<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MGI PHARMA, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $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 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
LOGO
MGI PHARMA, INC.
Suite 300E, Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
__________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 9, 1995
TO THE SHAREHOLDERS OF MGI PHARMA, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of MGI
PHARMA, INC. ("MGI" or the "Company") will be held on Tuesday, May 9, 1995, at
the Minneapolis Marriott Southwest, 5801 Opus Parkway, Minnetonka, Minnesota, at
3:30 p.m., Central time, for the following purposes:
1. To elect a Board of six directors to serve for the ensuing year and
until their successors are elected;
2. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the Company for the fiscal year ending December 31,
1995; and
3. 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 13, 1995 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
[Signature of James V. Adam]
James V. Adam
Secretary
March 31, 1995
<PAGE>
LOGO
MGI PHARMA, INC.
Suite 300E, Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
__________________
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 9, 1995
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of MGI PHARMA, INC. ("MGI" or the "Company")
for use at the annual meeting of shareholders (the "Annual Meeting") to be held
on Tuesday, May 9, 1995, at the Minneapolis Marriott Southwest, 5801 Opus
Parkway, Minnetonka, Minnesota, at 3:30 p.m., Central time, and at any
adjournment thereof, for the purposes set forth in the Notice of Annual Meeting
of Shareholders. This Proxy Statement and the form of proxy enclosed are being
mailed to shareholders commencing on or about March 31, 1995. A copy of the
Company's Annual Report to Shareholders for the year ended December 31, 1994 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 13, 1995 will be entitled to
vote at the Annual Meeting. As of that date, a total of 11,951,244 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. 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 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.
<PAGE>
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, but in addition,
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.
Six 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
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<PAGE>
in the enclosed form of proxy may vote for a substitute nominee in their
discretion. Information regarding the nominees is set forth below:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS
NAME AGE DIRECTOR SINCE EXPERIENCE FOR PAST FIVE YEARS
---------------------- --- -------------- ---------------------------------
<S> <C> <C> <C>
Frederick W. Armstrong 64 March 1988 Retired corporate executive; prior to retirement in January 1992, Vice President
of American Cyanamid Company (chemicals, pharmaceuticals, agricultural and
consumer products) since December 1985 (1)
Charles E. Austin 67 March 1981 Retired corporate executive; board member and advisor to several publicly and
privately held companies (2)
Hugh E. Miller 59 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) since October 1989 (3)
Robert W. Powell, Jr. 64 December 1988 Retired corporate executive; advisor to Aegis Research Corporation; prior to
retirement in August 1992, Vice President and Treasurer of Martin Marietta
Corporation (aerospace, technology, electronics and information management) since
April 1985
Lee J. Schroeder 66 May 1989 President and Director, Lee Schroeder & Associates, Inc. (pharmaceutical industry
consultants) since April 1985 (4)
Kenneth F. Tempero 55 September 1987 Chairman of the Board and Chief Executive Officer of MGI since September 1987 (5)
------------------------
</TABLE>
(1) Mr. Armstrong is also a director of CYTEC Industries Inc.
(2) Mr. Austin is also a director of Embrex Inc., Cytogen, Inc. and Hyal
Pharmaceutical, Inc.
(3) Mr. Miller is also a director of Wilmington Trust Corporation
(4) Mr. Schroeder is also a director of FirsTier Bank Lincoln, N.A., Interneuron
Pharmaceuticals, Inc. and Celgene Corporation.
(5) Dr. Tempero is also a director of EMPI, Inc.
The Board of Directors has an audit committee consisting of Messrs. Miller and
Powell, a compensation committee consisting of Messrs. Armstrong, Austin and
Schroeder and a nominating committee consisting of Messrs. Austin and Schroeder
and Dr. Tempero. The audit committee reviews and makes
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<PAGE>
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 1994, the audit committee held two
meetings and the compensation committee held three 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 1994, the Board of Directors held seven meetings. Each incumbent
director attended at least 75% of the total number of meetings of the Board of
Directors and committees on which he served that were held during the period he
was a member of the Board of Directors or such committees. 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 at the meeting of the Board of Directors preceding the Company's annual
meeting of shareholders. Each nonemployee director currently receives $1,000
for each meeting of the Board of Directors that he attends in person. Under the
Company's 1993 Nonemployee Director Stock Option Plan (the "Director Plan"),
each nonemployee director automatically receives an option to purchase 7,500
shares of Common Stock on the day following his reelection to the Board of
Directors. In addition, each new nonemployee director will receive an option to
purchase 10,000 shares of Common Stock on the date of such director's initial
election or appointment to the Board of Directors. The exercise price of all
such options granted under the Director Plan is the fair market value of the
Common Stock on the date of grant.
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<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company, who serve at the pleasure of the Board
of Directors, are as follows.
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------ --- --------------------------------------------------------------------------------
<S> <C> <C>
Kenneth F. Tempero, M.D., Ph.D. 55 Chairman of the Board and Chief Executive Officer since September 1987
Charles C. Muscoplat, Ph.D. 46 Executive Vice President, New Business since November 1987
James V. Adam 46 Vice President, Chief Financial Officer, Secretary and Treasurer since March 1988
</TABLE>
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 through stock options, restricted stock and restricted stock units and
through 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.
-5-
<PAGE>
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 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. For this
purpose, the Committee compares the Company with a self-selected group of
development stage pharmaceutical companies with similar market capitalizations,
business characteristics and strategies.
In making compensation decisions regarding the Company's executive officers,
the Committee first meets with Dr. Tempero, the Company's Chief Executive
Officer, who presents his recommendations with respect to compensation for the
other executive officers. The Committee, with Dr. Tempero not present, then
reviews Dr. Tempero's 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 Dr. Tempero.
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 and recommendations of the
Company's compensation consultant, Frederick W. Cook & Co., Inc. (the
"Compensation Consultant"), hired by the Committee in 1993.
At its meeting in January 1994, the Committee set 1994 base salaries for the
executive officers and made 1994 stock option grants to those officers. Dr.
Muscoplat received a modest increase in base salary of approximately 3% in line
with cost-of-living increases in 1993. In connection with the recommendations
of the Compensation Consultant, Mr. Adam's base cash compensation was increased
by approximately 10% for 1994, based on the Committee's conclusion that Mr.
Adam's salary was below the median industry range. At the same time, options to
purchase 22,000 shares of the Company's Common Stock were awarded by the
Committee to both Dr. Muscoplat and Mr. Adam. These options vest over a four-
year period and
-6-
<PAGE>
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, 1994," which follows this report. The size of the option grants was
based on the Committee's subjective judgment that these amounts were appropriate
to retain these highly qualified officers in coming years and to provide an
incentive for continued high quality performance after evaluating the
information provided and recommendations made by the Compensation Consultant.
The size of the option grants was also based on the Committee's 1993
determination that the executive officers' ownership stake in the Company should
be increased over the next several years, after consideration of the amount and
terms of stock options already held by Dr. Muscoplat and Mr. Adam.
Cash incentive bonuses for 1994 were awarded shortly after the end of 1994.
The compensation program for executive officers in 1994 was a continuation of
the compensation program adopted by the Committee 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 Dr. Tempero. This determination was based
primarily on 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. At its
meeting in January 1995, the Committee awarded cash bonuses for 1994 in the
range of 11% to 14% of 1994 base salaries to the executive officers, other than
the Chief Executive Officer. The size of the cash bonuses was based on the
significant achievements of the executive officers in: (i) obtaining approval
by the United States Food and Drug Administration to market Salagen(R) Tablets,
the Company's lead product, (ii) subsequently launching the product into the
pharmaceutical marketplace within less than two months after receipt of FDA
approval, and (iii) expanding the international market for Salagen(R) Tablets by
finalizing licensing agreements with Kissei Pharmaceutical Co., Ltd. and The
Upjohn Company of Canada to register and market Salagen(R) Tablets in Japan and
Canada, respectively. Cash bonuses for 1994 were lower in amount than for 1993
due, in large part, to disappointing sales growth for Salagen(R) Tablets
following product launch and to the continuing gap in the Company's short-term
product pipeline. In awarding the 1994 cash bonuses, the Committee also
considered the individual accomplishments of the executive officers and of the
operating groups reporting to each executive officer.
Compensation of the Chief Executive Officer
Dr. Tempero is compensated in accordance with the criteria discussed above
relating to the executive compensation program. The Committee makes subjective
decisions regarding Dr. Tempero's compensation contemporaneously with that of
the other executive officers. Dr. Tempero received slightly less than a 2%
increase in base salary for 1994. At the same time, the Committee awarded Dr.
Tempero options to acquire 60,000 shares of Common Stock. These options have
the same vesting and pricing terms as the options granted to the other executive
officers, as described
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<PAGE>
in the table entitled "Option Grants During Year Ended December 31, 1994," which
follows this report. As with the other executive officers, the size of Dr.
Tempero's option grant was based on the Committee's subjective judgment that
this amount was appropriate to retain his services in coming years and to
provide an incentive for continued high quality performance. The size of the
option grant was also based on the Committee's 1993 determination that the
executive officers' ownership stake in the Company should be increased over the
next several years, after consideration of the amount and terms of stock options
already held by Dr. Tempero.
The compensation program for Dr. Tempero, as with the other executive officers
as set forth above, was a continuation of the compensation program adopted by
the Committee in 1993, with a combination of 1994 base salary and a 45% bonus
considered to be a fair payment for good performance by the Chief Executive
Officer. Early in 1995, the Committee awarded Dr. Tempero 18% of his 1994 base
salary as a cash bonus for 1994, which was lower in amount than for 1993 due
primarily to disappointing sales growth for Salagen(R) Tablets following product
launch and the continuing gap in the Company's short-term product pipeline.
While not required as part of this report, it should be noted that no
increases in 1995 base cash compensation were granted to the Company's executive
officers by the Board of Directors at its meeting held in January 1995.
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 a provision in its 1994 Stock Incentive
Plan intended to preserve the full deductibility of certain performance-based
compensation under the Code.
FREDERICK W. ARMSTRONG,
CHARLES E. AUSTIN and
LEE J. SCHROEDER,
The Members of the Compensation Committee
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<PAGE>
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
and the two other executive officers of the Company.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
AWARDS
------------
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION (1)
-------------------------- ---- -------- -------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Kenneth F. Tempero 1994 $275,000 $ 50,000 60,000 $28,576
Chairman and 1993 270,000 150,000 50,000 33,574
Chief Executive Officer 1992 260,000 105,000 25,000 18,442
Charles C. Muscoplat 1994 $175,560 $ 20,000 22,000 $25,906
Executive Vice President, 1993 170,600 71,000 25,000 22,223
New Business 1992 165,600 47,000 12,000 19,101
James V. Adam 1994 $144,000 $ 20,000 22,000 $23,274
Vice President, Chief 1993 131,160 59,000 20,000 16,899
Financial Officer, 1992 126,720 36,000 10,000 12,891
Secretary and Treasurer
</TABLE>
_____________________
(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 1994, Company contributions were as follows: Dr. Tempero, $6,750, Dr.
Muscoplat, $6,750, and Mr. Adam, $6,480.
Company contributions under the Money Purchase Retirement Plan are made
annually following the end of each calendar year. For 1994, Company
contributions were as follows: Dr. Tempero, $14,388, Dr. Muscoplat, $14,388,
and Mr. Adam, $12,089.
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 1994, Company payments were as follows: Dr. Tempero, $7,438,
Dr. Muscoplat, $4,768, and Mr. Adam, $4,705.
None of the Company's executive officers currently has a written employment
agreement. Each executive officer 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) such officer will be
entitled to receive a lump-sum cash payment equal to 36 times his monthly
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<PAGE>
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
$825,000 for Dr. Tempero, $526,680 for Dr. Muscoplat, and $432,000 for Mr. Adam)
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 lump-sum amount payable under each termination agreement is subject to
reduction to avoid nondeductibility of any payment or benefit (under the
termination agreement or any other arrangement with such officer) solely by
reason of Section 280G of the Code. Section 280G provides that if "parachute
payments" (compensatory payments contingent on a change in control) made to a
covered individual 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 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.
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 1994 base compensation.
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------ POTENTIAL REALIZABLE
% OF VALUE AT ASSUMED
TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION
UNDERLYING EMPLOYEES OR BASE FOR OPTION TERM (2)
OPTIONS IN FISCAL PRICE EXPIRATION ------------------------------
NAME GRANTED (1) YEAR 1994 ($/SHARE) DATE 5% 10%
----------------------- ----------- ---------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
All Shareholders'
Stock Appreciation N/A N/A N/A N/A $101,417,669 $256,948,651
Kenneth F. Tempero 60,000 16.23% $13.50 1/06/04 $ 509,405 $ 1,290,931
Charles C. Muscoplat 22,000 5.95% $13.50 1/06/04 $ 186,782 $ 473,342
James V. Adam 22,000 5.95% $13.50 1/06/04 $ 186,782 $ 473,342
</TABLE>
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<PAGE>
____________________
(1) The options are exercisable as follows: 25% of such option shares on
January 6, 1995; 50% of such option shares on January 6, 1996; 75% of such
option shares on January 6, 1997; and 100% of such option shares on January
7, 1998. All options become fully exercisable upon the occurrence of certain
changes in control. Upon the occurrence of certain defined acceleration
events, these options would become immediately exercisable. All options were
granted with an exercise price equal to $13.50, the closing price of the
Common Stock on The Nasdaq Stock Market on the date of grant. All options
were granted in tandem with limited stock appreciation rights (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.
(2) These amounts represent certain assumed rates of appreciation only. 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. If the
price of the Common Stock were to appreciate at 5% and 10%, respectively,
compounded annually for ten years, then the Common Stock would have a price
on January 6, 2004 of $21.99 and $35.01 per share, respectively (assuming no
change in the number of outstanding shares of the Common Stock).
The following table summarizes option exercises during the year ended December
31, 1994 by the executive officers named in the Summary Compensation Table
above, and the values of the options held by such persons at December 31, 1994.
AGGREGATED OPTION EXERCISES DURING YEAR ENDED DECEMBER 31, 1994
AND VALUE OF OPTIONS HELD AT DECEMBER 31, 1994
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS HELD AT OPTIONS HELD AT
DECEMBER 31, 1994 DECEMBER 31, 1994
SHARES ACQUIRED VALUE (EXERCISABLE/ (EXERCISABLE/
NAME ON EXERCISE REALIZED (1) UNEXERCISABLE) UNEXERCISABLE) (1)
-------------------- --------------- ------------ ----------------- ------------------
<S> <C> <C> <C> <C>
Kenneth F. Tempero 48,620 $360,727.50 229,630/98,750 $24,172.50/$0.00
Charles C. Muscoplat 46,100 $316,987.50 130,038/41,250 $14,036.00/$0.00
James V. Adam 14,040 $ 94,770.00 70,000/37,500 $70,437.50/$0.00
</TABLE>
__________________
(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, 1994.
-11-
<PAGE>
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 Stock 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 29, 1989, and
the reinvestment of all dividends).
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
12/29/89 12/31/90 12/31/91 12/31/92 12/31/93 12/30/94
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
MGI PHARMA, INC. 100.0 105.9 435.3 288.2 347.1 147.1
Nasdaq Stock Market (U.S. Companies) 100.0 84.9 136.3 158.6 180.9 176.9
Nasdaq Pharmaceutical Stock Index 100.0 119.9 318.8 265.5 236.6 178.4
</TABLE>
-12-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of March 15, 1995, 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, 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.
<TABLE>
<CAPTION>
Amount and Nature
Name of Beneficial Owner of Beneficial Ownership Percent of Class
------------------------ ----------------------- ----------------
<S> <C> <C>
Kopp Investment Advisors, Inc. (1) 2,225,663 18.6%
6600 France Avenue
Suite 672
Edina, Minnesota 55435
American Cyanamid Company (2) 941,483 7.9%
One Cyanamid Plaza
Wayne, New Jersey 07470
Frederick W. Armstrong (3) 26,282 *
Charles E. Austin (3) (4) 69,782 *
Hugh E. Miller (3) 10,875 *
Robert W. Powell, Jr. (3) 11,075 *
Lee J. Schroeder (3) 19,571 *
Kenneth F. Tempero (3) (5) (6) 394,058 3.3%
Charles C. Muscoplat (3) (6) 207,306 1.7%
James V. Adam (3) (6) 111,186 *
All directors and executive 850,135 7.1%
officers as a group (8 persons) (3) (6)
</TABLE>
_______________________
* Less than 1%
(1) Disclosure is made in reliance upon a statement on Schedule 13G, dated as of
February 10, 1995, filed with the Securities and Exchange Commission. Such
Schedule 13G indicates that while Kopp Investment Advisors, Inc.
beneficially owns and exercises shared investment discretion with respect to
such shares, it does not vote and is not the record owner of such shares.
-13-
<PAGE>
(2) Disclosure is made in reliance upon a statement on Schedule 13D, dated as of
December 1, 1994, filed with the Securities and Exchange Commission. Such
Schedule 13D indicates that American Cyanamid Company is a subsidiary of
American Home Products Corporation.
(3) Includes the following number of shares which could be acquired within 60
days of March 15, 1995 through the exercise of stock options: Mr. Armstrong,
21,282 shares; Mr. Austin, 23,782 shares; Mr. Miller, 6,875 shares; Mr.
Powell, 6,875 shares; Mr. Schroeder, 12,298 shares; Dr. Tempero, 244,630
shares; Dr. Muscoplat, 135,538 shares; Mr. Adam, 75,500 shares; and all
directors and executive officers as a group, 526,780 shares.
(4) Excludes 7,000 shares beneficially owned by Mr. Austin's spouse and
disclaimed by Mr. Austin.
(5) Excludes 57,583 shares beneficially owned by Dr. Tempero's spouse and 3,200
shares beneficially owned by a trust for the benefit of Dr. Tempero's
children and disclaimed by Dr. Tempero.
(6) Includes the following number of shares beneficially owned through the
Company's Retirement Savings Plan: Dr. Tempero, 7,538 shares; Dr.
Muscoplat, 8,064 shares; and Mr. Adam, 12,650 shares.
CERTAIN TRANSACTIONS
Pursuant to the Company's Stock Acquisition Assistance Loan Program (the "Loan
Program"), the Company may make loans to selected key employees for the exercise
of options granted under its 1984 Stock Option Plan and its 1994 Stock Incentive
Plan or payment of taxes resulting from exercise of nonqualified stock options
granted under the 1984 Stock Option Plan and 1994 Stock Incentive Plan or
conversion of restricted stock units. The Loan Program is administered by the
Compensation Committee. All loans made under the Loan Program bear interest at
a rate equal to the lesser of (i) the minimum applicable rate to prevent
imputation of interest as publicly announced from time to time by the Internal
Revenue Service (7.19% as of March 1, 1995), and (ii) 4.5% above the discount
rate on ninety-day commercial paper in effect at the Federal Reserve Bank in the
Federal Reserve District encompassing Minnesota (5.25% as of March 1, 1995).
Accrued interest is payable annually prior to maturity. Loans are full
recourse, unsecured obligations with principal and accrued interest payable on
demand (or upon earlier default, death or termination of employment). The
amount of principal and accrued interest which may be outstanding to any
participant on any date under the Loan Program may not exceed 200% of such
participant's annual base salary on such date.
As of December 31, 1994, Dr. Tempero, Dr. Muscoplat and Mr. Adam had
outstanding balances under the Loan Program of $549,400, $86,875 and $52,650,
respectively, all of which was borrowed in connection with the exercise of stock
options by such individuals. The largest amount outstanding under the Loan
Program during 1994 was $549,964 for Dr. Tempero, $91,875 for Dr. Muscoplat and
$52,650 for Mr. Adam.
-14-
<PAGE>
SECTION 16(A) REPORTING
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, 1994, all Section 16(a) reporting requirements applicable to the
Company's directors, executive officers and such beneficial owners were complied
with.
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, 1995. 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 RECOMMENDS 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 18, 1995.
BY ORDER OF THE BOARD OF DIRECTORS
[Signature of James V. Adam]
James V. Adam
Secretary
March 31, 1995
-15-
<PAGE>
PROXY
MGI PHARMA, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having duly received the Notice of Annual Meeting of
Shareholders and Proxy Statement dated March 31, 1995, revoking all prior
proxies, hereby appoints Kenneth F. Tempero and James V. Adam, and each of
them, with power to appoint a substitute, to vote all shares the undersigned is
entitled to vote at the Annual Meeting of Shareholders of MGI PHARMA, INC. (the
"Company") to be held on May 9, 1995, and at all adjournments thereof, as
specified below on each matter referred to, and, in their discretion, upon any
other matters which may be brought before the meeting.
1. ELECTION OF FREDERICK W. ARMSTRONG, CHARLES E. AUSTIN, HUGH E. MILLER, ROBERT
W. POWELL, JR., LEE J. SCHROEDER AND KENNETH F. TEMPERO AS DIRECTORS FOR THE
TERM DESCRIBED IN THE PROXY STATEMENT.
[_] VOTE FOR all nominees listed [_] WITHHOLD AUTHORITY to vote for
above (except as marked to all nominees listed above.
the contrary below).
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
--------------------------------------------------------------------------------
2. RATIFICATION AND APPROVAL OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE
INDEPENDENT AUDITORS FOR THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31,
1995.
[_] FOR [_] AGAINST [_] ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR NAMED IN ITEM 1,
FOR ITEM 2 AND IN THE DISCRETION OF THE NAMED PROXIES ON ALL OTHER MATTERS.
(continued and to be dated and signed on other side)
Please sign exactly as name appears below. When shares are held by joint
tenants, both must sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
have signed in full corporate name by President or other authorized officer. If
a partnership, please have signed in partnership name by authorized person.
---------------------------------
Signature
---------------------------------
Signature (if held jointly)
DATED: ____________________, 1995
PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
