The Board of Directors Recommends a Vote FOR Items 1, 2 and 3.
1. Election of directors: 03 Joseph S. Frelinghuysen 06 Timothy G. Rothwell
01 Charles N. Blitzer 04 Michael E. Hanson 07 Lee J. Schroeder
02 Andrew J. Ferrara 05 Hugh E. Miller 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 Adopt the MGI [_] For [_] Against [_] Abstain
PHARMA, INC. 1999 Nonemployee
Director Stock Option Plan.
3. Ratification of KPMG Peat [_] For [_] Against [_] Abstain
Marwick as independent auditors
of the company for year ending
December 31, 1999.
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 ITEM.
Date _______________________
Address Change? Mark Box [_] Indicate changes below:
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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.
MGI PHARMA, INC.
ANNUAL MEETING
Tuesday May 11, 1999
3:30 p.m. local time
Hilton Towers
1001 Marquette Avenue
Minneapolis, Minnesota
MGI PHARMA, INC.
9900 Bren Rd. East Suite 300E, Minneapolis, MN 55343 Proxy
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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 James V. Adam, 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 15,
1999, at the Annual Meeting of Shareholders of the Company to be held on May
11, 1999 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.