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
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
IGI, 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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction
applies:
........................................................
2) Aggregate number of securities to which transaction
applies:
........................................................
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
<PAGE>
........................................................
4) Proposed maximum aggregate value of transaction:
........................................................
5) Total fee paid:
........................................................
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
1) Amount Previously Paid:
........................................................
2) Form, Schedule or Registration Statement No.:
........................................................
3) Filing Party:
........................................................
4) Date Filed:
........................................................
<PAGE>
IGI, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of IGI,
Inc., a Delaware corporation (the 'Company'), will be held on Wednesday, May 8,
1996 at 10:00 a.m. at the offices of Hale and Dorr, 60 State Street, Boston,
Massachusetts (the 'Meeting') for the purpose of considering and voting upon the
following matters:
1. To elect seven directors to serve until the next Annual Meeting of
Stockholders.
2. To ratify the appointment of Coopers & Lybrand L.L.P. as
independent auditors of the Company for the current fiscal year.
3. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the Meeting.
The Board of Directors has fixed the close of business on Friday, March 22,
1996 as the record date for the determination of stockholders entitled to notice
of and to vote at the Meeting and at any adjournments thereof.
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1995, which contains financial statements and other information of
interest to stockholders, accompanies this Notice and the enclosed Proxy
Statement.
By Order of the Board of Directors,
DONALD J. MACPHEE,
Secretary
April 12, 1996
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. NO POSTAGE NEED
BE AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
<PAGE>
IGI, INC.
WHEAT ROAD AND LINCOLN AVENUE
BUENA, NEW JERSEY 08310
------------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1996
------------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of IGI, Inc. (the 'Company') for use at the
Annual Meeting of Stockholders to be held on Wednesday, May 8, 1996 at 10:00
a.m. at the offices of Hale and Dorr, 60 State Street, Boston, Massachusetts,
and at any adjournments thereof (the 'Meeting').
All proxies will be voted in accordance with the instructions of the
stockholder. If no choice is specified, the proxies will be voted in favor of
proposals 1 and 2 set forth in the accompanying Notice of Meeting. Any proxy may
be revoked by a stockholder at any time before its exercise by delivery of a
written revocation to the Secretary of the Company. Attendance at the Meeting
will not itself be deemed to revoke a Proxy unless the stockholder gives
affirmative notice at the Meeting that the stockholder intends to revoke the
Proxy and vote in person.
Only the record holders of shares of common stock, $.01 par value per
share, of the Company (the 'Common Stock') at the close of business on March 22,
1996 may vote at the Meeting. Each share entitles the record holder to one vote
on each of the matters to be voted upon at the Meeting. On March 22, 1996, there
were 9,269,420 shares of Common Stock outstanding.
The Notice of Meeting, this Proxy Statement, the enclosed Proxy and the
Company's Annual Report for the year ended December 31, 1995 are being mailed to
stockholders on or about April 12, 1996.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of March 15, 1996 with
respect to the beneficial ownership of shares of Common Stock by (i) each person
known to the Company to own beneficially more than 5% of the outstanding shares
of Common Stock, (ii) the directors of the Company, (iii) the Chief Executive
Officer and the five executive officers of the Company listed in the 'Summary
Compensation Table' below (collectively, the 'Named Executive Officers') and
(iv) the directors and executive officers of the Company as a group. Unless
otherwise noted, the persons named in the table have sole voting and investment
power with respect to all shares of Common Stock shown as beneficially owned by
them.
Percent of
Beneficial Owner Number of Shares Class
- ---------------- ---------------- ----------
Charles B. Ganz ............................ 1,156,100(1) 12.5%
2875 N.E. 191st Street
Penthouse I
North Miami Beach, FL 33180
Edward B. Hager, M.D. ....................... 968,050(2) 10.1%
Pinnacle Mountain Farms
Lyndeboro, NH 03082
John P. Gallo ............................... 583,397(3) 6.1%
1772 Garwood Lane
Vineland, NJ 08360
2
Stephen J. Morris ........................... 559,435(4) 6.0%
66 Navesink Avenue
Rumson, New Jersey
Jane E. Hager ............................... 535,000(5) 5.7%
Pinnacle Mountain Farms
Lyndeboro, NH 03082
David G. Pinosky, M.D........................ 274,900(6) 2.9%
John O. Marsh, Jr............................ 60,000(7) *
Terrence O'Donnell........................... 40,000(8) *
Constantine L. Hampers, M.D.................. 33,000(9) *
Stephen G. Hoch.............................. 42,000(10) *
Denis M. O'Donnell, M.D...................... 38,000(11) *
Lawrence N. Zitto............................ 48,250(12) *
Donald J. MacPhee............................ 35,250(13) *
All executive officers and
directors, as a group (13 Persons)........... 2,708,747(14) 25.9%
- ------------------
* Less than 1% of the Common Stock outstanding.
(1) The information reported is based on a Schedule 13G, dated January
26, 1996, filed with the Securities and Exchange Commission (the
'Commission') by Charles B. Ganz ('Ganz'), Ganz Capital Management,
Inc. ('GCM'), The Probitas Fund, L.P. ('Fund'), Probitas Advisors,
Inc. ('Advisors') and The Probitas Offshore Fund, L.P. ('Offshore
Fund'). Ganz is President of each of GCM and Advisors, which are
registered investment advisers that invest and manage funds on
behalf of their clients. Advisors acts as General Partner for Fund
and as Investment General Partner for Offshore Fund. Ganz, through
his affiliations with GCM, Fund, Advisors and Offshore Fund, has
voting and investment power with respect to an aggregate of
1,156,100 shares of Common Stock. GCM disclaims beneficial ownership
with respect to the shares of Common Stock held by Advisors, Fund
and Offshore Fund, and Advisors, Fund and Offshore Fund disclaim
beneficial ownership with respect to the shares held by GCM.
(2) Includes 345,000 shares which Dr. Hager may acquire pursuant to
stock options exercisable within 60 days after March 15, 1996, but
does not include any of the shares (listed below) beneficially owned
by Dr. Hager's wife, Jane E. Hager, as to which Dr. Hager disclaims
beneficial ownership.
(3) Includes 295,000 shares which Mr. Gallo may acquire pursuant to
stock options exercisable within 60 days after March 15, 1996.
(4) The information reported is based on a Schedule 13D dated June 13,
1994 and filed with the Commission by Stephen J. Morris. Mr. Morris
has sole voting power with respect to 549,400 shares, shared voting
power with respect to 10,035 shares and sole investment power with
respect to 559,435 shares.
(5) Does not include any of the shares (listed above) beneficially owned
by Dr. Hager, as to which Mrs. Hager disclaims beneficial ownership.
Includes 110,000 shares which may be acquired pursuant to stock
options exercisable within 60 days after March 15, 1996.
(6) Includes 110,000 shares which may be acquired pursuant to stock
options exercisable within 60 days after March 15, 1996.
(7) Consists of 60, 000 shares which may be acquired pursuant to stock
options exercisable within 60 days after March 15, 1996.
(8) Consists of 40,000 shares which may be acquired pursuant to stock
options exercisable within 60 days after March 15, 1996.
3
<PAGE>
(9) Includes 30,000 shares which may be acquired pursuant to stock
options exercisable within 60 days after March 15, 1996.
(10) Consists of 42,000 shares which may be acquired pursuant to stock
options exercisable within 60 days after March 15, 1996.
(11) Consists of 38,000 shares which may be acquired pursuant to stock
options exercisable within 60 days after March 15, 1996.
(12) Includes 33,250 shares which may be acquired pursuant to stock
options exercisable within 60 days after March 15, 1996.
(13) Consists of 35,250 shares which may be acquired pursuant to stock
options exercisable within 60 days after March 15, 1996.
(14) Includes 1,179,500 shares which may be acquired pursuant to stock
options exercisable within 60 days after March 15, 1996.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
'Exchange Act'), requires the Company's directors, executive officers and
holders of more than 10% of the Company's Common Stock to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
The Company believes that during 1995 its officers, directors and holders of
more than 10% of the Company's Common Stock complied with all Section 16(a)
filing requirements.
VOTES REQUIRED
The holders of a majority of the shares of Common Stock outstanding shall
constitute a quorum for the transaction of business at the Meeting. Shares of
Common Stock present in person or represented by proxy (including shares which
abstain or do not vote with respect to one or more of the matters presented for
stockholder approval) will be counted for purposes of determining whether a
quorum exists at the Meeting.
The affirmative vote of the holders of a plurality of the votes cast at the
Meeting is required for the election of directors. The affirmative vote of the
holders of a majority of the shares of Common Stock cast is required for the
ratification of the appointment of Coopers & Lybrand L.L.P. as independent
auditors of the Company.
Shares which abstain from voting as to a particular matter, and shares held
in 'street name' by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter, will not be counted as votes cast in favor of such matter, and also will
not be counted as shares voting on such matter. Accordingly, abstentions and
'broker non-votes' will have no effect on the voting on a matter that requires
the affirmative vote of a certain percentage of the votes cast on the matter.
PROPOSAL 1 -- ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
The persons named as proxies in the accompanying Proxy intend (unless authority
to vote therefor is specifically withheld) to vote for the election of the seven
persons named below as directors to hold office until the next Annual Meeting of
Stockholders and until their respective successors are elected and qualified.
Each nominee is presently serving as a director of the Company and has consented
to being named in this Proxy Statement and to serve if elected. If any of the
nominees becomes unavailable to serve as a director, the persons named as
proxies in the accompanying Proxy may vote the Proxy for substitute nominees.
The Board of Directors has no reason to believe that any of the nominees will be
unable to serve if elected.
4
<PAGE>
The following table sets forth certain information with respect to the
nominees:
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION, OTHER BUSINESS EXPERIENCE
NAME AGE SINCE DURING PAST FIVE YEARS AND OTHER DIRECTORSHIPS
- ---- --- ----- ----------------------------------------------
<S> <C> <C> <C>
Edward B. Hager, M.D. ................... 64 1977 Chairman of the Board of Directors and Chief Executive
Officer of IGI, Inc. since 1977; Chairman of the Board
of Directors and Chief Executive Officer of Novavax,
Inc. since 1987; Dr. Hager is the husband of Jane E.
Hager.
John P. Gallo............................ 53 1985 President and Chief Operating Officer of IGI, Inc. since
1985; Chief Operating Officer and Treasurer of
Novavax, Inc. since September 1995; President of
Novavax, Inc. from January through September 1995;
Vice President of IGI, Inc. from 1983 to 1984; Vice
President of Vineland Laboratories, Inc. and Evsco
Pharmaceutical Corp. from 1973 to 1983; Director of
Novavax, Inc.
Jane E. Hager............................ 50 1977 President of Prescott Investment Corp. (real estate
development), Lyndeboro, NH since 1991; former
Treasurer and Secretary of IGI, Inc.; Director of
Fleet Bank-NH, Nashua, NH since 1986; Trustee of the
University System of New Hampshire; Director of
Crotched Mountain Rehabilitation Foundation,
Greenfield, NH; Overseer of Dartmouth Mary Hitchcock
Hospital; Incorporator of New Hampshire Charitable
Fund, Concord, NH; Mrs. Hager is the wife of Edward B.
Hager.
David G. Pinosky, M.D. .................. 66 1980 Member of the faculty of the University of Miami School
of Medicine since 1963; Medical Director, Psychiatric
Unit, Palmetto General Hospital, Hialeah, FL since
1986; President, Miami Psychiatric Associates since
1971; Medical Director of Highland Park General
Hospital, Miami, FL from 1971 to 1986.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION, OTHER BUSINESS EXPERIENCE
NAME AGE SINCE DURING PAST FIVE YEARS AND OTHER DIRECTORSHIPS
- ---- --- ----- ----------------------------------------------
<S> <C> <C> <C>
John O. Marsh, Jr. ...................... 69 1991 Of Counsel to the law firm of Hazel & Thomas, P.C.,
Falls Church, VA since January 1995 and Member from
1990 through 1994; Chairman of the Secretary of
Defense's Task Force on Quality of Life since 1995;
Chairman of the Reserve Forces Policy Board from 1989
to 1994; Legislative Counsel to Secretary of Defense,
1989; Secretary of the Army from 1981 to 1989; Acting
Assistant Secretary of Defense for Special Operations
and Low Intensity Conflict, 1988; Counsellor with
Cabinet rank to President Ford from 1974 to 1977;
Assistant for National Security Affairs to Vice
President Ford, from February 1974 to August 1974;
Assistant Secretary of Defense from 1973 to 1974; U.S.
Representative in Congress from the Seventh District
of Virginia from 1963 to 1971 and member of
Appropriations Committee from 1965 to 1971; Director
of Novavax, Inc.
Terrence O'Donnell....................... 52 1993 Member of law firm of Williams & Connolly, Washington,
D.C. since March 1992 and from March 1977 to October
1989; General Counsel of Department of Defense from
October 1989 to March 1992; Special Assistant to
President Ford from August 1974 to January 1977;
Deputy Special Assistant to President Nixon from May
1972 to August 1974.
Constantine L. Hampers, M.D.............. 63 1994 Chairman of the Board of Directors and Chief Executive
Officer of National Medical Care, Inc., a provider of
in-center and home kidney dialysis services and
products, since 1968; Executive Vice President of W.
R. Grace & Co. ('W. R. Grace') since 1991; Director of
Artificial Kidney Services at Peter Bent Brigham
Hospital and Assistant Professor of Medicine at
Harvard University School of Medicine prior to 1968
and for several years thereafter; Director of W. R.
Grace.
</TABLE>
For information relating to shares of the Company owned by each of the
directors, see 'Beneficial Ownership of Common Stock.'
BOARD AND COMMITTEE MEETINGS
The Board of Directors met five times (including one telephone conference
meeting) during 1995. Each of the current directors attended at least 75% of the
meetings of the Board of Directors and the committees on which he or she served.
The Board of Directors has an Executive Committee, an Audit Committee, an
Independent Committee of Outside Directors, a Financial Affairs Committee and a
Compensation and Stock Option Committee.
The Executive Committee, whose members are Dr. Hager, Mr. Gallo and Mrs.
Hager, has the authority to exercise the powers of the Board of Directors
between Board meetings. The Audit
6
<PAGE>
Committee, whose members are Dr. Pinosky, Messrs. Marsh and O'Donnell (Chairman)
and Mrs. Hager, reviews the audit of the Company's accounts, monitors the
effectiveness of the audit and evaluates the scope of the audit. The Independent
Committee of Outside Directors, whose members are Drs. Hampers and Pinosky and
Messrs. Marsh and O'Donnell, reviews and approves transactions with the
Company's majority-owned subsidiaries. The Financial Affairs Committee, whose
members are Dr. Hampers, Messrs. Marsh and O'Donnell and Mrs. Hager (Chairman),
advises management with respect to the investment of the Company's liquid
assets. The Compensation and Stock Option Committee, whose members are Drs.
Hampers and Pinosky and Messrs. Marsh (Chairman) and O'Donnell, reviews and
recommends salaries and other compensatory benefits for the principal officers
of the Company and grants stock options to key employees of the Company and its
subsidiaries. During 1995, the Executive Committee met five times, the Audit
Committee met two times, the Independent Committee of Outside Directors met
three times and the Compensation and Stock Option Committee met three times. The
Financial Affairs Committee did not meet during 1995. The Company has no
nominating committee of the Board of Directors.
DIRECTOR COMPENSATION AND STOCK OPTIONS
Each director not employed by the Company receives $2,000 for each meeting
of the Board of Directors he or she attends.
Pursuant to the Company's 1991 Stock Option Plan (the '1991 Plan'), each
director who is not an employee of the Company (an 'Eligible Director') is
granted a stock option for the purchase of 20,000 shares of Common Stock sixty
days after his or her initial election as a director. In addition, the 1991 Plan
provides that each Eligible Director will be granted a stock option to purchase
10,000 shares of Common Stock on the last business day of each of the calendar
years through 1996. Each Eligible Director elected on or after March 13, 1991
received an option for the initial grant of 20,000 shares, and each Eligible
Director then serving as a director received additional options for 10,000
shares in each of 1992, 1993, 1994 and 1995. Options granted to Eligible
Directors are exercisable in full beginning on the date which is six months
after the date of grant and terminate ten years after the date of grant. Such
options cease to be exercisable at the earlier of their expiration or three
years after an Eligible Director ceases to be a director for any reason. In the
event that an Eligible Director ceases to be a director on account of his death,
his outstanding options (whether exercisable or not on the date of death) may be
exercised within three years after such date (subject to the condition that no
such option may be exercised after the expiration of ten years from its date of
grant).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1995, the Company spun off the biotechnology business conducted
by its majority-owned subsidiary, Novavax, Inc. ('Novavax'), through a
distribution (the 'Distribution') to the Company's stockholders of all of the
Common Stock of Novavax ('Novavax Company Stock') held by the Company. The
Distribution was made on December 12, 1995 (the 'Distribution Date') to holders
of record of the Company's Common Stock on November 28, 1995 on the basis of one
share of Novavax Common Stock for each share of the Company's Common Stock held
by the Company's stockholders. Dr. Edward B. Hager and Messrs. John P. Gallo and
John O. Marsh, Jr., directors of the Company, serve on the seven-member Board of
Directors of Novavax, and Dr. Hager will serve as the Chairman of the Board and
Chief Executive Officer and Mr. Gallo will serve as the Chief Operating Officer
and Treasurer of Novavax through a date no later than June 30, 1996. Dr. Denis
M. O'Donnell, a Vice President of the Company from 1991 to 1995, is currently
President of Novavax. Dr. Hager, Mr. Gallo and Mrs. Jane E. Hager beneficially
owned approximately 10.8%, 6.5% and 5.3% of the outstanding shares of Novavax
Common Stock immediately following the Distribution.
License Agreement. In connection with the Distribution, the Company paid
Novavax $5,000,000 in return for a fully paid-up, ten-year license entitling it
to the exclusive use of Novavax's lipid vesicle and ultrasponge hydrogel
technologies and micellar nanoparticles ('Novavax Technologies') in the fields
of (i) animal pharmaceuticals, biologicals and other animal health products;
(ii) foods, food applications, nutrients and flavorings; (iii) cosmetics,
consumer products and dermatological over-the-counter and prescription products
(excluding certain topically delivered hormones); (iv) fragrances;
7
<PAGE>
and (v) chemicals, including herbicides, insecticides, pesticides, paints and
coatings, photographic chemicals and other specialty chemicals; and the
processes for making the same. The Company has the option, exercisable within
the last year of the ten-year term, to extend the License Agreement for an
additional ten-year period for $1,000,000. Novavax will retain the right to use
its Novavax Technologies for all other applications, including human vaccines
and pharmaceuticals.
To facilitate the spinoff of Novavax, the Company and Novavax entered into
the following intercompany agreements (the 'Intercompany Agreements'):
Distribution Agreement. The Distribution Agreement describes the principal
corporate transactions required to effect the Distribution, including, among
other things, the preparation of a registration statement registering the
Novavax Common Stock under the Exchange Act. The Distribution Agreement also
provides that each company will share equally any liabilities under federal and
state securities laws incurred as a result of the distribution of the
Information Statement relating to the spinoff.
Tax Matters Agreement. The Tax Matters Agreement provides, among other
things, that the Company will be responsible for all federal, state, local and
foreign tax liabilities of Novavax for periods ending on or prior to the
Distribution Date and Novavax will be responsible for all tax liabilities of
Novavax subsequent to that date. The Tax Matters Agreement further provides that
for the tax year of the Company that includes the Distribution Date and the tax
year of Novavax that commences immediately following the Distribution Date, the
Company will claim on its federal income tax returns certain specified tax
benefits and Novavax will not claim any of such tax benefits. The agreement also
provides that Novavax will be liable for any and all taxes, including interest
and penalties, incurred by Novavax as a result of Novavax engaging in any act
that results in the Distribution failing to qualify as a tax-free reorganization
under Section 368 of the Internal Revenue Code of 1986, as amended.
Transition Services Agreement. Through June 30, 1996, the Company will
continue to provide certain administrative services to Novavax, including
services relating to human resources, purchasing and accounting, data processing
and payroll services. Novavax will pay the Company a fee for all services
provided by Company employees, based on the standard hourly rate of such Company
employee, as well as all out-of-pocket expenses reasonably incurred by the
Company. The Company may increase the fees it charges Novavax for the scheduled
services, but only to the extent that the Company's cost of providing such
services to Novavax increases. Novavax employees will be eligible to participate
in certain of the Company's benefit programs. Novavax will reimburse the Company
for the costs and expenses associated with the provisions of the foregoing
services.
In addition to the services described in the Transition Services Agreement,
Edward B. Hager will serve as Chairman of the Board and Chief Executive Officer
and John P. Gallo will serve as Chief Operating Officer and Treasurer of Novavax
through a date no later than June 30, 1996 (the 'Transition Termination Date').
Prior to the Transition Termination Date, Dr. Hager will continue to devote the
majority of his time to the Company and will receive no compensation for his
services as Chairman and Chief Executive Officer of Novavax. Mr. Gallo will
devote approximately one half of his business time through the Transition
Termination Date to Novavax and its business, and the Company and Novavax will
each pay Mr. Gallo one half of his annual compensation. See 'Employment
Agreements.'
During 1995, the Company charged Novavax an aggregate of $35,000 under the
Intercompany Agreements.
In November 1990, the Company advanced $70,000 to Mr. Gallo, the President
of the Company, for educational expenses of his children. Mr. Gallo issued to
the Company a note bearing interest at the Company's bank borrowing rate plus
1/4% per annum and secured by 10,000 shares of Common Stock. As of February 15,
1996, the amount of indebtedness outstanding was $106,902, which is the largest
amount of indebtedness outstanding under the note since January 1, 1995.
In January 1993, Kevin Bratton, Vice President and Treasurer of the
Company, borrowed $100,000 from the Company in connection with the exercise of a
stock option granted to him on March
8
<PAGE>
14, 1983. Mr. Bratton issued to the Company a note that bears interest at the
Company's bank borrowing rate plus 1/4% per annum. The largest amount of
indebtedness outstanding under the note since January 1, 1995 was $125,410. In
December 1995, Mr. Bratton repaid $100,000 of the indebtedness under the note,
and, as of February 15, 1996, $25,706 of indebtedness remained outstanding. The
note is secured by 1,900 shares of Common Stock issued to Mr. Bratton upon
exercise of the stock option.
The Company has a $12,000,000 revolving credit facility and a $10,000,000
working capital line of credit with Fleet Bank--NH and Mellon Bank, N.A. Mrs.
Hager, a director of the Company, has been a director of Fleet Bank--NH since
1986.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and the five most highly compensated executive officers
of the Company who received compensation in excess of $100,000 during 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
AWARDS
ANNUAL COMPENSATION -------------
--------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION(1) OPTIONS(2) COMPENSATION(3)
PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- -------------------------------- --------- ----------- --------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Edward B. Hager ................ 1995 $ 314,050 $ 55,000 -- 50,000 $ 2,062
Chief Executive Officer 1994 285,500 55,000 $ 1,475 50,000 9,643
1993 259,545 35,000 -- 50,000 9,534
John P. Gallo .................. 1995 314,050 50,000 41,777 50,000 12,062
President and Chief 1994 285,500 50,000 38,668 50,000 9,643
Operating Officer 1993 259,545 30,000 35,387 50,000 9,534
Stephen G. Hoch ................ 1995 186,886 5,000 7,200 5,000 9,609
Vice President 1994 177,021 5,000 7,200 8,000 9,528
1993 168,732 5,000 24,998 -- 9,365
Denis M. O'Donnell ............. 1995 183,006 -- 7,200 -- 12,451
Vice President(4) 1994 169,500 25,000 7,200 8,000 9,487
1993 169,808 10,000 7,200 10,000 9,647
Lawrence N. Zitto .............. 1995 140,196 10,000 7,200 10,000 11,727
Vice President 1994 128,999 7,000 7,200 10,000 9,189
1993 115,952 7,000 6,500 10,000 9,819
Donald J. MacPhee .............. 1995 129,605 10,000 7,200 10,000 11,514
Vice President 1994 120,364 7,500 7,200 10,000 9,120
1993 109,217 5,000 5,600 10,000 8,885
</TABLE>
- ------------------
(1) The amounts shown in this column represent automobile allowances, relocation
expenses, medical expense reimbursements, housing allowances and
compensation for unused vacation time. Mr. Gallo received $36,237, $32,943
and $28,587 in 1995, 1994 and 1993, respectively, as compensation for unused
vacation time.
(2) The Company has never granted any stock appreciation rights.
9
<PAGE>
(3) The amounts shown in this column represent premiums for group life insurance
and medical insurance paid by the Company and the Company's contributions
under its 401(k) plan. The group life insurance premiums paid by the Company
for each of Drs. Hager and O'Donnell and Messrs. Gallo, Hoch, Zitto and
MacPhee for the last fiscal year were $1,297. The medical insurance premiums
paid by the Company for each of Drs. Hager and O'Donnell and Messrs. Gallo,
Hoch, Zitto and MacPhee were $8,207, $8,207, $8,207, $5,554, $8,207 and
$8,207, respectively. The Company's matching contributions under its 401(k)
savings plan to each of Drs. Hager and O'Donnell and Messrs. Gallo, Hoch,
Zitto and MacPhee for the last fiscal year were $2,558, $2,947, $2,558,
$2,758, $2,223 and $2,010, respectively.
(4) Dr. O'Donnell resigned as a Vice President of the Company as of the
Distribution Date. Dr. O'Donnell is currently President of Novavax.
STOCK OPTIONS
The following tables summarize option grants and exercises during 1995 to
or by the Named Executive Officers, and the value of the options held by such
persons at the end of 1995. No SARs were granted or exercised during 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES OF
SECURITIES STOCK PRICE APPRECIATION
UNDERLYING % OF TOTAL FOR OPTION TERM (3)
OPTIONS OPTIONS GRANTED EXERCISE OR --------------------------
GRANTED TO EMPLOYEES BASE PRICE EXPIRATION 5% 10%
NAME (#) IN FISCAL YEAR ($/SHARE) DATE $ $
- -------------------------------- ------------- ----------------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edward B. Hager(1) ............. 50,000 24.8% $ 6.63 12/06/05 $ 208,845 $ 527,085
John P. Gallo(1) ............... 50,000 24.8 6.63 12/06/05 208,845 527,085
Stephen G. Hoch(2) ............. 5,000 2.5 6.63 12/06/05 20,885 52,709
Denis M. O'Donnell(2) .......... -- -- -- -- -- --
Lawrence N. Zitto(2) ........... 10,000 5.0 6.63 12/06/05 41,769 105,417
Donald J. MacPhee(2) ........... 10,000 5.0 6.63 12/06/05 41,769 105,417
</TABLE>
- ------------------
(1) Options are exercisable in full six months after the date of grant.
(2) Options are exercisable one year after the date of grant, with 25% of the
shares covered thereby becoming exercisable at that time and with an
additional 25% of the shares becoming exercisable on each successive
anniversary date, with full vesting occurring on the fourth anniversary
date.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the dates the respective options were granted to
their expiration dates.
10
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE AT FISCAL YEAR-END AT FISCAL YEAR-END
EXERCISE REALIZED (#) ($)
NAME (#) ($) (1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(2)
- -------------------------------- ----------- ------------- ----------------------- -------------------------
<S> <C> <C> <C> <C>
Edward B. Hager ................ -- -- 345,000/50,000 $ 720,950/$81,000
John P. Gallo .................. 100,000 $ 1,037,250 295,000/50,000 739,450/81,000
Stephen G. Hoch ................ -- -- 42,000/16,000 85,075/13,325
Denis M. O'Donnell ............. -- -- 38,000/13,000 39,610/9,970
Lawrence N. Zitto .............. 8,000 108,960 33,250/24,250 72,685/26,015
Donald J. MacPhee .............. 2,500 22,975 35,250/24,250 84,420/26,015
</TABLE>
- ------------------
(1) Represents the difference between the exercise price and the last sales
price of the Common Stock on the date of exercise.
(2) Value based on market value of the Company's Common Stock at the end of
fiscal 1995 ($8.25 per share) minus the exercise price.
EMPLOYMENT AGREEMENTS
Pursuant to employment agreements between the Company and each of Dr. Hager
and Mr. Gallo, the terms of which agreements were extended by the Board of
Directors in December 1994, each of them will be entitled to a 10% increase in
salary for each year through 1999. In addition, each of these officers is
entitled to continuation of his salary until December 31, 1999 if terminated
without cause prior to that date. Pursuant to the terms of the Transition
Services Agreement between the Company and Novavax, Mr. Gallo will devote
approximately one half of his business time through June 30, 1996 to Novavax and
its business, and the Company and Novavax will each pay Mr. Gallo one half of
his annual compensation. See 'Certain Relationships and Related Transactions.'
Each of Dr. Hager and Mr. Gallo is bound by certain non-compete and
non-solicitation obligations for five years after termination of employment or
such longer period during which he receives severance payments under the
employment agreement.
REPORT OF THE COMPENSATION COMMITTEE
Overview and Philosophy
The Compensation and Stock Option Committee of the Board of Directors (the
'Committee') is composed of four non-employee directors and is responsible for
the development and administration of the Company's executive compensation
policies and programs, subject to the review and approval by the full Board. The
Committee reviews and recommends to the Board for its approval the salaries and
incentive compensation for the executive officers of the Company and grants
stock options to executives and other key employees of the Company and its
subsidiaries.
The objectives of the Company's executive compensation program are to:
o Support the achievement of strategic goals and objectives of the Company.
o Attract and retain key executives critical to the long-term success of
the Company.
o Align the executive officers' interests with the success of the Company.
Compensation Program
The Company's executive compensation program consists of three principal
elements -- base salary, annual cash incentive compensation and long-term
incentive compensation in the form of stock options.
The base salaries of Dr. Hager and Mr. Gallo have been established pursuant
to the terms of employment agreements between each of them and the Company. See
'Employment Agreements.' Base
11
<PAGE>
salary levels for the Company's executive officers are generally established
based on a review of compensation for competitive positions in the market, the
executives' job skills and experience and judgments as to past and future
contributions of the executives to the Company's success. Because the Company is
engaged in the animal health products and skin care products businesses, and,
during most of 1995, was engaged in the biotechnology business, it is difficult
to make meaningful compensation comparisons. The Committee seeks to set the
annual base salaries of its executives at levels competitive with those paid to
executives in these businesses. It seeks, however, to provide its executives
with opportunities for substantially higher compensation through annual
incentive awards and stock options.
The annual cash incentive compensation is designed to tie annual awards to
Company and individual executive performance. Because the Company's business
strategy prior to the spinoff of Novavax had been to use the profits from its
'core business' (animal health products and skin care products) to fund the
development of its biotechnology business, typical corporate performance
objectives based on increases in net income or earnings per share were not
applicable to the Company. Accordingly, the Committee considered a number of
factors in determining whether annual incentive awards should be paid, including
(i) achievement by the Company and/or specific business units of approved
budgets, new product introductions, progress in development of new products and
operating income and cash flow goals and (ii) achievement by the executives of
their assigned objectives. In considering individual performance, as contrasted
to Company performance, the Committee relies more on subjective evaluations of
executive performance than on quantitative data or objective criteria.
Long-term incentives for executive officers and key managers are provided
through stock options. The objectives of this program are to align executive and
stockholder long-term interests by creating a strong and direct link between
executive compensation and stockholder return, and to enable executives to
develop and maintain a significant, long-term stock ownership position in the
Company's Common Stock.
Stock options are granted at an option price equal to the fair market value
of the Company's Common Stock on the date of grant and will only have value if
the Company's stock price increases. In selecting executives eligible to receive
option grants and determining the amount of such grants, the Committee evaluates
a variety of factors including (i) the job level of the executive, (ii) option
grants awarded by competitors to executives at a comparable job level, and (iii)
past, current and prospective service to the Company rendered, or to be
rendered, by the executive. It has been the Company's practice to fix the
exercise price of option grants at 100% of the fair market value per share on
the date of grant.
Chief Executive Officer's 1995 Compensation
Dr. Edward B. Hager, Chairman of the Board and Chief Executive Officer of
the Company, is eligible to participate in the same executive compensation plans
available to the other Company executives. The Committee has set Dr. Hager's
total annual compensation, including annual incentive awards and potential
additional compensation derived from the Company's stock option program, at a
level it believes is competitive with other comparable companies.
Dr. Hager's annual compensation is governed in large part by the terms of
his employment agreement with the Company. In December 1994, the Company
extended the term of Dr. Hager's agreement through December 31, 1999. This
agreement provides that Dr. Hager will be entitled to a 10% increase in his base
salary each year. For 1995, Dr. Hager's salary was $314,050, an increase of
$28,550 (10%) over his salary for 1994.
In determining Dr. Hager's incentive compensation and stock option award,
the Committee considered not only the value added to the Company by Dr. Hager's
extensive medical expertise but also the diverse nature and competing demands of
the two businesses conducted by the Company. The Committee determined that the
Company's 'core business' had grown significantly in 1995 and that its
biotechnology business made significant progress in 1995 despite the lack of
funding normally available to comparable companies. The favorable progress in
both businesses was, in the Committee's judgment, attributable in large part to
the leadership efforts of Dr. Hager and the Company's President, Mr. Gallo.
Accordingly, the Committee awarded Dr. Hager a 1995 cash bonus of $55,000 (17.5%
of his annual salary), and granted him stock options in 1995 for the purchase of
50,000 shares of Common Stock of the Company.
12
<PAGE>
Tax Considerations
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over one million
dollars paid to its chief executive officer and its other Named Executive
Officers. Qualifying performance-based compensation will not be subject to the
deduction limit if certain requirements are met. Based on the compensation
received by Dr. Hager and the other Named Executive Officers, it does not appear
that the Section 162(m) limitation will have a significant impact on the Company
in the near term. While the Committee does not currently intend to qualify its
annual cash incentive compensation as a performance-based plan, it will continue
to monitor the impact of Section 162(m) on the Company.
Compensation and Stock Option
Committee
John O. Marsh, Jr., Chairman
Constantine L. Hampers, M.D.
David G. Pinosky, M.D.
Terrence O'Donnell
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Drs. Pinosky and Hampers and Messrs. Marsh and O'Donnell served on the
Company's Compensation and Stock Option Committee during 1994. Mr. Henry A.
Malkasian, who resigned from the Board of Directors in December 1995, was
Secretary of the Company from January 1980 through December 1995.
13
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total return on the AMEX Composite Index and a peer group over the same period
(assuming the investment of $100 in the Company's Common Stock, the AMEX
Composite Index and the peer group on December 31, 1990, and reinvestment of all
dividends). The peer group consists of the Company, The Liposome Company, Inc.,
Sequus Pharmaceuticals, Nexstar Pharmaceuticals and Advanced Polymer Systems,
Inc.
On December 12, 1995 (the 'Distribution Date'), the Company distributed all
of the shares of Novavax Common Stock held by the Company to its stockholders of
record as of November 28, 1995. For the period in the performance graph prior to
the Distribution Date, the Company has adjusted the share price of its Common
Stock to reflect the value of its Common Stock as if the spinoff of Novavax had
occurred on December 31, 1990. Such adjustments were determined based on the
relative market capitalizations of the Company and Novavax for the 20 trading
days immediately following the Distribution Date (i.e., the Company and Novavax
represented approximately 65% and 35%, respectively, of the combined market
capitalization).
<TABLE>
<CAPTION>
12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
IGI................................................... $ 100 $ 205 $ 144 $ 125 $ 170 $ 179
Peer Group............................................ $ 100 $ 410 $ 286 $ 203 $ 207 $ 437
AMEX Composite........................................ $ 100 $ 128 $ 130 $ 155 $ 140 $ 178
</TABLE>
PROPOSAL 2 -- RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Board of Directors has selected Coopers & Lybrand L.L.P. as auditors of
the Company for the fiscal year ending December 31, 1996, subject to
ratification by stockholders at the Meeting. If this proposal is not approved at
the Meeting, the Board of Directors will reconsider this selection. A
representative of Coopers & Lybrand L.L.P., which served as auditors for the
fiscal year ended December 31, 1995, is expected to be present at the Meeting to
respond to appropriate questions, and to make a statement if he or she so
desires.
14
<PAGE>
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Any proposal that a stockholder intends to present at the 1997 Annual
Meeting of Stockholders must be submitted to the Secretary of the Company at its
offices, Wheat Road and Lincoln Avenue, Buena, New Jersey 08310, no later than
December 13, 1996 in order to be considered for inclusion in the Proxy Statement
relating to that meeting.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented
for consideration at the Meeting other than that described above. However, if
any other business should come before the Meeting, it is the intention of the
persons named in the enclosed Proxy to vote, or otherwise act, in accordance
with their best judgment on such matters.
The Company will bear the costs of soliciting proxies. In addition to
solicitations by mail, the Company's directors, officers and regular employees
may, without additional remuneration, solicit proxies by telephone, telegraph,
facsimile and personal interviews. The Company will also request brokerage
houses, custodians, nominees and fiduciaries to forward copies of the proxy
material to those persons for whom they hold shares and request instructions for
voting the Proxies. The Company will reimburse such brokerage houses and other
persons for their reasonable expenses in connection with this distribution.
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
By Order of the Board of Directors,
DONALD J. MACPHEE,
Secretary
April 12, 1996
15
<PAGE>
APPENDIX
IGI, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, having received notice of the meeting and management's
proxy statement therefor, and revoking all prior proxies, hereby appoint(s) John
P. Gallo, Edward B. Hager and Paul P. Brountas, and each of them singly,
attorneys or attorney of the undersigned (with full power of substitution in
them and each of them) for and in the name(s) of the undersigned to attend the
Annual Meeting of Stockholders of IGI, Inc. (the "Company") to be held on
Wednesday, May 8, 1996 at 10:00 a.m. at the offices of Hale and Dorr, 60 State
Street, Boston, Massachusetts, and at any adjourned sessions thereof, and there
to vote and act upon the following matters in respect of all shares of stock of
the Company which the undersigned will be entitled to vote or act upon, with all
the powers the undersigned would possess if personally present.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN WITH RESPECT TO ANY PROPOSAL, THIS PROXY
WILL BE VOTED FOR SUCH PROPOSAL.
PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND
RETURN PROMPTLY IN ENCLOSED ENVELOPE.
Please sign this proxy exactly as your name appears on the books of the
Company. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more than
one name appears, a majority must sign. If a corporation, this signature should
be that of an authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED?
<PAGE>
__
|__| PLEASE MARK VOTES AS IN THIS EXAMPLE
(1) Election of Directors
__
|__| For
__
|__| Withhold
__
|__| For All Except
Edward B. Hager, M.D., John P. Gallo, Jane E.
Hager, David G. Pinosky, M.D., Constantine L.
Hampers, M.D., John O. Marsh, Jr. and Terrence
O'Donnell
If you do not wish your shares voted "For" a particular
nominee, mark the "For All Except" box and strike a line
through the nominee's name. Your shares voted will be
voted for the remaining nominee(s)
(2) To ratify the appointment of Coopers & Lybrand L.L.P. as
the Company's independent auditors for the 1996 fiscal
year.
- - -
For |_| Against |_| Abstain |_|
(3) IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
OR ANY ADJOURNMENT THEREOF.
Please be sure to sign and date this Proxy. Date: _______________________
______________________________________ _____________________________________
Stockholder sign here Co-owner sign here
