<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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE>
MGI PHARMA, INC.
Suite 300E, Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
__________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 14, 1996
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 14, 1996, 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, 1996;
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 18, 1996 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
Lori-jean Gille
Secretary
March 29, 1996
<PAGE>
MGI PHARMA, INC.
Suite 300E, Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
__________________
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 14, 1996
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 14, 1996, 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 29, 1996. A copy of the
Company's Annual Report to Shareholders for the year ended December 31, 1995 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 18, 1996 will be entitled
to vote at the Annual Meeting. As of that date, a total of 12,784,411 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
2
<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 65 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 68 March 1981 Retired corporate executive; board member
and advisor to several publicly and
privately held companies (2)
Hugh E. Miller 60 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. 65 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 67 May 1989 President and Director, Lee Schroeder &
Associates, Inc. (pharmaceutical industry
consultants) since April 1985 (4)
Kenneth F. Tempero 56 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 Co., Inc.
(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. In November 1995, Dr. Tempero
informed the Board that he would be retiring from MGI. The Board has
initiated a search for a new Chief Executive Officer and Dr. Tempero has
agreed to continue in his current capacity until his successor is chosen.
Dr. Tempero will resign as a director of the Company effective with his
retirement from the Company. The Board currently intends to appoint Dr.
Tempero's successor as Chief Executive Officer to fill the vacancy on the
Board that will be created by Dr. Tempero's retirement. See "-- Summary
Compensation Table."
3
<PAGE>
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 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 1995, the audit committee held two meetings and the
compensation committee held four 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 1995, the Board of Directors held six 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.
4
<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
- ------------------------------- --- ---------------------------------------
<C> <C> <S>
Kenneth F. Tempero, M.D., Ph.D. (1) 56 Chairman of the Board and Chief
Executive Officer since September 1987
James V. Adam 47 Vice President, Chief Financial Officer
since March 1988
Lori-jean Gille 44 Vice President, General Counsel since
January 1992; Secretary and an executive
officer of the Company since July 1995.
Prior to joining the Company, Ms. Gille was
Director, General Counsel Program for
Dorsey & Whitney LLP from September 1992 to
December 1991 and prior to that was General
Counsel of United HealthCare Corporation
Jon C. Lee 57 Vice President, Sales and Marketing and an
executive officer since July 1995. Prior
to joining the Company, Mr. Lee served in
various capacities at Eli Lilly and Company
since 1964
Charles C. Muscoplat, Ph.D. 47 Executive Vice President since November
1987
Rajesh C. Shrotriya, M.D. 52 Vice President, Chief Medical Officer and
an executive officer since July 1995; Vice
President, Medical Affairs from August 1994
to July 1995. Prior to joining the
Company, Dr. Shrotriya served in various
capacities at Bristol-Myers Squibb Company
since 1976
</TABLE>
_______
(1) In November 1995, Dr. Tempero informed the Board that he would be retiring
from MGI. The Board has initiated a search for a new Chief Executive Officer
and Dr. Tempero has agreed to continue in his current capacity until his
successor is chosen. See "-- Summary Compensation Table."
5
<PAGE>
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.
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 from time to time compares the Company with a self-
selected group of pharmaceutical companies with similar market capitalizations,
business characteristics and strategies.
6
<PAGE>
In making compensation decisions regarding the Company's executive
officers, the Committee first meets with the Company's Chief Executive Officer,
who presents his recommendations with respect to compensation for the other
executive officers. The Committee, with the Chief Executive Officer not
present, then reviews his recommendations related to the other executive
officers and makes its own independent determination with respect to each
executive officer, as well as with respect to the Chief Executive Officer.
Executive Compensation Program
The components of the Company's executive compensation program which are
subject to the discretion of the Committee on an individual basis include (a)
base salaries, (b) stock incentive compensation and (c) performance-based,
incentive bonuses. The Committee makes determinations with respect to these
components based on a subjective evaluation of each officer, after consideration
of both Company and individual performance objectives.
At its meeting in January 1995, the Committee set 1995 base salaries for
and made 1995 stock option grants to the executive officers. Drs. Tempero and
Muscoplat and Mr. Adam were the Company's only executive officers at the
beginning of 1995. No increases over 1994 base compensation were made for the
Company's three executive officers at the January 1995 meeting. Option grants
to the Company's executive officers remained at the same level as had been
granted in 1994. These options vest over a four-year period and are exercisable
at the fair market value of the Common Stock on the date of grant, as set forth
in the table entitled "Option Grants During Year Ended December 31, 1995," 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 and to provide an incentive for continued high quality
performance.
Cash incentive bonuses for 1995 were awarded shortly after the end of 1995.
Due to the election of three additional executive officers (Ms. Gille, Mr. Lee
and Dr. Shrotriya) in July 1995, cash incentive bonus determinations were made
for six executive officers by the Committee. The compensation program for
executive officers in 1995 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 1996, the Committee
awarded cash bonuses for 1995 in the range of 14% to 19% of 1995 base salaries
to the executive officers, other than the Chief Executive Officer. The size of
the cash bonuses remained, for a second year, well below the target bonus
objectives established by the Committee. This low level of bonuses granted to
executive officers for 1995 performance was due in large part to continued
disappointing sales growth for
7
<PAGE>
Salagen/(R)/ Tablets and the continuing gap in the Company's short-term product
pipeline. The amount of cash bonuses awarded was based on continuing solid
performance of the Company in the area of partnering its technology development,
highlighted by the conclusion of an agreement with Dainippon Pharmaceutical Co.,
Ltd. ("Dainippon") relating to development of the Company's acylfulvene
technology for the Japanese market, coupled with the potential of approximately
$12 million dollars being paid by Dainippon over the next several years for use
in development of the acylfulvene technology and in concluding of the Phase III
clinical trails relating to use of Salagen/(R)/ Tablets for treatment of dry
mouth and dry eyes in Sjogren's syndrome patients. In awarding the 1995 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. As with the other executive officers, Dr. Tempero
did not receive any increase in base compensation for 1995, while stock options
were awarded at the same level as in 1994. These options have the same vesting
and pricing terms as the options granted to the other executive officers, as
described in the table entitled "Option Grants During Year Ended December 31,
1995," 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 and to provide
an incentive for continued high quality performance.
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 1995 base salary and a
45% bonus considered to be a fair payment for good performance by the Chief
Executive Officer. Early in 1996, the Committee awarded Dr. Tempero 24% of his
1995 base salary as a cash bonus for 1995, based on conclusion of the agreement
with Dainippon discussed above and completion of the Phase III clinical trials
for the proposed Sjogren's syndrome indication, partially offset by
disappointing sales growth for Salagen(R) Tablets and the continuing gap in the
Company's short-term product pipeline.
8
<PAGE>
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
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation awarded to
or earned by the Chief Executive Officer and the other named executive officers
of the Company.
<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 1995 $275,000 $ 65,000 60,000 $26,305
Chairman and 1994 275,000 50,000 60,000 28,576
Chief Executive Officer 1993 270,000 150,000 50,000 33,574
James V. Adam 1995 $144,000 $ 27,500 22,000 $21,093
Vice President, Chief 1994 144,000 20,000 22,000 23,274
Financial Officer 1993 131,160 59,000 20,000 16,899
Lori-jean Gille (2) 1995 $134,352 $ 22,500 11,500 $12,389
Vice President, General
Counsel and Secretary
Jon C. Lee (2) 1995 $ 79,063 $ 12,500 45,000 $35,526
Vice President,
Sales and Marketing
</TABLE>
9
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Charles C. Muscoplat 1995 $175,560 $27,500 22,000 $22,354
Executive Vice President 1994 175,560 20,000 22,000 25,906
1993 170,600 71,000 25,000 22,223
Rajesh C. Shrotriya (2) 1995 $215,250 $30,000 11,500 $44,008
Vice President,
Chief Medical Officer
</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 1995, Company contributions were as follows: Dr. Tempero, $4,500, Mr.
Adam, $4,320, Ms. Gille, $4,031, Mr. Lee, $0.00, Dr. Muscoplat, $4,500 and
Dr. Shrotriya, $4,500.
Company contributions under the Money Purchase Retirement Plan are made
annually following the end of each calendar year. For 1995, Company
contributions were as follows: Dr. Tempero, $14,367, Mr. Adam, $12,068, Ms.
Gille, $8,358, Mr. Lee, $0.00, Dr. Muscoplat, $14,367 and Dr. Shrotriya,
$4,136.
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 1995, Company payments were as follows: Dr. Tempero, $7,438,
Mr. Adam, $4,705, Ms. Gille, $0.00, Mr. Lee, $35,526, Dr. Muscoplat, $3,487
and Dr. Shrotriya, $35,372.
(2) Ms. Gille and Dr. Shrotriya were named executive officers of the Company in
July 1995. Mr. Lee joined the Company in July 1995.
In November 1995, Dr. Tempero informed the Board that he would be retiring
from MGI. In connection with this planned retirement, MGI and Dr. Tempero
entered into a retirement agreement effective December 31, 1995 (the "Retirement
Agreement"). The Board has initiated a search for a new Chief Executive Officer
and Dr. Tempero has agreed to continue in his current role, at the pleasure of
the Board, until his successor is retained (the "Retirement Date").
From the time that Dr. Tempero's successor is selected through September
30, 1997, Dr. Tempero will, upon request from MGI, provide up to one day per
month of consulting services on MGI's behalf. Under the Retirement Agreement,
Dr. Tempero will be paid an annualized amount of $280,500 during the period from
January 1, 1996 to the later of the Retirement Date or September 30, 1997. As
part of Dr. Tempero's compensation under the Retirement Agreement, MGI will,
through September 30, 1997, pay Dr. Tempero's portion of coverage under MGI
insurance plans and will also make a lump-sum cash payment to Dr. Tempero as of
the Retirement Date for employee benefit contributions that MGI would have made
on his behalf had he remained employed through September 30, 1997. In addition,
on the Retirement Date, MGI will transfer to Dr. Tempero, without charge, its
interest in his split-dollar life policies. Also, at the Retirement Date, all
options previously granted to Dr. Tempero and not then vested, will accelerate
and become immediately exercisable, provided, that the exercise
10
<PAGE>
of any options after the Retirement Date will be subject to satisfaction of the
conditions that Dr. Tempero does not (i) violate the non-compete or
confidentiality provisions contained in the Retirement Agreement or (ii)
otherwise engage in conduct, which in the opinion of the Board of Directors,
adversely affects MGI. If the conditions described in (i) or (ii) are not
satisfied, the options may, by decision of the Board of Directors, become null
and void.
On the Retirement Date, Dr. Tempero's termination agreement (see discussion
below under "-- Termination Agreements") with the Company will become null and
void. Should a change in control of MGI occur after the Retirement Date but
prior to September 30, 1997, all monies yet to be paid to Dr. Tempero under the
Retirement Agreement shall immediately be paid to him in lump sum.
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 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 $841,500 for Dr.
Tempero, $447,000 for Mr. Adam, $412,056 for Ms. Gille, $502,200 for Mr. Lee,
$526,680 for Dr. Muscoplat and $660,750 for Dr. Shrotriya) 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. In
addition, to the payments received upon a Change in Control of the Company, Dr.
Shrotriya's termination
11
<PAGE>
agreement provides that if, prior to a Change in Control, Dr. Shrotriya is
terminated by the Company without Cause, he will be entitled to a termination
benefit payment equal to 12 times his monthly base salary (as in effect in the
month preceding the month in which the termination occurs).
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 1995 base compensation.
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1995
<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 1995 ($/SHARE) DATE 5% 10%
- ------------------ ----------- --------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Kenneth F. Tempero 60,000 15.63% $5.75 1/10/05 $216,969 $549,841
James V. Adam 22,000 5.73% $5.75 1/10/05 $ 79,555 $201,608
Lori-jean Gille 11,500 3.00% $5.75 1/10/05 $ 41,586 $105,386
Jon C. Lee 45,000 11.72% $4.00 7/11/05 $113,201 $286,874
Charles C. Muscoplat 22,000 5.73% $5.75 1/10/05 $ 79,555 $201,608
Rajesh C. Shrotriya 11,500 3.00% $5.75 1/10/05 $ 41,586 $105,386
</TABLE>
-----------------
(1) All but Mr. Lee's options are exercisable as follows: 20% of such option
shares on July 10, 1995; 40% of such option shares on July 10, 1996; 60%
of such option shares on July 10, 1997; 80% of such option shares on
July 10, 1998; and 100% of such option shares on July 10, 1999. Mr.
Lee's options are exercisable as follows: 20% of such shares on July 11,
1995; 40% of such option shares on July 11, 1996; 60% of such option
shares on July 11, 1997; 80% of such option shares on July 11, 1998; and
100% of such option shares on July 11, 1999. Upon the occurrence of
certain defined acceleration events, these options would become
immediately exercisable. All options were granted with an exercise
price of $5.75, with the exception of Mr. Lee's which were granted with
an exercise price of $4.00 per share. The exercise price of all options
was the closing price of the Common Stock on the Nasdaq National Market
on the date of grant. All of Dr. Tempero's, Mr. Adam's, Mr. Lee's and
Dr. Muscoplat's 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.
Potential realizable value is calculated assuming 5% and 10%
appreciation in the price of the Common Stock from the date of grant.
Actual gains, if any, on stock option exercises are dependent on the
future performance of the Common Stock, and overall stock market
conditions. The amounts reflected in this table may not necessarily be
achieved.
12
<PAGE>
The following table summarizes option exercises during the year ended
December 31, 1995 by the executive officers named in the Summary Compensation
Table above, and the values of the options held by such persons at December 31,
1995.
AGGREGATED OPTION EXERCISES DURING YEAR ENDED DECEMBER 31, 1995
AND VALUE OF OPTIONS HELD AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS HELD AT OPTIONS HELD AT
DECEMBER 31, 1995 DECEMBER 31, 1995
SHARES ACQUIRED VALUE (EXERCISABLE/ (EXERCISABLE/
NAME ON EXERCISE REALIZED (1) UNEXERCISABLE) UNEXERCISABLE) (1)
- ------------------ --------------- -------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Kenneth F. Tempero 0 $0.00 272,880/115,500 $ 0.00/$0.00
James V. Adam 0 $0.00 86,400/43,100 $ 12,031/$0.00
Lori-jean Gille 0 $0.00 9,744/29,399 $ 0.00/$0.00
Jon C. Lee 0 $0.00 9,000/36,000 $3,938/$15,750
Charles C. Muscoplat 0 $0.00 147,938/45,350 $ 0.00/$0.00
Rajesh C. Shrotriya 0 $0.00 2,875/27,625 $ 0.00/$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, 1995.
13
<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 National Market
(U.S. Companies) Index and on The Nasdaq Pharmaceutical Stock Index for the last
five fiscal years (assuming the investment of $100 in each on December 31, 1990,
and the reinvestment of all dividends).
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
12/31/90 12/31/91 12/31/92 12/31/93 12/30/94 12/29/95
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
MGI PHARMA, INC. 100 411 272 328 139 99
Nasdaq Stock Market (U.S. Companies) 100 161 187 215 210 296
Nasdaq Pharmaceutical Stock Index 100 266 221 197 148 271
</TABLE>
14
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of March 18, 1996, 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) 1,500,594 11.7%
6600 France Avenue
Suite 672
Edina, Minnesota 55435
Dainippon Pharmaceutical Co., Ltd. (2) 750,000 5.9%
6-8 Doshomachi, 2-Chome
Chuo-Ku, Osaka, 541 Japan
Frederick W. Armstrong (3) 32,532 *
Charles E. Austin (3) (4) 76,032 *
Hugh E. Miller (3) (5) 17,125 *
Robert W. Powell, Jr. (3) 17,325 *
Lee J. Schroeder (3) 25,821 *
Kenneth F. Tempero (3) (6) 314,153 2.5%
James V. Adam (3) (6) 131,100 1.0%
Lori-jean Gille (3) (6) 27,182 *
Jon C. Lee (3) (7) 16,000 *
Charles C. Muscoplat (3) (6) 176,254 1.4%
Rajesh C. Shrotriya (3) (6) 8,953 *
All directors and executive 818,152 6.4%
officers as a group (11 persons) (3) (4) (5) (6) (7)
</TABLE>
- -----------------------
* Less than 1%
(1) Disclosure is made in reliance upon a statement on Schedule 13G, dated as of
February 6, 1996, 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.
Also includes 50,000 shares held in an individual retirement account of
LeRoy C. Kopp and 20,000 shares held in Caring and Sharing Foundation, a
family foundation controlled by Mr. Kopp, all of which shares are voted by
Mr. Kopp.
15
<PAGE>
(2) Disclosure is made in reliance upon a statement on Schedule 13D, dated as of
April 28, 1995, filed with the Securities and Exchange Commission.
(3) Includes the following number of shares which could be acquired within 60
days of March 18, 1996 through the exercise of stock options: Mr. Armstrong,
27,532 shares; Mr. Austin, 30,032 shares; Mr. Miller, 13,125 shares; Mr.
Powell, 13,125 shares; Mr. Schroeder, 18,548 shares; Dr. Tempero, 287,880
shares; Mr. Adam, 91,900 shares; Ms. Gille, 18,552 shares; Mr. Lee, 9,000
shares; Dr. Muscoplat, 153,438 shares; Dr. Shrotriya, 5,750 shares; and all
directors and executive officers as a group, 668,882 shares.
(4) Excludes 7,000 shares beneficially owned by Mr. Austin's spouse and
disclaimed by Mr. Austin.
(5) Excludes 1,000 shares owned by Mr. Miller's spouse and disclaimed by Mr.
Miller.
(6) Includes the following number of shares beneficially owned through the
Company's Retirement Savings Plan: Dr. Tempero, 9,072 shares; Mr. Adam,
13,907 shares; Ms. Gille, 4,004 shares; Dr. Muscoplat, 8,915 shares; and Dr.
Shrotriya, 842 shares.
(7) Excludes 400 shares beneficially owned by Mr. Lee's spouse and disclaimed by
Mr. Lee.
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 (5.05% as of March 1, 1996), 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 (9.5% as of March 1, 1996).
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 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, 1995, Dr. Tempero, Mr. Adam and Dr. Muscoplat had
outstanding balances under the Loan Program of $429,500, $50,293 and $49,067,
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 1995 was $549,400 for Dr. Tempero, $52,650 for Mr. Adam and
$86,875 for Dr. Muscoplat. At March 18, 1996, Dr. Tempero and Dr. Muscoplat had
fully paid off their loans and had no outstanding balances under the Loan
Program; Mr. Adam's loan balance at March 18, 1996 was $47,935.
16
<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, 1995, 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, 1996. 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 30, 1996.
BY ORDER OF THE BOARD OF DIRECTORS
Lori-jean Gille
Secretary
March 29, 1996
17
<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 29, 1996, revoking all prior
proxies, hereby appoints Charles E. Austin 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 14, 1996, 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,
1996.
[_] 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: ____________________, 1996
PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
- --------------------------------------------------------------------------------
