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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995 Commission File No. 0-10736
MGI PHARMA, INC.
(Exact name of Registrant as specified in its charter)
Minnesota 41-1364647
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 300E, Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: 612/935-7335
Securities registered pursuant to Section
12(b) of the Act: None
Securities registered pursuant to Section
12(g) of the Act: Common Stock, $.01 par value,
Common Stock Purchase Rights
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__ No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of March 18, 1996 was approximately $ 56,850,000 (based on the
closing price of such stock as reported The Nasdaq Stock Market on such date).
The number of shares outstanding of each of the Registrant's classes of
common stock, as of March 18, 1996, was: Common Stock, $.01 par value;
12,784,411 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the Registrant's Annual Report to Shareholders for the fiscal year
ended December 31, 1995: II
Parts of the Registrant's definitive Proxy Statement for its 1996 Annual Meeting
of Shareholders to be held on May 14, 1996: III
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PART I
Item 1. Business
General
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MGI PHARMA, INC. ("MGI" or the "Company") is a human pharmaceutical
company that acquires, develops and markets pharmaceuticals that address
currently unmet medical needs or significantly improve upon current therapies.
MGI is currently marketing its oncology products to physicians across the United
States and developing other new drug candidates. The Company presently intends
to commercialize its products outside of the United States through various
alliances, and currently has agreements with three international pharmaceutical
companies to develop Salagen/(R)/ Tablets for the European, Japanese and
Canadian markets, as well as distribution agreements with companies to register
and market Salagen/(R)/ Tablets in Taiwan and Israel. DIDRONEL/(R)/ I.V.
Infusion is marketed in Canada through a separate alliance. In October 1995,
the Company entered into an agreement with Dainippon Pharmaceutical Co., Ltd. to
develop and market MGI 114, the Company's lead analog from its acylfulvene
group, in Japan. The Company is a Minnesota corporation founded in 1979.
During 1995, MGI's business activities focused primarily on the
development and marketing of prescription pharmaceuticals. Such development
work included pre-clinical testing in animals and clinical research in humans of
a number of the Company's pharmaceutical compounds. In addition, the Company
continued work relating to developing and improving its manufacturing processes
for both marketed products and its compounds under development. Most of the
Company's commercial activities for the year were focused on the promotion of
Salagen/(R)/ Tablets, a treatment for radiation-induced dry mouth in head and
neck cancer patients. The Company also marketed DIDRONEL/(R)/ I.V. Infusion, a
treatment for hypercalcemia of malignancy.
Specific development activities by MGI during 1995 included human
clinical studies for Salagen/(R)/ Tablets as a treatment for the dry mouth and
dry eyes caused by Sjogren's syndrome and preclinical studies for acylfulvenes
and phosphoramidates. During the year, MGI discontinued development efforts for
its synthetic muscarinic analogs.
MGI reported a 1995 net loss of $2,614,478, which was 73% less than its
1994 loss of $9,696,946. Total revenues of $13,283,110 in 1995 increased by 95%
over 1994 total revenues of $6,796,436.
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Business Strategy
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MGI's business strategy focuses on niche medical markets, particularly
the oncology market, and concentrates efforts on the clinical development and
marketing components of operating a pharmaceutical business.
MGI focuses on medical niche markets because it believes such markets
can be reached effectively by a relatively small sales force. In the United
States, the number of physicians in a particular subspecialty is usually
relatively small and such physician specialists tend to be located near major
metropolitan areas. Furthermore, MGI believes that current trends in
pharmaceutical detailing will continue to reduce the number of pharmaceutical
sales targets as decisions relating to use of prescription drugs consolidates
and becomes more centralized.
MGI attempts to reduce the risk of product failure by acquiring
products that are past the initial discovery stage. Such products have usually
already passed, or have a higher than average chance of passing, preliminary
toxicity testing and have demonstrated some efficacy in animals or humans. MGI
believes that acquiring products that meet such requirements may allow it to
reduce product development time frames, reduce the research rejection rate due
to safety and toxicity concerns, and achieve a higher probability of product
effectiveness. MGI believes there are a number of compounds that meet these
requirements available for licensing from universities and other research
organizations such as biotechnology companies and other pharmaceutical
companies.
By using contract manufacturers to make its products, MGI also controls
its investment in capital. MGI believes that there are a sufficient number of
high quality contract manufacturers available to fulfill its near-term
production needs for both clinical and commercial use. MGI intends to continue
to concentrate on its current activities in clinical development and marketing
for the foreseeable future and only expand its capabilities to include basic
research and manufacturing when it is necessary and economical to do so.
Products Currently Being Marketed
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Salagen/(R)/ Tablets
Salagen/(R)/ Tablets (pilocarpine hydrochloride) is a chronically-used,
oral treatment approved in the U.S. for radiation-induced xerostomia (chronic
dry mouth) in head and neck cancer patients. Radiation therapy used to treat
head and neck cancers can permanently damage salivary glands, resulting in
significant chronic reduction of saliva production. This reduction in saliva
can result in pain, discomfort, difficulty in eating and sleeping, rapid tooth
decay, periodontal disease, oral infection and severe halitosis. More than
25,000 head and neck cancer patients receive radiation therapy annually, and
currently, over 100,000 patients suffer from this chronic condition in the U.S.
Other
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therapies used to treat this condition are generally considered by physicians
and patients to be inadequate and are limited to products that act as wetting
agents such as water, lozenges, and saliva substitutes. Salagen/(R)/ Tablets
work by stimulating the residual functioning tissue in the damaged salivary
glands to increase saliva production, providing patients with a longer-term
solution for chronic dry mouth. Salagen/(R)/ Tablets have been marketed by MGI
since April 1994.
DIDRONEL/(R)/ I.V. Infusion
DIDRONEL/(R)/ I.V. Infusion is used to treat hypercalcemia (elevation
of blood calcium) of malignancy, which is the most common life-threatening
metabolic disorder associated with cancer. Hypercalcemia causes mental
confusion, nausea and vomiting, loss of kidney function, and, if left untreated,
death. The condition affects up to 20% of all cancer patients sometime during
the course of their disease, but appears to be most prevalent with tumors that
have metastasized to bone (usually lung and breast tumors).
MGI purchased DIDRONEL/(R)/ I.V. Infusion from Procter & Gamble
Pharmaceuticals, Inc. in January 1990 for the purpose of setting up MGI's sales
and marketing organization in advance of introducing a major product to the
market. Although sales of this product have declined over the last several
years following the introduction of additional competition, sales of this
product enabled MGI to establish its sales and marketing organization, develop
relationships with key oncologists across the United States, and build a
presence in the medical community.
In 1993, sales revenues of the Company's products were $2,285,458.
Product sales in 1994 totaled $4,276,027, representing an 87% increase from the
1993 level, due to the launch of Salagen/(R)/ Tablets in April 1994. In 1995,
sales revenues increased 8% from 1994 to $4,607,231, reflecting increasing sales
of Salagen/(R)/ Tablets, partially reduced by continuation of the long-term
decline in sales of DIDRONEL/(R)/ I.V. Infusion.
Post-Approval Development Products
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Salagen/(R)/ Tablets for Head and Neck Cancer
As a condition of the Food and Drug Administration's approval of
Salagen/(R)/ Tablets for marketing, MGI committed to conduct several additional
studies with the drug, including: (1) a two-year carcinogenicity bioassay in
rats; (2) long-term clinical trials in Sjogren's syndrome patients to further
clarify the relationship of baseline salivary flow to the effect of Salagen/(R)/
Tablet therapy as well as provide additional safety data for 5 mg and 10 mg
doses; and (3) determination of the metabolic clearance rate of Salagen/(R)/
Tablets in a subset of patients with renal and hepatic insufficiency. In 1995,
the carcinogenicity study and the renal study were both initiated and are
ongoing, and a pharmacokinetic study in patients with hepatic impairment was
completed. Enrollment has been completed in the Sjogren's syndrome trials. In
1996, the Company will further explore the feasibility of studying dosing
adjustments in the pediatric population.
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Products in Clinical Development
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Salagen/(R)/ Tablets
In 1993, MGI initiated patient enrollment in a Phase III clinical
program with Salagen/(R)/ Tablets as a treatment for the chronic dry mouth and
dry eyes caused by Sjogren's syndrome, which is a progressive, chronic,
autoimmune disease that damages the salivary glands in the mouth and the
lacrimal glands in the eyes. A second study was initiated in early 1995.
Patient enrollment in both studies has been completed and the Company is
preparing a supplemental New Drug Application (NDA) to be submitted to the FDA
by seeking expansion of the labeling for Salagen/(R)/ Tablets to reflect the
results of these trials. The Company currently anticipates that such
supplemental NDA will be submitted to the FDA in late 1996.
Acylfulvenes
In September 1993, MGI acquired the rights to the acylfulvenes, a new
category of anti-cancer agents that have the potential to treat solid tumors,
including those that do not respond to or have become resistant to other
therapies. While still in the early stages of development, these compounds have
a novel mechanism of action that appears to be able to inhibit the growth of
tumor cells without being excessively toxic to healthy cells. Laboratory and
animal studies with these agents have shown them to kill human tumors growing in
animals more effectively than conventional anti-cancer agents. During 1994, MGI
made progress in the preclinical development of one particular acylfulvene
analog, MGI 114 (6-HMAF). Preclinical efficacy studies with this analog showed
impressive results against human tumors transplanted to mice, especially non-
small cell lung, breast, squamous cell carcinoma and colon tumors. Dainippon
Pharmaceutical Co., Ltd., MGI's Japanese partner for acylfulvene development,
replicated MGI's results against these tumor lines in addition to others.
Preclinical toxicity testing of MGI 114 began in late 1994 and were completed in
mid-1995. An Investigational New Drug application was submitted to the FDA in
September 1995 and human Phase I clinical safety testing was initiated in
December 1995. MGI expects that the Phase I study will continue throughout
1996.
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Phosphoramidates (cyclophosphamide-related agents)
These chemotherapeutic agents have the potential to treat a variety of
cancers including breast, gastrointestinal, head and neck, lung, and blood.
They are all chemical relatives of cyclophosphamide, which is one of the most
widely used cancer chemotherapeutic drugs. The new agents appear to have many
of the same antitumor capabilities of cyclophosphamide while avoiding some of
that drug's limitations. The new agents, known as phosphoramidates, may also be
effective against tumors that have become resistant to cyclophosphamide. The
agents are all very early stage compounds and could take five years or longer to
develop. During 1995, MGI expended only minimal resources for the development
of these agents.
Commercial Operations
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MGI currently markets Salagen/(R)/ Tablets and DIDRONEL/(R)/ I.V.
Infusion to certain physician specialists mainly within oncology through its own
commercial organization. The Company sells to pharmaceutical wholesalers in the
United States who distribute MGI's drugs to retail and hospital pharmacies.
The majority of MGI's sales and marketing efforts are focused on
Salagen/(R)/ Tablets, which it markets to radiation oncologists, head and neck
surgeons, medical oncologists, hospital based dentists and special-care nurses
using a combination of personal promotion, direct mail and journal
advertisement. MGI's personal promotion uses the Company's established national
sales force.
MGI's direct marketing efforts are currently focused solely on the
United States. To extend globally, the Company has formed alliances with
organizations having an established presence in various international markets.
As a part of this globalization plan, in late 1992 MGI entered into an agreement
with Chiron B.V., a subsidiary of Chiron Corp., whereby Chiron agreed to
register and market Salagen/(R)/ Tablets for the treatment of radiation-induced
xerostomia throughout Europe. In 1994, the Company entered into agreements with
Kissei Pharmaceutical Co., Ltd. and the Pharmacia & Upjohn Company for the
Japanese and Canadian markets, respectively. In 1995, the Company entered into
distribution agreements for the marketing of Salagen(R) Tablets in Israel and
Taiwan, broadening the worldwide reach of the product. MGI will continue to
seek alliances to expand the reach of Salagen(R) Tablets globally in 1996.
Research and Development
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The Company believes that its ability to accomplish its long-term
business plan depends upon its success in acquiring new compounds, in the mid-
to late-development stage, and on its ability to develop compounds to the point
of filing NDAs and securing
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FDA approval. The Company maintains an active program of searching for new
products for acquisition and developing its present products for approval.
The Company anticipates incurring significant research and development
costs in the coming years as it continues its development efforts and identifies
and acquires additional products for future development. MGI's total research
and development expenses were $7,266,597, $6,196,076 and $6,896,608 during the
years ended December 31, 1995, 1994 and 1993, respectively. Research and
development expenses increased 17% in 1995 over 1994 primarily due to continued
development of Salagen/(R)/ Tablets, especially toward expansion of the approved
indication, and of acylfulvenes, including filing of an Investigational New Drug
application and initiating enrollment in a Phase I clinical study for MGI 114,
the lead analog of these anti-tumor compounds. The decrease in expenditures of
10% from 1993 to 1994 was due to the discontinuance of several products in
development.
In 1996, the Company anticipates that research and development spending
will in part be related to the Company's ability to generate revenues mainly
from sales in the United States of Salagen/(R)/ Tablets, as well as funds
received from Dainippon Pharmaceuticals, the Company's Japanese partner for
acylfulvene development. Future research and development funds may be secured
from internally generated funds, debt or equity financings, joint ventures,
strategic alliances, co-promotion or co-marketing arrangements or other sources
of capital.
Manufacturing
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MGI does not have and does not intend to develop facilities to
manufacture any of its drugs in the near future. The Company's marketed and
development-stage pharmaceuticals are manufactured under various agreements with
third party manufacturers. MGI's manufacturing and quality assurance personnel
do, however, authorize, monitor, and approve virtually all aspects of the
manufacturing process. In-process and finished product inventories are analyzed
through independent testing laboratories and the results reviewed and approved
by MGI prior to release for distribution.
Salagen/(R)/ Tablets
MGI obtains pilocarpine hydrochloride, the active drug substance for
the manufacture of Salagen/(R)/ Tablets, under a supply agreement with EM
Industries, Incorporated of Hawthorne, New York. The refined raw material is an
extract from a plant grown and processed in South America. The Company believes
that the supply of pilocarpine hydrochloride is adequate for the foreseeable
future. Salagen/(R)/ Tablets are currently manufactured at Boehringer Ingelheim
Pharmaceuticals, Inc. ("Boehringer") in Ridgefield, Connecticut and at Global
Pharm Inc. in Toronto, Ontario, Canada pursuant to manufacturing contracts
between MGI and each of those companies. Boehringer has notified MGI that it
will be closing its Ridgefield plant and will discontinue providing
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contract manufacturing services to third parties such as MGI, although
Boehringer will continue to provide contract manufacturing services to MGI
through the expiration of the Company's supply agreement in March, 1998. The
Company is presently in the process of identifying a backup manufacturer for
Salagen/(R)/ Tablets to replace Boehringer at the expiration of the Company's
supply agreement.
DIDRONEL/(R)/ I.V. Infusion
Pharmaceutical grade etidronate disodium for the manufacture of
DIDRONEL/(R)/ I.V. Infusion is obtained from Procter & Gamble Pharmaceuticals,
Inc. in Norwich, New York, under a supply agreement. The agreement provides for
automatic renewal for one-year terms unless either party gives written notice of
termination at least 180 days prior to the end of each calendar year.
DIDRONEL/(R)/ I.V. Infusion is currently manufactured at a wholly owned
subsidiary of Akorn, Inc. in Decatur, Illinois. Ben Venue Laboratories, Inc.
of Bedford, Ohio is an approved alternate contract manufacturer of DIDRONEL/(R)/
I.V. Infusion.
Other Manufacturing Agreements
As a regular part of its business, MGI establishes from time to time
contract manufacturing arrangements for its development-stage pharmaceuticals.
These arrangements are typically short-term and generally include supply
agreements for the active pharmaceutical drug substance and development-scale
manufacturing contracts for the production of clinical supplies.
Patents and Protection of Proprietary Technology
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MGI intends to use patents and orphan drug designation to protect its
licensed technology. The term of a U.S. patent issued from an application filed
before June 8, 1995 is the longer of seventeen years from its issue date or
twenty years from its effective filing date. The term of a U.S. patent issuing
from an application filed after June 8, 1995 is twenty years from its effective
filing date. All of the allowed applications or patents referenced below were
filed prior to, or issued from applications filed before June 8, 1995. The Drug
Price and Competition and Patent Term Restoration Act of 1984 (Public Law 98-
417) and the Generic Animal Drug and Patent Term Restoration Act (Public Law
100-670) generally provide that a patent relating to, among other items, a human
drug product, may be extended for a period of up to five years by the United
States Commissioner of Patents and Trademarks if the patented item was subject
to regulatory review by the FDA before the item was marketed. Under these acts,
a product's regulatory review period (which consists generally of the period
from the time when the exemption to permit clinical investigations becomes
effective until the FDA grants marketing approval for the product) forms the
basis for determining the length of the extension an applicant may receive.
There can be no assurance that any issued
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patents will provide competitive advantages for particular products or will not
be challenged or circumvented by competitors, or that any patent applications
will be approved.
Orphan drugs are currently provided seven years market exclusivity for
an approved indication following approval to market by the FDA. Orphan drug
designation for the Company's products does not, however, insulate the Company
from other manufacturers attempting to develop an alternate drug for the
designated indication, or the designated drug for another, separate indication.
There can be no assurance that the Company will be able to obtain orphan drug
status with respect to any of its products or as to the precise scope of
protection that may be afforded by such status.
Current patent and orphan drug status with respect to certain of MGI's
products are as follows:
. Pilocarpine hydrochloride (the active drug in Salagen/(R)/ Tablets)
was designated an orphan drug for the treatment of radiation-induced
xerostomia in head and neck cancer patients by the FDA in September 1990.
Upon FDA approval of Salagen/(R)/ Tablets for marketing on March 22, 1994,
MGI notified the Office of Orphan Products Development of the FDA of its
intention to exercise orphan drug exclusivity, thereby affording seven
years of exclusivity for Salagen/(R)/ Tablets for that indication. In
February 1992, pilocarpine hydrochloride was designated an orphan drug as a
treatment for xerostomia and keratoconjunctivitis sicca in Sjogren's
syndrome patients.
. Two U.S. patents containing claims relating to the use of acylfulvenes
to treat tumors, or to pharmaceutical compositions containing acylfulvenes
have been issued (both on August 8, 1995), and the claims of a U.S.
application relating to certain acylfulvenes per se have been allowed.
Another U.S. application is pending. Foreign patent applications have been
filed to protect the acylfulvenes and their use to prepare compositions to
treat tumors in the European Patent Office, the Russian Republic, the
Peoples Republic of China, Poland, New Zealand, Norway, Japan, South Korea,
Hungary, The Czech Republic, Canada, Brazil and Australia. Foreign patents
related to certain of the acylfulvenes have been granted in Israel and
allowed in Europe.
. The three families of cyclophosphamide-related agents are protected by
three patents ("Phosphoramidates Useful as Antitumor Agents," April 26,
1994; "Cyclophosphamide Analogs Useful as Anti-Tumor Agents," March 2,
1993; and "Aldophosphamide Derivatives Useful as Antitumor Agents," March
13, 1990).
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The Company has obtained federal trademark registration on the "Salagen"
trademark and is seeking broad trademark protection for "Salagen" worldwide. In
addition, the Company uses the federally registered "DIDRONEL" trademark under a
license agreement with Procter & Gamble Pharmaceuticals.
Competition
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The pharmaceutical industry is intensely competitive, based mostly on
product performance and pricing. Many members of the industry have resources
far greater than MGI, providing them with potentially greater flexibility in
developing and marketing their products. Additionally, the biotechnology
industry may intensify competition as new developments are brought to market.
While the Company will seek to protect its products from direct competition
through filing patents, seeking marketing exclusivity under the Orphan Drug Act,
and maintaining technical information as trade secrets, there is no way to
insulate the Company from competition from products with different chemical
composition or products made using different technology. There can be no
assurance that the Company will be successful in its plan to gain product
specific protection for each of its pharmaceuticals or that developments by
others will not render the Company's products noncompetitive or obsolete.
Salagen/(R)/ Tablets is the first systemic pharmacologic treatment for dry
mouth. Persons suffering from dry mouth in the past have used water, sugar-free
hard candies and lozenges and over-the-counter saliva substitutes to moisten
their mouths. The Company does not believe that any of these products are
direct competitors, but anticipates that they may be used in conjunction with
Salagen/(R)/ Tablets.
Government Regulation
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In order to manufacture and market most health care products for human use,
approval of the FDA and comparable agencies in foreign countries must first be
obtained. The FDA has established mandatory procedures to regulate the
manufacturing and testing process to assure safety, potency and efficacy of the
final product. The procedure for seeking and obtaining FDA approval of a new
product involves many steps, including animal testing and clinical testing on
humans to determine safety, efficacy and potential toxicity. Even after initial
FDA approval has been obtained, further studies may be required to provide
additional data on safety in order to obtain approval for uses other than those
for which the product was initially tested. The process of seeking and
obtaining FDA approval of a new product can take several years and often
involves the expenditure of substantial resources without any assurance that
approval for marketing will be granted. Moreover, such approval may entail
limitations on the indicated uses for which a drug may be marketed. Even if FDA
approval is obtained, there can be no assurance of commercial success for any
product. Post-marketing testing and surveillance programs may also be required.
In addition, before, during and after the process of approval, the Company's
prescription drug products must all be manufactured in accordance with Good
Manufacturing Practices
<PAGE>
as set forth by the FDA. FDA approval may also be required to export certain
human health care products. As the Company expands the reach of its products
world-wide through alliances such as those described earlier, the Company's
products will be subject to similar regulatory requirements of regulatory
agencies comparable to the FDA in other countries.
The health care industry is changing rapidly as the public, government,
medial professionals and the pharmaceutical industry examine ways to broaden
medical coverage while controlling health care costs. The Company is unable to
predict when any proposed health care reforms will be implemented, if ever, or
the effect of any implemented reforms on the Company's business.
Federal, state and local environmental laws and regulations do not
materially affect the Company's operations and the Company believes that it is
currently in material compliance with such applicable laws and regulations.
Human Resources
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As of March 18, 1996, MGI had 55 full time employees. Twenty-four of MGI's
employees are engaged in the Company's marketing and selling effort, 19 are
involved in pharmaceutical development, including regulatory interaction and
manufacturing, and 12 are in other management or administrative positions. No
employee of the Company is represented by a labor union or is subject to a
collective bargaining agreement. The Company believes that its relations with
its employees are satisfactory.
Item 2. Properties
The Company leases office space consisting of approximately 15,000 square
feet in the Opus Center complex located in Minnetonka, Minnesota for its
operations. The office lease will expire in September 1997, and may be extended
for a two-year renewal term at MGI's option. The Company believes that its
existing facilities will be adequate to meet its needs for the foreseeable
future.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters
The Company's common stock trades on The Nasdaq National Market under
the symbol "MOGN." The information contained under the heading "Market Price
and Related Matters" in the Company's Annual Report to Shareholders for the year
ended December 31, 1995 (the "Annual Report to Shareholders"), is incorporated
herein by reference.
Item 6. Selected Financial Data
The information contained under the heading "Selected Consolidated
Financial Data" in the Annual Report to Shareholders is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information contained under the heading "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in the Annual
Report to Shareholders is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The information contained in the Consolidated Financial Statements,
"Independent Auditors' Report" and "Notes to Consolidated Financial Statements"
in the Annual Report to Shareholders is incorporated herein by reference.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The information contained under the headings "Election of Directors"
and "Executive Officers of the Company" in the Company's Proxy Statement for its
1996 Annual Meeting of Shareholders, to be held on May 14, 1996 (the "Proxy
Statement"), is incorporated herein by reference.
Item 11. Executive Compensation
The information contained under the heading "Executive Compensation"
in the Proxy Statement is incorporated herein by reference, other than the
subsection thereunder entitled "Report of Compensation Committee on Executive
Compensation."
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information contained under the heading "Security Ownership of
Certain Beneficial Owners and Management" in the Proxy Statement is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information contained under the heading "Certain Transactions" in
the Proxy Statement is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements
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Section Reference in the
Annual Report to Shareholders
-----------------------------
Consolidated Balance Sheets at *
December 31, 1995 and 1994
Consolidated Statements of Operations *
for the Three Years Ended December 31, 1995
Consolidated Statements of Cash Flows *
for the Three Years Ended December 31, 1995
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Consolidated Statements of Stockholders' *
Equity for the Three Years Ended December 31, 1995
Notes to Consolidated Financial Statements *
Independent Auditors' Report *
* The consolidated financial statements and the Independent Auditors'
Report listed above, which are included in the Annual Report to Shareholders,
are incorporated by reference in Item 8 hereof.
Except for the financial statements listed above and the items
specifically incorporated by reference in Items 5, 6, 7 and 8 hereof, the Annual
Report to Shareholders is not deemed to be "filed" as part of this Annual Report
on Form 10-K.
2. Consolidated Financial Statement Schedules
------------------------------------------
Page in this
Annual Report
-------------
Independent Auditors' Report on 20
Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts 21
All other schedules have been omitted because they are not applicable
or not required, or because the required information is included in the
consolidated financial statements or the notes thereto.
3. Exhibits
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Exhibit No.
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3.1 Restated Articles of Incorporation (Incorporated by reference to
Exhibit 3.1 to the Company's Registration Statement on Form S-2,
File No. 33-40763).
3.2 Restated Bylaws of the Company, as amended to date (Incorporated
by reference to Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
4.1 Specimen certificate for shares of Common Stock of the Company
(Incorporated by reference to Exhibit 4.1 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994).
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4.2 Rights Agreement, dated as of January 19, 1988, between the
Company and Norwest Bank Minneapolis, National Association
(including the form of Right Certificate attached as Exhibit A
thereto) (Incorporated by reference to Exhibit 4.2 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).
* 10.1 1993 Nonemployee Director Stock Option Plan (Incorporated by
reference to Exhibit 10.1 to the Company's Annual Report on Form
10-K for the year ended December 31, 1994).
* 10.2 Nonemployee Director Stock Option Plan (Incorporated by
reference to Exhibit 10.2 to the Company's Annual Report on Form
10-K for the year ended December 31, 1994).
* 10.3 Deferred Compensation Plan for Nonemployee Directors
(Incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1995).
* 10.4 1994 Stock Incentive Plan (Incorporated by reference to Exhibit
10.3 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994).
* 10.5 1984 Stock Option Plan (Incorporated by reference to Exhibit
10.4 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994).
* 10.6 1982 Incentive Stock Option Plan (Incorporated by reference to
Exhibit 10.5 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994).
* 10.7 Stock Acquisition Assistance Loan Program (Incorporated by
reference to Exhibit 10.6 to the Company's Annual Report on Form
10-K for the year ended December 31, 1994).
* 10.8 Money Purchase Retirement Plan Supplement Program (Incorporated
by reference to Exhibit 10.7 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
* 10.9 Retirement, Separation Agreement and Release, dated December 31,
1995 with Kenneth F. Tempero.
* 10.10 Termination Agreement, dated as of January 1, 1992, with Kenneth
F. Tempero (Incorporated by reference to Exhibit 10.8 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).
<PAGE>
* 10.11 Termination Agreement, dated as of January 1, 1992, with Charles
C. Muscoplat (Incorporated by reference to Exhibit 10.9 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).
* 10.12 Termination Agreement, dated as of January 1, 1992, with James
V. Adam (Incorporated by reference to Exhibit 10.10 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).
* 10.13 Termination Agreement, dated as of January 1, 1992, with Lori-
jean Gille.
* 10.14 Termination Agreement, dated as of July 10, 1995, with Jon C.
Lee.
* 10.15 Termination Agreement, dated as of August 9, 1994, with Rajesh
C. Shrotriya.
10.16 Lease Agreement, dated August 7, 1989, with ALSCOR Investors
Joint Venture, as amended by that certain Amendment to Office
Lease, dated October 30, 1989, with ALSCOR Investors Joint
Venture (Incorporated by reference to Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).
10.17 Second Amendment to Office Lease, dated May 3, 1991 between the
Company and ALSCOR Investors Joint Venture (Incorporated by
reference to Exhibit 10.12 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10.18 Third Amendment to Office Lease, dated September 23, 1992
between the Company and ALSCOR Investors Joint Venture
(Incorporated by reference to Exhibit 10.13 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994).
10.19 Fourth Amendment to Office Lease, dated September 23, 1992
between the Company and ALSCOR Investors Joint Venture
(Incorporated by reference to Exhibit 10.14 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994).
10.20 Fifth Amendment to Office Lease, dated March 10, 1995 between
the Company and ALSCOR Investors Joint Venture (Incorporated by
reference to Exhibit 10.15 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
<PAGE>
10.21 Trademark License Agreement, dated as of December 31, 1989,
between the Company and Norwich Eaton Pharmaceuticals, Inc.
(Incorporated by reference to Exhibit 10.16 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994).
10.22 Supply and License Agreement, dated March 19, 1992, among E
Merck Fine Chemicals Division, EM Industries and the Company
(Incorporated by reference to Exhibit A to Exhibit 10.15 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1992).
10.23 Supply Agreement, dated December 21, 1993, between the Company
and Boehringer Ingelheim Pharmaceuticals, Inc. (Incorporated by
reference to Exhibit 10.18 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10.24 Development, Marketing and Cooperation Agreement, dated October
23, 1995, between the Company and Dainippon Pharmaceutical Co.,
Ltd. (Incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1995).
10.25 Manufacturing Agreement, dated December 12, 1995, between the
Company and GLOBAL PHARM INC.
11 Computation of Net Income (Loss) Per Common Share.
13 1995 Annual Report to Shareholders.
23 Consent of KPMG Peat Marwick LLP.
24 Powers of Attorney.
27 Financial Data Schedule.
* Items that are management contracts or compensatory plans or
arrangements required to be filed as an exhibit pursuant to Item 14(c)
of this Form 10-K.
(b) Reports on Form 8-K
-------------------
The Company filed no reports on Form 8-K during the quarter ended
December 31, 1995.
<PAGE>
MGI PHARMA, INC. Retirement Savings Plan
The following financial statements and schedules of the Company's Retirement
Savings Plan are included herein in lieu of filing a Form 11-K for such plan,
pursuant to General Instruction F to Form 10-K and Rule 15d-21:
<TABLE>
<CAPTION>
Page in this
Annual Report
-------------
<S> <C>
Statements of Net Assets Available for 23
Participants at December 31, 1995 and 1994
Statements of Changes in Net Assets Available 24
for Participants in the years ended December 31,
1995 and 1994
Notes to Financial Statements 26
Schedule 1 - Schedule of Investments Held at 30
End of Plan Year
Schedule 2 - Reportable Transactions 31
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 22, 1996 MGI PHARMA, INC.
By /s/ James V. Adam
-----------------
James V. Adam
Vice President, Chief Financial
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title
- --------- -----
<S> <C> <C>
Kenneth F. Tempero* Chairman of the Board, )
(principal executive )
officer) and Director )
)
James V. Adam Vice President, Chief )
Financial Officer )
(principal financial )
and accounting officer) ) By /s/ James V. Adam
) -----------------
Frederick W. Armstrong* Director ) James V. Adam
) Pro se and as
Charles E. Austin* Director ) Attorney-in Fact*
)
Hugh E. Miller* Director ) Dated: March 22, 1996
)
Robert W. Powell, Jr.* Director )
)
Lee J. Schroeder* Director )
</TABLE>
* By Power of Attorney filed with this report as Exhibit 24 hereto.
<PAGE>
Independent Auditors' Report on Financial Statement Schedule
The Board of Directors and Stockholders
MGI PHARMA, INC.:
Under date of February 9, 1996, we reported on the consolidated balance sheets
of MGI PHARMA, INC. and subsidiary as of December 31, 1995 and 1994, and the
related consolidated statements of operations, cash flows, and stockholders'
equity for each of the years in the three-year period ended December 31, 1995,
as contained in the 1995 Annual Report to Shareholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year 1995. In connection with our audits of
the aforementioned consolidated financial statements, we also have audited the
related financial statement schedule as listed in the accompanying index. The
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth herein.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 9, 1996
<PAGE>
Schedule II
MGI PHARMA, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
---------------------------------
Balance at Charged to Costs Charged to Balance at
Description Beginning of Period and Expenses Other Accounts Deductions End of Period
- --------------------------------- ------------------- ---------------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Deducted from asset accounts:
Accounts receivable allowance $347,823 $ 355,706 $ 379,180 (1) $324,349
Inventory valuation allowance 13,562 300,000 132,104 (2) 181,458
-------- ---------- ---------- --------
Total $361,385 $ 655,706 $ 511,284 $505,807
======== ========== ========== ========
Year ended December 31, 1994:
Deducted from asset accounts:
Accounts receivable allowance $ 17,388 $1,546,251 $1,215,816 (1) $347,823
Inventory valuation allowance -- 51,294 37,732 (2) 13,562
-------- ---------- ---------- --------
Total $ 17,388 $1,597,545 $1,253,548 $361,385
======== ========== ========== ========
Year ended December 31, 1993:
Deducted from asset accounts:
Accounts receivable allowance $ 18,750 $ 333,872 $ 335,234 (1) $ 17,388
Inventory valuation allowance 205,167 -- 205,167 (2) --
-------- ---------- ---------- --------
Total $223,917 $ 333,872 $ 540,401 $ 17,388
======== ========== ========== ========
</TABLE>
(1) Product returns, discounts by customers, or write-off of uncollectible
accounts, net of recoveries.
(2) Destruction of returned or obsolete inventory, or inventory rework costs.
<PAGE>
MGI PHARMA, INC. Retirement Savings Plan
Financial Statements and Schedules
1995
<PAGE>
STATEMENTS OF NET ASSETS AVAILABLE FOR PARTICIPANTS
MGI PHARMA, INC. Retirement Savings Plan
(unaudited)
<TABLE>
<CAPTION>
December 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Investments at fair value:
Guaranteed investment contract $ -- $ 300,980
Shares of registered investment
companies:
Invesco Stable Value 315,301 --
Vanguard Group:
Fixed Income, GNMA 85,502 58,959
World, International Growth 207,416 145,519
Fidelity Investments:
Puritan 183,847 86,561
Retirement Growth 205,432 97,014
MGI PHARMA, INC. common stock 506,786 518,927
Participant notes receivable 17,574 16,405
---------- -----------
1,521,858 1,224,365
----------- -----------
Receivables:
Contributions receivable:
Employer 103,212 70,472
Employees 3,098 8,329
----------- -----------
106,310 78,801
----------- -----------
Net assets available
for participants $ 1,628,168 $ 1,303,166
=========== ===========
</TABLE>
- ------------------------------------------------
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PARTICIPANTS
MGI PHARMA, INC. Retirement Savings Plan
(unaudited)
<TABLE>
<CAPTION>
Year Ended December 31, 1995
--------------------------------------------------------------------------------
Shares of registered investment companies
-------------------------------------------------------------------
Vanguard Group Fidelity Investment
Guaranteed Invesco ----------------------- -------------------------
Investment Stable Fxd. Inc., World Intl. Retirement
Contract Value GNMA Growth Puritan Growth
----------- --------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Additions to
net assets:
Investment inc.:
Net appreciation
(depreciation)
in fair value $ -- $ -- $ 5,956 $ 20,110 $ 17,679 $ 13,156
Interest 3,693 -- -- -- -- --
Dividends -- 16,937 5,218 5,511 8,649 18,168
--------- -------- ------- -------- -------- --------
3,693 16,937 11,174 25,621 26,328 31,324
--------- -------- ------- -------- -------- --------
Contributions:
Employer -- -- -- -- -- --
Participants 1,611 37,960 15,226 36,308 60,701 55,728
--------- -------- ------- -------- -------- --------
1,611 37,960 15,226 36,308 60,701 55,728
--------- -------- ------- -------- -------- --------
Total additions 5,304 54,897 26,400 61,929 87,029 87,052
--------- -------- ------- -------- -------- --------
Distributions -- (1,810) (1,915) (1,668) (1,749) (9,541)
Transfers, net (306,284) 262,214 2,058 1,636 12,006 30,907
--------- -------- ------- -------- -------- --------
Net increase
(decrease) (300,980) 315,301 26,543 61,897 97,286 108,418
Net assets avail.
for partici.:
Start of year 300,980 -- 58,959 145,519 86,561 97,014
--------- -------- ------- -------- -------- --------
End of year $ -- $315,301 $85,502 $207,416 $183,847 $205,432
========= ======== ======= ======== ======== ========
<CAPTION>
----------------------------------------------
MGI
Common Partic.
Stock Notes Recvble. Total
---------- -------- --------- ----------
<S> <C> <C> <C> <C>
Additions to
net assets:
Investment inc.:
Net appreciation
(depreciation)
in fair value $(172,654) $ -- $ -- $ (115,753)
Interest -- 1,225 -- 4,918
Dividends -- -- -- 54,483
--------- ------- -------- ----------
(172,654) 1,225 -- (56,352)
--------- ------- -------- ----------
Contributions:
Employer 139,174 -- 103,212 242,386
Participants 30,523 -- 3,098 241,155
--------- ------- -------- ----------
169,697 -- 106,310 483,541
--------- ------- -------- ----------
Total additions (2,957) 1,225 106,310 427,189
--------- ------- -------- ----------
Distributions (5,331) (1,600) -- (23,614)
Transfers, net (3,853) 1,544 (78,801) (78,573)
--------- ------- -------- ----------
Net increase
(decrease) (12,141) 1,169 27,509 325,002
Net assets avail.
for partici.:
Start of year 518,927 16,405 78,801 1,303,166
--------- ------- -------- ----------
End of year $ 506,786 $17,574 $106,310 $1,628,168
========= ======= ======== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PARTICIPANTS
MGI PHARMA, INC. Retirement Savings Plan
(unaudited)
<TABLE>
<CAPTION>
Year Ended December 31, 1994
------------------------------------------------------------------------
Shares of registered investment companies
------------------------------------------------------------------------
Vanguard Group Fidelity Investment
Guaranteed ------------------------- --------------------
Investment Morgan Fxd. Inc., World Intl. Retirement
Contract Growth GNMA Growth Puritan Growth
----------- ---------- ------------ ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Additions to
net assets:
Investment inc.:
Net appreciation
(depreciation)
in fair value $ -- $ (3,925) $ (5,100) $ (2,487) $ (3,253) $ (11,751)
Interest 18,777 -- -- -- -- --
Dividends -- 1,657 4,258 1,988 1,816 9,528
-------- -------- -------- -------- -------- --------
18,777 (2,268) (842) (499) (1,437) (2,223)
-------- --------- -------- -------- ------- --------
Contributions:
Employer -- -- -- -- -- --
Participants 43,457 36,771 14,635 43,525 20,470 23,027
-------- --------- -------- -------- ------- --------
43,457 36,771 14,635 43,525 20,470 23,027
-------- --------- -------- -------- ------- --------
Total additions 62,234 34,503 13,793 43,026 19,033 20,804
-------- --------- -------- -------- ------- --------
Distributions (14,571) (9,991) (176) (15,274) (53) (54)
Transfers, net (21,041) (200,384) (14,750) 13,873 67,581 76,264
-------- -------- -------- ------- --------
Net increase
(decrease) 26,622 (175,872) (1,133) 41,625 86,561 97,014
Net assets avail.
for partici.:
Start of year 274,358 175,872 60,092 103,894 -- --
-------- --------- -------- -------- ------- --------
End of year $ 300,980 $ -- $ 58,959 $ 145,519 $ 86,561 $ 97,014
======== ========= ======== ======== ======= ========
<CAPTION>
-----------------------------------------------------
MGI
Common Partic.
Stock Notes Recvble. Total
---------- ------ ---------- ----------
<S> <C> <C> <C> <C>
Additions to
net assets:
Investment inc.:
Net appreciation
(depreciation)
in fair value $ (595,695) $ 331 $ -- $ (621,880)
Interest -- -- -- 18,777
Dividends -- -- -- 19,247
--------- ------ --------- ----------
(595,695) 331 -- (583,856)
--------- ------ --------- ----------
Contributions:
Employer 44,718 -- 70,472 115,190
Participants 41,994 -- 8,329 232,208
--------- ------ --------- ----------
86,712 -- 78,801 347,398
--------- ------ --------- ----------
Total additions (508,983) 331 78,801 (236,458)
--------- ------ --------- ----------
Distributions (27,707) -- -- (67,826)
Transfers, net 181,199 6,600 (109,342) --
--------- ------ --------- ----------
Net increase
(decrease) (355,491) 6,931 (30,541) (304,284)
Net assets avail.
for partici.:
Start of year 874,418 9,474 109,342 1,607,450
--------- ------ --------- ----------
End of year $ 518,927 $ 16,405 $ 78,801 $ 1,303,166
========= ======= ======== ==========
</TABLE>
- -------------------------------------------------
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MGI PHARMA, INC. Retirement Savings Plan
(unaudited)
1. Description of Plan
-------------------
The following description of the MGI PHARMA, INC. Retirement Savings Plan
(the "Plan") provides only general information. Participants should refer
to the Summary Plan Description for a more complete description of the
Plan's provisions. The plan is a defined contribution retirement savings
plan sponsored by MGI PHARMA, INC. ("MGI"). It conforms to Section 401(k)
of the Internal Revenue Code and therefore defers income taxes on
qualifying contributions and Plan earnings. The Plan benefits eligible
employees by accumulating retirement assets during their working careers
through employee participation in a systematic savings and investment
program to which MGI also contributes. The Plan is administered by an
Administrative Committee appointed for that purpose by MGI's Board of
Directors and all Plan administrative costs are currently borne by MGI.
At December 31, 1995, 44 employees were participants in the Plan. The Plan
is available to every employee of MGI who completes six months of
employment, is at least 21 years old, and is scheduled for at least 1,000
hours of service annually. Eligible employees may participate in the Plan
through: (1) contributions of up to 10% of their compensation; (2) employer
matching contributions equal to 50% of employee contributions, up to 6% of
an employee's compensation; (3) employer discretionary contributions; and
(4) employee rollover contributions. Contributions are subject to certain
limitations.
Employee contributions and related earnings are directed by the participant
into available investment options and are fully vested at all times.
Employer contributions are in the form of MGI common stock. At December
31, 1995, employer directed balances totaled $352,834 of the MGI common
stock fund. Employer contributions are 20% vested after completion of two
years of employment, 40% after three years, 75% after four years and 100%
after five years. Employer discretionary contributions are allocated to a
participant's account based upon his/her pro rata share of total recognized
compensation during the year. Forfeitures are used to reduce the amount of
MGI's contributions to the Plan.
A participant's account may mature and become distributable upon the
occurrence of one of the following: (1) death, (2) retirement, (3) the
attainment of 70-1/2 years of age, (4) termination of employment, (5)
termination of the Plan or (6) upon certain MGI "change in control" events.
Distributions may be a lump sum of cash and MGI common stock held in a
participant's account.
<PAGE>
Investments
-----------
The following investment alternatives are or have been available to
participants:
Guaranteed Investment Contract - The Guaranteed Investment Contract ("GIC")
was an Investment Accumulation, Group Annuity Contract with Minnesota
Mutual Life Insurance Company that offers stated rates of return. Risk in
this investment related to the financial performance of Minnesota Mutual
and the underlying portfolio. The underlying portfolio was invested
primarily in bonds and mortgages.
Registered Investment Companies Funds:
Invesco Funds Group:
Stable Value - The INVESCO Retirement Trust Stable Value Fund ("Stable
Value Fund") seeks to provide a high level of current income while
preserving principal, primarily by investing in a diversified portfolio of
investment contracts with insurance companies, banks or other financial
institutions. An investment contract is an agreement to provide a
specific rate of return for a period of time. Risk in these contracts
relates to the financial performance of the issuing entity and in certain
cases a portfolio of marketable securities securing the investment.
Vanguard Group:
Fixed Income, GNMA - The GNMA portfolio is part of the Fixed Income
Securities Fund, a no-load, open-end, diversified fund that seeks to
provide a high level of current income while maintaining a high level of
principal protection and liquidity. The portfolio invests at least 80%
of its assets in Government National Mortgage Association ("GNMA" or
"Ginnie Mae") pass-through mortgage backed certificates representing part
ownership of a pool of mortgage loans. The mortgage loans underlying GNMA
certificates are guaranteed by the full faith and credit of the U.S.
Government.
World, International Growth - The International Growth Portfolio is part
of the World Fund, a no load, open end, diversified equity security fund.
The portfolio seeks to provide long-term capital growth by investing
primarily in equity securities of growth companies located outside the
United States.
Fidelity Investments:
Puritan - The Puritan fund is an open-end, diversified security fund that
seeks to primarily provide income by investing in common stocks, preferred
stocks and bonds.
Retirement Growth - The Retirement Growth fund is an open-end, diversified
securities fund that seeks long-term capital growth by investing primarily
in common stocks. It may realize capital gains without regard to
shareholders' current tax liability since it is designed for investors in
tax qualified retirement plans.
During 1995 as part of an ongoing evaluation of investment alternatives,
the Stable Value Fund was added to and the GIC removed from the plan
investment alternatives.
<PAGE>
MGI PHARMA, INC. common stock - MGI PHARMA, INC. (the Plan Sponsor) common
stock is publicly traded with trades reported on the NASDAQ National Market
System. MGI is a pharmaceutical company that acquires, develops and
markets specialty pharmaceuticals. MGI's goal is to develop innovative
products that significantly improve treatment of a variety of serious
medical conditions. MGI has not paid, and has no present intention of
paying cash dividends on its common stock.
Participant Notes Receivable
----------------------------
Participants may borrow from their accounts a minimum of $1,000 up to the
lesser of $50,000 or one-half of their balances. Loan transactions are
treated as transfers between the relevant investment fund and the
Participant Notes fund. Loan terms generally cannot exceed five years.
The loans are secured by balances in the participant's accounts and bear
interest fixed at 1% above the prime rate upon initiation of the loan.
Principal and interest is paid by monthly or more frequent installments.
2. Summary of Accounting Policies
------------------------------
Basis of Accounting
-------------------
The financial statements of the Plan are prepared under the accrual method
of accounting.
Investment Valuation and Income Recognition
-------------------------------------------
Plan investments are stated at fair value except for the investment
contract which is valued at contract value. Contract value represents
contributions made under the contract, plus earnings, less withdrawals.
Shares of registered investment companies are valued at quoted market
prices which represent the net asset value of shares held by the Plan at
year-end. Company stock is valued at its quoted market price of $4.4375
and $6.25 per share at December 31, 1995 and 1994, respectively.
Participant notes receivable are valued at cost which approximates fair
value.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded
on the ex-dividend date. Investment income is allocated to participants'
accounts based upon their pro rata share of the respective investment
balance during the income period.
Payment of Benefits
-------------------
Benefits are recorded when paid.
3. Federal Income Taxes
--------------------
The Plan received a tax qualification letter from the Internal Revenue
Service stating that it is a qualified plan under the Internal Revenue Code
("IRC"), and therefore the associated trust is exempt from federal income
taxes. Following the qualification letter, the Plan administration
believes operation of the Plan has been performed in a manner to maintain
compliance with the applicable requirements of the IRC.
<PAGE>
4. Party-in-interest Transactions
------------------------------
The Plan engaged in transactions involving the acquisition or disposition
of units of participation in collective investment funds of the Trustee,
which is a party-in-interest with respect to the Plan. These transactions
are not considered "prohibited transactions" under ERISA and are for short-
term investment of cash balances pending reinvestment.
5. Plan Termination
----------------
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of
Plan termination, participants will become 100 percent vested in their
accounts.
<PAGE>
Schedule 1
SCHEDULE OF INVESTMENTS HELD AT END OF PLAN YEAR
MGI PHARMA, INC. Retirement Savings Plan
December 31, 1995
(unaudited)
<TABLE>
<CAPTION>
Number Fair Market
Description of shares/units Cost Value
- ----------- --------------- -----------------------
<S> <C> <C> <C>
Shares of registered investment
companies:
Invesco Stable Value 315,301 $ 315,301 $ 315,301
Vanguard Group:
Fixed Income, GNMA 8,198 80,820 85,502
World, International Growth 13,809 194,266 207,416
Fidelity Investments:
Puritan 10,808 169,542 183,847
Retirement Growth 11,294 204,142 205,432
MGI PHARMA, INC. common stock 114,204 805,915 506,786
Participant notes receivable 17,574 17,574 17,574
---------- ----------
Total $1,787,560 $1,521,858
========== ==========
</TABLE>
<PAGE>
Schedule 2
REPORTABLE TRANSACTIONS
MGI PHARMA, INC. Retirement Savings Plan
Year ended December 31, 1995
(unaudited)
<TABLE>
<CAPTION>
Total Total Total Dollar Total Dollar
Number Number Value of Value Net Gain
Description of Purchases of Sales Purchases of Sales or (Loss)
- ----------- ------------ -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Guaranteed investment contract -0- 1 $ -0- $306,284 -0-
Shares of registered investment
companies:
Invesco Stable Value 58 10 368,111 52,810 -0-
Fidelity Investments:
Puritan 59 7 85,899 6,292 124
Retirement Growth 56 8 109,051 13,789 216
MGI PHARMA, INC. common stock 30 3 183,307 16,289 10,921
</TABLE>
<PAGE>
EXHIBIT INDEX
MGI PHARMA, INC.
Annual Report on Form 10-K
For
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- ------------
<S> <C> <C>
3.1 Restated Articles of Incorporation (Incorporated by N/A
reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-2, File No. 33-40763).
3.2 Restated Bylaws of the Company, as amended to date N/A
(Incorporated by reference to Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1994).
4.1 Specimen certificate for shares of Common Stock of N/A
the Company (Incorporated by reference to Exhibit 4.1 to
the Company's Annual Report on Form 10-K for the
year ended December 31, 1994).
4.2 Rights Agreement, dated as of January 19, 1988, between N/A
the Company and Norwest Bank Minneapolis, National
Association (including the form of Right Certificate
attached as Exhibit A thereto) (Incorporated by reference to
Exhibit 4.2 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994).
10.1 1993 Nonemployee Director Stock Option Plan N/A
(Incorporated by reference to Exhibit 10.1 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1994).
10.2 Nonemployee Director Stock Option Plan (Incorporated by N/A
reference to Exhibit 10.2 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994).
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10.3 Deferred Compensation Plan for Nonemployee Directors N/A
(Incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995).
10.4 1994 Stock Incentive Plan (Incorporated by reference to N/A
Exhibit 10.3 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994).
10.5 1984 Stock Option Plan (Incorporated by reference to N/A
Exhibit 10.4 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10.6 1982 Incentive Stock Option Plan (Incorporated by N/A
reference to Exhibit 10.5 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994).
10.7 Stock Acquisition Assistance Loan Program (Incorporated N/A
by reference to Exhibit 10.6 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994).
10.8 Money Purchase Retirement Plan Supplement Program N/A
(Incorporated by reference to Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1994).
10.9 Retirement, Separation Agreement and Release, dated 36
December 31, 1995 with Kenneth F. Tempero.
10.10 Termination Agreement, dated as of January 1, 1992, N/A
with Kenneth F. Tempero (Incorporated by reference to
Exhibit 10.8 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10.11 Termination Agreement, dated as of January 1, 1992, N/A
with Charles C. Muscoplat (Incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10.12 Termination Agreement, dated as of January 1, 1992, N/A
with James V. Adam (Incorporated by reference to
Exhibit 10.10 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10.13 Termination Agreement, dated as of January 1, 1992, 52
with Lori-jean Gille.
10.14 Termination Agreement, dated as of July 10, 1995, with 61
Jon C. Lee.
10.15 Termination Agreement, dated as of August 9, 1994, 70
with Rajesh C. Shrotriya.
10.16 Lease Agreement, dated August 7, 1989, with ALSCOR N/A
Investors Joint Venture, as amended by that certain
Amendment to Office Lease, dated October 30, 1989, with
ALSCOR Investors Joint Venture (Incorporated by reference
to Exhibit 10.11 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10.17 Second Amendment to Office Lease, dated May 3, 1991 N/A
between the Company and ALSCOR Investors Joint
Venture (Incorporated by reference to Exhibit 10.12 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1994).
10.18 Third Amendment to Office Lease, dated N/A
September 23, 1992 between the Company and ALSCOR
Investors Joint Venture (Incorporated by reference to
Exhibit 10.13 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10.19 Fourth Amendment to Office Lease, dated N/A
September 23, 1992 between the Company and ALSCOR
Investors Joint Venture (Incorporated by reference to
Exhibit 10.14 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10.20 Fifth Amendment to Office Lease, dated March 10, 1995 N/A
between the Company and ALSCOR Investors Joint
Venture (Incorporated by reference to Exhibit 10.15
to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994).
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10.21 Trademark License Agreement, dated as of N/A
December 31, 1989, between the Company and Norwich
Eaton Pharmaceuticals, Inc. (Incorporated by reference to
Exhibit 10.16 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10.22 Supply and License Agreement, dated March 19, 1992, N/A
among E Merck Fine Chemicals Division, EM Industries
and the Company (Incorporated by reference to
Exhibit A to Exhibit 10.15 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1992).
10.23 Supply Agreement, dated December 21, 1993, between N/A
the Company and Boehringer Ingelheim
Pharmaceuticals, Inc. (Incorporated by reference to
Exhibit 10.18 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10.24 Development, Marketing and Cooperation Agreement, N/A
dated October 23, 1995, between the Company and
Dainippon Pharmaceutical Co., Ltd. (Incorporated by
reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1995).
10.25 Manufacturing Agreement, dated December 12, 1995, 79
between the Company and Global Pharm Inc.
11 Computation of Net Income (Loss) Per Common Share. 106
13 1995 Annual Report to Shareholders. 107
23 Consent of KPMG Peat Marwick LLP. 135
24 Powers of Attorney. 136
27 Financial Data Schedule. 137
</TABLE>
<PAGE>
Exhibit 10.9
RETIREMENT, SEPARATION AGREEMENT AND RELEASE
This Retirement, Separation Agreement and Release ("Agreement") effective
this 31st day of December, 1995, by and between MGI PHARMA, INC., a Minnesota
corporation ("MGI"), and Dr. Kenneth F. Tempero, a resident of the State of
Minnesota ("Employee").
Employee is the Chairman and Chief Executive Officer at MGI. MGI and
Employee wish to effect the termination of Employee's employment on the terms
and conditions set forth hereafter.
In consideration of the premises, mutual covenants and agreements contained
in this Agreement, MGI and Employee hereby agree as follows:
1. Continued Employment, Resignation - In order to retire, Employee hereby
---------------------------------
resigns from his employment with MGI at the Resignation Date, which shall be the
earlier of (i) the date the Board of Directors (the "Board") in its sole
discretion determines that it is in the best interest of MGI that Employee's
employment shall cease or (ii) the time at which a successor to Employee is
chosen and begins employment with MGI. From the effective date of this
Agreement, December 31, 1995 (the "Effective Date") until the Resignation Date,
Employee shall remain employed by MGI at, at least, his current base salary of
$275,000 dollars per year, less applicable withholding and deductions, and with
all benefits associated with full time employment at MGI.
MGI, recognizing that Employee is important to the recently initiated
collaboration with Dainippon, has requested, and Employee has agreed to continue
to assist MGI in its relationship with Dainippon regarding MGI-114 and its
analogues. From Effective Date to Resignation Date Employee will continue to
assume responsibility as the primary, senior interface between the MGI Board,
MGI management and senior management at Dainippon. In addition, Employee
agrees that from Resignation Date to September 30, 1997, Employee may, from time
to time, be required to provide certain services, as may be reasonably
determined by the Board, on MGI's behalf with respect to Dainippon. In no
event, however, will Employee be required to commit more than one day per month
to such services after Resignation Date including travel time.
2. Termination Agreement - Employee entered into a Termination Agreement
---------------------
with MGI dated January 1, 1992, ("Termination Agreement") attached hereto as
Exhibit A, with respect to certain changes in control of MGI. Employee and MGI
hereby agree that upon the Resignation Date of this Agreement, the Termination
Agreement is null and void. Should, past the Resignation Date but prior to
September 30, 1997, MGI experience a Change of Control (as defined in the
Termination Agreement, all monies yet to be paid Employee under this Contract
will be immediately paid to the Employee in lump sum.
<PAGE>
3. Severance, Initial Retirement Compensation - As consideration for past
------------------------------------------
services and future services to MGI, the covenants set forth in Sections 4 and 5
hereof, and the release of any and all claims as set forth in Section 7 hereof,
and subject to the terms hereof, MGI agrees as follows:
(a) MGI will pay to Employee his salary of at least the annual rate of
$275,000 (the "Base Severance"), subject to all withholding and deductions
as required by law from Resignation Date through September 30, 1997.
Periodic payments shall be made by direct deposit to the bank account
designated by Employee. Employee shall be entitled to a salary increase
consistent with any increases granted to other officers of MGI for 1996
(customarily decided at the January Board and Committee meetings), to a
bonus for 1995 accomplishments commensurate with his bonus plan and in line
with bonuses for 1995 performance awarded to other corporate officers, and,
at the discretion of the Board, to a grant of stock options in January
1996. During the period up to September 30, 1997, Employee will be
entitled and expected to continue his practice of registering for,
traveling to and attending meetings on developments in corporate governance
and Continuing Medical Education as has been done historically. MGI will
continue to pay or reimburse such licensure and professional membership
fees for licenses, memberships and subscriptions currently held and that
shall be due and payable before September 30, 1997. Employee may change
the mailing address for subscriptions at his discretion. Subject to
Employee's performance of his obligations under this Agreement, MGI agrees
to pay the Base Severance without regard to Employee's employment or
earnings from permitted employment (i.e., employment not prohibited by
----
Section 4 hereof) during the period ending September 30, 1997. Employee
will not be entitled to any bonus, stock options or other compensation not
otherwise specifically provided herein.
(b) MGI will, through September 30, 1997, pay the employer's portion of
coverage for the Employee and Employee's family under the MGI group health,
group life and dental insurance applicable to the Employee; provided,
however, that such payment will be made only if Employee and Employee's
family elect COBRA and other benefit continuation rights as of the
Resignation Date. MGI will make a lump-sum cash payment to Employee as of
Resignation Date reflecting an estimate, as determined by the Board, of the
contributions MGI would have made on behalf of Employee for his accidental
death and dismemberment, individual split-dollar policies, 401(k) and Money
Purchase Retirement Plan and non-ERISA program, the non-ERISA program to be
prorated 9/12 (nine twelveths) for 1997, had the Employee remained employed
from Resignation Date to September 30, 1997. Such lump-sum cash payment
made to Employee will be made in gross to include any additional tax that
may result from the lump-sum payment.
<PAGE>
(c) Employee has been granted stock options ("Options") under MGI's 1994
Stock Incentive Plan and 1984 Stock Option Plan, as amended to date ("1994
Plan", "1984 Plan" or collectively the "Plans") and pursuant to various
Stock Option Agreements and related Limited Stock Appreciation Right Grant
Agreements (collectively the "Option Agreements"), as set forth in the
chart attached hereto as Exhibit B. If Employee had remained continuously
employed with MGI, certain additional options to purchase shares of MGI's
Common Stock would have vested in Employee pursuant to the Option
Agreements. By reason of Employee's resignation and retirement hereunder,
Employee's participation in the Option Plans will cease as of the
Resignation Date. MGI and Employee hereby agree that the terms of the
Option Agreements are amended as follows.
(i) Upon Resignation Date, all Options outstanding, whether or
not exercisable on Resignation Date, will accelerate, vest and become
immediately exercisable, subject to the condition that no option shall
be exercisable after the expiration of the original term of the
option.
(ii) The exercise of any options after Resignation Date shall be
subject to, in addition to the terms of the Plans and Option
Agreements, satisfaction of the conditions precedent that Employee
does not (aa) violate the conditions of Sections 4 and 5 of the
Agreement, or (bb) otherwise engage in conduct which, in the judgment
of the Board, adversely affects MGI. Should the Board decide that
either event (aa or bb) may have occurred the options may, by decision
of the Board, become null and void. Employee will be granted a face-
to-face meeting with the Board to discuss the alleged event(s) before
such decision is taken by the Board.
(d) Employee and MGI entered into a Stock Acquisition Assistance Loan
Agreement ("Loan Agreement") effective February 22, 1993, whereby MGI made
available to Employee certain funds to be used in connection with MGI
stock. Pursuant to the Loan Agreement, Employee executed two promissory
notes (the "Notes" attached as Exhibit C); the first dated February 22,
1993 in the amount $540,000 and the second dated January 12, 1994 in the
amount $550,000. On Effective Date, the notes have a principal outstanding
balance of approximately $429,000 plus accrued interest. Employee agrees
to repay to MGI all but $200,000 of the outstanding balance by December 31,
1996 and to pay the remaining outstanding balance including accrued
interest on or before March 31, 1997, unless the Resignation Date is after
March 31, 1997, in which case the remaining outstanding balance including
accrued interest shall be paid by the Resignation Date. Interest shall
continue to accrue until the entire principal balance is paid.
(e) MGI will, without alteration, continue to maintain the MGI Split-
Dollar Life Policies, numbered 2,451,269 and 2,656,487, with Phoenix Home
Life (the "Policies"). Effective as of the Resignation Date, MGI shall
<PAGE>
release its assignment in the Policies and will transfer without charge,
and free of encumbrances or obligations of any kind, MGI's entire interest
in said policies to the Employee. Upon transfer MGI will have no further
obligations under the Policies.
(f) MGI agrees to reimburse Employee for reasonable attorneys' fees
and/or reasonable financial planning fees actually incurred by Employee for
legal and/or financial advice in connection with this Agreement, as
documented by a detailed statement describing services rendered, and
subject to a maximum reimbursement in any case of $3,000.00.
(g) All cash payments to Employee under this Agreement shall be
reduced by all applicable state and federal tax withholding or similar
required deductions.
(h) At Resignation Date, Employee may purchase the computer which he
is currently using at the computer's net book value. The residual contents
on the hard drive will be reviewed by MGI counsel to verify that it
contains none of MGI's confidential information.
4. Non-Competition Non-Harm Covenant; Non-Solicitation Agreement -
-------------------------------------------------------------
Employee agrees that throughout the period between Effective Date and September
30, 1997, Employee will not without the prior written consent of MGI:
(a) knowingly solicit, attempt to obtain from, or in any way transact
business with any accounts, existing or potential, or customers, licensees,
licensors, of MGI, wherever located;
(b) knowingly aid or assist any other party in such solicitation of
any such customers or accounts; or
(c) otherwise interfere with MGI's relationships with any accounts,
existing or potential, licensees or licensors, customers or employees by
soliciting such accounts, licensees or licensors, customers, or employees
or inducing them to discontinue their relationships with MGI. Employee
agrees he will not assist any other person in carrying out any activity
that would be prohibited by the foregoing provisions if such activity were
carried out by Employee himself. It shall not be a violation of the terms
of this Agreement for Employee to provide a reference for an employee of
MGI upon the request of that employee. These prohibition, (a), (b) and
(c), are not intended to apply to wholesalers, contract manufacturers,
contract research organizations or others who routinely maintain non-
exclusive relationships with multiple parties.
If Resignation Date is later than June 1, 1996 MGI acknowledges that
Employee may, without further approval, thereafter begin utilizing time in
independent pharmaceutical and/or business management consulting efforts that
are not in conflict with the above. Between June 1, 1996 and December 31, 1996
these activities are expected to be limited to an average of no more than one
day per week and thereafter to two days per week assuming Resignation Date has
not yet occurred.
<PAGE>
Employee agrees that throughout the period between Effective Date and
September 30, 1997 his conduct is to be guided by the principle of not assisting
others to compete directly with MGI (unless, for example, MGI has specifically
declined to exploit or participate in the development of a specific compound)
and to avoid undertaking activities competitive to MGI. When there is a
potential for conflict, it is incumbent upon Employee to avoid or delay such
activity until he has prior written consent from the Board.
5. Confidential Information - Employee agrees he will not at any time
------------------------
divulge, furnish or make accessible to anyone, any trade secret or any knowledge
or information held in confidence by MGI, which is not in the public domain,
including but not limited to the identity of business associations or
relationships of MGI, or the functions, responsibilities or production levels of
employees, except as such functions and responsibilities may be described in an
employee reference provided in accordance with the terms of Section 4 above, or
as may be required by law or by an order, rule or request of any regulatory
agency.
6. Effect of Breach - If Employee breaches or violates any material
----------------
obligation imposed under this Agreement, MGI shall have the right to terminate
this Agreement, and all further obligations hereunder to Employee, or to others
whose rights may derive from him, will cease. The parties agree that, in the
event Employee violates the provisions of Section 4 or 5, the Resignation Date
provided in Section 1 above shall immediately be accelerated to the first date
of such violation. Employee acknowledges that it would be difficult to
compensate MGI for damages for any violation of this Agreement, including
without limitation the provisions of Sections 4 and 5 hereof. Accordingly,
Employee specifically agrees that MGI shall be entitled to temporary and
permanent injunctive relief to enforce the provisions of this Agreement and that
such relief may be granted without the necessity of proving actual damages.
This provision with respect to injunctive relief will not, however, diminish the
right of MGI to claim and recover damages in addition to injunctive relief.
7. Releases -
--------
(a) Employee for himself, his heirs, successors and assigns hereby
releases and discharges MGI, and all of its respective directors, officers,
agents, employees, successors and assigns, whether current or former, (the
"Released Parties") from any and all claims, demands, actions, liabilities,
damages, or rights of any kind, whether known or unknown, arising out of or
relating to Employee's employment with MGI and the contemplated cessation
of Employee's employment with MGI. Employee further agrees that he will
not institute or authorize any other party, either governmental or
otherwise, to institute any administrative or legal proceedings against MGI
or its respective directors, officers, agents, employees, successors or
assigns as a result of any claims of any kind or character which Employee
might have arising from or relating to Employee's employment with MGI
and/or the contemplated cessation of Employee's employment with MGI. This
Release is intended to
<PAGE>
include any and all claims under or for any stock options, option plan,
compensation or benefits of any kind, without regard to whether any
instruments evidencing same were issued, except as set forth in this
Agreement. MGI and Employee agree, however, that this release does not
include: (i) any presently vested rights of Employee under the terms of
MGI's applicable pension, benefit or deferred compensation plans, (ii)
Employee's right to be indemnified by MGI consistent with the terms of its
Articles of Incorporation, By-laws and applicable law, or (iii) Employee's
rights under this Agreement.
(b) This Agreement is also intended to extend to and include, among
other things, any claim of discrimination, on the basis of gender, age,
disability, or otherwise, arising under the Minnesota Human Rights Act,
Minn. Stat. (S)363.01 et seq., Title VII of the Civil Rights Act of 1964,
-- ---
42 U.S.C. (S)2000 et seq., the Age Discrimination in Employment Act, 29
-- ---
U.S.C. (S)621 et seq., the Americans With Disabilities Act, 42 U.S.C.
-- ---
(S)(S)1201 et seq., and any other federal, state or local statute,
-- ---
regulation or ordinance, as well as any claim for wrongful termination,
breach of contract, fraud, misrepresentation, retaliation, violation of
public policy, infliction of emotional distress, defamation, promissory
estoppel or any other claim or theory, whether legal or equitable.
Employee has been informed of his right to revoke this Agreement insofar as
it extends to potential claims under the Age Discrimination in Employment
Act by informing MGI of his intent to revoke this Agreement within seven
(7) calendar days following Effective Date. Employee has likewise been
informed of his right to rescind this release insofar as it relates to
potential claims under the Minnesota Human Rights Act by written notice to
MGI within fifteen (15) calendar days following Effective Date. Employee
has been further informed and understands that any such rescission must be
in writing and hand-delivered to MGI or, if sent by mail, postmarked within
the applicable time period, sent by certified mail, return receipt
requested, and addressed as follows:
Office of the General Counsel
MGI PHARMA, INC.
Suite 300 E. Opus Center
9900 Bren Road East
Minneapolis, MN 55343-9667
Employee understands that if he does rescind this Agreement in accordance
with the above provisions, this entire Agreement is null and void and Employee
will return to MGI any consideration paid or benefit provided pursuant to this
Agreement contemporaneously with the delivery of this rescission notice;
however, any rescission does not affect the termination of Employee's employment
as of the Resignation Date.
<PAGE>
8. Successors and Assigns of Employee - Neither this Agreement nor any of
----------------------------------
the rights, interests or benefits of Employee hereunder shall be assigned,
transferred, pledged, hypothecated or otherwise disposed of or encumbered by
Employee, and, to the extent provided by law, no such rights, interests or
benefits shall be subject to attachment, execution, levy or similar process.
Any attempted assignment transfer, pledge or hypothecation, encumbrance or other
disposition of this Agreement or of any such rights, interests or benefits, and
any such attachment, execution, levy or similar process, shall be null and void
and without effect. This Agreement shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, successors, heirs and legatees. If Employee should die and any
amount is or becomes payable hereunder, including, but not limited to, amounts
payable pursuant to Section 3 hereof, such amounts shall be paid in accordance
with the terms of this Agreement to Employee's devisee, legatee or other
designee or if there is not such designee, to Employee's estate.
9. Successors and Assigns of MGI - This Agreement shall inure to the
-----------------------------
benefit of and be binding upon MGI, its successors and assigns, including
without limitation any person partnership or corporation that may acquire all or
substantially all of the assets and business of MGI or with or into which MGI
might be consolidated or merged or which may hold a majority of MGI's capital
stock. Employee shall be entitled to reasonable attorneys' fees and associated
costs incurred by Employee in enforcing this Agreement against such person,
partnership or corporation.
10. Non-Admissions - This Agreement does not constitute and shall not in
--------------
any way be construed as an admission by MGI that it has acted wrongfully with
respect to Employee or any other person, or that Employee has any rights
whatsoever against MGI except those granted by this Agreement, those existent by
virtue of fact of employment or existent by virtue of shareholdings to the
extent shareholdings exist. MGI specifically disclaims any liability to
Employee except as otherwise specifically provided in this Agreement.
11. Confidentiality - The terms of this Agreement shall remain strictly
---------------
confidential between the Employee and MGI. Employee shall not disclose the
terms and conditions of this Agreement to any third person other than to his
immediate family, attorneys, accountants, tax consultants, state and federal tax
authorities or as may be required by law or by an order, rule or request of any
regulatory agency, provided, however, that Employee shall be permitted to
disclose the terms of Sections 4 and 5 to prospective employers. By specific
mutual agreement between Employee and the Board, Employee may reveal the
existence of and certain aspects of this Agreement to J. S. Cole and certain
senior managers of Dainippon and Kissei, if in the judgment of Employee and
Cole, such may be helpful and/or necessary in their efforts to retain the
relationships of these companies with MGI. The terms of this Agreement shall be
disclosed by MGI as required by law or by an order, rule or request of any
regulatory agency.
<PAGE>
12. Applicable Law - This Agreement and all questions arising in
--------------
connection herewith shall be governed by the laws of the State of Minnesota.
13. Severability - To the extent any provision of this Agreement shall be
------------
determined to be invalid or unenforceable, such provision shall be deleted from
this Agreement and the validity and enforceability of the remainder of the
provisions of this Agreement shall all be unaffected. In furtherance and not in
limitation of the foregoing, Employee expressly agrees that should the duration
or geographical extent of, or the business activities covered by, any provision
of this Agreement be in excess of that which is valid or enforceable under
applicable law, then such provision shall be construed to cover only such
duration, extent or activities as may validly or enforceably be covered.
Employee acknowledges the uncertainty of the law in this respect and expressly
stipulates that this Agreement shall be construed in a manner that renders its
provisions valid and enforceable to the maximum extent (not exceeding its
express terms) possible under applicable law.
14. Reasonable Restrictions - Employee acknowledges and agrees that the
-----------------------
covenants and restrictions imposed in this Agreement are reasonable as to scope,
time and geographic area. Employee further acknowledges and agrees that his
compliance with the covenants and restrictions set forth herein is reasonable
and necessary for the protection of MGI's future interest in and the value of
MGI's business.
15. Waivers; Amendment - No provision of this Agreement may be modified,
------------------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by Employee and MGI. No waiver by either party hereto at
any time of any breach by the other party hereto, or of compliance with any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same time or any prior or subsequent time.
16. Entire Agreement - MGI and Employee mutually agree that this Agreement
----------------
contains the entire understanding and agreement between them as to all matters
referenced herein and that any prior promises, commitments, agreements or
understandings with respect to his employment or the cessation of his employment
have been entirely superseded by the terms of this Agreement. Further, the
payments and benefits provided for in this Agreement are to be made for among
other things, full satisfaction of any claim, right or entitlement of Employee
for compensation or benefits of any kind, whether in the form of salary, fringe
benefits, bonus, commissions, incentive pay, stock, stock options, or otherwise.
17. Time To Reflect - The Employee has been informed that the terms of
---------------
this Agreement will remain open for acceptance and execution by him for a period
of twenty-one (21) days during which time he may consult with an attorney and
consider whether to accept this Agreement.
18. Employee's Acknowledgement - Employee hereby affirms and acknowledges
--------------------------
that he has read the foregoing Agreement and that he has been advised to and has
in fact consulted with legal counsel of his choosing prior to
<PAGE>
signing this Agreement. Employee further affirms that he understands the
meaning of the terms of this Agreement and their effect and that he agrees that
the provisions set forth in the Agreement are written in language understandable
to the Employee. Employee represents that he enters into this Agreement freely,
knowingly and voluntarily.
/s/ K F Tempero
-----------------------------------
Kenneth F. Tempero - Employee
MGI PHARMA, INC.
By /s/ C.E. Austin
-------------------------------
Its Director
-------------------------------
<PAGE>
Exhibit 10.13
TERMINATION AGREEMENT
This Agreement is made as of the 1st day of January, 1992, between MGI
PHARMA, INC., a Minnesota corporation, with its principal offices at Suite 300E
Opus Center, 9900 Bren Road East, Minnetonka, Minnesota 55343 (the "Company")
and Lori-jean Gille ("Employee"), residing at
---------------
3443 St. Louis Avenue
- --------------------------------------------------------------------------------
Minneapolis, MN 55416 .
- -------------------------------------------------------------------------------
WITNESSETH THAT:
WHEREAS, this Agreement is intended to specify the financial
arrangements that the Company will provide to the Employee upon Employee's
separation from employment with the Company under any of the circumstances
described herein; and
WHEREAS, this Agreement is entered into by the Company in the belief
that it is in the best interests of the Company and its shareholders to provide
stable conditions of employment for Employee notwithstanding the possibility,
threat or occurrence of certain types of change in control, thereby enhancing
the Company's ability to attract and retain highly qualified people.
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of Employee notwithstanding the possibility, threat or occurrence of
a bid to take over control of the Company, and to induce Employee to remain in
the employ of the Company, and for other good and valuable consideration, the
Company and Employee agree as follows:
1. Term of Agreement. The term of this Agreement shall commence on
-----------------
the date hereof as first written above and shall continue through December 31,
1994; provided that commencing on January 1, 1995 and each January 1 thereafter,
-------- ----
the term of this Agreement shall automatically be extended for one additional
year unless not later than twelve months prior to such January 1, the Company
shall have given notice that it does not wish to extend this Agreement (which
notice may not, in any event, be given sooner than January 1, 1995); and
provided, further, that notwithstanding any such notice by the Company not to
- -------- ------- ----
extend, this Agreement shall continue in effect for a period of 24 months beyond
the term provided herein if a Change in Control (as defined in Section 3(i)
hereof) shall have occurred during such term.
<PAGE>
2. Termination of Employment
-------------------------
(i) Prior to a Change in Control. Prior to a Change in Control (as
----------------------------
defined in Section 3(i) hereof), the Company may terminate Employee from
employment with the Company at will, with or without Cause (as defined in
Section 3(iii) hereof), at any time.
(ii) After a Change in Control
-------------------------
(a) From and after the date of a Change in Control (as defined in
Section 3(i) hereof) during the term of this Agreement, the Company shall
not terminate Employee from employment with the Company except as provided
in this Section 2(ii) or as a result of Employee's Disability (as defined
in Section 3(iv) hereof) or his death.
(b) From and after the date of a Change in Control (as defined in
Section 3(i) hereof) during the term of this Agreement, the Company shall
have the right to terminate Employee from employment with the Company at
any time during the term of this Agreement for Cause (as defined in Section
3(iii) hereof), by written notice to the Employee, specifying the
particulars of the conduct of Employee forming the basis for such
termination.
(c) From and after the date of a Change in Control (as defined in
Section 3(i) hereof) during the term of this Agreement: (x) the Company
shall have the right to terminate Employee's employment without Cause (as
defined in Section 3(iii) hereof), at any time; and (y) the Employee shall,
upon the occurrence of such a termination by the Company without Cause, or
upon the voluntary termination of Employee's employment by Employee for
Good Reason (as defined in Section 3(ii) hereof), be entitled to receive
the benefits provided in Section 4 hereof. Employee shall evidence a
voluntary termination for Good Reason by written notice to the Company
given within 60 days after the date of the occurrence of any event that
Employee knows or should reasonably have known constitutes Good Reason for
voluntary termination. Such notice need only identify the Employee and set
forth in reasonable detail the facts and circumstances claimed by Employee
to constitute Good Reason.
Any notice given by Employee pursuant to this Section 2 shall be
effective five business days after the date it is given by Employee.
<PAGE>
3. Definitions
-----------
(i) A "Change in Control" shall mean:
(a) a change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or successor provision thereto, whether or not the Company
is then subject to such reporting requirement;
(b) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly,
of securities of the Company representing 35% or more of the combined
voting power of the Company's then outstanding securities;
(c) the Continuing Directors (as defined in Section 3(v) hereof)
cease to constitute a majority of the Company's Board of Directors;
provided that such change is the direct or indirect result of a proxy fight
-------- ----
and contested election or elections for positions on the Board of
Directors; or
(d) the majority of the Continuing Directors (as absolute
discretion that there has been a change in control of the Company.
(ii) "Good Reason" shall mean the occurrence of any of the following
events, except for the occurrence of such an event in connection with the
termination or reassignment of Employee's employment by the Company for Cause
(as defined in Section 3(iii) hereof), for Disability (as defined in Section
3(iv) hereof) or for death:
(a) the assignment to Employee of employment responsibilities
which are not of comparable responsibility and status as the employment
responsibilities held by Employee immediately prior to a Change in Control;
(b) a reduction by the Company in Employee's base salary as in
effect immediately prior to a Change in Control;
(c) an amendment or modification of the Company's incentive
compensation program (except as may be required by applicable law) which
affects the terms or administration of the program in a manner adverse to
the interest of Employee as compared to the terms and administration of
such program immediately prior to a Change in Control;
<PAGE>
(d) the Company's requiring Employee to be based anywhere other
than within 50 miles of Employee's office location immediately prior to a
Change in Control, except for requirements of temporary travel on the
Company's business to an extent substantially consistent with Employee's
business travel obligations immediately prior to a Change in Control;
(e) except to the extent otherwise required by applicable law,
the failure by the Company to continue in effect any benefit or
compensation plan, stock ownership plan, stock purchase plan, bonus plan,
life insurance plan, health-and-accident plan or disability plan in which
Employee is participating immediately prior to a Change in Control (or
plans providing Employee with substantially similar benefits), the taking
of any action by the Company which would adversely affect Employee's
participation in, or materially reduce Employee's benefits under, any of
such plans or deprive Employee of any material fringe benefit enjoyed by
Employee immediately prior to such Change in Control, or the failure by the
Company to provide Employee with the number of paid vacation days to which
Employee is entitled immediately prior to such Change in Control in
accordance with the Company's vacation policy as then in effect; or
(f) the failure by the Company to obtain, as specified in Section
5(i) hereof, an assumption of the obligations of the Company to perform
this Agreement by any successor to the Company.
(iii) "Cause" shall mean termination by the Company of Employee's
employment based upon (a) the willful and continued failure by Employee
substantially to perform his duties and obligations (other than any such failure
resulting from his incapacity due to physical or mental illness or any such
actual or anticipated failure resulting from Employee's termination for Good
Reason) or (b) the willful engaging by Employee in misconduct which is
materially injurious to the Company, monetarily or otherwise. For purposes of
this Section 3(iii), no action or failure to act on Employee's part shall be
considered "willful" unless done, or omitted to be done, by Employee in bad
faith and without reasonable belief that his action or omission was in the best
interests of the Company.
(iv) "Disability" shall mean any physical or mental condition which
would qualify Employee for a disability benefit under the Company's long-term
disability plan.
(v) "Continuing Director" shall mean any person who is a member of
the Board of Directors of the Company, while such person is a member of the
Board of Directors, who is not an Acquiring Person (as hereinafter defined) or
an Affiliate or
<PAGE>
Associate (as hereinafter defined) of an Acquiring Person, or a representative
of an Acquiring Person or of any such Affiliate or Associate, and who (a) was a
member of the Board of Directors on the date of this Agreement as first written
above or (b) subsequently becomes a member of the Board of Directors, if such
person's initial nomination for election or initial election to the Board of
Directors is recommended or approved by a majority of the Continuing Directors.
For purposes of this Section 3(v): "Acquiring Person" shall mean any "person"
(as such term is used in Sections 13(d) and 14(d) of the Exchange Act) who or
which, together with all Affiliates and Associates of such person, is the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of the shares of Common Stock of the Company then outstanding,
but shall not include the Company, any subsidiary of the Company or any employee
benefit plan of the Company or of any subsidiary of the Company or any entity
holding shares of Common Stock organized, appointed or established for, or
pursuant to the terms of, any such plan; and "Affiliate" and "Associate" shall
have the respective meanings ascribed to such terms in Rule 12b-2 promulgated
under the Exchange Act.
4. Benefits upon Termination under Section 2(ii)(c)
------------------------------------------------
(i) Upon the termination (voluntary or involuntary) of the employment
of Employee pursuant to Section 2(ii)(c) hereof, Employee shall be entitled to
receive the benefits specified in this Section 4. The amounts due to Employee
under subparagraphs (a), (b) and (c) of this Section 4(i) shall be paid to
Employee not later than one business day prior to the date that the termination
of Employee's employment becomes effective. All benefits to Employee pursuant
to this Section 4(i) shall be subject to any applicable payroll or other taxes
required by law to be withheld.
(a) The Company shall pay to Employee any and all amounts payable
to Employee pursuant to any standard or general severance policy of the
Company or its Board of Directors;
(b) In lieu of any further base salary payments to Employee for
periods subsequent to the date that the termination of Employee's
employment becomes effective, the Company shall pay as severance pay to
Employee a lump-sum cash amount equal to thirty-six (36) times the
Employee's monthly base salary (as in effect in the month preceding the
month in which the termination becomes effective or as in effect in the
month preceding the Change in Control, whichever is higher);
<PAGE>
(c) The Company shall also pay to Employee all legal fees and
expenses incurred by Employee as a result of such termination of employment
(including all fees and expenses, if any, incurred by Employee in seeking
to obtain or enforce any right or benefit provided to Employee by this
Agreement whether by arbitration or otherwise); and
(d) Any and all contracts, agreements or arrangements between the
Company and Employee prohibiting or restricting the Employee from owning,
operating, participating in, or providing employment or consulting services
to, any business or company competitive with the Company at any time or
during any period after the date the termination of Employee's employment
becomes effective, shall be deemed terminated and of no further force or
effect as of the date the termination of Employee's employment becomes
effective, to the extent, but only to the extent, such contracts,
agreements or arrangements so prohibit or restrict the Employee; provided
that the foregoing provisions shall not constitute a license or right to
use any proprietary information of the Company and shall in no way affect
any such contracts, agreements or arrangements insofar as they relate to
nondisclosure and nonuse of proprietary information of the Company
notwithstanding the fact that such nondisclosure and nonuse may prohibit or
restrict the Employee in certain competitive activities.
(ii) Employee shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or otherwise.
The amount of any payment or benefit provided in this Section 4 shall not be
reduced by any compensation earned by Employee as a result of any employment by
another employer or from any other source.
(iii) In the event that any payment or benefit received or to be
received by Employee in connection with a Change in Control of the Company or
termination of Employee's employment (whether payable pursuant to the terms of
this Agreement or any other plan, contract, agreement or arrangement with the
Company, with any person whose actions result in a Change in Control of the
Company or with any person constituting a member of an "affiliated group" as
defined in Section 280G(d)(5) of the Internal Revenue Code of 1986, as amended
(the "Code"), with the Company or with any person whose actions result in a
Change in Control of the Company) (collectively, the "Total Payments") would not
be deductible (in whole or in part) by the Company or such other person making
such payment or providing such benefit solely as a result of Section 280G of the
Code, the amount payable to Employee pursuant to Section 4(i)(b) hereof shall be
reduced until no portion of the Total Payments is not deductible solely as a
result of Section 280G of the Code or such amount payable to Employee pursuant
to Section 4(i)(b) is reduced to zero. For purposes of this limitation, (a)
<PAGE>
no portion of the Total Payments shall be taken into account which in the
opinion of tax counsel selected by the Company and acceptable to Employee does
not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of
the Code (such as payments payable pursuant to the Company's standard or general
severance policies); (b) the payment pursuant to Section 4(i)(b) shall be
reduced only to the extent necessary so that the Total Payments (other than
those referred to in the immediately preceding clause (a)) in their entirety
constitute reasonable compensation within the meaning of Section 280G(b)(4)(B)
of the Code, in the opinion of the tax counsel referred to in the immediately
preceding clause (a); and (c) the value of any other non-cash benefit or of any
deferred cash payment included in the Total Payments shall be determined by the
Company's independent auditors in accordance with the principles of Sections
280G(d)(3) and (4) of the Code. In case of uncertainty as to whether all or
some portion of a payment is or is not payable to Employee under this Agreement,
the Company shall initially make the payment to the Employee, and Employee
agrees to refund to the Company any amounts ultimately determined not to have
been payable under the terms hereof.
5. Successors and Binding Agreement
--------------------------------
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company), by agreement in
form and substance satisfactory to Employee, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle
Employee to compensation from the Company in the same amount and on the same
terms as Employee would be entitled hereunder if employee terminated Employee's
employment after a Change in Control for Good Reason, except that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the date that the termination of Employee's employment
becomes effective. As used in this Agreement, "Company" shall mean the Company
and any successor to its business and/or assets which executes and delivers the
agreement provided for in this Section 5(i) or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
<PAGE>
(ii) This Agreement is personal to Employee, and Employee may not
assign or transfer any part of Employee's rights or duties hereunder, or any
compensation due to Employee hereunder, to any other person. Notwithstanding
the foregoing, this Agreement shall inure to the benefit of and be enforceable
by Employee's personal or legal representatives, executors, administrators,
heirs, distributees, devisees and legatees.
6. Arbitration. Any dispute or controversy arising under or in
-----------
connection with this Agreement shall be settled exclusively by arbitration in
the Minneapolis-St. Paul metropolitan area, in accordance with the applicable
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction.
7. Modification; Waiver. No provisions of this Agreement may
--------------------
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in a writing signed by Employee and such officer as may be
specifically designated by the Board of Directors of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
8. Notice. All notices, requests, demands and all other
------
communications required or permitted by either party to the other party by this
Agreement (including, without limitation, any notice of termination of
employment and any notice of intention to arbitrate) shall be in writing and
shall be deemed to have been duly given when delivered personally or received by
certified or registered mail, return receipt requested, postage prepaid, at the
address of the other party, as first written above (directed to the attention of
the Board of Directors and Corporate Secretary in the case of the Company).
Either party hereto may change its address for purposes of this Section 8 by
giving 15 days' prior notice to the other party hereto.
9. Severability. If any term or provision of this Agreement
------------
or the application hereof to any person or circumstances shall to any extent be
invalid or unenforceable, the remainder of this Agreement or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable shall not be affected thereby, and each term
and provision of this Agreement shall be valid and enforceable to the fullest
extent permitted by law.
<PAGE>
10. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11. Governing Law. This Agreement has been executed and
-------------
delivered in the State of Minnesota and shall in all respects be governed by,
and construed and enforced in accordance with, the laws of the State of
Minnesota, including all matters of construction, validity and performance, and
without taking into consideration the conflict of law provisions of such state.
12. Effect of Agreement; Entire Agreement. The Company and the
-------------------------------------
Employee understand and agree that this Agreement is intended to reflect their
agreement only with respect to payments and benefits upon termination in certain
cases and is not intended to create any obligation on the part of either party
to continue employment. This Agreement supersedes any and all other oral or
written agreements or policies made relating to the subject matter hereof and
constitutes the entire agreement of the parties relating to the subject matter
hereof; provided that this Agreement shall not supersede or limit in any way
Employee's rights under any benefit plan, program or arrangements in accordance
with their terms.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed, all as of the date first written above.
MGI PHARMA, INC.
By /s/ James V. Adam
----------------------------
Its VP, CFO
-----------------------
and
By /s/ K F Tempero
----------------------------
Its Chmn & CEO
-------------------------
EMPLOYEE
/s/ Lori-jean Gille
--------------------------------
<PAGE>
Exhibit 10.14
TERMINATION AGREEMENT
This Agreement is made as of the 10th day of July, 1995, between MGI
PHARMA, INC., a Minnesota corporation, with its principal offices at Suite 300E
Opus Center, 9900 Bren Road East, Minnetonka, Minnesota 55343 (the "Company")
and Jon C. Lee ("Employee"), residing at 4600 Sunnyside Road, Edina, MN 55424.
WITNESSETH THAT:
WHEREAS, this Agreement is intended to specify the financial arrangements
that the Company will provide to the Employee upon Employee's separation from
employment with the Company under any of the circumstances described herein; and
WHEREAS, this Agreement is entered into by the Company in the belief that
it is in the best interests of the Company and its shareholders to provide
stable conditions of employment for Employee notwithstanding the possibility,
threat or occurrence of certain types of change in control, thereby enhancing
the Company's ability to attract and retain highly qualified people.
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of Employee notwithstanding the possibility, threat or occurrence of
a bid to take over control of the Company, and to induce Employee to remain in
the employ of the Company, and for other good and valuable consideration, the
Company and Employee agree as follows:
1. Term of Agreement. The term of this Agreement shall commence on the
-----------------
date hereof as first written above and shall continue through December 31, 1995;
provided that commencing on January 1, 1996 and each January 1 thereafter, the
- -------- ----
term of this Agreement shall automatically be extended for one additional year
unless not later than twelve months prior to such January 1, the Company shall
have given notice that it does not wish to extend this Agreement (which notice
may not, in any event, be given sooner than January 1, 1996); and provided,
--------
further, that notwithstanding any such notice by the Company not to extend, this
- ------- ----
Agreement shall continue in effect for a period of 24 months beyond the term
provided herein if a Change in Control (as defined in Section 3(i) hereof) shall
have occurred during such term.
<PAGE>
2. Termination of Employment
-------------------------
(i) Prior to a Change in Control. Prior to a Change in Control (as defined
----------------------------
in Section 3(i) hereof), the Company may terminate Employee from employment with
the Company at will, with or without Cause (as defined in Section 3(iii)
hereof), at any time.
(ii) After a Change in Control
-------------------------
(a) From and after the date of a Change in Control
(as defined in Section 3(i) hereof) during the term of
this Agreement, the Company shall not terminate Employee
from employment with the Company except as provided in
this Section 2(ii) or as a result of Employee's Disability (as defined in
Section 3(iv) hereof) or his death.
(b) From and after the date of a Change in Control
(as defined in Section 3(i) hereof) during the term of this Agreement, the
Company shall have the right to terminate Employee from employment with the
Company at any time during the term of this Agreement for Cause (as defined
in Section 3(iii) hereof), by written notice to the Employee, specifying
the particulars of the conduct of Employee forming the basis for such
termination.
(c) From and after the date of a Change in Control
(as defined in Section 3(i) hereof) during the term of this Agreement: (x)
the Company shall have the right to terminate Employee's employment without
Cause (as defined in Section 3(iii) hereof), at any time; and (y) the
Employee shall, upon the occurrence of such a termination by the Company
without Cause, or upon the voluntary termination of Employee's employment
by Employee for Good Reason (as defined in Section 3(ii) hereof), be
entitled to receive the benefits provided in Section 4 hereof. Employee
shall evidence a voluntary termination for Good Reason by written notice to
the Company given within 60 days after the date of the occurrence of any
event that Employee knows or should reasonably have known constitutes Good
Reason for voluntary termination. Such notice need only identify the
Employee and set forth in reasonable detail the facts and circumstances
claimed by Employee to constitute Good Reason.
Any notice given by Employee pursuant to this Section 2 shall be effective
five business days after the date it is given by Employee.
<PAGE>
3. Definitions
-----------
(i) A "Change in Control" shall mean:
(a) a change in control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or successor provision thereto, whether or not the Company is then subject
to such reporting requirement;
(b) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-
3 promulgated under the Exchange Act), directly or indirectly, of
securities of the Company representing 35% or more of the combined voting
power of the Company's then outstanding securities;
(c) the Continuing Directors (as defined in Section 3(v) hereof) cease to
constitute a majority of the Company's Board of Directors; provided that
-------- ----
such change is the direct or indirect result of a proxy fight and contested
election or elections for positions on the Board of Directors; or
(d) the majority of the Continuing Directors
(as defined in Section 3(v) hereof) determine in their sole and absolute
discretion that there has been a change in control of the Company.
(ii) "Good Reason" shall mean the occurrence of any of the following
events, except for the occurrence of such an event in connection with the
termination or reassignment of Employee's employment by the Company for Cause
(as defined in Section 3(iii) hereof), for Disability (as defined in Section
3(iv) hereof) or for death:
(a) the assignment to Employee of employment responsibilities which are not
of comparable responsibility and status as the employment responsibilities
held by Employee immediately prior to a Change in Control;
(b) a reduction by the Company in Employee's base salary as in effect
immediately prior to a Change in Control;
(c) an amendment or modification of the Company's incentive compensation
program (except as may be required by applicable law) which affects the
terms or administration of the program in a manner adverse to the interest
of Employee as compared to the terms and administration of such program
immediately prior to a Change in Control;
<PAGE>
(d) the Company's requiring Employee to be based anywhere other than within
50 miles of Employee's office location immediately prior to a Change in
Control, except for requirements of temporary travel on the Company's
business to an extent substantially consistent with Employee's business
travel obligations immediately prior to a Change in Control;
(e) except to the extent otherwise required by applicable law, the failure
by the Company to continue in effect any benefit or compensation plan,
stock ownership plan, stock purchase plan, bonus plan, life insurance plan,
health-and-accident plan or disability plan in which Employee is
participating immediately prior to a Change in Control (or plans providing
Employee with substantially similar benefits), the taking of any action by
the Company which would adversely affect Employee's participation in, or
materially reduce Employee's benefits under, any of such plans or deprive
Employee of any material fringe benefit enjoyed by Employee immediately
prior to such Change in Control, or the failure by the Company to provide
Employee with the number of paid vacation days to which Employee is
entitled immediately prior to such Change in Control in accordance with the
Company's vacation policy as then in effect; or
(f) the failure by the Company to obtain, as specified in Section 5(i)
hereof, an assumption of the obligations of the Company to perform this
Agreement by any successor to the Company.
(iii) "Cause" shall mean termination by the Company of Employee's
employment based upon (a) the willful and continued failure by Employee
substantially to perform his duties and obligations (other than any such failure
resulting from his incapacity due to physical or mental illness or any such
actual or anticipated failure resulting from Employee's termination for Good
Reason) or (b) the willful engaging by Employee in misconduct which is
materially injurious to the Company, monetarily or otherwise. For purposes of
this Section 3(iii), no action or failure to act on Employee's part shall be
considered "willful" unless done, or omitted to be done, by Employee in bad
faith and without reasonable belief that his action or omission was in the best
interests of the Company.
(iv) "Disability" shall mean any physical or mental condition which would
qualify Employee for a disability benefit under the Company's long-term
disability plan.
(v) "Continuing Director" shall mean any person who is a member of the
Board of Directors of the Company, while such person is a member of the Board of
Directors, who is not an Acquiring Person (as hereinafter defined) or an
Affiliate or
<PAGE>
Associate (as hereinafter defined) of an Acquiring Person, or a representative
of an Acquiring Person or of any such Affiliate or Associate, and who (a) was a
member of the Board of Directors on the date of this Agreement as first written
above or (b) subsequently becomes a member of the Board of Directors, if such
person's initial nomination for election or initial election to the Board of
Directors is recommended or approved by a majority of the Continuing Directors.
For purposes of this Section 3(v): "Acquiring Person" shall mean any "person"
(as such term is used in Sections 13(d) and 14(d) of the Exchange Act) who or
which, together with all Affiliates and Associates of such person, is the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of the shares of Common Stock of the Company then outstanding,
but shall not include the Company, any subsidiary of the Company or any employee
benefit plan of the Company or of any subsidiary of the Company or any entity
holding shares of Common Stock organized, appointed or established for, or
pursuant to the terms of, any such plan; and "Affiliate" and "Associate" shall
have the respective meanings ascribed to such terms in Rule 12b-2 promulgated
under the Exchange Act.
4. Benefits upon Termination under Section 2(ii)(c)
------------------------------------------------
(i) Upon the termination (voluntary or involuntary) of the employment of
Employee pursuant to Section 2(ii)(c) hereof, Employee shall be entitled to
receive the benefits specified in this Section 4. The amounts due to Employee
under subparagraphs (a), (b) and (c) of this Section 4(i) shall be paid to
Employee not later than one business day prior to the date that the termination
of Employee's employment becomes effective. All benefits to Employee pursuant
to this Section 4(i) shall be subject to any applicable payroll or other taxes
required by law to be withheld.
(a) The Company shall pay to Employee any and all amounts payable to
Employee pursuant to any standard or general severance policy of the
Company or its Board of Directors;
(b) In lieu of any further base salary payments to Employee for periods
subsequent to the date that the termination of Employee's employment
becomes effective, the Company shall pay as severance pay to Employee a
lump-sum cash amount equal to thirty-six (36) times the Employee's monthly
base salary (as in effect in the month preceding the month in which the
termination becomes effective or as in effect in the month preceding the
Change in Control, whichever is higher);
(c) The Company shall also pay to Employee all legal fees and expenses
incurred by Employee as a result of such termination of employment
(including all fees and expenses, if any, incurred by Employee in seeking
to obtain or enforce any
<PAGE>
right or benefit provided to Employee by this Agreement whether by
arbitration or otherwise); and
(d) Any and all contracts, agreements or arrangements between the Company
and Employee prohibiting or restricting the Employee from owning,
operating, participating in, or providing employment or consulting services
to, any business or company competitive with the Company at any time or
during any period after the date the termination of Employee's employment
becomes effective, shall be deemed terminated and of no further force or
effect as of the date the termination of Employee's employment becomes
effective, to the extent, but only to the extent, such contracts,
agreements or arrangements so prohibit or restrict the Employee; provided
that the foregoing provisions shall not constitute a license or right to
use any proprietary information of the Company and shall in no way affect
any such contracts, agreements or arrangements insofar as they relate to
nondisclosure and nonuse of proprietary information of the Company
notwithstanding the fact that such nondisclosure and nonuse may prohibit or
restrict the Employee in certain competitive activities.
(ii) Employee shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise. The
amount of any payment or benefit provided in this Section 4 shall not be reduced
by any compensation earned by Employee as a result of any employment by another
employer or from any other source.
(iii) In the event that any payment or benefit received or to be received
by Employee in connection with a Change in Control of the Company or termination
of Employee's employment (whether payable pursuant to the terms of this
Agreement or any other plan, contract, agreement or arrangement with the
Company, with any person whose actions result in a Change in Control of the
Company or with any person constituting a member of an "affiliated group" as
defined in Section 280G(d)(5) of the Internal Revenue Code of 1986, as amended
(the "Code"), with the Company or with any person whose actions result in a
Change in Control of the Company) (collectively, the "Total Payments") would not
be deductible (in whole or in part) by the Company or such other person making
such payment or providing such benefit solely as a result of Section 280G of the
Code, the amount payable to Employee pursuant to Section 4(i)(b) hereof shall be
reduced until no portion of the Total Payments is not deductible solely as a
result of Section 280G of the Code or such amount payable to Employee pursuant
to Section 4(i)(b) is reduced to zero. For purposes of this limitation, (a) no
portion of the Total Payments shall be taken into account which in the opinion
of tax counsel selected by the Company and acceptable to Employee does not
constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the
Code (such as
<PAGE>
payments payable pursuant to the Company's standard or general severance
policies); (b) the payment pursuant to Section 4(i)(b) shall be reduced only to
the extent necessary so that the Total Payments (other than those referred to in
the immediately preceding clause (a)) in their entirety constitute reasonable
compensation within the meaning of Section 280G(b)(4)(B) of the Code, in the
opinion of the tax counsel referred to in the immediately preceding clause (a);
and (c) the value of any other non-cash benefit or of any deferred cash payment
included in the Total Payments shall be determined by the Company's independent
auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the
Code. In case of uncertainty as to whether all or some portion of a payment is
or is not payable to Employee under this Agreement, the Company shall initially
make the payment to the Employee, and Employee agrees to refund to the Company
any amounts ultimately determined not to have been payable under the terms
hereof.
5. Successors and Binding Agreement
--------------------------------
(i) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise to all or substantially all of the
business and/or assets of the Company), by agreement in form and substance
satisfactory to Employee, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle Employee to
compensation from the Company in the same amount and on the same terms as
Employee would be entitled hereunder if employee terminated Employee's
employment after a Change in Control for Good Reason, except that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the date that the termination of Employee's employment
becomes effective. As used in this Agreement, "Company" shall mean the Company
and any successor to its business and/or assets which executes and delivers the
agreement provided for in this Section 5(i) or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
(ii) This Agreement is personal to Employee, and Employee may not assign or
transfer any part of Employee's rights or duties hereunder, or any compensation
due to Employee hereunder, to any other person. Notwithstanding the foregoing,
this Agreement shall inure to the benefit of and be enforceable by Employee's
personal or legal representatives, executors, administrators, heirs,
distributees, devisees and legatees.
6. Arbitration. Any dispute or controversy arising under or in connection
-----------
with this Agreement shall be settled
<PAGE>
exclusively by arbitration in the Minneapolis-St. Paul metropolitan area, in
accordance with the applicable rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction.
7. Modification; Waiver. No provisions of this Agreement may be modified,
--------------------
waived or discharged unless such waiver, modification or discharge is agreed to
in a writing signed by Employee and such officer as may be specifically
designated by the Board of Directors of the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.
8. Notice. All notices, requests, demands and all other communications
------
required or permitted by either party to the other party by this Agreement
(including, without limitation, any notice of termination of employment and any
notice of intention to arbitrate) shall be in writing and shall be deemed to
have been duly given when delivered personally or received by certified or
registered mail, return receipt requested, postage prepaid, at the address of
the other party, as first written above (directed to the attention of the Board
of Directors and Corporate Secretary in the case of the Company). Either party
hereto may change its address for purposes of this Section 8 by giving 15 days'
prior notice to the other party hereto.
9. Severability. If any term or provision of this Agreement or the
------------
application hereof to any person or circumstances shall to any extent be invalid
or unenforceable, the remainder of this Agreement or the application of such
term or provision to persons or circumstances other than those as to which it is
held invalid or unenforceable shall not be affected thereby, and each term and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
10. Counterparts. This Agreement may be executed in several counterparts,
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
11. Governing Law. This Agreement has been executed and delivered in the
-------------
State of Minnesota and shall in all respects be governed by, and construed and
enforced in accordance with, the laws of the State of Minnesota, including all
matters of construction, validity and performance, and without taking into
consideration the conflict of law provisions of such state.
<PAGE>
12. Effect of Agreement; Entire Agreement. The Company and the Employee
-------------------------------------
understand and agree that this Agreement is intended to reflect their agreement
only with respect to payments and benefits upon termination in certain cases and
is not intended to create any obligation on the part of either party to continue
employment. This Agreement supersedes any and all other oral or written
agreements or policies made relating to the subject matter hereof and
constitutes the entire agreement of the parties relating to the subject matter
hereof; provided that this Agreement shall not supersede or limit in any way
Employee's rights under any benefit plan, program or arrangements in accordance
with their terms.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, all as of the date first written above.
MGI PHARMA, INC.
By /s/ James V. Adam
-----------------------------------
Its VP, CFO
----------------------------
and
By /s/ Lori-jean Gille
-----------------------------------
Its VP, General Counsel
-----------------------------------
EMPLOYEE
/s/ John C. Lee
--------------------------------------
John C. Lee
<PAGE>
Exhibit 10.15
TERMINATION AGREEMENT
This Agreement is made as of the 9th day of August, 1994, between MGI PHARMA,
--- -------
INC., a Minnesota corporation, with its principal offices at Suite 300E Opus
Center, 9900 Bren Road East, Minnetonka, Minnesota 55343 (the Company) and
Rajesh C. Shrotriya (Employee), residing at
--------------------
1314 Marquette Avenue. Act. #704
---------------------------------
Minneapolis. MN 55403
----------------------
WITNESSETH THAT:
WHEREAS, this Agreement is intended to specify the financial
arrangements that the Company will provide to the Employee upon Employee's
separation from employment with the Company under any of the circumstances
described herein; and
WHEREAS, this Agreement is entered into by the Company in the belief
that it is in the best interests of the Company and its shareholders to provide
stable conditions of employment for Employee notwithstanding the possibility,
threat or occurrence of certain types of change in control, thereby enhancing
the Company's ability to attract and retain highly qualified people.
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of Employee notwithstanding the possibility, threat or occurrence of
a bid to take over control of the Company, and to induce Employee to remain in
the employ of the Company, and for other good and valuable consideration, the
Company and Employee agree as follows:
1. Term of Agreement. The term of this Agreement shall commence on
------------------
the date hereof as first written above and shall continue through December 31,
1994; provided that commencing on January 1, 1995 and each January 1 thereafter,
--------
the term of this Agreement shall automatically be extended for one additional
year unless not later than twelve months prior to such January 1, the Company
shall have given notice that it does not wish to extend this Agreement (which
notice may not, in any event, be given sooner than January 1, 1995); and
provided, further, that notwithstanding any such notice by the Company not to
- -------- ------- -----
extend, this Agreement shall continue in effect for a period of 24 months beyond
the term provided herein if a Change in Control (as defined in Section 3(i)
hereof) shall have occurred during such term; and provided, further, that
--------- -------
notwithstanding any such notice by the Company to extend the term of this
Agreement, the provisions of Section 2(iii) shall be effective through July 31,
1997.
<PAGE>
2. Termination of Employment
-------------------------
(i) Prior to a Change in Control. Prior to a Change in Control (as
----------------------------
defined in Section 3(i) hereof), the Company may terminate Employee from
employment with the Company at will, with or without Cause (as defined in
Section 3(iii) hereof), at any time, except that in the event the Company
terminates Employee's employment on or before July 31, 1997, and prior to a
change of control, then Section 2(iii) shall apply.
(ii) After a Change in Control
-------------------------
(a) From and after the date of a Change in Control (as defined in
Section 3(i) hereof) during the term of this Agreement, the Company shall not
terminate Employee from employment with the Company except as provided in this
Section 2(ii) or as a result of Employee's Disability (as defined in
Section 3(iv) hereof) or his death.
(b) From and after the date of a Change in Control (as defined in
Section 3(i) hereof) during the term of this Agreement, the Company shall have
the right to terminate Employee from employment with the Company at any time
during the term of this Agreement for Cause (as defined in Section 3(iii)
hereof), by written notice to the Employee, specifying the particulars of the
conduct of Employee forming the basis for such termination.
(c) From and after the date of a Change in Control (as defined in
Section 3(i) hereof) during the term of this Agreement: (x) the Company shall
have the right to terminate Employee's employment without Cause (as defined in
Section 3(iii) hereof), at any time; and (y) the Employee shall, upon the
occurrence of such a termination by the Company without Cause, or upon the
voluntary termination of Employee's employment by Employee for Good Reason (as
defined in Section 3(ii) hereof), be entitled to receive the benefits provided
in Section 4 hereof. Employee shall evidence a voluntary termination for Good
Reason by written notice to the Company given within 60 days after the date of
the occurrence of any event that Employee knows or should reasonably have known
constitutes Good Reason for voluntary termination. Such notice need only
identify the Employee and set forth in reasonable detail the facts and
circumstances claimed by Employee to constitute Good Reason.
(iii) Special Termination Provision Prior to
--------------------------------------
Change in Control
-----------------
In the event the Company terminates Employee from employment without
cause on or before July 31, 1997, the Employee shall be entitled to a
termination benefit payment equal to twelve (12) times the Employee's monthly
salary (as in effect in the month preceding the month in which the termination
becomes effective).
<PAGE>
Any notice given by Employee pursuant to this Section 2 shall be
effective five business days after the date it is given by Employee.
3. Definitions
-----------
(i) A "Change in Control" shall mean:
(a) a change in control of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or successor provision thereto, whether or not the Company
is then subject to such reporting requirement;
(b) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly,
of securities of the Company representing 35% or more of the combined
voting power of the Company's then outstanding securities;
(c) the Continuing Directors (as defined in Section 3(v) hereof)
cease to constitute a majority of the Company's Board of Directors;
provided that such change is the direct or indirect result of a proxy fight
-------- ----
and contested election or elections for positions on the Board of
Directors; or
(d) the majority of the Continuing Directors (as defined in
Section 3(v) hereof) determine in their sole and absolute discretion that
there has been a change in control of the Company.
(ii) "Good Reason" shall mean the occurrence of any of the following
events, except for the occurrence of such an event in connection with the
termination or reassignment of Employee's employment by the Company for Cause
(as defined in Section 3(iii) hereof), for Disability (as defined in Section
3(iv) hereof) or for death:
(a) the assignment to Employee of employment responsibilities
which are not of comparable responsibility and status as the employment
responsibilities held by Employee immediately prior to a Change in Control;
(b) a reduction by the Company in Employee's base salary as in
effect immediately prior to a Change in Control;
<PAGE>
(c) an amendment or modification of the Company's incentive
compensation program (except as may be required by applicable law) which
affects the terms or administration of the program in a manner adverse to
the interest of Employee as compared to the terms and administration of
such program immediately prior to a Change in Control;
(d) the Company's requiring Employee to be based anywhere other
than within 50 miles of Employee's office location immediately prior to a
Change in Control, except for requirements of temporary travel on the
Company's business to an extent substantially consistent with Employee's
business travel obligations immediately prior to a Change in Control;
(e) except to the extent otherwise required by applicable law,
the failure by the Company to continue in effect any benefit or
compensation plan, stock ownership plan, stock purchase plan, bonus plan,
life insurance plan, health-and-accident plan or disability plan in which
Employee is participating immediately prior to a Change in Control (or
plans providing Employee with substantially similar benefits), the taking
of any action by the Company which would adversely affect Employee's
participation in, or materially reduce Employee's benefits under, any of
such plans or deprive Employee of any material fringe benefit enjoyed by
Employee immediately prior to such Change in Control, or the failure by the
Company to provide Employee with the number of paid vacation days to which
Employee is entitled immediately prior to such Change in Control in
accordance with the Company's vacation policy as then in effect; or
(f) the failure by the Company to obtain, as specified in Section
5(i) hereof, an assumption of the obligations of the Company to perform
this Agreement by any successor to the Company.
(iii) "Cause" shall mean termination by the Company of Employee's
employment based upon (a) the willful and continued failure by Employee
substantially to perform his duties and obligations (other than any such failure
resulting from his incapacity due to physical or mental illness or any such
actual or anticipated failure resulting from Employee's termination for Good
Reason) or (b) the willful engaging by Employee in misconduct which is
materially injurious to the Company, monetarily or otherwise. For purposes of
this Section 3(iii), no action or failure to act on Employee's part shall be
considered "willful" unless done, or omitted to be done, by Employee in bad
faith and without reasonable belief that his action or omission was in the best
interests of the Company.
<PAGE>
(iv) "Disability" shall mean any physical or mental condition which
would qualify Employee for a disability benefit under the Company's long-term
disability plan.
(v) "Continuing Director" shall mean any person who is a member of the
Board of Directors of the Company, while such person is a member of the Board of
Directors, who is not an Acquiring Person (as hereinafter defined) or an
Affiliate or Associate (as hereinafter defined) of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate, and
who (a) was a member of the Board of Directors on the date of this Agreement as
first written above or (b) subsequently becomes a member of the Board of
Directors, if such persons initial nomination for election or initial election
to the Board of Directors is recommended or approved by a majority of the
Continuing Directors. For purposes of this Section 3(v): "Acquiring Person"
shall mean any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) who or which, together with all Affiliates and Associates of such
person, is the "beneficial owner" (as defined in Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of the shares of Common Stock of the Company
then outstanding, but shall not include the Company, any subsidiary of the
Company or any employee benefit plan of the Company or of any subsidiary of the
Company or any entity holding shares of Common Stock organized, appointed or
established for, or pursuant to the terms of, any such plan; and "Affiliate" and
"Associate" shall have the respective meanings ascribed to such terms in Rule
12b-2 promulgated under the Exchange Act.
4. Benefits upon Termination under Section 2(ii)(c)
------------------------------------------------
(i) Upon the termination (voluntary or involuntary) of the employment
of Employee pursuant to Section 2(ii)(c) hereof, Employee shall be entitled to
receive the benefits specified in this Section 4. The amounts due to Employee
under subparagraphs (a), (b) and (c) of this Section 4(i) shall be paid to
Employee not later than one business day prior to the date that the termination
of Employee's employment becomes effective. All benefits to Employee pursuant to
this Section 4(i) shall be subject to any applicable payroll or other taxes
required by law to be withheld.
(a) The Company shall pay to Employee any and all amounts payable
to Employee pursuant to any standard or general severance policy of the
Company or its Board of Directors;
(b) In lieu of any further base salary payments to Employee for
periods subsequent to the date that the termination of Employee's
employment becomes effective, the Company shall pay as severance pay to
Employee a lump-sum cash amount equal to thirty-six (36) times the
Employee's monthly base salary (as in effect in the month preceding the
<PAGE>
month in which the termination becomes effective or as in effect in the
month preceding the Change in Control, whichever is higher);
(c) The Company shall also pay to Employee all legal fees and
expenses incurred by Employee as a result of such termination of employment
(including all fees and expenses, if any, incurred by Employee in seeking
to obtain or enforce any right or benefit provided to Employee by this
Agreement whether by arbitration or otherwise); and
(d) Any and all contracts, agreements or arrangements between the
Company and Employee prohibiting or restricting the Employee from owning,
operating, participating in, or providing employment or consulting services
to, any business or company competitive with the Company at any time or
during any period after the date the termination of Employee's employment
becomes effective, shall be deemed terminated and of no further force or
effect as of the date the termination of Employee's employment becomes
effective, to the extent, but only to the extent, such contracts,
agreements or arrangements so prohibit or restrict the Employee; provided
that the foregoing provisions shall not constitute a license or right to
use any proprietary information of the Company and shall in no way affect
any such contracts, agreements or arrangements insofar as they relate to
nondisclosure and nonuse of proprietary information of the Company
notwithstanding the fact that such nondisclosure and nonuse may prohibit or
restrict the Employee in certain competitive activities.
(ii) Employee shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or otherwise.
The amount of any payment or benefit provided in this Section 4 shall not be
reduced by any compensation earned by Employee as a result of any employment by
another employer or from any other source.
(iii) In the event that any payment or benefit received or to be
received by Employee in connection with a Change in Control of the Company or
termination of Employee's employment (whether payable pursuant to the terms of
this Agreement or any other plan, contract, agreement or arrangement with the
Company, with any person whose actions result in a Change in Control of the
Company or with any person constituting a member of an "affiliated group" as
defined in Section 280G(d)(5) of the Internal Revenue Code of 1986, as amended
(the "Code"), with the Company or with any person whose actions result in a
Change in Control of the Company) (collectively, the "Total Payments") would not
be deductible (in whole or in part) by the Company or such other person making
such payment or providing such benefit solely as a result of Section 280G of the
Code, the amount payable to Employee pursuant to Section 4(i)(b) hereof shall be
reduced until no portion of the Total Payments is not deductible
<PAGE>
solely as a result of Section 280G of the Code or such amount payable to
Employee pursuant to Section 4(i)(b) is reduced to zero. For purposes of this
limitation, (a) no portion of the Total Payments shall be taken into account
which in the opinion of tax counsel selected by the Company and acceptable to
Employee does not constitute a "parachute payment" within the meaning of Section
280G(b)(2) of the Code (such as payments payable pursuant to the Company's
standard or general severance policies); (b) the payment pursuant to Section
4(i)(b) shall be reduced only to the extent necessary so that the Total Payments
(other than those referred to in the immediately preceding clause (a)) in their
entirety constitute reasonable compensation within the meaning of Section
280G(b)(4)(B) of the Code, in the opinion of the tax counsel referred to in the
immediately preceding clause (a); and (c) the value of any other noncash benefit
or of any deferred cash payment included in the Total Payments shall be
determined by the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. In case of uncertainty as
to whether all or some portion of a payment is or is not payable to Employee
under this Agreement, the Company shall initially make the payment to the
Employee, and Employee agrees to refund to the Company any amounts ultimately
determined not to have been payable under the terms hereof.
5. Successors and Binding Agreement
--------------------------------
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company), by agreement in
form and substance satisfactory to Employee, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle
Employee to compensation from the Company in the same amount and on the same
terms as Employee would be entitled hereunder if employee terminated Employee's
employment after a Change in Control for Good Reason, except that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the date that the termination of Employee's employment
becomes effective. As used in this Agreement, "Company" shall mean the Company
and any successor to its business and/or assets which executes and delivers the
agreement provided for in this Section 5(i) or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
(ii) This Agreement is personal to Employee, and Employee may not
assign or transfer any part of Employee's rights or duties hereunder, or any
compensation due to Employee hereunder, to any other person. Notwithstanding the
foregoing, this Agreement shall inure to the benefit of and be enforceable
<PAGE>
by Employee's personal or legal representatives, executors, administrators,
heirs, distributees, devisees and legatees.
6. Arbitration. Any dispute or controversy arising under or in
-----------
connection with this Agreement shall be settled exclusively by arbitration in
the Minneapolis-St. Paul metropolitan area, in accordance with the applicable
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrators award in any court having jurisdiction.
7. Modification: Waiver. No provisions of this Agreement may be
--------------------
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in a writing signed by Employee and such officer as may be
specifically designated by the Board of Directors of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
8. Notice. All notices, requests, demands and all other
------
communications required or permitted by either party to the other party by this-
Agreement (including, without limitation, any notice of termination of
employment and any notice of intention to arbitrate) shall be in writing and
shall be deemed to have been duly given when delivered personally or received by
certified or registered mail, return receipt requested, postage prepaid, at the
address of the other party, as first written above (directed to the attention of
the Board of Directors and Corporate Secretary in the case of the Company).
Either party hereto may change its address for purposes of this Section 8 by
giving 15 days prior notice to the other party hereto.
9. Severability. If any term or provision of this Agreement or the
-------------
application hereof to any person or circumstances shall to any extent be invalid
or unenforceable, the remainder of this Agreement or the application of such
term or provision to persons or circumstances other than those as to which it is
held invalid or unenforceable shall not be affected thereby, and each term and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
10. Counterparts. This Agreement may be executed in several
-------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11. Governing Law. This Agreement has been executed and delivered in
-------------
the State of Minnesota and shall in all respects be governed by, and construed
and enforced in accordance with, the laws of the State of Minnesota, including
all matters of
<PAGE>
construction, validity and performance, and without taking into consideration
the conflict of law provisions of such state.
12. Effect of Agreement: Entire Agreement. The Company and the
--------------------------------------
Employee understand and agree that this Agreement is intended to reflect their
agreement only with respect to payments and benefits upon termination in certain
cases and is not intended to create any obligation on the part of either party
to continue employment. This Agreement supersedes any and all other oral or
written agreements or policies made relating to the subject matter hereof and
constitutes the entire agreement of the parties relating to the subject matter
hereof; provided that this Agreement shall not supersede or limit in any way
Employee's rights under any benefit plan, program or arrangements in accordance
with their terms.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed, all as of the date first written above.
MGI PHARMA, INC.
By /s/ James V. Adam
-------------------------------
Its Vice President, CFO
----------------------------
EMPLOYEE
/s/ RC Schrotriya
----------------------------------
Rajesh C. Shrotriya 8/23/94
<PAGE>
Exhibit 10.25
MANUFACTURING AGREEMENT
This Manufacturing Agreement (the "Agreement") is made and entered into
effective as of December 12, 1995, by and between MGI PHARMA, INC., a Minnesota
corporation ("MGI"), and GLOBAL PHARM INC., a corporation incorporated under the
laws of the Province of Ontario, Canada ("Manufacturer").
WHEREAS, MGI desires to retain Manufacturer to perform certain
manufacturing services for MGI in connection with the Product (as defined
herein), in accordance with the terms and conditions of this Agreement, and
Manufacturer desires to be so retained by MGI.
NOW, THEREFORE, in consideration of the foregoing recital and the mutual
covenants and agreements contained in this Agreement, and for other good and
valuable consideration the receipt and adequacy of which are hereby
acknowledged, MGI and Manufacturer do hereby agree as follows:
Section 1. Manufacturing and Supply
------------------------
1.1 Manufacture of Product.
----------------------
(a) During the term of this Agreement and subject to all of the
provisions hereof, Manufacturer shall manufacture for MGI Salagen(R)
Tablets (the "Product"). All Product manufactured pursuant to this
Agreement shall (i) be manufactured in accordance with such
manufacturing processes and quality control standards (the
"Manufacturing Processes") and shall meet such Product
specifications (the "Product Specifications") as are provided in
writing by MGI to Manufacturer, as the same may be modified or
amended from time to time by MGI, and (ii) be merchantable.
(b) Manufacturer shall bear all of its own costs and expenses incurred
in manufacturing the Product and otherwise carrying out its
obligations under this Agreement, unless otherwise specifically
provided herein. Manufacturer shall maintain its systems and
equipment in a state of current validation and shall promptly notify
MGI upon becoming aware that the condition of any of its systems or
equipment may adversely affect its ability to manufacture the
Product pursuant to this Agreement.
(c) MGI shall provide, at its own cost and expense, such technical and
other assistance as MGI determines, in its sole discretion, is
reasonably necessary in connection with this Agreement.
<PAGE>
(d) Manufacturer understands and agrees that MGI may at any time
manufacture itself, or use any other third party to manufacture, the
Product, in any quantity, and neither this Agreement nor any provision
hereof shall confer upon Manufacturer the exclusive right to
manufacture the Product for MGI or the right to manufacture any
minimum quantity of the Product.
(e) The terms of the Quality Assurance Letter of Understanding entered
into as of October 2, 1995 between MGI and Manufacturer, a copy of
which is attached hereto as Exhibit B, is hereby incorporated herein
by reference and made a part hereof. If at any time there is a
conflict between the provisions of such Letter of Understanding and
the main body of this Agreement, the terms of this Agreement shall
prevail.
1.2 Raw Materials and Supplies.
--------------------------
(a) Manufacturer shall supply such raw materials and supplies as are
necessary to manufacture the Product (collectively, the "Raw
Materials") (but not including the active ingredient which shall be
supplied by MGI as set forth below) and such packaging materials and
labels as are necessary to package the Product for distribution
(collectively, the "Other Materials"). Such Raw Materials and Other
Materials shall all be sourced from MGI-approved vendors as
communicated to Manufacturer from time to time by MGI. In the event
that Manufacturer has any difficulties in securing the required Raw
Materials and/or Other Materials at any time, Manufacturer shall
promptly notify MGI of such difficulty or anticipated difficulty and
MGI shall use its reasonable efforts to assist Manufacturer in
securing adequate supplies of such Raw Materials or Other Materials as
are required for purposes of manufacturing the Product.
(b) MGI shall supply the active ingredient, pilocarpine hydrochloride (the
"Active Ingredient") required for Manufacturer to manufacture the
Product, at no charge to Manufacturer, in quantities sufficient to
accommodate that portion of forecasted production of the Product which
constitute "Firm Orders" as that term is defined in this Agreement.
Active Ingredient shall be delivered to Manufacturer sufficiently in
advance of the scheduled manufacturing date to provide Manufacturer
with sufficient opportunity to test and analyze such Active
Ingredient, as Manufacturer shall deem necessary. MGI will provide a
Certificate of Analysis for each lot of Active Ingredient provided to
Manufacturer by MGI under the terms of this Agreement. The Active
Ingredient supplied by MGI shall be delivered to Manufacturer in
proper storage containers and proper packaging.
<PAGE>
(c) Manufacturer shall take such actions as it deems reasonably
necessary or prudent to insure the quality of all Raw Materials
provided by it for purposes of manufacturing the Product. MGI shall
have the right to test and analyze all such Raw Materials used in
manufacturing the Product and Manufacturer shall cooperate with MGI
and take all such actions as MGI may reasonably request in connection
therewith; provided, that any such testing or analysis by MGI shall
not relieve Manufacturer from its obligations to provide Raw Materials
which conform to the Product Specifications provided to Manufacturer
by MGI.
(d) Manufacturer shall not use or otherwise dispose of the Active
Ingredient supplied by MGI except in accordance with this Agreement
and shall not use or apply any other active ingredient in
manufacturing or packaging the Product for distribution, except as
directed in writing by MGI.
1.3 Quantity and Delivery Date.
--------------------------
(a) A twelve (12) month forecast of purchases of the Product, including
requested delivery dates, shall be submitted by MGI to Manufacturer
each month during the Term of this Agreement. The first three (3)
months of each forecast shall constitute a firm order by MGI against
which Manufacturer is authorized to institute production (the "Firm
Order"). MGI's purchase order for each Firm Order (or any part
thereof for which a purchase order has not been delivered) shall be
delivered to Manufacturer following delivery of each forecast.
Manufacturer shall use its best efforts to meet the delivery dates
specified in the purchase order, provided that, Manufacturer shall in
--------
any event deliver the requested quantity of Product within 30 days
after a specified delivery date.
(b) Manufacturer shall manufacture the Product in such quantities as are
ordered by MGI from time to time by written purchase order delivered
to Manufacturer, but shall not manufacture Product in excess of the
quantity on order at the time of manufacture.
1.4 Legal Compliance. In manufacturing, packaging, labeling, exporting,
----------------
importing and delivering the Product and otherwise carrying out its obligations
under this Agreement, Manufacturer shall at all times:
(a) comply with all U.S., Canadian or other territory, state, provincial,
local and other laws, rules, regulations or other requirements
(collectively, "Laws") applicable to the business of Manufacturer and
to the manufacturing, packaging, labeling, exporting, importing and
delivering of the Product;
<PAGE>
(b) obtain and maintain in full force and effect all licenses,
permits, certificates, authorizations or approvals from U.S., Canadian
or other territory, state, provincial, local and other authorities
necessary to conduct its business and manufacture, package, label,
export, import and deliver the Product;
(c) in particular, but without limiting the generality of the foregoing,
Manufacturer shall at all times comply with the Environmental Laws and
Pharmaceutical Rules (as such terms are defined below) and obtain and
maintain in full force and effect all licenses, permits, certificates,
authorizations or approvals required by the Environmental Laws and
Pharmaceutical Rules;
(d) no Product manufactured hereunder shall be adulterated or contaminated
within the meaning of Section 505 of the U.S. Federal Food, Drug and
Cosmetic Act, as amended, and the rules and regulations promulgated
thereunder, or any similar Canadian or other territory, provincial,
state, local or other law or regulation;
(e) in connection with the manufacture of the Product, Manufacturer shall
be solely responsible for compliance with all laws, rules, regulations
or other requirements relating to the handling, generation,
transportation, treatment, storage and disposal or other management of
waste and regulated substances, including, without limitation, solid
and hazardous waste and hazardous and toxic substances and materials;
and
(f) in the event of any recall, seizure or other similar governmental
action with respect to the Product, Manufacturer shall cooperate with
MGI and take such other actions in connection therewith as MGI may
reasonably request.
The term "Environmental Laws" means any and all applicable U.S., Canadian,
state, provincial, local and other laws, statutes, codes, ordinances,
regulations, rules, policies, consent decrees, judicial orders,
administrative orders or other requirements relating to the environment or
to human health or safety associated with the environment, all as amended
or modified from time to time, and includes, but is not limited to, the
following U.S. laws and any similar Canadian, provincial, state, local or
other laws and the companion regulations thereto: the Comprehensive
Environmental Response, Compensation and Liability Act; the Resource
Conservation and Recovery Act of 1976; the Clean Water Act; the Clean Air
Act; the Hazardous Materials Transportation Act and the Toxic Substances
Control Act.
The term "Pharmaceutical Rules" means any and all applicable laws,
statutes, rules, regulations, standards, policies, orders or other
requirements promulgated or subject to enforcement, regulation or
administration by the United States Food
<PAGE>
and Drug Administration (the "FDA"), the Health Protection Branch,
Department of Health Canada, or the comparable regulatory authority for
such other jurisdictions for which Product is manufactured under this
Agreement, all as amended or modified from time to time, and includes, but
is not limited to, current Good Manufacturing Practice regulations of the
FDA, any similar Canadian or other territory, state, provincial, local or
other laws, statutes, rules, regulations, standards, policies, orders or
requirements.
1.5 Noncompetition Covenant. For the consideration recited in this
-----------------------
Agreement and as a significant inducement to MGI to enter into this Agreement,
Manufacturer agrees to the terms of this Section 1.5, which Manufacturer
acknowledges and agrees are reasonable and appropriate under the circumstances.
During the term of this Agreement, Manufacturer shall not, directly or
indirectly, compete with MGI in any manner or capacity (e.g., as an advisor,
----
supplier, manufacturer, consultant, principal, agent, partner, stockholder or
independent contractor) by engaging in the manufacture, distribution or sale of
any drug or other product which contains the same Active Ingredient as the
Product, without MGI's prior written consent. For the period covered by this
Section 1.5, Manufacturer shall not, directly or indirectly, assist or encourage
any other person or entity in carrying out, directly or indirectly, any activity
that would be prohibited by the provisions of this Section 1.5 if such activity
were carried out by Manufacturer. This Section 1.5 is expressly subject to the
severability provisions of Section 14.8 hereof, and is further subject to the
requirement that for this Section to be in full force and effect, MGI must have
purchased from Manufacturer at least twenty-five percent (25%) of MGI's
requirements for Product for countries in which Manufacturer is qualified as a
manufacturer, in each calendar year during the term of this Agreement.
1.6 Other Activities. Except pursuant to this Agreement or as may be
----------------
specifically requested in writing by MGI, Manufacturer shall not undertake any
product development, manufacturing or testing activities with respect to the
Product.
Section 2. Manufacturing Charges
---------------------
2.1 Price. For manufacturing the Product and as compensation in full for
-----
all services rendered by Manufacturer under this Agreement, MGI shall pay to
Manufacturer the Price for the Product, as set forth in Exhibit A to this
Agreement, and the cost of Product samples other than as delivered pursuant to
Section 7.1, along with such other charges as set forth in this Section 2.1.
Duties, taxes, brokerage and delivery costs shall be the responsibility of MGI
as well as the cost of any insurance secured by Manufacturer on behalf of MGI.
<PAGE>
2.2 Invoices. Manufacturer shall invoice MGI upon completion of
--------
manufacturing of the Product by Manufacturer and Product Release by MGI as set
forth in Section 7.1, at the Price determined in Section 2.1. Other charges
payable to Manufacturer by MGI under the terms of Section 2.1 shall be
separately invoiced. MGI shall pay each invoice, to the extent accurate,
within 30 days of its receipt thereof. Payment shall be made at the office of
Manufacturer specified in Section 14.3. MGI shall not be required to pay for
any Product or other services not requested by MGI pursuant to a written
purchase order, or other written instructions for services other than
manufacture of Product, delivered to Manufacturer.
2.3. Manufacturing Price Changes. MGI and Manufacturer agree that the
---------------------------
purchase prices set forth in Exhibit A to this Agreement shall remain in effect
through December 31, 1996. Thereafter, the prices shall be increased or
decreased to reflect any increase or decrease in costs incurred by the
Manufacturer in purchasing Raw Materials or Other Materials. The Manufacturer
shall be permitted to pass along such increased costs to MGI on all subsequent
orders received from MGI after such price increase becomes effective. Any
increase or decrease in cost due to an increase or decrease in labor and/or
overhead, shall be identified for MGI no later than December 15th of each year
and subsequently passed on to MGI on January 1, 1997 and on each January 1st
thereafter. In no event, however, shall the price of the Product increase more
than ten percent (10%) per year, unless a greater increase is expressly approved
by MGI after consultation with Manufacturer. The parties shall from time to
time meet to discuss actual or potential price increases which may affect the
purchase prices set forth in Exhibit A and shall use reasonable efforts to
cooperate to reduce or avoid such price increases.
2.4 Cost Reductions. Either of MGI or the Manufacturer shall have the
---------------
right to request changes to reduce the cost of manufacturing. Cost reductions
requested by MGI shall be implemented by the Manufacturer upon the approval in
writing by both parties and made effective as directed by MGI. Cost reductions
initiated by MGI will result in a reduction in manufacturing Price for the first
batch of Product produced by the Manufacturer and each batch thereafter. The
costs associated with the implementation of cost reductions requested by MGI
shall be borne by MGI, unless such cost reductions will also inure to the
benefit of the Manufacturer for its own or another company's products produced
by Manufacturer, in which case the cost of implementation will be shared as
agreed by both parties in writing. Cost reductions requested by the
Manufacturer shall be implemented by the Manufacturer upon approval in writing
by both parties. The costs associated with the implementation of cost
reductions requested by the Manufacturer shall be borne by the Manufacturer.
Reductions in manufacturing costs implemented by the Manufacturer will be not
result in a reduction in manufacturing Price for the first twelve months of
production following implementation. All batches of Product produced by the
Manufacturer between the twelfth month and twenty-fourth month following
implementation will result in a reduction of the manufacturing Price by one-half
the savings realized by the
<PAGE>
Manufacturer. All batches manufactured thereafter will be invoiced to MGI with
all of the savings credited to the current manufacturing Price. Under no
circumstances shall this Section be construed to require either party to agree
to changes that do not comply with FDA rules or regulations or with current good
manufacturing practices.
2.5 Specification Changes Affecting Manufacturing Price. Either of MGI
---------------------------------------------------
or the Manufacturer shall have the right to request changes to the Product
Specifications. Recommendations to change any Product Specifications shall be
in writing. No change in the Product Specifications shall be implemented by the
Manufacturer, whether requested by either of the parties or requested or
required by any governmental agency, until the parties have agreed in writing to
such change. The costs associated with any changes to the Product
Specifications shall be paid by MGI, unless such changes are solely for the
benefit of the Manufacturer, in which case such costs shall be borne by the
Manufacturer.
Section 3. Delivery of Product
-------------------
The Product and Product samples pursuant to Section 7.1 will be shipped FCA
(Incoterms 1990) point of manufacture. Manufacturer shall deliver the Product
to MGI or a customer or other third party designated by MGI (a "designee") at
the destination and by the mode of transportation specified by MGI in its
purchase orders for Product or in any other notice to Manufacturer delivered
pursuant to this Agreement. Manufacturer shall obtain and deliver to MGI a bill
of lading or similar receipt with respect to each delivery of Product.
Manufacturer shall comply with any and all applicable laws and regulations and
with any special delivery instructions (e.g., with respect to packaging,
----
loading, insuring or shipping) provided by MGI to Manufacturer. Manufacturer
shall notify MGI in writing upon shipment of Product. All Product shall be
delivered by Manufacturer free and clear of any security interests, liens,
claims, pledges or encumbrances of any kind or nature except for such as are
created by MGI. At MGI's request and at no cost to MGI, Manufacturer shall
store Product at its premises for such reasonable period of time prior to
delivery as MGI may request.
Section 4. Title to Product; Risk of Loss; Insurance
-----------------------------------------
Title in and to the Product shall remain in, and risk of loss shall remain
with, Manufacturer, until the Product is delivered to the shipper selected to
deliver the Product pursuant to Section 3, at which time title and risk of loss
shall pass to MGI. Notwithstanding the foregoing, Manufacturer shall not sell or
otherwise dispose of any Product except in accordance with the terms of this
Agreement. At the request of MGI, Manufacturer shall assist MGI in securing (or
shall secure on behalf of MGI), insurance necessary to adequately cover the risk
of loss of Product during the period that Product is in the hands of a shipper
prior to delivery to MGI or its designee.
<PAGE>
Section 5. Representations and Warranties
------------------------------
Manufacturer and MGI do hereby represent and warrant to each other, as
follows:
5.1 This Agreement has been duly authorized by all necessary corporate
action on behalf of Manufacturer and MGI, executed and delivered, and
constitutes the valid and binding agreement of each of them enforceable in
accordance with its terms.
5.2 MGI represents and warrants to Manufacturer that in carrying out its
obligations under this Agreement, MGI will comply in all material respects with
all federal, state and local laws, rules, regulations or other requirements
applicable to the business of MGI and the manufacture of the Product, including,
without limitation, the Pharmaceutical Rules.
5.3 MGI represents and warrants to Manufacturer that the manufacture of
the Product in accordance with the Manufacturing Processes will not constitute
any infringement, misappropriation or violation of any patent or trademark of
any third party.
5.4 Manufacturer represents and warrants to MGI that in carrying out its
obligations under this Agreement, it will at all times act in good faith and
will not take any action that could adversely affect MGI's business, reputation
or standing.
Section 6. Safety Information; Due Care; Accidents; Recalls
------------------------------------------------
6.1 Safety Information. Prior to commencing the manufacture of the
------------------
Product hereunder, Manufacturer shall furnish to MGI (a) all material safety
data sheets (within the meaning of the U.S. Code of Federal Regulations 29
C.F.R. (S)(S)1910.1200(c) and (g)) or Canadian equivalent documents required by
U.S. or Canadian or other territory's law to be provided by Manufacturer in
connection with any Raw Materials or the Product, (b) any information in the
possession of or known to Manufacturer indicating the potentially toxic or
hazardous nature of the Raw Materials or the Product, and (c) any other
information necessary or appropriate for the safe handling and processing of the
Raw Materials and the safe manufacture and delivery of the Product in accordance
with this Agreement. Manufacturer shall also promptly furnish to MGI any new or
additional information of the type described in clauses (b) and (c) of the
foregoing sentence as it becomes available or known to Manufacturer at any time
during the term of this Agreement. MGI shall furnish to Manufacturer all
material safety data sheets required to be provided by MGI in connection with
any Active Ingredient. Manufacturer understands and assumes the risks inherent
in manufacturing the Product and in otherwise carrying out its obligations under
this Agreement.
<PAGE>
6.2 Due Care. In manufacturing the Product and carrying out its
--------
obligations under this Agreement, Manufacturer represents and warrants to MGI
that it shall exercise due care and shall otherwise take all such precautions
and measures with respect to safety as are reasonable necessary in connection
with the manufacture of the Product and as are otherwise reasonable and
customary for companies engaged in operations similar to those of Manufacturer.
6.3 Responsibility for Accidents. Manufacturer shall be responsible for
----------------------------
and pay all losses, damages, costs and expenses (including, without limitation,
response and cleanup and disposal costs) arising, directly or indirectly, out of
any Release of Raw Materials at any time. The party in whom title to the
Product then resides shall be responsible for and pay all losses, damages, costs
and expenses (including, without limitation, response and cleanup and disposal
costs) arising, directly or indirectly, out of any Release of Product at any
time during which such party has title to such Product.
The term "Release" shall mean the spilling, leaking, disposing,
discharging, emitting, depositing, ejecting, leaching, escaping or any other
release or threatened release into the environment, whether intentional or
unintentional, of Raw Materials or Product, as the case may be.
6.4 Notification of Accidents. Manufacturer shall promptly notify MGI
-------------------------
upon becoming aware of any accidents, injury to or illness of employees or
others, damage or harm to human safety or property or the environment, Release
of Raw Materials or Product, or any other occurrence having or potentially
having serious consequences related to the Product and the manufacture thereof
or the provision of any services hereunder. MGI shall promptly notify
Manufacturer upon becoming aware of any Release of Product.
6.5 Recalls. Subject to the provisions of Section 12, any recall of
-------
Product instituted either at the request of any regulatory body or voluntarily
by MGI shall be the sole responsibility of MGI. MGI shall reimburse
Manufacturer for any costs incurred by Manufacturer in connection with such
recall of Product. Manufacturer shall cooperate fully with MGI in the conduct
of any such recall in matters that relate to the manufacture of the Product.
Section 7. Samples and Testing
-------------------
7.1 Samples and Testing. From each batch of Product manufactured by
-------------------
Manufacturer, Manufacturer shall take such number of representative samples of
the Product as MGI may request and shall deliver such samples to MGI in
accordance with such written delivery procedures as are provided by MGI. As
directed by MGI, Manufacturer shall also take and analyze itself samples of the
Product in accordance with such testing procedures (the "Testing Procedures") as
are specified in writing by
<PAGE>
MGI to determine whether the Product meets the Product Specifications; provided
--------
that, Manufacturer shall not take or analyze any Product samples without
specific instructions to do so from MGI. Manufacturer shall identify and
document all Product samples taken pursuant to this Section 7.1. Manufacturer
shall not ship any Product from any batch unless and until (a) if MGI has
directed Manufacturer to analyze samples of the Product, Manufacturer has
determined, in accordance with the Testing Procedures, that the Product meets
the Product Specifications and has provided MGI with the results of its analysis
in writing, and (b) Manufacturer has received MGI's notification of release
("Product Release"). Manufacturer shall also take and deliver to MGI such
additional samples of Product and retain samples of any Raw Materials or
excipients as MGI may request from time to time. Manufacturer shall store all
Product samples in accordance with the Testing Procedures.
7.2 Non-Specification Product. If it is determined by MGI or Manufacturer
-------------------------
pursuant to the Testing Procedures that a batch of Product has been manufactured
that does not meet the Product Specifications, Manufacturer shall not ship or
invoice any Product from such batch unless and until Manufacturer takes and
completes to MGI's satisfaction such corrective action as is specified by MGI
and Manufacturer receives Product Release from MGI for such batch. Further,
Manufacturer shall not manufacture another batch of Product until the cause of
the problem has been discovered and cured to MGI's satisfaction or until MGI
otherwise instructs Manufacturer. All Product not meeting the Product
Specifications, as to which corrective action is not taken or completed as
specified by MGI, shall be the sole responsibility of and shall be dealt with by
Manufacturer, at its sole cost and expense, in accordance with all applicable
laws and regulations (including, without limitation, the Environmental Laws),
and in a manner as to which MGI has given its prior written approval, and shall
not be reprocessed, salvaged, reclaimed or otherwise reused in any manner by
Manufacturer.
If it is determined by Manufacturer or MGI that any Product not meeting the
Product Specifications has been delivered to MGI or any designee of MGI,
Manufacturer shall, at MGI's request, replace such Product with Product meeting
the Product Specifications at no additional cost or expense to MGI. Further,
Manufacturer shall be responsible for and pay all losses, damages, costs and
expenses (including, without limitation, response and cleanup and disposal
costs) arising, directly or indirectly, out of such non-specification Product at
any time. At MGI's request, Manufacturer shall remove any non-specification
Product from any site where it is located and either take such corrective action
as MGI specifies so that such non-specification Product meets the Product
Specifications or dispose of it at its sole cost and expense, in accordance with
the written instructions of MGI and with all applicable laws and regulations
(including, without limitation, the Environmental Laws), in which case it shall
not reprocess, salvage, reclaim or otherwise reuse in any manner any such non-
specification Product.
<PAGE>
7.3 Disagreements as to Specifications. If any determination by
----------------------------------
Manufacturer and MGI differs as to whether any Product meets the Product
Specifications, the matter will be submitted for testing to an independent
testing laboratory acceptable to both parties. The determination of such
independent testing laboratory will be binding on both parties. The cost of the
independent testing laboratory shall be borne by the party whose testing results
were in error.
7.4 Costs of Compliance. Subject to the provisions of Section 7.3,
-------------------
Manufacturer shall bear all of its own costs and expenses incurred in complying
with this Section 7 and MGI shall bear all of its own costs and expenses
incurred in connection with testing and analysis of Product samples which it
conducts.
7.5 Product Specifications; Compliance; Regulations for New Territories.
-------------------------------------------------------------------
In the event that MGI requires Product to be produced for territories other
than the United States and Canada, then the parties shall agree on product
specifications, appropriate sampling and testing procedures and regulatory and
such other requirements as are applicable for such territories, which shall be
attached hereto as an additional exhibit, signed by both Manufacturer and MGI,
and shall for purposes of such additional territories only, replace the
provisions of this Section 7. Exhibit A shall be revised accordingly to reflect
the price of producing Product for such additional territories as MGI and
Manufacturer shall agree to from time to time. Upon reaching an agreement to
manufacture Product for such additional territories and receiving the necessary
regulatory approvals, the provisions of Sections 1.4, 5.2 and 8.1 shall apply to
such additional territories as well as to the United States and Canada.
Section 8. Records and Inspection
----------------------
8.1 Records. Manufacturer shall keep (a) such records and reports with
-------
respect to the manufacture and delivery of the Product as MGI may reasonably
request, and (b) all records and reports with respect to the manufacture and
handling of the Product as are required by applicable law, including, without
limitation, the Pharmaceutical Rules and the Environmental Laws. In particular,
but without limiting the generality of the foregoing, Manufacturer shall keep
records relating to quality-control testing requirements and specifications with
respect to all components of the Product, and all analytical raw data (including
chromatograms) relating to component test and inspection results. Manufacturer
represents and warrants to MGI that all such records and reports will be
accurate and complete in all material respects. Promptly upon completion
thereof, Manufacturer shall provide the originals (or copies if Manufacturer is
required by law to retain the originals) of all such records and reports to MGI,
which shall be the property of MGI, but may retain copies of the same for its
files. MGI shall also have the right, at any time during normal business hours,
to inspect and copy all such records and reports in progress at Manufacturer's
premises and all other books, records and accounts of Manufacturer relating to
the Product and Manufacturer's services hereunder.
<PAGE>
8.2 Inspection. Each of MGI and any licensee of MGI with respect to the
----------
Products shall have the right, at any time during normal business hours, to
enter Manufacturer's premises and observe and inspect all aspects of
Manufacturer's business as it relates to the Product and the manufacture thereof
or the provision of any services hereunder. In particular, but without limiting
the generality of the foregoing, MGI and such licensees shall have the right to
observe and inspect (a) manufacturing processes and work practices relating to
the Product and inventory of Raw Materials and Product, and (b) all licenses,
permits, certificates, authorizations or approvals from U.S., Canadian or other
territory, provincial, state, local and other authorities necessary to conduct
Manufacturer's business and manufacture, package, label, export, import and
deliver the Product. Further, during the term of this Agreement, MGI and such
licensees shall have the right to be present for and observe any inspection of
Manufacturer or its facilities by any governmental or regulatory authority, and
Manufacturer shall notify MGI promptly after learning that any such inspection
is being conducted or will be conducted. Neither MGI nor any of such licensees
shall be obligated to exercise any rights under this Section 8.2, but any of
them may do so in its or their sole discretion. Any action taken by MGI or any
of such licensees pursuant to this Section 8.2 shall be solely for its own
benefit and not for the benefit of any third party and neither the existence of
this provision nor the taking of any action by MGI or any such licensees
hereunder shall constitute the taking of control of Manufacturer's business by
MGI or any such licensee.
Section 9. Confidentiality
---------------
9.1 Confidential Information. For purposes of this Agreement, the term
------------------------
"Confidential Information" shall mean (a) all information and material, other
than information or material expressly designated by MGI as non-confidential,
provided or disclosed to Manufacturer by MGI in connection with this Agreement
relating in any way to the Product or to the business of MGI or its affiliates,
together with all notes, analyses, studies or other documents prepared by
Manufacturer or any of Manufacturer's directors, officers, employees, agents and
advisors (collectively, with Manufacturer, the "Receiving Group") containing or
based on such information or material, and (b) all information obtained by the
Receiving Group by visiting MGI's facilities or reviewing products, plans,
processes, formulations, operations, facilities, equipment or other assets of
MGI or discussing MGI, the Product or this Agreement with MGI or any of MGI's
directors, officers, employees, agents and advisors. Notwithstanding the
foregoing, Confidential Information does not include information or material
that (x) is publicly available or becomes publicly available through no action
or fault of any member of the Receiving Group, (y) was already lawfully in the
Receiving Group's possession or known to the Receiving Group prior to being
disclosed or provided to the Receiving Group by or on behalf of MGI, or (z) was
or is obtained by the Receiving Group from a third party having a legal right to
transmit such information or material.
<PAGE>
9.2 Use and Non-disclosure. Manufacturer agrees that the Confidential
----------------------
Information shall be used solely for the purpose of satisfying its obligations
under this Agreement and not for its own benefit or the benefit of any third
party or in any manner adverse to MGI or its shareholders. Manufacturer agrees
that, during the term of this Agreement and thereafter, the Confidential
Information will at all times be kept strictly confidential; provided that,
--------
Manufacturer may disclose the Confidential Information to directors, officers,
employees, agents or advisors (collectively, "Representatives") of Manufacturer
who in Manufacturer's reasonable judgment have a need to know such information
in order that Manufacturer may carry out its obligations hereunder.
Manufacturer shall maintain records of all Representatives to whom Confidential
Information is disclosed and will inform such Representatives of the
confidential nature of the Confidential Information. Manufacturer shall direct
its Representatives to treat all Confidential Information in accordance with
this Agreement and to take all precautions and measures that are reasonably
necessary to prevent any improper use of the Confidential Information, and
Manufacturer shall be responsible for any breaches by them of this Agreement.
At MGI's request, Manufacturer shall cause its Representatives to execute
written confidentiality agreements, in form satisfactory to MGI, requiring such
Representatives to treat all Confidential Information in accordance with this
Agreement.
9.3 Notice of Required Disclosure. If Manufacturer or any of its
-----------------------------
Representatives is required by law or legal process to disclose any of the
Confidential Information, Manufacturer shall (a) promptly notify MGI of such
requirement prior to making any disclosure, and (b) give MGI all information,
assistance and authority necessary to enable MGI to take measures that MGI, in
its sole discretion, deems appropriate to protect the confidential nature of the
Confidential Information.
9.4 Ownership. The Confidential Information is owned solely and
---------
exclusively by MGI and shall remain the exclusive property of MGI and no member
of the Receiving Group shall have any right, title or interest in or to any of
the Confidential Information.
9.5 No Licenses; Inventions. MGI grants no licenses or other rights, by
-----------------------
implication or otherwise, under any patent, copyright, trademark, trade secret
or other intellectual property right or intangible asset owned by, licensed to
or otherwise controlled by MGI or used in MGI's business anywhere in the world,
by entering into this Agreement or disclosing the Confidential Information
hereunder, except such limited right as is necessary to permit Manufacturer to
perform its obligations hereunder which right shall terminate automatically upon
the termination or expiration of this Agreement. Manufacturer understands and
agrees that neither this Agreement nor any provision hereof shall constitute, or
be construed as, a sale or other transfer of title by MGI to Manufacturer with
respect to any patent, copyright, trademark, trade secret or other intellectual
property right or intangible asset of MGI, all of which are and shall remain the
sole and exclusive property of MGI. Manufacturer hereby agrees to cooperate
with MGI and take all actions which MGI may reasonably request, at MGI's cost
and expense, in order to protect and enforce MGI's rights in and to such
intellectual property.
<PAGE>
Manufacturer further understands and agrees that all inventions,
discoveries, improvements, devices, designs, practices, processes, methods or
products, whether patentable or not (collectively, the "Inventions"), made,
developed, perfected, devised, conceived or first reduced to practice by
Manufacturer at any time during the term of this Agreement or thereafter, which
contain, reflect or are based on, in whole or in part, the Confidential
Information, or relate, directly or indirectly, to the Product, shall be the
sole and exclusive property of MGI. Manufacturer hereby assigns to MGI all of
Manufacturer's right, title and interest in and to the Inventions and agrees to
take all such actions as are reasonably requested by MGI in order to perfect,
affirm and record MGI's complete ownership and title in and to the Inventions
(including, without limitation, executing appropriate documents of assignment
and other instruments and giving testimony regarding the Inventions).
9.6 Quality of Information. The Confidential Information is being
----------------------
provided to Manufacturer "as is" and without any representations or warranties
of any kind, either express or implied, regarding the accuracy or completeness
or other quality thereof, except such as are contained in this Agreement. In no
event shall MGI or its affiliates or any of their respective directors,
officers, employees, agents or representatives have any liability to
Manufacturer or its Representatives relating to or resulting from the use of the
Confidential Information, except in accordance with the specific
representations, warranties and agreements contained herein.
9.7 Return. Manufacturer shall, upon the termination or expiration of
------
this Agreement, or at any time upon the written request of MGI, promptly return
to MGI all Confidential Information (including notes, writings and other
material developed therefrom) and all copies thereof and retain none for its
files, except to the extent retention thereof is required by applicable law.
The return or retention of such information shall not relieve Manufacturer of
its continuing obligation of confidentiality hereunder.
Section 10. Insurance
---------
Manufacturer shall obtain and maintain in full force and effect during the
term of this Agreement (a) policies of insurance issued by insurers rated A
minus or better by A.M. Best insuring Manufacturer, its properties and business
against such losses and risks (including product liability), and in such
amounts, as are reasonable and prudent in light of the nature and extent of
Manufacturer's business, and (b) such other policies of insurance and in such
amounts as MGI may reasonably request. All of such policies shall include MGI
as an additional named insured as its interests may appear or provide contract
coverage with respect to this Agreement, provide for a waiver of subrogation
rights against MGI, contain no cross-liability exclusion, and require that MGI
receive 60 days' notice of any modification or termination of coverage.
Concurrent with the execution of this Agreement, Manufacturer shall deliver to
MGI certificates of insurance or other evidence of insurance coverage all in
form satisfactory to MGI.
<PAGE>
Section 11. Force Majeure
-------------
11.1 Definition. "Force Majeure" shall mean any event or condition, not
----------
existing as of the date of this Agreement, not reasonably foreseeable as of such
date and not reasonably within the control of either party, which prevents in
whole or in material part the performance by one of the parties of its
obligations hereunder or which renders the performance of such obligations so
difficult or costly as to make such performance commercially unreasonable.
Without limiting the generality of the foregoing, the following shall constitute
events or conditions of Force Majeure: governmental action or acts of state,
riots, disturbance, war, strikes, lockouts, slowdowns, prolonged shortage of
energy supplies, epidemics, fire, flood, hurricane, typhoon, earthquake,
lightning and explosion.
11.2 Notice. Upon giving notice to the other party, the party whose
------
performance is affected as aforesaid by an event of Force Majeure shall be
released without any liability on its part from the performance of its
obligations under this Agreement, except for the obligation to pay any amounts
due and owing hereunder, but only to the extent and only for the period that
such performance is so affected by the event of Force Majeure. Such notice
shall include a description of the nature of the event of Force Majeure, and its
cause and possible consequences. The party claiming Force Majeure shall
promptly notify the other party of the termination of such event.
11.3 Confirmation. The party invoking Force Majeure shall provide to
------------
the other party confirmation of the existence of the circumstances constituting
Force Majeure. Such evidence may consist of a statement or certificate of an
appropriate governmental department or agency where available, or a statement
describing in detail the facts claimed to constitute Force Majeure.
11.4 Suspension of Performance. During the period that the performance
-------------------------
by one of the parties of its obligations under this Agreement has been suspended
by reason of an event of Force Majeure, the other party may likewise suspend the
performance of all or part of its obligations hereunder to the extent that such
suspension is commercially reasonable.
11.5 Termination. Should the period of Force Majeure continue for more
-----------
than 180 days, either party may terminate this Agreement without liability to
the other based solely on such termination, upon delivering written notice to
the other party.
Section 12. Indemnification
---------------
12.1 Indemnification by Manufacturer. Manufacturer shall indemnify and
-------------------------------
hold harmless at all times (whether during the term of this Agreement or
thereafter) MGI and its affiliates and their respective directors, officers,
employees, agents, advisors, and their respective heirs, successors and assigns
from and against any and all losses, damages,
<PAGE>
liabilities or expenses (including, without limitation, reasonable attorneys'
fees and expenses) caused by or arising, directly or indirectly, in whole or in
part, out of (i) any breach of any representation, warranty, covenant or
agreement of Manufacturer under this Agreement, and (ii) any error, mistake,
negligence or reckless or willful misconduct on the part of Manufacturer, its
employees and/or agents in connection with manufacturing, packaging, labeling,
exporting, importing and delivering the Product or otherwise performing this
Agreement, and any and all actions, suits, proceedings, claims, demands or
judgments incident to any of the foregoing.
12.2 Indemnification by MGI. MGI shall indemnify and hold harmless at all
----------------------
times (whether during the term of this Agreement or thereafter) Manufacturer and
its affiliates and their respective directors, officers, employees, agents,
advisors, successors and assigns from and against any and all losses, damages,
liabilities or expenses (including, without limitation, reasonable attorneys'
fees and expenses) caused by or arising out of any material breach of any
representation, warranty, covenant or agreement of MGI under this Agreement and
any and all actions, suits, proceedings, claims, demands or judgments incident
to any of the foregoing.
12.3 Indemnification Claims. In the event that any action, suit,
----------------------
proceeding or demand is instituted against or made upon either party (the
"Aggrieved") for which the Aggrieved may seek indemnification hereunder (an
"Indemnifiable Claim") from a party hereto (the "Indemnitor"), the Indemnitor
shall be entitled to assume the control of the defense of such Indemnifiable
Claim with counsel reasonably satisfactory to the Aggrieved by providing notice
thereof to the Aggrieved, provided that, if the defendants in any action include
--------
both the Aggrieved and the Indemnitor and the Aggrieved shall have reasonably
concluded that there may be legal defenses available to it which are different
from or additional to those available to the Indemnitor, or if there is a
conflict of interest which would prevent counsel for the Indemnitor from also
representing the Aggrieved, the Aggrieved shall have the right to select
separate counsel to participate in the defense of such action on behalf of the
Aggrieved. After notice from the Indemnitor to the Aggrieved of its election to
assume the defense, the Indemnitor will not be liable to the Aggrieved for any
legal or other expense subsequently incurred by the Aggrieved in connection with
the defense thereof other than reasonable costs of investigation, unless (x) the
Aggrieved shall have employed counsel in accordance with the preceding sentence,
(y) the Indemnitor shall not have employed counsel reasonably satisfactory to
the Aggrieved to represent the Aggrieved within a reasonable time after the
notice of the commencement of the action, or (z) the Indemnitor has authorized
the employment of counsel for the Aggrieved at the expense of the Indemnitor.
In any case in which the Indemnitor assumes the control of the defense of such
Indemnifiable Claim, the Indemnitor shall give the Aggrieved not less than ten
calendar days' notice prior to executing any settlement agreement, and the
Aggrieved shall have the right to approve or reject any settlement; provided
--------
that, upon rejection of any settlement, the Aggrieved shall assume control of
the defense of such Indemnifiable Claim and the liability, if any, of the
Indemnitor with respect to such Indemnifiable Claim shall be limited to an
<PAGE>
amount up to the amount of the rejected settlement. Each party hereby agrees to
use all reasonable efforts to mitigate any Indemnifiable Claim for which it may
seek indemnification hereunder.
Section 13. Term and Termination
--------------------
13.1 Term. The initial term (the "Initial Term") of this Agreement shall
----
be four (4) years commencing on the date on which Manufacturer shall have
received all licenses, permits, certificates, authorizations and approvals
necessary to manufacture the Product suitable for sale in the United States or
in any country in Europe. This Agreement shall be automatically extended for
successive renewal terms of three years each (the "Renewal Terms"), provided,
however, that either party, upon three years prior written notice, may terminate
this Agreement at any time during any Renewal Term. This Agreement may not be
terminated, except as set forth in Section 13.2, during the Initial Term of this
Agreement. As used in this Agreement, the phrase "during the term of this
Agreement" means during the Initial Term or any Renewal Term.
13.2 Termination. This Agreement may be terminated at any time by either
-----------
party (a) by 30 days written notice delivered to the other if there has been a
material breach of any representation, warranty, covenant or agreement under
this Agreement by the other party which breach is not cured to the reasonable
satisfaction of the non-breaching party prior to the expiration of such 30-day
period; (b) by written notice upon any distribution of assets, receivership,
insolvency, assignment for the benefit of creditors, bankruptcy, reorganization,
composition, dissolution, liquidation or any other marshaling of the assets or
liabilities of the other party; or (c) pursuant to Section 11.5.
MGI shall also have the right to terminate this Agreement immediately by
written notice delivered to Manufacturer (d) if Manufacturer shall not have
received all licenses, permits, certificates, authorizations and approvals
necessary to conduct its business and manufacture, package, label, export,
import and deliver the Product as provided in Section 1.4 within 18 months of
the date of this Agreement, or (e) upon the occurrence of any material change in
the management, ownership, control, manufacturing capability or financial
condition of Manufacturer.
13.3 Disposition of Product, Supplies and Records. If, upon the
--------------------------------------------
termination or expiration of this Agreement, Manufacturer shall be in the
process of manufacturing Product requested by MGI pursuant to a written purchase
order delivered to Manufacturer, Manufacturer shall be entitled to finish,
deliver and receive payment for such Product in accordance with the terms of
this Agreement, but shall not thereafter manufacture any Product. Except as
required to be used in connection with the previous sentence, upon the
termination or expiration of this Agreement Manufacturer shall promptly return
to MGI, in accordance with MGI's instructions and at MGI's cost and expense, all
Active Ingredient supplied by MGI pursuant to Section 1.2 then in Manufacturer's
possession. Upon the expiration or termination of this Agreement,
<PAGE>
Manufacturer shall also promptly deliver to MGI all records in progress or
otherwise not yet delivered to MGI pursuant to Section 8.1.
13.4 No Breach. Neither party shall be deemed to have breached any
---------
obligation to the other by terminating or not renewing this Agreement in
accordance with any provision of this Section 13, and neither party shall have
any claim against the other based solely upon any such termination or
nonrenewal. Without limiting the generality of the foregoing, Manufacturer
shall not have any right or claim of reimbursement, indemnity or compensation
whatsoever against MGI (including, without limitation, for any loss of goodwill,
customers or profits or of any expenses incurred or to be incurred either prior
to or upon the termination or expiration hereof, including salaries and/or
termination benefits of employees and the like) based upon any termination or
nonrenewal of this Agreement.
13.5 Survival. The termination or expiration of this Agreement shall not
--------
relieve either party from any liability for any breach on its part of any
representation, warranty, covenant or agreement contained herein. Further,
notwithstanding any termination or the expiration of this Agreement, the
respective continuing obligations of Manufacturer and MGI set forth in this
Agreement shall survive and shall continue in full force and effect, including,
without limitation, those continuing obligations contained in Sections 1.5,
8.1(b), 9, 12, 13 and 14.
Section 14. Miscellaneous
-------------
14.1 Dispute Resolution.
------------------
(a) Except as to breaches or alleged breaches of Section 9, as to which
MGI reserves the right, at its sole option and discretion, to seek
judicial relief as provided in subparagraph (b) hereof, and except
as provided in subparagraph (c) hereof, if any dispute, claim or
controversy shall arise out of or relating to this Agreement, or the
breach or termination thereof (a "Dispute"), which cannot be settled
by good faith negotiation between the parties within 10 business
days after one party shall give notice to the other thereof, such
Dispute shall be settled by final and binding arbitration to be held
in Minneapolis, Minnesota in accordance with the International
Arbitration Rules of the American Arbitration Association (the
"AAA"). Such arbitration shall be conducted by a panel of three
English speaking arbitrators (the "Panel") appointed in accordance
with such Rules of the AAA. The Panel shall resolve the Dispute in
accordance with applicable law and shall render a reasoned opinion
(detailing the reasons for its decision) as soon as practicable
after the Panel shall have been selected. The Panel may award relief
under legal or equitable principles. The Panel shall allocate the
costs of the arbitration between the parties upon such basis as the
Panel deems equitable. Judgment upon the award rendered
<PAGE>
by all or a majority of the arbitrators on the Panel may be entered in
any court having jurisdiction in any country.
(b) Manufacturer agrees that its failure to perform any obligation or duty
which it has agreed to perform in Section 9 shall cause irreparable
harm to MGI, which harm cannot be adequately compensated for by money
damages. Manufacturer further agrees that an order of specific
performance or for injunctive relief against Manufacturer in the event
of a breach of or default under Section 9 would be equitable and would
not work a hardship on Manufacturer. Accordingly, in the event of any
actual or threatened breach of or default under Section 9 by
Manufacturer, MGI, without any bond or other security being required
and in addition to whatever other remedies are or might be available
at law or in equity, shall have the right either to compel specific
performance by, or to obtain injunctive relief against, Manufacturer
with respect to any obligation or duty in Section 9 or breach thereof,
without the necessity of proving actual damages and Manufacturer does
hereby waive as a defense to any equitable action the allegation that
MGI has an adequate remedy at law. This Section 14.1(b) shall not be
interpreted to diminish or otherwise limit the right of MGI to claim
and recover damages or to obtain any equitable remedy in addition to
specific performance or injunctive relief to which it may otherwise be
entitled.
(c) Nothing in this Section 14.1 shall prevent MGI from resorting to
judicial proceedings if interim resort to a court is deemed necessary,
in the sole discretion of MGI, as the case may be, to prevent serious
and irreparable injury to MGI or to others. In furtherance thereof,
Manufacturer agrees that any breach of the provisions of this
Agreement would cause irreparable harm to MGI for which MGI could not
be fully compensated by money damages. Accordingly, Manufacturer
specifically agrees that MGI shall be entitled to specific performance
and/or injunctive relief to enforce the provisions of this Agreement
and that such relief may be granted without the necessity of proving
actual damages and without the necessity of posting any bond or other
security in connection therewith. This provision with respect to
equitable relief shall not, however, diminish the right of MGI to
claim and recover damages in addition to injunctive relief. MGI and
Manufacturer specifically agree that the appropriate and exclusive
forum for any judicial proceedings brought pursuant to this
Section 14.1(c) shall be any state or federal court of competent
jurisdiction in the State of Minnesota, and Manufacturer hereby
consents to such court's exercise of personal jurisdiction over it and
agrees to be bound by any judgment rendered by any such court in
Minnesota, and any such judgment may be enforced in any jurisdiction
in accordance with applicable law. Manufacturer does hereby
irrevocably designate and
<PAGE>
appoint CT Corporation System ("CT"), 401 2nd Avenue South, Suite 454,
Minneapolis, Minnesota 55401, as its authorized agent for service of
process in any action or proceeding brought pursuant to this Section
14.1(c), and agrees that service of process upon CT shall be deemed
effective in any such action or proceeding. Manufacturer agrees to
take all such actions, including the execution, delivery and filing of
appropriate documents and instruments, as may be necessary in order to
effectuate and continue such appointment of CT as its agent for
service of process in Minnesota. The foregoing shall not in any way
limit the right of MGI to serve process in any other manner permitted
by applicable law.
14.2 Relationship. Manufacturer and its Representatives are not, and shall
------------
not act as, the employees, agents, representatives, sales representatives,
distributors or dealers of MGI or with respect to the Product. Manufacturer is
and shall act as an independent contractor, maintaining full responsibility and
complete control over all of its operations and business. Neither this
Agreement, nor any provision hereof, shall be deemed to create a partnership,
joint venture, franchise or relationship of principal and agent between the
parties hereto. Neither MGI nor Manufacturer shall have any right or authority
whatsoever to represent or bind the other in any way.
14.3 Notices. Any notices or other communications required or permitted by
-------
this Agreement shall be in writing and shall be deemed duly given and received
on the third business day following the day of mailing thereof by registered or
certified airmail, postage prepaid and return receipt requested, on the next
business day following the day of sending by an internationally recognized
overnight courier, or when receipt confirmed, if sent by facsimile transmission,
or when personally delivered as follows:
If to Manufacturer, as follows: If to MGI, as follows:
GLOBAL PHARM INC. MGI PHARMA, INC.
865 York Mills Road, Unit Two 9900 Bren Road East
Don Mills, Ontario Opus Center, Suite 300E
Canada M3B 1Y6 Minneapolis, MN 55343
Attn: Cheryl Kalpin, Attn: Vice President, General Counsel
Manager, Business Development Fax No. 612/935-0468
Fax No. 416/445-9048
Either party may change its address for purposes of notice by providing notice
to the other party of such change pursuant to this Section 14.3.
14.4 Complete Agreement. This Agreement, together with the Manufacturing
------------------
Processes, Product Specifications, Testing Procedures and other exhibits
attached hereto (all of which are incorporated herein by reference and made a
part hereof) and other documents specifically referred to herein, constitutes
the entire agreement of the parties
<PAGE>
hereto with respect to the subject matter hereof and shall supersede in all
respects any prior agreements, understandings, representations or warranties
(whether oral or written) between the parties hereto relating to such matters.
14.5 Amendment. This Agreement may not be modified or amended except by a
---------
written agreement signed by the parties hereto. Any modification or amendment of
this Agreement by a written agreement signed by, or binding upon, a party hereto
shall be valid and binding upon any and all successors or assigns of such party.
14.6 Waiver. No term or condition of this Agreement shall be deemed
------
to have been waived, nor shall there be any estoppel to enforce any provisions
of this Agreement, except by a statement in writing signed by the party against
whom enforcement of the waiver or estoppel is sought. Any written waiver shall
not be deemed a continuing waiver unless specifically stated, shall operate only
as to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.
14.7 Assignment. This Agreement shall not be assignable, in whole
----------
or in part, by either party without the prior written consent of the other
party, except that MGI may, without the consent of Manufacturer, assign its
rights and obligations under this Agreement to any affiliate of MGI or any
corporation, firm or other business entity with or into which MGI may merge or
consolidate, or to which MGI may sell or transfer all or substantially all of
its assets. After any such assignment by MGI, MGI shall be discharged from all
further liability hereunder and such assignee shall thereafter be deemed to be
MGI for the purposes of all provisions of this Agreement including this Section
14.7. Subject to the foregoing, this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
14.8 Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable under any applicable law or rule in any jurisdiction,
such provision will be ineffective only to the extent of such invalidity,
illegality, or unenforceability in such jurisdiction, without invalidating the
remainder of this Agreement in such jurisdiction or any provision hereof in any
other jurisdiction. If any time period or geographic area referred to in this
Agreement shall be determined by any court or arbitration panel having
jurisdiction over any dispute between MGI and Manufacturer arising hereunder to
be unreasonable, such time period or geographic area shall be changed to the
maximum amount of time or geographic area that such court or arbitration panel
determines is reasonable under all of the facts and circumstances.
14.9 Attorneys' Fees. If either party to this Agreement seeks
---------------
arbitration or brings an action (under Section 14.1 or otherwise) based upon
this Agreement, the prevailing party in such arbitration or action shall be
entitled to recover, in addition to
<PAGE>
any other appropriate amounts, its reasonable costs and expenses in connection
with such proceeding, including its reasonable attorneys' fees and the costs of
arbitration.
14.10 Headings. The section, paragraph and other headings and
--------
captions contained herein are used for the purpose of convenience only and are
not intended to define or limit the contents of any provision hereof.
14.11 Expenses. Except as otherwise specifically provided herein,
--------
each of MGI and Manufacturer shall bear their own costs and expenses in carrying
out their respective obligations hereunder.
14.12 Governing Law. This Agreement shall be deemed to be a
-------------
contract under the laws of the State of Minnesota and for all purposes shall be
construed and enforced in accordance with the internal laws of the State of
Minnesota, U.S.A., without regard to the principles of conflicts of law therein
contained under which any other law would be made applicable. The 1980 United
Nations Convention on Contracts for the International Sale of Goods is hereby
expressly excluded.
14.13 Press Releases and Announcements. The parties agree not
--------------------------------
to issue any press release (or make any other public announcement) related to
this Agreement or the transactions contemplated hereby without prior written
approval of the other party hereto, except as may be necessary, in the opinion
of counsel to the party seeking to make disclosure, to comply with the
requirements of this Agreement or applicable law (in the case of MGI, including,
without limitation, the federal securities laws). If any such press release or
public announcement is so required, the party making such disclosure shall
consult with the other party prior to making such disclosure, and the parties
shall use all reasonable efforts, acting in good faith, to agree upon a text for
such disclosure which is satisfactory to both parties.
14.14 Currency; Language. All dollar amounts in this Agreement are
------------------
expressed as currency of the United States of America unless otherwise
specifically noted. The English language version of this Agreement shall govern
and control any translations hereof into any other language. All written
information to be provided by either party hereunder shall be in the English
language.
14.14 Negotiated Agreement. The parties agree that this Agreement
---------------------
is the result of negotiations between counsel for the parties and that the
language of this Agreement shall not be construed for or against either party by
reason of such party being the drafter hereof.
<PAGE>
14.16 Counterparts. This Agreement may be executed in two
------------
counterparts, neither of which need contain the signature of the other party,
but both of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first set forth above.
MGI PHARMA, INC.
By: /s/ James V. Adam
-------------------------------
James V. Adam
Vice President, Chief Financial
Officer
GLOBAL PHARM INC.
By: /s/ N Shkordoff
-------------------------------
Nick Shkordoff
Executive Vice President
<PAGE>
Exhibit B to Exhibit 10.25
Quality Assurance Letter of Understanding
-----------------------------------------
The following is to set forth responsibilities of MGI and GPI with respect to
the manufacture, testing and release of Salagen FCT.
GPI Responsibilities
- --------------------
. Maintain specifications and test methods for raw materials, actives and
finished product according to MGI approved documents.
. Sample and maintain Reserve Samples (and NDA samples).
. Testing of raw materials, actives and finished products according to scheme
outlined in Addendum I.
. Provide MGI receiving reports for all raw materials, actives and packaging
components.
. Maintain Master manufacturing and packaging documents.
. Validate cleaning procedures for Salagen FCT as per GPI current requirements.
. Perform testing and release of all components, packaging and labeling.
. Review and forward all batch records and deviation reports to MGI for review.
. Perform physical release of finished goods according to MGI written
disposition.
. Ship product per MGI's requirements.
. Perform GMP audits of suppliers and laboratories as per GPI current
requirements (Canadian sources) and provide evidence to MGI of approval
status.
. Maintain Facility and Critical Systems in a current state of validation per
GMP/HPB requirements
. Support investigation of product complaints.
<PAGE>
MGI Responsibilities
- --------------------
. Provide GPI with approved specifications for raw materials, active and
finished product.
. Provide GPI with approved and validated (if non-compendial) test methods for
active and finished product.
. Approve master manufacturing and packaging documents.
. Testing of actives and finished product per addendum I.
. Perform label copy and label artwork approvals.
. Perform batch record review and notify GPI of disposition for physical
release.
. Provide storage and transportation requirements to GPI.
. Maintain distribution records.
. Perform stability testing and determination of expiry dating.
. Responsibility for Product Complaints and Adverse Experiences.
. Process for Annual Product Reviews.
. Notify GPI of any change or pending changes in Regulation Status.
. Perform product recalls.
Signed:
/s/ R. Tlachac 9/25/95 /s/ Brian Dale 10/02/95
- ---------------------------- -----------------------
MGI PHARMA Inc. GLOBAL PHARM INC.
Randall J. Tlachac Brian Dale
Director, Quality Assurance Vice President, Quality Assurance
<PAGE>
<TABLE>
<CAPTION>
CATEGORY TEST SUB-TEST RESPONSIBILITY LOCATION
<S> <C> <C> <C> <C>
Raw Material Testing
Pilocarpine HCl All MGI SAI
Pilocarpine HCl, Micronized
Assay MGI SAI
Particle Size MGI Coulter
Loss On Drying MGI SAI
Bulk Density GPI GPI
Microcrystalline Cellulose All GPI GPI
Stearic Acid All GPI GPI
Purified Water All GPI GPI
Carnauba Wax All GPI GPI
Opadry White All GPI GPI
Opacode Black All GPI GPI
Isopropyl Alcohol All GPI GPI
Component Testing
All Components GPI GPI
In-Process Testing
Content Uniformity MGI NT
Friability GPI GPI
Weight Variation GPI GPI
Physical Defects GPI GPI
Description GPI GPI
Diameter GPI GPI
Thickness GPI GPI
Disintegration GPI GPI
Hardness GPI GPI
Loss On Drying GPI GPI
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CATEGORY TEST SUB-TEST RESPONSIBILITY LOCATION
<S> <C> <C> <C> <C>
Finished Product Testing
Uniformity of Mass GPI GPI
Description GPI GPI
Physical Defects GPI GPI
Assay MGI NT/SAI
Dissolution MGI NT/SAI
Content Uniformity MGI NT/SAI
Identity MGI NT/SAI
Validation Testing
Blend
Assay MGI SAI
Moisture GPI GPI
Bulk Density GPI GPI
Tap Density GPI GPI
Sieve Analysis GPI GPI
Core
Weight GPI GPI
Hardness GPI GPI
Thickness GPI GPI
Assay MGI SAI
Dissolution MGI SAI
Friability GPI GPI
Disintegration GPI GPI
Visual Inspection GPI GPI
Coated Tablets Visual Inspection GPI GPI
Branded Tablets Visual Inspection GPI GPI
MGI PHARMA QUALITY ASSURANCE BY/DATE: /s/ R. Tlachac 9/25/95
-------------------------
</TABLE>
<PAGE>
Exhibit 11
Computation of Net Loss Per Common Share
MGI PHARMA, INC.
(Unaudited)
The following information is required in computations of primary and fully
diluted loss per common share in each year ended December 31:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Loss:
Loss $(2,614,478) $(9,696,946) $(11,722,877)
Common shares:
Adjusted weighted shares
outstanding (a) 12,508,639 11,784,027 11,414,517
Loss per common share:
Net loss $(0.21) $(0.82) $(1.03)
</TABLE>
(a) Net loss per common share shown on the face of the statements of operations
is the equivalent of a simple capital structure presentation since it excludes
common stock equivalents as their effect is antidilutive. There are no pro
forma fully diluted share outstanding adjustments, so primary and fully diluted
share amounts are identical.
<PAGE>
Exhibit 13
marketing + development
MGI PHARMA acquires and develops specialty pharmaceuticals that address
currently unmet medical needs or that significantly improve the treatment of
serious medical conditions.
[LOGO OF MGI APPEARS HERE]
1995 Annual Report
<PAGE>
MGI PHARMA'S 2-part strategy
marketing + development
The horizontal and vertical consolidation of the pharmaceutical industry offers
many opportunities for niche players such as MGI PHARMA.
Our commitment to serving the needs of physician-specialist markets has lead us
to develop the focus, insight and motivation necessary to compete in the
interdependent cycle of pharmaceutical development and marketing.
[M] The strong scientific foundation of our development programs goes hand in
hand with commercialization of our pharmaceutical products. Effective marketing
support leads to proper medical use of our drugs, which is a sine qua non of
good medical practice. After we receive FDA approval for a drug, we continue to
evaluate the compound for use with specific subsets of patients and for
treatment of additional indications. In the United States, MGI PHARMA's sales
representatives market Salagen(R) Tablets (pilocarpine hydrochloride), for the
treatment of radiation-induced dry mouth in head and neck cancer patients, and
Didronel(R) I.V. Infusion (etidronate disodium), a treatment for excess calcium
in the blood, known as hypercalcemia of malignancy. Currently, MGI PHARMA has
agreements with various partners who will market Salagen(R) Tablets in Europe,
Japan, Canada, Israel and Taiwan. We have completed enrollment in clinical
trials designed to extend the use of Salagen(R) Tablets as a treatment for dry
mouth and dry eye in patients suffering from Sjogren's syndrome, and expect to
apply for FDA approval to market Salagen(R) Tablets for this new indication
later in 1996.
[D] MGI PHARMA acquires and develops specialty pharmaceuticals that address
currently unmet medical needs or that significantly improve the treatment of
serious medical conditions. Our initial focus is on the cancer market. When
acquiring a compound, we look for established evidence of safety and efficacy
that can reduce the clinical and investment risk, since less than one in 5,000
new drug candidates reach the market. We design innovative clinical programs
intended to quickly move drugs through clinical testing, from laboratory to
market; and we generally seek worldwide patent protection. When appropriate, we
also seek orphan drug protection in the United States and elsewhere. In the
United States, "Orphan Drug Status" provides drugs that treat relatively small
patient populations with seven years of market exclusivity following Food and
Drug Administration approval.
<PAGE>
fellow
shareholders:
During 1995, MGI PHARMA forged new connections between the two key components of
our business - pharmaceutical development and commercialization.
We accomplished this primarily by working to strengthen and refocus both our
sales and marketing team and our programs for Salagen(R) Tablets, our primary
commercialized drug that treats radiation-induced dry mouth in head and neck
cancer patients.
We are pleased by early evidence that our new marketing strategy is on
target and that revenues have been growing. In 1995, we concentrated our
resources on realizing the potential of both Salagen(R) Tablets and the
acylfulvenes, a unique new family of antitumor compounds.
On the development front, we made significant progress toward
broadening indications approved for Salagen(R) Tablets. Patient enrollment has
been completed in the human clinical trials intended to demonstrate the utility
of Salagen(R) Tablets in treating symptoms of dryness in patients with Sjogren's
syndrome. Sjogren's syndrome is a chronic autoimmune system disease, which is
experienced in varying degrees by many patients with rheumatoid arthritis and
other autoimmune diseases. We also started patient enrollment in a Phase I
[BAR GRAPH OF REVENUES (IN THOUSANDS) APPEARS HERE]
based on the following data:
<TABLE>
<S> <C>
1993 $3,778
1994 $6,796
1995 $13,283
</TABLE>
clinical trial for MGI 114, the leading acylfulvenes analog. Acylfulvenes, our
new anticancer compounds, are at the very beginning of the human testing process
and can best be described as still involving a high risk, as well as holding the
potential of high reward.
Financial Results
MGI PHARMA's progress in strengthening sales and marketing is reflected in
improved financial results for 1995. Total revenues increased to $13.3 million,
up 95 percent from $6.8 million in 1994. The Company's net loss continued to
narrow, falling by 73 percent to $2.6 million, or 21 cents per share, down from
$9.7 million, or 82 cents per share, in 1994.
We were especially pleased that the 1995 fourth quarter was the
Company's first profitable quarter in six years. In addition to rising
Salagen(R) Tablets sales, contributions to fourth-quarter profitability included
more than $5.0 million received from an exclusive agreement with Dainippon
Pharmaceutical Co., Ltd., of Japan and the transfer of certain agricultural
technological rights to DEKALB Genetics Corporation. The Dainippon agreement
provides for the development and commercialization of the acylfulvenes for the
Japanese market, under which Dainippon may be anticipated to pay approximately
$12 million in cumulative milestone payments over a five-year period.
Recent Progress
MGI PHARMA achieved a number of important milestones in 1995. We strengthened
our senior management group by electing Lori-jean Gille vice president, general
counsel and secretary, and Rajesh C. Shrotriya, M.D., vice president, chief
medical officer. In the sales and marketing arena, we hired Jon C. Lee as our
new vice president, sales and marketing. A talented medical marketing executive,
Jon joins us following a 30-year career in commercial operations at Eli Lilly &
Company.
Under his direction, we have started producing materials and training
personnel in support of a promising new sales and marketing plan for Salagen(R)
Tablets that emphasizes education for both physicians and patients. The plan
focuses on the importance of appropriate dosing, the length of time expected
<PAGE>
between initial treatment and initial response, the potential advantages of
including Salagen(R) Tablets early in treatment, as well as the importance and
function of saliva and the long-term consequences of xerostomia (dry mouth).
[BAR GRAPH OF LOSSES (IN THOUSANDS) APPEARS HERE]
based on the following data:
<TABLE>
<S> <C>
1993 $(11,723)
1994 $(9,697)
1995 $(2,614)
</TABLE>
Through our European marketing partner, Chiron B.V., we have expanded
the use of Salagen(R) Tablets through registrations in additional markets,
including France, Greece and Ireland, in 1995. These new approvals will add to
the revenues already being realized in our existing U.S. and United Kingdom
markets. Through our own efforts, we have completed the enrollment in two
pivotal studies designed to examine the effectiveness of Salagen(R) Tablets to
treat the dryness symptoms in patients suffering from Sjogren's syndrome.
Late in the year, we executed a development and marketing agreement
for acylfulvenes in Japan with Dainippon Pharmaceuticals, a major Japanese
company. The successful completion of the required animal toxicology studies
allowed us to begin our Phase I human clinical trial on MGI 114, our lead
acylfulvenes analog. This trial is designed to test tolerance and safety, while
later phases will determine the drug's effectiveness in treating cancer in
humans.
[PHOTO OF JON C. LEE, VICE PRESIDENT, SALES & MARKETING, JAMES V. ADAM, VICE
PRESIDENT, CHIEF FINANCIAL OFFICER AND LORI-JEAN GILLE, VICE PRESIDENT, GENERAL
COUNSEL AND SECRETARY APPEARS HERE]
1996 Goals
The Company's top priority for 1996 is to continue to improve the
effectiveness of our commercial marketing organization so that we can further
grow Salagen(R) Tablets sales and move toward sustainable profitability.
Additional marketing goals for the current year include preparing to
enter the U.S. Sjogren's market, pending submission and approval by the FDA, and
continuing support of our international partners as they introduce Salagen(R)
Tablets in their markets. We plan to submit a supplemental New Drug Application
(sNDA) for Sjogren's syndrome to the FDA during the 1996 second half. We also
will work to expand our growing portfolio of international licensing
arrangements and build on the important relationships we have established with
Chiron B.V., Dainippon Pharmaceutical Co., Ltd., Kissei Pharmaceutical Co.,
Ltd., and Pharmacia & Upjohn.
[PHOTO OF RAJESH C. SHROTRIYA, VICE PRESIDENT, CHIEF MEDICAL OFFICER AND CHARLES
C. MUSCOPLAT, EXECUTIVE VICE PRESIDENT APPEARS HERE]
The acylfulvenes, which in animal studies have proven highly effective
against human tumors of the lung, breast, colon and skin, could be a unique
therapeutic advance in treating these tumors. During 1996, significant resources
will be devoted to additional toxicology studies in animals and to a pilot
production scale-up. We will work through Phase I of our human clinical studies
and plan for Phase II.
The Future
Longer term, we and our international partners will work to expand Salagen(R)
Tablets and the acylfulvenes worldwide. Additionally, we anticipate studying the
usefulness of Salagen(R) Tablets for treating other medical conditions, such as
dry eyes, dry mouth and vaginal dryness, resulting from the use of narcotic
analgesic and antidepressant medications. We also plan to begin animal studies
of several other molecules from the acylfulvenes family and may explore the
potential of another cancer-fighting family of compounds in our product
portfolio, known as phosphoramidates. We also will pursue opportunities to
broaden MGI PHARMA's product portfolio through research and development,
acquisitions, alliances and co-promotion.
As we announced in mid-November, I plan to retire from MGI PHARMA.
Recruitment is currently underway for an experienced CEO who will also serve on
the Board of Directors of the Company. It has been a tremendously gratifying
challenge and a true pleasure to have guided MGI PHARMA through its refocusing
and its formative years in the field of human pharmaceuticals. During this
period, MGI PHARMA joined a very select group of companies when it
<PAGE>
successfully and independently took a new drug all the way through the FDA
approval process. MGI PHARMA's commercial operation must now continue to grow to
match the Company's clinical achievements.
Post my retirement, the time has come for MGI PHARMA to demonstrate
its ability to attain sustainable profitability. We have established solid
momentum in achieving our mission of addressing unmet medical needs and
improving current therapies, particularly those that alleviate the suffering of
cancer patients. I am confident that under the new CEO, the Company can continue
to strive to meet these as well as many new challenges. I wish the Company, its
employees and shareholders the very best, and extend to you my heartfelt thanks
for your support during my tenure.
[PHOTO OF KENNETH F. TEMPERO APPEARS HERE]
Sincerely,
/s/ K.F. Tempero
Kenneth F. Tempero, M.D., Ph.D.
Chairman and Chief Executive Officer
March 11, 1996
<PAGE>
marketing
MGI PHARMA's top priority for 1996 is to increase sales of Salagen(R) Tablets, a
safe and effective drug that stimulates salivary secretion in glands that have
been damaged by radiation therapy for head and neck cancer. While positive
momentum has been established since we began marketing Salagen(R) Tablets in
April 1994, new efforts are underway to more effectively position Salagen(R)
Tablets as a treatment for this previously untreated condition.
"I strongly believe that Salagen
will become the treatment of choice for Sjogren's syndrome."
[PHOTO OF FREDERICK VIVINO, M.D. APPEARS HERE]
Frederick Vivino, M.D., director, of the Philadelphia Sjogren's Syndrome Dry
Mouth Treatment Center at Presbyterian Medical Center, is involved in clinical
trials testing Salagen(R) Tablets' effectiveness in treating dry mouth caused by
Sjogren's, an autoimmune disease.
<PAGE>
Marketing Strategy
Central to our new six-point marketing strategy is education designed to
increase the awareness and ongoing use of Salagen(R) Tablets directed toward
both the healthcare providers and patients. The cornerstone of this strategy
emphasizes the importance of saliva and the long-term consequences of xerostomia
with physicians who treat this condition. Our target physician specialists
include radiation oncologists, hospital-based dentists, head and neck surgeons,
and other related medical specialists.
Typically, radiation therapy for head and neck cancer is administered daily for
six weeks. Decreased salivary output occurs immediately upon the first dose of
radiation therapy. After three to four weeks, side effects often include mouth
sores, pain and weight loss. By the fifth or sixth week, most patients need
codeine or morphine for pain relief; treatment sometimes must be interrupted
because of the severe side effects. Salagen(R) Tablets' role in stimulating
damaged salivary glands to replace some of the lost saliva, and the importance
of early treatment, are central points of emphasis in our new marketing
programs. During 1996, we plan to support the growing body of in-process and
published clinical data on the therapeutic effectiveness of Salagen(R) Tablets.
In addition, we are increasing our efforts to help both patients and physicians
understand that saliva is a unique and medically necessary substance. It
contains many essential proteins, enzymes, electrolytes and minerals that aid
tasting, speaking, chewing and digestion, as well as providing protection from
bacteria, viruses and fungal growths that can cause mouth and throat infections
and tooth decay. Because saliva is so much more complex and beneficial than
moisture, common dry-mouth remedies, such as sips of water, hard candies and
saliva substitutes, simply do not effectively stimulate saliva production and
are not equivalent to Salagen(R) Tablets.
[PHOTO OF ATHENA PAPAS, D.M.D., PH.D. APPEARS HERE]
"Salagen dramatically reduces dry mouth, and can improve patients' quality of
life and dental health."
Athena Papas, D.M.D., Ph.D., director of oral medicine at Tufts Dental School,
Boston, is a renowned saliva expert who runs a dry mouth clinic.
<PAGE>
marketing
1995 was a year of extensive market research. MGI's new marketing plan outlines
six strategic initiatives for 1996.
[BAR GRAPH OF PRODUCT SALES APPEARS HERE]
based on the following data:
<TABLE>
<S> <C>
1st Quarter $ 937,140
2nd Quarter $1,061,294
3rd Quarter $1,142,800
4th Quarter $1,465,997
</TABLE>
<PAGE>
initiatives
Increase sales of Salagen(R) Tablets in 1996
Educate physicians to the benefits of using Salagen(R) Tablets early in
treatment
Expand licensing for Salagen(R) Tablets internationally
The goal of our new marketing strategy is to more solidly establish Salagen(R)
Tablets as the first-line, preferred treatment for xerostomia. To increase
Salagen(R) Tablets sales growth, we plan to:
. Educate physicians and patients about the importance of saliva and the
long-term consequences of dry mouth, using new educational materials.
. Establish early use of Salagen(R) Tablets to deal with the immediate
effects of radiation therapy.
. Ensure that physicians prescribe appropriate dosages and monitor and
counsel the patient from initial Salagen(R) Tablets treatment through the
initial therapeutic response.
. Provide a Xerostomia Patient Management Program for health care providers
to help patients understand and comply with their treatment. This will
include patient educational materials, a patient newsletter, and a new
toll-free (Salagen(R) Tablets/Dry Mouth) information phone line.
. Build our commercial operations to more effectively communicate the
Salagen(R) Tablets message to health care providers and patients.
. Continue and enhance support of our network of international partners as
they introduce and expand Salagen(R) Tablets in their markets.
<PAGE>
development
"We're enthusiastic about acylfulvenes' unique ability to affect cancerous
tumors that are resistant to other forms of chemotherapy."
[PHOTOS OF DANIEL VON HOFF, M.D. AND S. GAIL ECKHARDT, M.D. APPEAR HERE]
Daniel Von Hoff, M.D., director (left), and S. Gail Eckhardt, M.D., associate
director (bottom), Institute for Drug Development, Cancer and Therapy Research
Center at San Antonio, are oncologists undertaking human clinical trials for
acylfulvenes.
<PAGE>
[GRAPHIC OF THE MGI 114 CHEMICAL STRUCTURE (6-HYDROXYMETHYLACYLFULVENE) APPEARS
HERE]
Currently, MGI PHARMA is devoting most of its pharmaceutical development
resources to two areas: investigating the potential of a new and unique family
of compounds, called the acylfulvenes, that have the potential to become a
significant new cancer therapy; and expanding the approved indications for our
primary commercialized product, Salagen(R) Tablets.
[GRAPHIC OF THE OMPHALOTUS ILLUDENS MUSHROOM APPEARS HERE]
Acylfulvenes
In extensive preclinical work involving human tumors transplanted to animals,
the acylfulvenes appear to be more effective than currently approved drugs in
fighting cancers of the lung, breast, colon and skin. Acylfulvenes are
chemically modified versions of natural substances produced by the Omphalotus
illudens mushroom. They utilize a mechanism of tumor-killing action that is
distinct from other chemotherapeutic drugs and appear to be absorbed more
quickly by tumor cells than by healthy tissue.
In September 1995, the Company completed enough preclinical testing with MGI
114, the lead acylfulvenes compound, to file an Investigative New Drug (IND)
application with the FDA. In December, human clinical studies began when MGI 114
was administered to the first patient. During 1996, our continuing Phase I human
clinical studies will examine safety and patient tolerance of the drug, while
later phases will measure its cancer-fighting effectiveness. Also during 1996,
we will begin evaluating several other acylfulvenes molecules in animal studies.
Although very exciting, the acylfulvenes, an early-stage pharmaceutical, are at
the very beginning of human testing and incorporate the high risk associated
with all early-stage developmental drug candidates.
"In our studies, we're finding
that Salagen virtually eliminates painful throat and mouth ulcers in cancer
patients, allowing potentially life-saving radiation treatments to proceed."
[PHOTOS OF FRANCIS LEVEQUE, D.D.S. AND JAMES FONTANESI, M.D. APPEAR HERE]
Francis LeVeque, D.D.S., oral surgeon (left), and James Fontanesi, M.D.,
pediatric oncologist (right), are clinical researchers at Wayne State
University, Detroit, studying the benefits of using Salagen(R) Tablets at the
beginning of radiation therapy for head and neck cancer.
<PAGE>
Expanding Salagen(R) Tablets
Development resources also have been channeled into expanding the approved
medical uses for Salagen(R) Tablets in a dry-mouth and dry-eyes patient
population significantly larger than the population of head and neck cancer
patients. These include patients suffering from a chronic autoimmune disease
known as Sjogren's syndrome, and of patients suffering from dry mouth and dry
eyes resulting from the use of antidepressants and cancer pain medications such
as morphine and codeine.
The development cycle is farthest along for Sjogren's syndrome, a disease that
gradually destroys the moisture-producing glands of the body and is common in
patients suffering from rheumatic or autoimmune diseases. Patient enrollment has
been completed for the Company's two pivotal Sjogren's syndrome studies. We plan
to complete data analysis and file a supplemental New Drug Application (sNDA)
with the FDA during the 1996 second half.
We remain excited about the multiple market opportunities for Salagen(R) Tablets
- - a drug that has been proven safe and effective and can be characterized as low
risk, moderate reward. We are equally energized by the long-term potential for
acylfulvenes, a possible breakthrough drug for cancer treatment.
[BAR GRAPH OF RESEARCH AND DEVELOPMENT EXPENSES APPEARS HERE]
based on the following data:
<TABLE>
<S> <C>
1993 $6,896,608
1994 $6,196,076
1995 $7,266,597
</TABLE>
development
<PAGE>
management's discussion
and analysis of financial condition and results of operations
Overview
MGI PHARMA, INC. ("MGI" or the "Company") is a pharmaceutical company which
acquires, develops and markets specialty pharmaceuticals. The Company's goal is
to develop innovative products that significantly improve the treatment of a
variety of serious medical conditions. The Company is initially focused on
products that treat cancer or improve the quality of life for cancer patients.
In March 1994, MGI received approval from the Food and Drug Administration
("FDA") to market Salagen(R) Tablets for treatment of radiation-induced dry
mouth in head and neck cancer patients. The Company began marketing Salagen(R)
Tablets to physicians across the United States during the 1994 second quarter.
Commercialization of Salagen(R) Tablets outside the United States is being
accomplished through establishment of various licensing and distributor
relationships. These include Europe, Japan, Canada, Israel, and Taiwan.
During 1995, MGI entered into a cooperative development and commercialization
agreement with Dainippon Pharmaceutical Co., Ltd., a Japanese pharmaceutical
company. Under the agreement, Dainippon was granted exclusive rights in Japan to
MGI's acylfulvenes, a family of anticancer compounds with a mechanism of action
that is novel compared to approved chemotherapeutic drugs. In addition to making
a $2.8 million equity investment in MGI, Dainippon is expected to make milestone
payments of approximately $12 million during the precommercial period (of which
nearly $3 million was paid during 1995) and MGI will participate in commercial
success of acylfulvenes in Japan by supplying Dainippon with bulk drug
substance.
Results of Operations
The Company's 1995 net loss of $2,614,478 compares with net losses of $9,696,946
and $11,722,877 in 1994 and 1993, respectively. While the decreased loss in 1995
was primarily due to increased licensing revenue, net sales of Salagen(R)
Tablets also increased.
Licensing revenue increased 372% to $7,718,094 in 1995, following a 240%
increase from $481,390 in 1993 to $1,636,343 in 1994. The 1995 increase was
primarily due to nearly $3 million paid by Dainippon in conjunction with
granting the license to develop and market acylfulvenes, and a non-recurring $3
million payment from DEKALB Genetics Corporation, in conjunction with the
transfer of certain non-core agricultural technology to DEKALB. Also
contributing to the 1995 increase was a non-recurring $1 million milestone
payment received in the 1995 first quarter from Chiron B.V. following approval
of Salagen(R) Tablets for marketing in the United Kingdom. The 1994 increase was
almost exclusively due to establishment of the alliance with Kissei
Pharmaceutical for commercialization of Salagen(R) Tablets in Japan. Future
licensing revenues will likely fluctuate from one quarter to the next and
between years depending on current partners achievement of milestones and the
amount of their recurring royalty generating activities, and the timing of
initiating additional licensing relationships. Absent revenue from initiation of
additional licensing relationships, 1996 licensing revenue is expected to
decline from 1995 amounts due to the magnitude of initiation and milestone
payments recognized in 1995.
[BAR GRAPH OF LICENSING REVENUES APPEARS HERE]
based on the following data:
<TABLE>
<S> <C>
1993 $481,390
1994 $1,636,343
1995 $7,718,094
</TABLE>
<PAGE>
Sales revenue increased 8% to $4,607,231 in 1995, following an 87% increase from
$2,285,458 in 1993 to $4,276,027 in 1994. The increase in 1995 reflected
increasing sales of Salagen(R) Tablets, partially reduced by continuation of the
long-term decline in sales of DIDRONEL(R) I.V. Infusion. The increase in 1994
was due to the launch of Salagen(R) Tablets in the U.S. during the 1994 second
quarter and reflects relatively large quantities of product sold to wholesale
distributors. Inventory quantities in distribution channels have been
approaching equilibrium since launch, and management believes Company shipments
have only recently increased to a level which approximates retail demand for
Salagen(R) Tablets. The recent trend in retail demand, as estimated using
shipment activity from wholesalers to pharmacies, has been approximately a 10%
increase per quarter.
Cost of sales increased 37% to $771,912 in 1995, following a 137% increase from
$237,626 in 1993 to $563,490 in 1994. The 1995 increase was due primarily to a
non-recurring provision for potential excess inventory. Management believes that
future cost of sales as a percent of sales should eventually resume its
historical relationship of around 10%. This relationship will continue to be
influenced by the unit sales volume of Salagen(R) Tablets, as the Company's
fixed production costs are allocated across the base of production activity.
Interest and other income increased 8% to $957,785 in 1995, following a 13%
decrease from $1,010,837 in 1993 to $884,066 in 1994. The 1995 increase was due
to higher investment yields in 1995, partially reduced by a decline in the
average amount of funds available for investment in 1995. Despite the decline in
average amount of funds available for investment, positive cash flow late in
1995, especially from Dainippon and DEKALB, resulted in more funds available for
investment at the end of 1995 than were available at the beginning of 1995. The
1994 decrease in interest income was due to reduced funds available for
investment. Until the Company attains positive cash flow, whether from
operations or outside funding, funds available for investments will continue to
decline. Interest income would correspondingly decline, assuming yields remain
constant. Near the end of 1995, reinvestment rates were trending lower.
[BAR GRAPH OF SELLING, GENERAL AND ADMINISTRATIVE EXPENSES APPEARS HERE]
based on the following data:
<TABLE>
<S> <C>
1993 $6,896,608
1994 $6,196,076
1995 $7,266,597
</TABLE>
Total research and development expense increased 17% to $7,266,597 in 1995,
following a 10% decrease from $6,896,608 in 1993 to $6,196,076 in 1994. Expenses
in 1995 primarily included continued development of Salagen(R) Tablets,
especially toward expansion of the approved indication, and of acylfulvenes,
including filing of an Investigational New Drug application and initiating
enrollment in a Phase I clinical study for MGI 114, the lead analog of these
anticancer compounds. Over the next several quarters, development of Salagen(R)
Tablets as a treatment for dry mouth due to Sjogren's Syndrome is expected to
increase research and development expense.
Selling, general and administrative expenses decreased 15% to $7,487,413 in
1995, following a 30% increase from $6,813,093 in 1993 to $8,845,171 in 1994.
The 1995 decrease resulted from the effect of non-recurring 1994 selling
expenses associated with the 1994 launch of Salagen(R) Tablets and scaling down
selling expenses in 1995. This decrease was tempered by a non-recurring $670,000
provision for 1995 expenses related to the retirement of the Company's Chief
Executive Officer. While the level of initial-use prescriptions of Salagen(R)
Tablets has been satisfactory, management believes improvement in the ratio of
refill prescriptions to initial-use prescriptions is essential for the product
to realize its full potential. New efforts targeting better conversion of
initial prescribing into ongoing refills are being implemented and selling
expense will likely increase for 1996 compared to 1995 as these new efforts are
implemented.
<PAGE>
Using the purchase method of accounting to record acquisition of DIDRONEL(R)
I.V. Infusion, acquired intangible assets were recorded at their estimated fair
market value at their acquisition in 1990 and the excess purchase price over
these values was recorded as goodwill. These assets, including goodwill, were
amortized over their estimated useful lives (generally five years) on a
straight-line basis and were fully amortized at December 31, 1995, resulting in
$371,666, $888,645 and $1,553,235 of amortization expense in 1995, 1994 and
1993, respectively.
Liquidity and Capital Resources
At December 31, 1995, the Company had cash and cash equivalents and investments
of $17,978,931 and working capital of $15,973,086 compared to $16,636,590 and
$14,858,722, respectively, at December 31, 1994. During the year ended December
31, 1995, the Company used cash of $1,727,567 to fund its operating activities,
and received $2,837,687 of cash from the issuance of common stock to Dainippon.
[BAR GRAPH OF TOTAL CASH AND INVESTMENTS APPEARS HERE]
based on the following data:
<TABLE>
<S> <C>
1993 $22,937,982
1994 $16,636,590
1995 $17,978,931
</TABLE>
Cash in excess of current operating needs is invested in marketable debt
securities in accordance with the Company's investment policy. This policy
emphasizes principal preservation, so it requires strong issuer credit ratings
and limits the amount of credit exposure from any one issuer or industry.
Substantial amounts of capital are required for pharmaceutical development and
commercialization efforts. For continued development and commercialization of
MGI 114 and Salagen(R) Tablets, the Company plans to utilize cash provided from
growth in sales of Salagen(R) Tablets, collaborative arrangements and existing
liquid assets. If these sources of capital are insufficient, the Company will
seek other sources of funding, including additional equity issuances, or it will
manage the pace of developing MGI 114 and continuing label expansion of
Salagen(R) Tablets.
For 1996, the Company is required to adopt Statement of Financial Accounting
Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of, and SFAS No. 123, Accounting for
Stock-Based Compensation. SFAS No. 121 prescribes accounting and reporting
standards when circumstances indicate that the carrying amount of an asset may
not be recoverable. Initial application of SFAS No. 121 is not expected to
result in recognition of a cumulative effect of a change in accounting principle
by the Company. SFAS No. 123 prescribes accounting and reporting standards for
all stock-based compensation plans. Since the Company intends to elect continued
recognition of certain stock-based compensation using the intrinsic value method
prescribed under Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, no effect on the Company's expense recognition is
expected. However, extensive new disclosures will be required in notes to the
financial statements.
<PAGE>
consolidated
balance sheets
MGI PHARMA, INC.
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 9,075,569 $ 6,728,006
Short-term investments 8,903,362 9,908,584
Receivables, less allowances
of $324,349 and $347,823 566,366 283,636
Inventories, net 1,003,278 1,386,909
Prepaid expenses 43,417 595,746
----------- -----------
Total current assets 19,591,992 18,902,881
Equipment and furniture,
at cost less accumulated
depreciation of $681,467 and $624,122 243,197 359,393
Intangible assets,
net of accumulated
amortization of $8,205,249 and $7,833,583 -- 371,666
Other assets 515,991 448,515
----------- -----------
Total assets $20,351,180 $20,082,455
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 1,277,713 $ 1,752,555
Accrued expenses 2,333,868 1,499,702
Unearned revenue -- 777,778
Other current liabilities 7,325 14,124
----------- -----------
Total current liabilities 3,618,906 4,044,159
----------- -----------
Stockholders' Equity:
Common stock, $.01 par value,
30,000,000 authorized shares,
12,781,608 and 11,945,544 issued shares 127,816 119,455
Additional paid-in capital 82,872,883 79,706,292
Notes receivable from officers (432,082) (565,586)
Accumulated deficit (65,836,343) 63,221,865)
-----------
Total common stockholders' equity 16,732,274 16,038,296
----------- -----------
Total liabilities and stockholders' equity $20,351,180 $20,082,455
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
consolidated statements of
operations
MGI PHARMA, INC.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Sales $ 4,607,231 $ 4,276,027 $ 2,285,458
Licensing 7,718,094 1,636,343 481,390
Interest and other 957,785 884,066 1,010,837
13,283,110 6,796,436 3,777,685
Costs and Expenses:
Research and development 7,266,597 6,196,076 6,896,608
Cost of sales 771,912 563,490 237,626
Selling, general and
administrative 7,487,413 8,845,171 6,813,093
Amortization of intangible
assets 371,666 888,645 1,553,235
15,897,588 16,493,382 15,500,562
Net loss $(2,614,478) $(9,696,946) $(11,722,877)
Net loss per common share $(0.21) $(0.82) $(1.03)
Weighted average number
of common shares outstanding 12,508,639 11,784,027 11,414,517
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
consolidated statements of
cash flows
MGI PHARMA, INC.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Operating Activities:
Net loss $ (2,614,478) $ (9,696,946) $(11,722,877)
Adjustments for non-cash items:
Depreciation and asset
amortization 476,702 1,011,682 1,660,698
Unearned revenue amortization (777,778) (388,889) --
Facility rent abatement (39,264) (77,572) (58,723)
Deferred compensation -- -- 278,363
Other 185,501 140,070 306,622
Change in operating assets and
liabilities:
Receivables (282,730) (149,938) 154,551
Receivables from employees -- 104,528 (104,528)
Inventories 383,631 (986,504) (283,428)
Prepaid expenses 552,329 (595,488) --
Accounts payable and accrued
expenses 395,319 498,119 222,845
Unearned revenue -- 1,166,667 --
Other current liabilities (6,799) (41,455) (15,542)
------------ ------------ ------------
Net cash used in operating
activities (1,727,567) (9,015,726) (9,562,019)
------------ ------------ ------------
Investing Activities:
Purchase of investments (21,469,232) (21,945,336) (24,486,180)
Maturity of investments 22,474,454 30,290,649 29,287,772
Purchase of equipment and
furniture (4,066) (114,960) (268,158)
Other 66,028 1,214 (108,571)
------------ ------------ ------------
Net cash provided in
investing activities 1,067,184 8,231,567 4,424,863
------------ ------------ ------------
Financing Activities:
Issuance of shares under employee
stock plans 170,259 494,747 660,290
Proceeds from issuance of shares 2,837,687 2,333,333 --
------------ ------------ ------------
Net cash provided in
financing activities 3,007,946 2,828,080 660,290
------------ ------------ ------------
Increase (decrease) in cash and
cash equivalents 2,347,563 2,043,921 (4,476,866)
Cash and cash equivalents at
beginning of year 6,728,006 4,684,085 9,160,951
------------ ------------ ------------
Cash and cash equivalents at end
of year $ 9,075,569 $ 6,728,006 $ 4,684,085
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
consolidated statements of
stockholders' equity
MGI PHARMA, INC.
<TABLE>
<CAPTION>
Notes
Additional Receivable Total
Common Paid-in from Accumulated Stockholders'
Stock Capital Officers Deficit Equity
-------- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 $112,649 $74,732,997 $ -- $(41,802,042) $ 33,043,604
Exercise of stock options, 208,647 shares 2,086 855,143 (448,480) -- 408,749
Restricted stock unit conversions,
29,290 shares 293 387,799 -- -- 388,092
Employee stock purchase plan,
32,666 shares 327 251,213 -- -- 251,540
Employee retirement savings plan
contribution, 11,981 shares 120 162,687 -- -- 162,807
Note payment -- -- 11,092 -- 11,092
Other issuances, 10,000 shares 100 142,400 -- -- 142,500
Nonemployee director stock option issuance -- 60,000 -- -- 60,000
Net loss -- -- -- (11,722,877) (11,722,877)
-------- ----------- --------- ------------ ------------
Balance at December 31, 1993 115,575 76,592,239 (437,388) (53,524,919) 22,745,507
Exercise of stock options, 126,640 shares 1,266 448,861 (144,525) -- 305,602
Employee stock purchase plan,
26,295 shares 263 176,882 -- -- 177,145
Employee retirement savings plan
contribution, 18,064 shares 181 157,147 -- -- 157,328
Strategic alliance issuance,
217,054 shares 2,170 2,331,163 -- -- 2,333,333
Note payment -- -- 16,327 -- 16,327
Net loss -- -- -- (9,696,946) (9,696,946)
-------- ----------- --------- ------------ ------------
Balance at December 31, 1994 119,455 79,706,292 (565,586) (63,221,865) 16,038,296
Exercise of stock options, 16,847 shares 169 68,820 -- -- 68,989
Employee stock purchase plan,
31,746 shares 317 100,953 -- -- 101,270
Employee retirement savings plan
contribution, 37,471 shares 375 166,631 -- -- 167,006
Issuance of shares, 750,000 shares 7,500 2,830,187 -- -- 2,837,687
Note payment -- -- 133,504 -- 133,504
Net loss -- -- -- (2,614,478) (2,614,478)
-------- ----------- --------- ------------ ------------
Balance at December 31, 1995 $127,816 $82,872,883 $(432,082) $(65,836,343) $ 16,732,274
======== =========== ========= ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
notes
to consolidated financial statements
MGI PHARMA, INC.
1. Summary of Significant Accounting Policies
Description of Business
MGI PHARMA, INC. ("MGI" or the "Company") is a pharmaceutical company which
acquires, develops and markets specialty pharmaceuticals. The Company's goal is
to develop innovative products that significantly improve the treatment of a
variety of serious medical conditions. The Company is initially focused on
products that treat cancer or improve the quality of life for cancer patients.
It is currently marketing its oncology products to physicians across the United
States, with sales made to pharmaceutical wholesalers for distribution to the
ultimate consumer of Company products. Sales of Salagen(R) Tablets account for
the vast majority of Company sales. The Company intends to commercialize its
products outside the United States through various alliances, and has agreements
with international pharmaceutical companies to commercialize Salagen(R) Tablets
for the European, Japanese and Canadian markets. Product development efforts
currently include continued development of Salagen(R) Tablets, especially toward
expansion of the approved indication, and development of acylfulvenes, a family
of compounds with potential to become effective cancer therapies. Exclusive
rights to acylfulvenes for Japan were granted to a Japanese pharmaceutical
company under a cooperative development and commercialization agreement.
<PAGE>
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
Molecular Genetics Research, Inc., its wholly-owned subsidiary, for all periods
and dates presented until it was merged into MGI and ceased to exist in November
1994. All significant intercompany accounts and transactions have been
eliminated.
Cash and Cash Equivalents and Short Term Investments
Effective January 1, 1994, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 115, Investment in Certain Debt and Equity Securities. In
accordance with SFAS No. 115, prior period financial statements have not been
restated. No cumulative effect adjustment occurred as a result of this change in
accounting principle.
Because the Company has the positive intent and the ability to hold its
investments to maturity, they are considered held-to-maturity investments. As
such, they are stated at amortized cost, which approximates estimated fair
value. Amortized cost is adjusted for amortization of premiums and discounts to
maturity, and this amortization is included in interest and other income in the
accompanying statements of operations.
The Company considers highly liquid debt instruments with remaining maturities
of ninety days or less at the time of purchase to be cash equivalents. Other
highly liquid debt instruments with remaining maturities of one year or less at
the time of purchase are classified as short-term investments.
Concentration of Credit Risk
Financial instruments that may subject the Company to significant concentrations
of credit risk consist primarily of cash investments and trade receivables.
Cash in excess of current operating needs is invested in accordance with the
Company's investment policy. This policy emphasizes principal preservation, so
it requires strong issuer credit ratings and limits the amount of credit
exposure from any one issuer or industry.
The Company grants credit primarily to pharmaceutical wholesale distributors
throughout the United States in the normal course of business. Customer credit
worthiness is routinely monitored and collateral is not normally required.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined on a
first-in, first-out basis.
Intangible Assets
In connection with its 1990 acquisition of DIDRONEL(R) I.V. Infusion, the
Company recognized $8,205,249 of intangible assets under the purchase method of
accounting. The acquired assets were recorded at their estimated fair market
values as of the date of acquisition, with the excess purchase price over these
values recorded as goodwill. These assets, including goodwill, were fully
amortized at December 31, 1995.
Sales Recognition
Sales and related costs are recognized upon shipment of product to customers.
Sales are recorded net of provisions for returns, discounts, Medicaid rebates
and chargebacks.
Licensing Revenue Recognition
Licensing revenue is recognized when underlying performance criteria for payment
have been met and the Company has an unconditional right to such payment.
Depending on a license agreement's terms, recognition criteria may be satisfied
upon achievement of milestones, passage of time or product sales by the
licensee. Payments received by the Company in excess of amounts earned are
classified as unearned revenue.
<PAGE>
Advertising and Promotion Expense
Costs of advertising and promotion are expensed as incurred and were $1,163,320,
$2,182,908 and $606,700 in 1995, 1994 and 1993, respectively. The Company has
not deferred costs related to direct-response advertising.
Depreciation
Depreciation of equipment and furniture is provided over the estimated useful
lives of the respective assets on a straight-line basis. Estimated useful lives
of equipment and furniture range from three to ten years.
Income Taxes
The Company adopted Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, as of January 1, 1993. Under the asset and
liability method of SFAS No. 109, deferred tax assets and liabilities are
recognized for future tax consequences attributable to differences between the
financial carrying amounts of existing assets and liabilities and their
respective tax bases.
Loss Per Common Share
Loss per common share is based upon the weighted average number of shares
outstanding during each period. Common stock equivalents are not included as
their effect is antidilutive.
Use of Estimates
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
affecting reported asset and liability amounts and disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
New Accounting Pronouncements
For 1996, the Company is required to adopt Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, and SFAS No. 123, Accounting for Stock-
Based Compensation. SFAS No. 121 prescribes accounting and reporting standards
when circumstances indicate that the carrying amount of an asset may not be
recoverable. Initial application of SFAS No. 121 is not expected to result in
recognition of a cumulative effect of a change in accounting principle by the
Company. SFAS No. 123 prescribes accounting and reporting standards for all
stock-based compensation plans. Since the Company intends to elect continued
recognition of certain stock-based compensation using the intrinsic value method
prescribed under Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, no effect on the Company's expense recognition is
expected. However, extensive new disclosures will be required in notes to the
consolidated financial statements.
Basis of Presentation
Certain prior year amounts have been reclassified to conform with the current
year presentation.
<PAGE>
2. Short-Term Investments
Held-to-maturity investments, including estimated fair value based on quoted
market prices or valuation models, at December 31, 1995 and 1994 are summarized
as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------------------------------
Cost Fair Value Cost Fair Value
----------------------------------------------
<S> <C> <C> <C> <C>
Commercial
paper $7,896,851 $7,896,851 $7,899,033 $7,899,033
Closed-end
investment
companies 1,006,511 1,006,511 -- --
Corporate notes -- -- 2,009,551 2,009,551
----------------------------------------------
Short-term
investments $8,903,362 $8,903,362 $9,908,584 $9,908,584
==============================================
</TABLE>
3. Inventories
Inventories at December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
-----------------------
<S> <C> <C>
Raw materials and supplies $ 26,631 $ 157,476
Work in process 68,387 14,676
Finished products 1,089,718 1,228,319
Valuation allowance (181,458) (13,562)
-----------------------
$1,003,278 $1,386,909
=======================
</TABLE>
<PAGE>
4. Accrued Expenses
Accrued expenses at December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------
<S> <C> <C>
Retirement commitment $ 655,468 $ --
Product development commitments 476,049 477,358
Bonuses 356,826 226,776
Technology licensing commitment 253,243 --
Retirement plan contribution 145,854 134,831
Other accrued expenses 446,428 660,737
----------------------
$2,333,868 $1,499,702
======================
</TABLE>
5. Leases
The Company leases office space and computer software under non cancelable lease
agreements that contain renewal options and require the Company to pay operating
costs, including property taxes, insurance and maintenance. Rent expense for all
operating leases was $334,534, $401,023 and $363,916 in 1995, 1994 and 1993,
respectively.
Future minimum lease payments under non cancelable lease agreements are
approximately as follows:
<TABLE>
<S> <C>
1996 $286,000
1997 214,000
Thereafter --
--------
$500,000
========
</TABLE>
6. Licensing Arrangements
During 1995, MGI entered into a cooperative development and commercialization
agreement with Dainippon Pharmaceutical Co., Ltd., a Japanese pharmaceutical
company, whereby MGI granted Dainippon exclusive rights to its acylfulvenes in
Japan. Under this agreement, Dainippon is expected to make $12 million in
milestone payments during a precommercial phase and MGI will participate in the
commercial success of the drug product in Japan by supplying Dainippon with bulk
drug substance. The precommercial phase will conclude upon receipt of approval
to market the first acylfulvenes product in Japan and payment of the approval
milestone by Dainippon. The remainder of the milestone payments are scheduled to
be received over approximately five years, with nearly $3 million already paid
through December 31, 1995. In conjunction with the agreement, MGI issued 750,000
shares of common stock to Dainippon and received net proceeds of $2.8 million
from this issuance.
Also during 1995, MGI transferred certain non-core agricultural
technology to DEKALB Genetics Corporation. DEKALB made a one-time payment of $3
million to MGI for these rights. Separately, a non-recurring $1 million
milestone payment was received in 1995 from Chiron B.V. following approval of
Salagen(R) Tablets for marketing in the United Kingdom. A strategic alliance was
established with Chiron in 1992 for commercialization of Salagen(R) Tablets in
Europe.
During 1994, MGI licensed exclusive rights to commercialize Salagen(R)
Tablets in Japan to Kissei Pharmaceutical Co., Ltd., a Japanese pharmaceutical
company. Kissei is expected to make certain milestone payments, with the final
milestone payment due upon its filing for product approval in Japan. MGI will
participate in commercial success of the product through royalty payments based
on product sales in Japan. In conjunction with the license, MGI issued 217,054
shares of common stock to Kissei at a premium over market value. The issuance
premium of $1,166,667 was amortized evenly to licensing revenues through
December 31, 1995, with $777,778 earned and recognized in 1995. Total proceeds
of $3.5 million from the stock issuance were used to supplement funding of MGI's
clinical studies with Salagen(R) Tablets as a potential treatment for chronic
dry-mouth symptoms resulting from Sjogren's syndrome.
<PAGE>
7. Stockholders' Equity
Common Stock Purchase Rights
Each share of the Company's common stock has one Common Stock Purchase Right
("Right") attached. Each Right entitles shareholders to buy one-half of one
share of MGI common stock at an initial exercise price of $12 (subject to
adjustment). The Rights become exercisable only if certain change in ownership
control events occur and the Company does not redeem the Rights. The Rights
expire on February 2, 1998, if not previously redeemed or exercised.
Stock Incentive Plans
Under stock incentive plans, designated persons (including officers, directors,
and employees) have been or may be granted rights to acquire Company common
stock. These rights include stock options and restricted stock units. At
December 31, 1995, 1,367,282 shares remain available for grant.
Stock options become exercisable over varying periods and expire up to
ten years from date of grant. Options may be granted in the form of incentive
stock options or nonqualified stock options. The option price for incentive
stock options cannot be less than fair market value on the date of the grant.
The option price for nonqualified stock options may be set by the board of
directors. At December 31, 1995, options representing 747,029 shares were
exercisable.
Stock option activity in the three years ended December 31, 1995 is
summarized as follows:
<TABLE>
<CAPTION>
Number Average Price
of Shares Per Share
-------------------------
<S> <C> <C>
Outstanding at December 31, 1992 1,022,437 $ 6.13
---------
Granted 192,463 13.44
Exercised (208,647) 4.11
Canceled (11,175) 13.28
---------
Outstanding at December 31, 1993 995,078 7.89
---------
Granted 407,137 12.95
Exercised (151,883) 5.08
Canceled (63,090) 13.16
---------
Outstanding at December 31, 1994 1,187,242 9.70
---------
Granted 661,350 5.73
Exercised (16,847) 4.10
Canceled (210,692) 9.06
---------
Outstanding at December 31, 1995 1,621,053 8.23
=========
</TABLE>
Loans to officers were made for their exercises of options and payment of
associated tax obligations. The loans are full recourse, unsecured obligations.
At December 31, 1995, $528,859 of principal remains outstanding, of which
$429,500 is payable on or before March 31, 1997. The remainder is payable upon
demand. The portion required to exercise options is presented as "Notes
receivable from officers" within stockholders' equity and the remaining balance
is presented as "Other assets" in the accompanying balance sheets.
For restricted stock units, the fair market value of awards, as of the award
date, is recognized as compensation expense over an award's restricted period.
Compensation expense related to restricted stock units was $278,363 in 1993. No
expense was recognized in 1995 or 1994. At December 31, 1995, no restricted
stock units were outstanding.
Employee Stock Purchase Plan
Under the Company's employee stock purchase plan, substantially all employees
may purchase shares of common stock at the end of semiannual purchase periods at
a price equal to the lower of 85% of the stock's fair market value on the first
or last day of that period. Plan funding occurs throughout the purchase period
by pre-elected payroll deductions of up to 15% of regular pay. Since purchases
are employee funded, no compensation expense results from the plan. Shares
issued under the plan were 31,746, 26,295 and 32,666 at average prices of $3.19,
$6.74 and $7.70 per share in 1995, 1994 and 1993, respectively. At December 31,
1995, 100,728 shares remain reserved for future issuance under the plan.
<PAGE>
Retirement Savings Plan
The Company's retirement savings plan conforms to Section 401(k) of the Internal
Revenue Code and participation is available to substantially all employees.
Under the savings plan, participants may contribute a percentage of their
eligible compensation for investment in Company common stock or other investment
vehicles. The Company matches a portion of employees' contributions and may also
make discretionary contributions ratably to all eligible employees. Company
contributions are made in the form of Company common stock and become fully
vested when an employee attains five years of service. Contribution expense was
$185,502, $140,070 and $164,123 in 1995, 1994 and 1993, respectively. The
Company had 396,171 shares reserved for future issuance under the savings plan
at December 31, 1995.
Preferred Stock
At December 31, 1995, 10,000,000 shares of preferred stock remain issuable.
Issuance is subject to Board of Directors' action.
8. Money Purchase Retirement Plan
The Company sponsors a money purchase retirement plan covering substantially all
employees. Under the plan, the Company contributes a percentage of participating
employees' eligible compensation. Company contributions resulted in expense of
$139,717, $126,095 and $175,826 in 1995, 1994 and 1993, respectively.
9. Income Taxes
The Company incurred losses for both book and tax purposes in each of the three
years in the period ended December 31, 1995, and accordingly, no income taxes
were provided. Effective tax rates differ from statutory federal income tax
rates in the years ended December 31, 1995, 1994 and 1993 as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------
<S> <C> <C> <C>
Statutory federal income tax rate (35.0)% (35.0)% (35.0)%
Effect on deferred tax asset
of federal tax rate increase -- -- (5.1)
Valuation allowance increase 44.3 40.7 46.4
Research activities credit (7.9) (2.5) (3.8)
State income taxes, net of federal
benefit (2.5) (2.5) (2.5)
Other 1.1 (0.7) --
------------------------
0.0 % 0.0 % 0.0 %
========================
</TABLE>
<PAGE>
Deferred taxes as of December 31, 1995 and 1994 consist of the following:
<TABLE>
<CAPTION>
1995 1994
----------------------------
Deferred Tax Assets:
<S> <C> <C>
Receivable allowances $ 121,631 $ 130,433
Rent expense -- 29,980
Inventory allowances 68,047 5,086
Miscellaneous accrued expenses 396,936 65,011
Net operating loss carryforward 26,481,668 25,881,973
Research credit carryforward 2,097,143 1,890,341
Alternative minimum tax credit
carryforward 48,295 48,295
---------------------------
29,213,720 28,051,119
Less valuation allowance (29,192,132) (28,033,647)
---------------------------
$ 21,588 $ 17,472
===========================
Deferred Tax Liabilities:
Tax depreciation greater than book $ 21,588 $ 17,472
</TABLE>
At December 31, 1995, the Company had net operating loss carryforwards of
approximately $71,000,000 for federal income tax purposes, which begin to expire
in 1996. Additionally, the Company had research credit carryforwards of
approximately $2,097,000, which begin to expire in 1996. The net change in the
valuation allowance for the years ended December 31, 1995 and 1994 was an
increase of $1,158,485 and $3,941,707, respectively.
10. Quarterly Financial Data (Unaudited)
Following is a summary of quarterly financial results in the years ended
December 31:
<TABLE>
<CAPTION>
First Second Third Fourth
--------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
1995
Revenues $ 2,511 $ 1,954 $ 1,707 $ 7,111
Net income (loss) (1,267) (1,553) (1,791) 1,997
Income (loss) per share $ (0.11) $ (0.12) $ (0.14) $ 0.16
Weighted average shares 11,951 12,600 12,731 12,742
1994
Revenues $ 692 $ 3,269 $ 1,015 $ 1,820
Net loss (2,744) (937) (3,288) (2,728)
Loss per share $ (0.24) $ (0.08) $ (0.28) $ (0.23)
Weighted average shares 11,611 11,692 11,910 11,918
</TABLE>
Income (loss) per common share is computed based upon the weighted
average number of shares outstanding during each period. Common stock
equivalents are not included as their effect is antidilutive or immaterial.
<PAGE>
independent
auditors' report
The Board of Directors and Stockholders
MGI PHARMA, INC.:
We have audited the accompanying consolidated balance sheets of MGI PHARMA, INC.
and subsidiary as of December 31, 1995 and 1994, and the related consolidated
statements of operations, cash flows and stockholders' equity for each of the
years in the three-year period ended December 31, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of MGI PHARMA, INC. and
subsidiary as of December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the years in the three-year period ended
December 31, 1995 in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 9, 1996
<PAGE>
selected consolidated
financial data
MGI PHARMA, INC.
<TABLE>
<CAPTION>
Consolidated Statements of Operations Data:
(in thousands, except per share amounts) Year Ended December 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues $13,283 $ 6,796 $ 3,778 $ 4,693 $ 8,657
Total costs and expenses 15,897 16,493 15,501 13,940 17,372
Net loss $(2,614) $(9,697) $(11,723) $(9,247) $(8,715)
Net loss per common share (a) $(0.21) $(0.82) $(1.03) $(0.83) $(0.94)
Weighted average number of
common shares outstanding 12,509 11,784 11,415 11,210 9,454
Consolidated Balance Sheets Data:
(in thousands) December 31,
---------------------------------------------------
1995 1994 1993 1992 1991
---------------------------------------------------
Cash and cash equivalents and investments $17,979 $16,637 $ 22,938 $32,216 $38,569
Total assets 20,351 20,082 25,638 35,956 44,551
Total liabilities 3,619 4,044 2,893 2,912 2,705
Preferred stock (b) -- -- -- -- 3,696
Common stockholders' equity (c) 16,732 16,038 22,745 33,044 38,150
</TABLE>
(a) Adjusted for dividends on redeemable cumulative preferred stock through
1992.
(b) Effective January 10, 1992, the Company exercised its right to convert all
of its then outstanding preferred stock into 414,117 shares of Company
common stock.
(c) No common stock cash dividends have been declared or paid by the Company.
Market Price and Related Matters
The following table sets forth, for the calendar periods indicated, the high and
low last daily sales prices as reported on the NASDAQ National Market. Prices
represent transactions between dealers and do not reflect retail markups,
markdowns or commissions, and may not necessarily represent actual transactions.
As of February 22, 1996, MGI PHARMA had 1,166 shareholders of record of its
common stock and had 12,784,411 shares of its common stock outstanding. The
Company has not paid cash dividends on its common stock and has no present
intention of paying cash dividends on its common stock.
<TABLE>
<CAPTION>
Stock Prices
High Low
-----------------
<S> <C> <C>
1995
First Quarter $ 6 3/4 $ 3 7/8
Second Quarter 4 3/4 3 45/64
Third Quarter 6 3/8 3 5/8
Fourth Quarter 6 1/2 4 3/8
1994
First Quarter $14 3/4 $ 10 1/2
Second Quarter 12 1/2 9 3/4
Third Quarter 11 1/4 7 1/4
Fourth Quarter 8 1/4 5 1/4
</TABLE>
<PAGE>
corporate
information
Directors
Frederick W. Armstrong
Retired Vice President
American Cyanamid Company
Charles E. Austin
Retired Corporate Executive, Board Member and
advisor to several private and public companies
Hugh E. Miller
Retired Vice Chairman and Director
ICI Americas, Inc.
Robert W. Powell, Jr.
Retired Vice President and Treasurer
Martin Marietta Corporation
Lee J. Schroeder
President and Director
Lee Schroeder & Associates, Inc.
Kenneth F. Tempero, M.D., Ph.D.
Chairman and Chief Executive Officer
MGI PHARMA, INC.
Executive Officers
Kenneth F. Tempero, M.D., Ph.D.
Chairman and Chief Executive Officer
James V. Adam
Vice President, Chief Financial Officer
Lori-jean Gille
Vice President, General Counsel and Secretary
Jon C. Lee
Vice President, Sales and Marketing
Charles C. Muscoplat, Ph.D.
Executive Vice President
Rajesh C. Shrotriya, M.D.
Vice President, Chief Medical Officer
<PAGE>
Auditors
KPMG Peat Marwick LLP
Minneapolis, Minnesota
Outside Legal Counsel
Dorsey & Whitney LLP
Minneapolis, Minnesota
Transfer Agent and Registrar
Norwest Bank Minnesota, N.A.
P.O. Box 738
South Saint Paul, Minnesota 55075-0738
800-468-9716
Local: 450-4064
SEC Form 10-K
A copy of the Company's annual report to the Securities and Exchange Commission
on Form 10-K is available without charge upon written request to:
Investor Relations
MGI PHARMA, INC.
Suite 300E, Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343-9667
Annual Meeting
The annual meeting of shareholders will be held on May 14, 1996 at 3:30 p.m. at
the Minneapolis Marriott Southwest, 5801 Opus Parkway, Minnetonka, Minnesota
55343.
Inquiries
Shareholders and prospective investors are welcome to call or write the Company
with questions or requests for additional information. Inquiries should be
directed to Investor Relations at MGI PHARMA headquarters 612-935-7335.
Concept and Design: Yanovick Coburn Inc, Minneapolis, MN USA
Printing: Watt/Peterson, Inc., Plymouth, MN USA
<PAGE>
MGI PHARMA acquires and develops specialty pharmaceuticals that address
currently unmet medical needs or that significantly improve the treatment of
serious medical conditions.
[LOGO] MGI PHARMA, INC.
OF Suite 300E, Opus Center
MGI 9900 Bren Road East
APPEARS Minnetonka, MN 55343-9667
HERE] 612-935-7335
<PAGE>
Exhibit 23
Independent Auditors' Consent
The Board of Directors and Stockholders
MGI PHARMA, INC.:
We consent to incorporation by reference in the Registration Statements (Nos. 2-
80845, 2-92340, 2-94654, 33-13785, 33-23098, 33-23099, 33-37254, 33-42341, 33-
65026, 33-65032 and 33-79024) on Form S-8 of MGI PHARMA, INC. of our reports
dated February 9, 1996, relating to the consolidated balance sheets of MGI
PHARMA, INC. and subsidiary as of December 31, 1995 and 1994, and the related
consolidated statements of operations, cash flows, stockholders' equity, and the
related financial statement schedule for each of the years in the three-year
period ended December 31, 1995, which reports are included in or incorporated by
reference in the annual report on Form 10-K of MGI PHARMA, INC.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
March 22, 1996
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints James V. Adam and Lori-jean Gille,
and each of them, his true and lawful attorneys-in-fact and agents, each acting
alone, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign an Annual Report on
Form 10-K of MGI PHARMA, INC., and any and all amendments thereto, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, each acting alone, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ K. F. Tempero Chairman of the Board, March 12, 1996
- ----------------------------- Director and Chief Executive
Kenneth F. Tempero Officer (Principal Executive
Officer)
/s/ James V. Adam Vice President, Chief March 12, 1996
- ----------------------------- Financial Officer (Principal
James V. Adam Financial and Accounting
Officer)
/s/ F. W. Armstrong Director March 12, 1996
- -----------------------------
Frederick W. Armstrong
/s/ C.E. Austin Director March 12, 1996
- -----------------------------
Charles E. Austin
/s/ Hugh E. Miller Director March 12, 1996
- -----------------------------
Hugh E. Miller
/s/ Robert W. Powell, Jr. Director March 12, 1996
- -----------------------------
Robert W. Powell, Jr.
/s/ L. J. Schroeder Director March 12, 1996
- -----------------------------
Lee J. Schroeder
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING CONSOLIDATED BALANCE SHEET OF MGI PHARMA, INC. AS OF DECEMBER 31,
-----------
1995, AND THE RELATED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED
- ---- ----------
DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
- -----------------
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 9,075,569
<SECURITIES> 8,903,362
<RECEIVABLES> 566,366
<ALLOWANCES> 324,349
<INVENTORY> 1,003,278
<CURRENT-ASSETS> 19,591,992
<PP&E> 243,197
<DEPRECIATION> 681,467
<TOTAL-ASSETS> 20,351,180
<CURRENT-LIABILITIES> 3,618,906
<BONDS> 0
0
0
<COMMON> 16,732,274
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 20,351,180
<SALES> 4,607,231
<TOTAL-REVENUES> 13,283,110
<CGS> 771,912
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,266,597
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,614,478)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,614,478)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,614,478)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
</TABLE>
