<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
MGI PHARMA, INC.
(Name of Registrant as Specified in its Charter)
------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
---------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
[LOGO OF MGI PHARMA, INC.]
MGI PHARMA, INC.
Suite 300E, Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 12, 1998
TO THE SHAREHOLDERS OF MGI PHARMA, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of MGI
PHARMA, INC. ("MGI" or the "Company") will be held on Tuesday, May 12, 1998, at
the Minneapolis Marriott Southwest, 5801 Opus Parkway, Minnetonka, Minnesota, at
3:30 p.m., Central time, for the following purposes:
1. To elect a Board of seven directors to serve for the ensuing year and
until their successors are elected;
2. To approve amendments to the Company's Amended and Restated Employee
Stock Purchase Plan;
3. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the Company for the fiscal year ending December 31, 1998;
and
4. To consider and act upon any other matters that may properly come
before the meeting or any adjournment thereof.
Only holders of record of MGI Common Stock at the close of business on
March 16, 1998 will be entitled to receive notice of and to vote at the meeting
or any adjournment thereof.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO
BE PERSONALLY PRESENT AT THE MEETING, HOWEVER, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU LATER
DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS EXERCISED.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Lori-jean Gille
Lori-jean Gille
Secretary
April 7, 1998
<PAGE>
[LOGO OF MGI PHARMA, INC.]
MGI PHARMA, INC.
Suite 300E, Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 12, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of MGI PHARMA, INC. ("MGI" or the "Company")
for use at the annual meeting of shareholders (the "Annual Meeting") to be held
on Tuesday, May 12, 1998, at the Minneapolis Marriott Southwest, 5801 Opus
Parkway, Minnetonka, Minnesota, at 3:30 p.m., Central time, and at any
adjournment thereof, for the purposes set forth in the Notice of Annual Meeting
of Shareholders. This Proxy Statement and the form of proxy enclosed are being
mailed to shareholders commencing on or about April 7, 1998. A copy of the
Company's Annual Report to Shareholders for the year ended December 31, 1997 is
being furnished to each shareholder with this Proxy Statement.
All holders of the Company's Common Stock whose names appear of record on
the Company's books at the close of business on March 16, 1998 will be entitled
to vote at the Annual Meeting. As of that date, a total of 14,215,380 shares of
such Common Stock were outstanding, each share being entitled to one vote. There
is no cumulative voting. The affirmative vote of a majority of the shares of
Common Stock present and entitled to vote at the Annual Meeting is necessary to
elect the nominees for director named in the Proxy Statement and to approve
amendments to the Amended and Restated Employee Stock Purchase Plan. Shares of
Common Stock represented by proxies in the form solicited will be voted in the
manner directed by a shareholder. If no direction is given, the proxy will be
voted for the election of the nominees for director named in this Proxy
Statement, for the approval of the amendments to the Amended and Restated
Employee Stock Purchase Plan and for the ratification of the appointment of KPMG
Peat Marwick LLP ("KPMG Peat Marwick") as the Company's independent auditors. If
a shareholder abstains (or indicates a "withhold vote for" as to directors) from
voting as to any matter, then the shares held by such shareholder shall be
deemed present at the Annual Meeting for purposes of determining a quorum and
for purposes of calculating the vote with respect to such matter, but shall not
be deemed to have
<PAGE>
been voted in favor of such matter. If a broker returns a "non-vote" proxy,
indicating a lack of authority to vote on such matter, then the shares covered
by such non-vote shall be deemed present at the Annual Meeting for purposes of
determining a quorum but shall not be deemed to be represented at the Annual
Meeting for purposes of calculating the vote with respect to such matter.
So far as the management of the Company is aware, no matters other than
those described in this Proxy Statement will be acted upon at the Annual
Meeting. In the event that any other matters properly come before the Annual
Meeting calling for a vote of shareholders, the persons named as proxies in the
enclosed form of proxy will vote in accordance with their best judgment on such
other matters. A proxy may be revoked at any time before being exercised, by
delivery to the Secretary of the Company of a written notice of termination of
the proxies' authority or a duly executed proxy bearing a later date.
Expenses in connection with the solicitation of proxies will be paid by the
Company. Proxies are being solicited primarily by mail, although employees of
the Company (including officers) who will receive no extra compensation for
their services may solicit proxies by telephone, telegraph, facsimile
transmission or in person. In addition, the Company has retained Georgeson &
Company, Inc. to assist in the solicitation of proxies, and has agreed to pay
such firm approximately $6,500, plus reasonable expenses incurred, for its
services.
ELECTION OF DIRECTORS
The Company's Restated Articles of Incorporation provide that the Board of
Directors shall consist of no fewer than three members and require that a
majority of the members shall be persons who are not employed by, or rendering
consulting or professional services for compensation to, the Company, or any
corporation controlled by, controlling or under common control with the Company
(or related to or directly or indirectly controlled by any of the foregoing).
For such purposes, "control" is defined as direct or indirect beneficial
ownership of more than 25% of a corporation's voting stock.
Seven directors have been nominated for election to the Company's Board of
Directors at the Annual Meeting to hold office until the next annual meeting of
shareholders or until their successors are duly elected and qualified (except in
the case of earlier death, resignation or removal). Frederick W. Armstrong, who
has been a director of the Company since March 1988 and Charles E. Austin, who
has been a director of the Company since March 1981, have each decided to retire
from the Board at the end of his current term. In addition, David E. Collins,
who has been a director of the Company since November 1996, has decided not to
stand for re-election. The Board of Directors has nominated Andrew J. Ferrara
and Michael E. Hanson to fill two of the vacancies created by these departures.
The Board has
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elected not to fill the third vacancy at this time, which will reduce the size
of the Board from eight to seven.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES
NAMED BELOW. The affirmative vote of a majority of the shares of Common Stock
present and entitled to vote at the Annual Meeting is necessary to elect the
nominees for director named below. It is intended that the persons named as
proxies in the enclosed form of proxy will vote the proxies received by them for
the election as directors of the nominees named below. Except for Andrew J.
Ferrara and Michael E. Hanson, each of the nominees is currently serving on the
Board of Directors. Each nominee has indicated a willingness to serve, but in
case any nominee is not a candidate at the Annual Meeting, for reasons not now
known to the Company, the persons named as proxies in the enclosed form of proxy
may vote for a substitute nominee in their discretion. Information regarding the
nominees is set forth below:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS
NAME AGE DIRECTOR SINCE EXPERIENCE FOR PAST FIVE YEARS
- ------------------------- ----- -------------- ---------------------------------------------------------
<S> <C> <C> <C>
Charles N. Blitzer 55 April 1996 President and Chief Executive Officer of MGI;
prior to joining the Company in April 1996, President and
Chief Executive Officer of Oncologix, Inc.
(pharmaceuticals) since July 1992, and a variety of
management positions with Marion Merrell Dow
Pharmaceuticals, Inc. and Marion Laboratories, Inc.
(pharmaceuticals) since 1977
Andrew J. Ferrara 58 Nominee Managing Partner, BioLicensing Consultants, L.L.C.
(biotechnology consulting company), President and Chief
Executive Officer, Boston Healthcare (pharmaceutical and
biotechnology consulting firm); prior to founding Boston
Healthcare in 1993 and Boston BioLicensing, L.L.C. in
1997, founded Molecular Simulations, Inc. (f/k/a Polygen
Corporation) (computer software company) in 1984.
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
Joseph S. Frelinghuysen 58 November 1997 President of J. S. Frelinghuysen & Co. (private
investment banking advisory firm); prior to founding J.
S. Frelinghuysen & Co. in 1989, Managing Director in
investment banking department at The First Boston
Corporation (investment bank) (1)
Michael E. Hanson 50 Nominee President of Internal Medicine Business Unit, Eli Lilly
and Company (life sciences) since July 1994; has held a
variety of management and marketing positions at Eli
Lilly & Company since 1973.
Hugh E. Miller 62 October 1992 Retired corporate executive; prior to retirement in
December 1990, Vice Chairman and Director of ICI Americas
Inc. (chemicals, pharmaceuticals, agricultural, consumer
and specialty products) (2)
Timothy G. Rothwell 47 November 1996 Executive Vice President, President of Pharmaceutical
Operations, Pharmacia & Upjohn (pharmaceuticals); prior
to joining Pharmacia & Upjohn in January 1998, President
of Rhone-Poulenc Rorer Inc. (pharmaceuticals) and Chief
Executive Officer and President of the U.S.
pharmaceuticals business of Sandoz Pharmaceuticals
(pharmaceuticals)
Lee J. Schroeder 68 May 1989 President and Director, Lee Schroeder & Associates, Inc.
(pharmaceutical industry consultants); prior to
retirement in April 1985, Executive Vice President of
Sandoz, Inc. (pharmaceuticals) (3)
</TABLE>
- ----------------------
(1) Mr. Frelinghuysen was appointed to the Board of Directors in November 1997.
(2) Mr. Miller is also a director of Wilmington Trust Co., Inc.
(3) Mr. Schroeder is also a director of Ascent Pediatrics, Inc., Harris
Laboratories, Interneuron Pharmaceuticals, Inc. and Celgene Corporation.
During 1997, the Board of Directors had an audit committee consisting of
Messrs. Miller, Robert W. Powell, Jr. (through May 1997) and, beginning in
November 1997, Mr. Frelinghuysen, a compensation committee consisting of Messrs.
Armstrong, Austin and Schroeder and a nominating committee consisting of Messrs.
Miller, Schroeder and Blitzer. At its meeting to be held immediately after
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<PAGE>
the Annual Meeting, the Board of Directors will appoint two of its members to
the compensation committee to replace Mssrs. Armstrong and Austin, who will be
retiring from the Board at that meeting. The audit committee reviews and makes
recommendations to the Board of Directors with respect to designated financial
and accounting matters. The compensation committee reviews and makes certain
determinations with respect to designated matters concerning remuneration of
employees and officers. The nominating committee considers and makes
recommendations to the Board with respect to the number and qualifications of
the members of the Board of Directors and the persons to be nominated for
election to the Board of Directors. During 1997, the audit committee held two
meetings and the compensation committee held three meetings. The nominating
committee carries out its duties without holding any formal meetings. In
evaluating persons to be nominated for election or appointment to the Board of
Directors, the members of the nominating committee meet on an informal basis to
identify and present such persons for consideration by the Board of Directors.
Shareholder recommendations of potential nominees to the Board of Directors are
welcomed at any time and should be made in writing, accompanied by pertinent
information regarding nominee background and experience, to the Secretary of the
Company.
During 1997, the Board of Directors held nine meetings. Each incumbent
director attended at least 75% of the total number of meetings of the Board of
Directors and committees on which he served that were held during the period he
was a member of the Board of Directors or such committees, except that Mr.
Rothwell attended one meeting of the Board of Directors in 1997. The Company's
Board of Directors and the committees thereof also act from time to time by
written action in lieu of meetings.
Compensation payable to nonemployee directors for service on the Board of
Directors and committees thereof for the next term of office is established each
year at the meeting of the Board of Directors preceding the Company's annual
meeting of shareholders. Each nonemployee director currently receives $1,000 for
each meeting of the Board of Directors that he attends either in person or
telephonically. Under the Company's 1993 Nonemployee Director Stock Option Plan
(the "Director Plan"), each nonemployee director automatically receives an
option to purchase 7,500 shares of Common Stock on the day following his
reelection to the Board of Directors. In addition, each new nonemployee director
receives an option to purchase 10,000 shares of Common Stock upon such
director's initial election or appointment to the Board of Directors. The
exercise price of all such options granted under the Director Plan is the fair
market value of the Common Stock on the date of grant. Accordingly, Messrs.
Armstrong, Austin, Collins, Miller, Rothwell and Schroeder each received an
option to purchase 7,500 shares of Common Stock at an exercise price of $3.625
in May 1997, and Mr. Frelinghuysen received an option to purchase 4,944 shares
of Common Stock at an exercise price of $4.5775 in November
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<PAGE>
1997 and an option to purchase 5,056 shares of Common Stock at an exercise price
of $3.9375 in January 1998.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company, who serve at the pleasure of the
Board of Directors, are as follows:
NAME AGE POSITION
- -------------------- --- ----------------------------------------
Charles N. Blitzer 56 President and Chief Executive Officer of
MGI; prior to joining the Company in
April 1996, President and Chief
Executive Officer of Oncologix, Inc.
(pharmaceuticals) since July 1992, and a
variety of management positions with
Marion Merrell Dow Pharmaceuticals, Inc.
and Marion Laboratories, Inc.
(pharmaceuticals) since 1977
James V. Adam 49 Chief Operating Officer since November
1997; formerly Vice President, Chief
Financial Officer since March 1988
Lori-jean Gille 46 Senior Vice President since November
1997; Secretary and an executive officer
of the Company since July 1995; General
Counsel since January 1992
William C. Brown (1) 42 Vice President, Finance since November
1997; formerly Director, Finance and
Planning since 1996 and Controller from
1986 to 1996.
- ----------------------
(1) Mr. Brown is considered an executive officer of the Company under the rules
of the Securities and Exchange Commission, but is not an executive officer
for purposes of the Company's compensation programs.
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<PAGE>
EXECUTIVE COMPENSATION
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Overview
The Board of Directors has delegated to the compensation committee (the
"Committee") the authority and responsibility to establish and make certain
decisions with respect to the compensation of the Company's executive officers,
as well as various aspects of other compensation and fringe benefit matters
applicable to all of the Company's employees, including executive officers. In
addition, the Committee administers the Company's stock option and stock based
incentive programs. The Committee is composed entirely of independent, outside
directors of the Company.
Through its executive compensation policies, the Company seeks to attract
and retain highly qualified executives who will contribute positively to the
Company's continued progress. To achieve these goals, the Company emphasizes
compensation arrangements that are tied to Company performance and which provide
key employees the opportunity to acquire a significant ownership interest in the
Company primarily through stock options and stock purchases. The Committee also
believes that the availability of certain benefits is important to its goal of
retaining high quality leadership and motivating executive performance
consistent with shareholder interest. Accordingly, the Company makes available a
range of benefit programs to its employees (including its executive officers),
including life and disability insurance, a 401(k) savings plan, a money purchase
retirement plan, an employee stock purchase plan and other benefit programs.
Process
In preparation for its annual compensation decisions, the Committee reviews
the progress the executive officers have made in leading the Company towards
both short- and long-term goals. In order to match the executive officers' goals
with shareholder goals, the Committee's general policy has been to hold base
salary adjustments to increments that reflect changes in the cost-of-living
(once the officer has reached a reasonable level of compensation as determined
by the Committee), to reward past performance with cash bonuses and to use stock
option grants as a means of motivating executive officers to perform at the
highest possible level in the future. The Committee intends to make the total
compensation package for executive officers competitive with the marketplace,
with emphasis on compensation in the form of equity ownership, the value of
which is contingent on the Company's longer-term market performance. For this
purpose, the Committee from time to time compares the Company with a
self-selected group of
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<PAGE>
pharmaceutical companies with similar market capitalizations, business
characteristics and strategies.
In making compensation decisions regarding the Company's executive
officers, the Committee first meets with the Company's Chief Executive Officer,
who presents his recommendations with respect to compensation for the other
executive officers. The Committee, with the Chief Executive Officer not present,
then reviews his recommendations related to the other executive officers and
makes its own independent determination with respect to each executive officer,
as well as with respect to the Chief Executive Officer.
Although Mr. Brown, the Company's Vice President, Finance, is considered an
executive officer of the Company under the rules of the Securities and Exchange
Commission, the Company has not classified Mr. Brown as an executive officer for
the purpose of the Company's compensation programs. As a result, decisions
regarding Mr. Brown's compensation are not made by the Compensation Committee
but by the Company's executive officers as a group.
Executive Compensation Program
The components of the Company's executive compensation program which are
subject to the discretion of the Committee on an individual basis include (a)
base salaries, (b) stock incentive compensation and (c) performance-based,
incentive bonuses. The Committee makes determinations with respect to these
components based on a subjective evaluation of each officer, after consideration
of both Company and individual performance objectives.
At its meeting in January 1997, the Committee set 1997 base salaries for
and made stock option grants to the executive officers. Mr. Adam was awarded a
base salary increase of $8,000 to $157,000, Ms. Gille was awarded an increase of
$7,648 to $145,000, Mr. Lee was awarded an increase of $8,600 to $176,000 and
Dr. Muscoplat was awarded an increase of $8,940 to $197,000. The Committee
intended these increases to approximate the general increase in the
cost-of-living during 1996.
During 1997, Mr. Adam, Ms. Gille, Mr. Lee and Dr. Muscoplat were each
awarded options to purchase 22,000 shares of Company Common Stock, which
represented a decrease of 22,000 shares from 1996 in the case of Mr. Adam and
Dr. Muscoplat, a decrease of 42,000 shares from 1996 in the case of Ms. Gille
and a decrease of 11,000 shares from 1996 in the case of Mr. Lee. These stock
option awards represent a decrease from 1996 because Mr. Adam, Ms. Gille, Mr.
Lee and Dr. Muscoplat were each granted a double award of stock options in 1996
in order to induce them to remain with the Company during the transitional
period after the appointment of Mr. Blitzer as the Company's new President and
Chief Executive Officer. In addition, Ms. Gille was granted an option to
purchase 20,000 shares in
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<PAGE>
1996 in recognition of her promotion to executive officer status. The options
vest over a four-year period and are exercisable at the fair market value of the
Common Stock on the date of grant, as set forth in the table entitled "Option
Grants During Year Ended December31, 1997," which follows this report. The size
of the option grants was based on the Committee's subjective judgment that these
amounts were appropriate to retain these highly qualified officers and to
provide an incentive for continued high quality performance. Because the total
number of stock options approved in January 1997 to be granted to the executive
officers would have exceeded the remaining number of shares of Company Common
Stock authorized to be issued under the Company's 1994 Stock Incentive Plan, the
Committee granted the stock options to Mr. Adam, Ms. Gille, Mr. Lee and Dr.
Muscoplat in two rounds. The Committee granted the first round of options in
January 1997 under the 1994 Stock Incentive Plan and the second round in July
1997 under the Company's 1997 Stock Incentive Plan. The shareholders of the
Company approved the 1997 Stock Incentive Plan in May 1997.
Cash incentive bonuses for 1997 were awarded in January 1998. The bonus
compensation program for executive officers in 1997 was a continuation of the
program adopted by the Committee in 1993. Under the bonus program, base cash
compensation coupled with a 30% cash bonus was considered by the Committee to be
a fair payment for good performance by the Company's executive officers, other
than the Chief Executive Officer. This determination was based primarily on
compensation data from comparable companies and the Committee's conclusion that
a 30% bonus would place the compensation of the executive officers on a par with
the middle tier of such comparable companies. At its meeting in January 1998,
the Committee awarded cash bonuses to the executive officers, other than the
Chief Executive Officer, Mr. Brown and Dr. Muscoplat, for 1997 in the range of
22% to 25% of 1997 base salaries. In awarding the 1997 cash bonuses, the
Committee also considered the individual accomplishments of the executive
officers and of the operating groups reporting to each executive officer during
the transition in management and focus of the Company during 1997. Dr.
Muscoplat's bonus was approximately 10% of the reduced base salary he received
due to his transition to a new, part-time position with the Company.
In January 1997, Mr. Brown was awarded a salary increase of $6,360 to
$112,360, representing an increase of 6%, which was intended to approximate the
general increase in the cost of living in 1996. During 1997, Mr. Brown was
awarded options to purchase an aggregate of 10,000 shares of Company Common
Stock. The options vest over a four-year period and are exercisable at the fair
market value of the Common Stock on the date of grant, as set forth in the table
entitled "Option Grants During Year Ended December31, 1997," which follows this
report. The sizes of the option grants to Mr. Brown were based on the Company's
stock incentive program for an employee at Mr. Brown's grade level. The initial
award of 8,750 stock options to Mr. Brown was granted in two rounds. The first
round of options
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was granted in January 1997 under the 1994 Stock Incentive Plan, and the second
round was granted in July 1997 under the Company's 1997 Stock Incentive Plan. In
addition, Mr. Brown was awarded options to purchase 1,250 shares of Company
Common Stock upon his promotion to Vice President, Finance in November 1997. In
January 1998, Mr. Brown was awarded a cash bonus equal to 12.5% of base salary,
the amount of which was based on the Company's guidelines for an employee at Mr.
Brown's grade level and on Mr. Brown's individual accomplishments during 1997,
including his promotion to Vice President, Finance.
Compensation of the Chief Executive Officer
In 1997 Mr. Blitzer received a base salary increase of $19,500 to $300,000,
and an option to purchase 50,000 shares of the Company's Common Stock. Mr.
Blitzer also received an option to purchase 75,000 shares of the Company's
Common Stock under the terms of Mr. Blitzer's employment agreement with the
Company. The increase in his base salary was intended to approximate the
increase in the cost of living in 1996, plus a base salary adjustment based on
market conditions. The size of the option grant was based on the Committee's
subjective judgment that this amount was appropriate to retain Mr. Blitzer and
to provide an incentive for continued high performance. This option vests over a
four year period and is exercisable at a price equal to the fair market value of
Company Common Stock on the date of grant. The Committee granted the stock
options to Mr. Blitzer in two rounds. The Committee granted the first round,
which included the option granted in connection with Mr. Blitzer's employment
agreement, in January 1997 under the 1994 Stock Incentive Plan and the second
round in July 1997 under the 1997 Stock Incentive Plan, which had been approved
by the shareholders of the Company in May 1997.
In January 1998, the Committee awarded Mr. Blitzer a cash bonus for 1997 of
$100,000 or 33% of his 1997 base salary. This represented a continuation of the
bonus compensation program adopted by the Committee in 1993, with a combination
of 1997 base salary and a 45% bonus considered to be a fair payment for good
performance by the Chief Executive Officer. In awarding Mr. Blitzer's 1997 cash
bonus, the Committee considered the filing of the supplemental New Drug
Application for Salagen(R)Tablets in February 1997 and the continued strong
growth of Salagen(R)Tablet sales, degree of success made in the clinical trials
for MGI 114 and the success in making additions to the Company's pipeline of
products in 1997.
Section 162(m) of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally limits the corporate deduction for compensation paid to
executive officers named in this Proxy Statement to one million dollars, unless
the compensation is performance-based. The Committee has considered the
potential
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long-term impact of this new tax code provision on the Company and has concluded
that it is in the best interests of the Company and its shareholders to attempt
to qualify the Company's long-term incentives as performance-based compensation
within the meaning of the Code and thereby preserve the full deductibility of
long-term incentive payments to the extent they might ever be impacted by this
legislation. The Company has included provisions in its 1994 Stock Incentive
Plan and the 1997 Stock Incentive Plan intended to preserve the full
deductibility of certain performance-based compensation under the Code.
FREDERICK W. ARMSTRONG,
CHARLES E. AUSTIN and
LEE J. SCHROEDER,
The Members of the Compensation Committee
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<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation awarded to
or earned by the Chief Executive Officer and the other named executive officers
of the Company.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------- ------------
AWARDS
------------
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION (1)
- ------------------------- ------ ---------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
Charles N. Blitzer (2) 1997 $300,000 $100,000 125,000 $ 41,762
President and 1996 192,159 200,000(3) 150,000 29,951
Chief Executive Officer
James V. Adam 1997 $157,000 $ 35,000 22,000 $ 23,216
Chief Operating Officer 1996 149,000 45,000 44,000 27,221
1995 144,000 27,500 22,000 21,093
Lori-jean Gille (4) 1997 $145,000 $ 33,000 22,000 $ 20,101
Senior Vice President and 1996 137,352 34,000 64,000 18,806
General Counsel 1995 134,352 22,500 11,500 12,389
William C. Brown (5) 1997 $112,360 $ 14,000 10,000 $ 17,730
Vice President, Finance
Jon C. Lee (6) 1997 $176,000 $ 45,000 22,000 $ 54,037
Vice President, 1996 167,400 42,000 33,000 48,560
Sales and Marketing 1995 79,063 12,500 45,000 35,526
Charles C. Muscoplat (7) 1997 $184,083 $ 18,000 22,000 $ 27,927
Vice President, Medical 1996 181,526 56,000 44,000 29,583
Affairs 1995 175,560 27,500 22,000 22,354
</TABLE>
- ----------------------
(1) These amounts represent the Company's contributions to the Company's
Retirement Savings Plan, Money Purchase Retirement Plan and split dollar
insurance plan.
Company contributions under the Retirement Savings Plan are made in the
form of MGI Common Stock. The amounts included under this column
attributable to Company contributions to the Retirement Savings Plan
represent the fair market value of MGI Common Stock on the date of the
Company's contribution. For 1997, Company contributions were as follows:
Mr. Blitzer, $4,800, Mr. Adam, $9,600, Ms. Gille, $9,600, Mr. Brown, $7,492
, Mr. Lee, $9,600 and Dr. Muscoplat, $9,600.
Company contributions under the Money Purchase Retirement Plan are made
annually following the end of each calendar year. For 1997, Company
contributions were as follows: Mr. Blitzer $8,911, Mr. Adam, $8,911, Ms.
Gille, $8,911, Mr. Brown, $6,451, Mr. Lee, $8,911 and Dr. Muscoplat,
$8,911.
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The Company pays a portion of the premium on the split dollar life
insurance plan and proceeds payable under or the cash surrender value of
such plan are first payable to the Company up to the amount of premiums
paid by the Company. For 1997, Company payments were as follows: Mr.Blitzer
$28,051, Mr. Adam, $4,705, Ms. Gille, $1,590, Mr. Brown, $3,787 , Mr. Lee,
$35,526 and Dr. Muscoplat, $9,416.
(2) Mr. Blitzer joined the Company as President and Chief Executive Officer in
April 1996.
(3) Bonuses awarded to Mr. Blitzer included a $75,000 signing bonus and
$125,000 performance bonus pursuant to the Company's executive compensation
program discussed above.
(4) Ms. Gille was named an executive officer of the Company in July 1995.
(5) Mr. Brown was named Vice President, Finance of the Company in November
1997.
(6) Mr. Lee retired at the end of 1997.
(7) Dr. Muscoplat was named Vice President, Medical Affairs and became a
part-time employee of the Company in November 1997
None of the Company's executive officers currently has a written employment
agreement. Each executive officer does, however, have a termination agreement
with the Company providing that, following a "Change in Control" (as defined) of
the Company, if such officer is terminated by the Company without "Cause" (as
defined) or leaves for "Good Reason" (as defined), then (i) such officer will be
entitled to receive a lump sum cash payment equal to 36 times his monthly base
salary (as in effect at the time of the Change in Control or the termination,
whichever is higher, which as of this date, would amount to $936,000 for Mr.
Blitzer, $540,000 for Mr. Adam, $495,000 for Ms. Gille, $375,000 for Mr. Brown,
$0 for Mr. Lee and $405,000 for Dr. Muscoplat) and payment of legal fees and
expenses relating to the termination, and (ii) any noncompetition arrangement
between such officer and the Company will terminate. The lump sum amount payable
under each termination agreement is subject to reduction to avoid
nondeductibility of any payment or benefit (under the termination agreement or
any other arrangement with such officer) solely by reason of Section 280G of the
Code. Section 280G provides that if "parachute payments" (compensatory payments
contingent on a change in control) made to a covered individual exceed three
times such individual's "base amount" (average annual compensation over the five
taxable years preceding the taxable year in which the change in control occurs),
the excess of such parachute payments over such individual's base amount will
not be deductible by the Company. Under the termination agreements, "Change in
Control" is defined to include a change in control of the type required to be
disclosed under Securities and Exchange Commission proxy rules, an acquisition
by a person or group of 35% of the outstanding voting stock of the Company, a
proxy fight or contested election which results in Continuing Directors (as
defined) not constituting a majority of the Board of Directors or another event
which the majority of the Continuing Directors determines to be a change in
control; "Cause"
-13-
<PAGE>
is defined as willful and continued failure to perform duties and obligations or
willful misconduct materially injurious to the Company; and "Good Reason" is
defined to include a change in the officer's responsibility or status, a
reduction in salary or benefits or a mandatory relocation. In December 1997, the
Company notified the persons who have entered into termination agreements that
the Company intends to modify the agreements as of January 1, 1999 to provide
for a lump sum cash payment equal to 18, instead of 36, times his monthly base
salary.
STOCK OPTIONS
The following table summarizes option grants made by the Company to each of
its executive officers named in the Summary Compensation Table above as a part
of such person's 1997 base compensation.
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE
% OF VALUE AT ASSUMED
TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION
UNDERLYING EMPLOYEES OR BASE FOR OPTION TERM (2)
OPTIONS IN FISCAL PRICE EXPIRATION ------------------------
NAME GRANTED (1) YEAR 1996 ($/SHARE) DATE (3) 5% 10%
- --------------------- ------------ --------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Charles N. Blitzer 100,000 21.67 $4.8125 1/14/07 $302,655 $766,989
25,000 5.42 $3.75 7/1/07 $58,959 $149,413
James V. Adam 11,000 2.38 $4.8125 1/14/07 $33,292 $84,369
11,000 2.38 $3.75 7/1/07 $25,942 $65,742
Lori-jean Gille 11,000 2.38 $4.8125 1/14/07 $33,292 $84,369
11,000 2.38 $3.75 7/1/07 $25,942 $65,742
William C. Brown (4) 4,375 .95 $4.8125 1/14/07 $13,241 $33,556
4,375 .95 $3.75 7/1/07 $10,318 $26,147
1,250 .27 $4.5775 11/11/07 $3,598 $9,119
Jon C. Lee 11,000 2.38 $4.8125 1/14/07 $33,292 $84,369
11,000 2.38 $3.75 7/1/07 $25,942 $65,742
Charles C. Muscoplat 11,000 2.38 $4.8125 1/14/07 $33,292 $84,369
11,000 2.38 $3.75 7/1/07 $25,942 $65,742
</TABLE>
- --------------------
(1) All options were granted with an exercise price equal to the closing price
of the Common Stock on the Nasdaq National Market on the date of grant. All
options, except for those granted to Mr. Brown, were granted in tandem with
limited stock appreciation rights, (each a "Limited Right"). Each Limited
Right is exercisable for cash in lieu of such associated options only upon
the occurrence of certain changes in control. Upon the occurrence of
certain defined accelerating events, these options would become immediately
exercisable.
-14-
<PAGE>
(2) These amounts represent certain assumed annual rates of appreciation only.
Potential realizable value is calculated assuming 5% and 10% appreciation
in the price of the Common Stock from the date of grant. Actual gains, if
any, on stock option exercises are dependent on the future performance of
the Common Stock, and overall stock market conditions. The amounts
reflected in this table may not necessarily be achieved. Assuming
14,195,563 shares of Common Stock are outstanding, a beginning stock price
of $4.00 per share and 5% and 10% annual appreciation in the price of the
Common Stock over 10 years, the aggregate market value of the Company's
outstanding Common Stock would increase from $56,782,252 to $92,492,305,
assuming 5% annual appreciation and to $147,278,538, assuming 10% annual
appreciation.
(3) The options which expire on January 14, 2007 are exercisable as to 25% of
the underlying option shares as of January 14, 1998, 50% of such option
shares as of January 14, 1999, 75% of such option shares as of January 14,
2000 and 100% of such option shares as of January 14, 2001. The options
which expire on July 1, 2007 are exercisable as to 25% of the underlying
option shares as of July 1, 1998, 50% of such option shares as of July 1,
1999, 75% of such option shares as of July 1, 2000, and 100% of such option
shares as of July 1, 2001.
(4) The options granted to Mr. Brown which expire on November 11, 2007 are
exercisable as to 25% of the underlying option shares as of November 11,
1998, 50% of such option shares as of November 11, 1999, 75% of such option
shares as of November 11, 2000 and 100% of such option shares as of
November 11, 2001.
The following table summarizes option exercises during the year ended
December 31, 1997 by the executive officers named in the Summary Compensation
Table above, and the values of the options held by such persons at December 31,
1997.
AGGREGATED OPTION EXERCISES DURING YEAR ENDED DECEMBER 31, 1997
AND VALUE OF OPTIONS HELD AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS HELD AT OPTIONS HELD AT
DECEMBER 31, 1997 DECEMBER 31, 1997
SHARES ACQUIRED VALUE (EXERCISABLE/ (EXERCISABLE/
NAME ON EXERCISE REALIZED (1) UNEXERCISABLE) UNEXERCISABLE) (1)
- -------------------- --------------- ------------ ---------------- ------------------
<S> <C> <C> <C> <C>
Charles N. Blitzer 0 0 75,000/200,000 $0/$1,563
James V. Adam 0 0 118,200/52,300 $2,531/$688
Lori-jean Gille 0 0 72,927/52,216 $0/$688
William C. Brown 0 0 27,739/25,736 $0/$274
Jon C. Lee 0 0 54,500/45,500 $0/$688
Charles C. Muscoplat 0 0 93,450/53,500 $0/$688
</TABLE>
- -----------------
(1) "Value" has been determined based upon the difference between the per share
option exercise price and the market value of the Common Stock at the date
of exercise or December 31, 1997.
-15-
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total shareholder return on MGI's Common
Stock with the cumulative total return on the Nasdaq National Market (U.S.
Companies) Index and on The Nasdaq Pharmaceutical Stock Index for the last five
fiscal years (assuming the investment of $100 in each on December 31, 1992, and
the reinvestment of all dividends).
Comparison of Five Year Cumulative Total Return* Among MGI PHARMA, INC., The
Nasdaq Stock Market (U.S.) index and the Nasdaq Pharmaceutical Index.
<TABLE>
<CAPTION>
MGI PHARMA, INC. Nasdaq Stock Market (U.S.) Nasdaq Pharmacutical
---------------- -------------------------- --------------------
(dollars) (dollars) (dollars)
<S> <C> <C> <C>
Dec-92 100 100 100
Dec-93 120 115 89
Dec-94 51 112 67
Dec-95 36 159 123
Dec-96 35 195 123
Dec-97 31 240 127
</TABLE>
* $100 INVESTED ON 12/31/92 IN STOCK OR INDEX INCLUDING REINVESTMENT OF
DIVIDENDS.
-16-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of March 16, 1998, certain information
with respect to all shareholders known to the Company to have been beneficial
owners of more than five percent of its Common Stock, and information with
respect to Common Stock beneficially owned by directors of the Company, nominees
for director of the Company, the executive officers of the Company named in the
Summary Compensation Table above, and all directors and executive officers as a
group. Except as otherwise indicated, the shareholders listed in the table have
sole voting and investment power with respect to the Common Stock owned by them.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------------ ----------------------- ----------------
<S> <C> <C>
Dainippon Pharmaceutical Co., Ltd. (1) 750,000 5.3%
6-8 Doshomachi, 2-Chome
Chuo-Ku, Osaka, 541 Japan
Frederick W. Armstrong (2) 50,157 *
Charles E. Austin (2) (3) 80,173 *
Charles N. Blitzer (2) (5) 158,014 1.1%
David E. Collins (2) 13,112 *
Joseph S. Frelinghuysen 105,000 *
Hugh E. Miller (2) (3) 32,750 *
Timothy G. Rothwell 3,112 *
Lee J. Schroeder (2) 41,446 *
James V. Adam (2) (5) 170,390 1.2%
Lori-jean Gille (2) (5) 102,959 *
William C. Brown (2) (5) 80,176 *
Jon C. Lee (2) (5) (6) 72,782 *
Charles C. Muscoplat (2) (5) 120,146 *
Andrew J. Ferrara (7) 0 *
Michael E. Hanson (7) 0 *
All directors and current executive 837,289 5.9%
officers as a group (11 persons)
(2) (3) (4) (5) (6) (7)
</TABLE>
- -----------------------
* Less than 1%
-17-
<PAGE>
(1) Disclosure is made in reliance upon a statement on Schedule 13D, dated as
of April 28, 1995, filed with the Securities and Exchange Commission.
(2) Includes the following number of shares which could be acquired within 60
days of March 16, 1997 through the exercise of stock options: Mr.
Armstrong, 40,157 shares; Mr. Austin, 34,173 shares; Mr.Blitzer, 137,500
shares; Mr. Collins, 3,112 shares; Mr. Frelinghuysen, 0 shares, Mr. Miller,
28,750 shares; Mr. Rothwell, 3,112 shares; Mr. Schroeder, 28,570 shares;
Mr. Adam, 126,450 shares; Ms. Gille, 85,352 shares; Mr. Brown, 38,008
shares; Mr. Lee, 57,250 shares; Dr. Muscoplat, 101,700 shares; and all
directors and current executive officers as a group, 684,314 shares.
(3) Excludes 7,000 shares beneficially owned by Mr. Austin's spouse and
disclaimed by Mr. Austin.
(4) Excludes 1,000 shares owned by Mr. Miller's spouse and disclaimed by Mr.
Miller.
(5) Includes the following number of shares beneficially owned through the
Company's Retirement Savings Plan: Mr. Blitzer, 447 shares; Mr. Adam,
18,647 shares; Ms. Gille, 10,816 shares; Mr. Brown, 10,092 shares; Mr. Lee,
3,532 shares; and Dr. Muscoplat, 13,587 shares.
(6) Excludes 400 shares beneficially owned by Mr. Lee's spouse and disclaimed
by Mr. Lee.
(7) Nominee to the Board of Directors.
CERTAIN TRANSACTIONS
Pursuant to the Company's Stock Acquisition Assistance Loan Program (the
"Loan Program"), the Company may make loans to selected key employees for the
exercise of options granted under the 1984 Stock Option Plan, the 1994 Stock
Incentive Plan and the 1997 Stock Incentive Plan. In addition, under the Loan
Program the Company may make loans to selected key employees for payment of
taxes resulting from exercise of nonqualified stock options or conversion of
restricted stock units granted under the 1984 Stock Option Plan, the 1994 Stock
Incentive Plan and the 1997 Stock Incentive Plan. The Loan Program is
administered by the Compensation Committee. All loans made under the Loan
Program bear interest at a rate equal to the lesser of (i) the minimum
applicable rate to prevent imputation of interest as publicly announced from
time to time by the Internal Revenue Service (5.51% compounded annually, as of
April 1, 1998), and (ii) 4.5% above the discount rate on ninety-day commercial
paper in effect at the Federal Reserve Bank in the Federal Reserve District
encompassing Minnesota (9.98% as of March 1, 1998). Accrued interest is payable
annually prior to maturity. Loans are full recourse, unsecured obligations with
principal and accrued interest payable on demand (or upon earlier default, death
or termination of employment). The amount of principal which may be outstanding
to any participant on any date under the Loan Program may not exceed 200% of
such participant's annual base salary on such date.
-18-
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and all persons who beneficially own more than
10 percent of the outstanding shares of the Company's Common Stock to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of such Common Stock. Directors, executive officers and
such beneficial owners are also required to furnish the Company with copies of
all Section 16(a) reports they file. To the Company's knowledge, based solely
upon a review of the copies of such reports furnished to the Company and written
representations that no other reports were required during the fiscal year ended
December 31, 1997, all Section 16(a) reporting requirements applicable to the
Company's directors, executive officers and such beneficial owners were complied
with.
PROPOSAL TO APPROVE AMENDMENTS TO THE
AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN
On January 14, 1998, the Board of Directors approved amendments to the MGI
PHARMA, INC. Amended and Restated Employee Stock Purchase Plan (the "Stock
Purchase Plan"), subject to stockholder approval, pursuant to which the Stock
Purchase Plan will be extended for an additional five years and an additional
150,000 shares of MGI Common Stock would be reserved for issuance under the
Stock Purchase Plan. The Stock Purchase Plan was approved by the Board of
Directors and the shareholders of the Company in May 1988, and amended and
restated in May 1993. The prior plan expires by its terms on June 30, 1998. The
following summary description of the Stock Purchase Plan is qualified in its
entirety by reference to the full text of the Stock Purchase Plan, which is
attached to this Proxy Statement as Exhibit A.
SUMMARY OF THE STOCK PURCHASE PLAN
The Stock Purchase Plan provides for the purchase of shares of MGI's Common
Stock by eligible employees of the Company and certain related corporations
through payroll deductions of 1% to 15% of an employee's current compensation.
The Stock Purchase Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code").
The Stock Purchase Plan is administered by the Compensation Committee of
the Board of Directors, which also interprets the Stock Purchase Plan. Employees
of the Company and certain related corporations, other than those employees
whose customary employment is less than 20 hours weekly, are eligible to
participate in the Stock Purchase Plan. In addition, an employee who immediately
after receiving a right to purchase shares would own, directly or indirectly,
stock equal to 5% or more
-19-
<PAGE>
of the total combined voting power or value of all of the capital stock of the
Company or all of its affiliates will not be eligible to participate in the
Stock Purchase Plan. The Stock Purchase Plan will terminate if and when all the
shares of the Company's Common Stock provided for in the Stock Purchase Plan
have been sold. The Board of Directors has reserved 400,000 shares of MGI's
Common Stock for issuance under the Stock Purchase Plan.
Under the Stock Purchase Plan, there are two six-month purchase periods
(each a "Purchase Period"). One Purchase Period begins on the first business day
of January and ends on the last business day in June and the other begins on the
first business day of July and ends on the last business day of December. On the
last business day of each Purchase Period, each participant receives the right
to purchase as many whole shares of MGI Common Stock as could be purchased with
the balance in that participant's stock purchase account as of that date. The
exercise price for rights granted under the Stock Purchase Plan is the lesser of
85% of the fair market value of MGI's Common Stock on (i) the first business day
of the Purchase Period or (ii) the last business day of the Purchase Period. No
participant may purchase stock under the Stock Purchase Plan and under all other
stock purchase plans of the Company and its affiliates at a rate exceeding
$25,000 in fair market value of such stock (determined at the beginning of each
Purchase Period) for each calendar year.
The Board of Directors may amend or discontinue the Stock Purchase Plan at
any time. In the absence of shareholder approval, however, no amendment or
discontinuation of the Stock Purchase Plan shall be made that: (i) absent such
shareholder approval, would cause Rule 16b-3 under the Securities Act of 1934,
as amended, to become unavailable with respect to the Stock Purchase Plan, (ii)
reduces the price per share at which MGI Common Stock may be purchased, or (iii)
increases the number of shares of MGI Common Stock available for issuance under
the Stock Purchase Plan.
TAX MATTERS
The Stock Purchase Plan and the right of participants to make purchases
thereunder, are intended to qualify under the provisions of Sections 421 and 423
of the Code. Payroll deductions under the Stock Purchase Plan will be taxable to
a participant as compensation for the year in which such amounts would otherwise
have been paid to the participant. No income will be taxable to a participant at
the time of grant of the option or purchase of shares. A participant may become
liable for tax upon disposition of the shares acquired as summarized below.
If the shares are sold or disposed of (including by way of gift) at least
two years after the date of the beginning of the offering period (the "date of
option grant") and at least one year after the date such shares are purchased
(the "date of option exercise"), in this event, the lesser of (a) the excess of
the fair market value of the
-20-
<PAGE>
shares at the time of such disposition over the purchase price of the shares
subject to the option (the "option price") or (b) the excess of the fair market
value of the shares at the time the option was granted over an amount equal to
what the option price would have been if it had been computed as of the date of
option grant, will be treated as ordinary income to the participant. Any further
gain upon such disposition will be treated as capital gain. Any such capital
gain would be taxed at long-term rates if the stock is held for more than 18
months and at mid-term rates if held more than 12 but not more than 18 months.
If the shares are sold and the sales price is less than the option price, there
is no ordinary income and the participant has a capital loss for the difference.
In the event that the shares are sold or disposed of (including by way of
gift or by exchange in connection with the exercise of an incentive stock
option) before the expiration of the holding periods described above, the excess
of the fair market value of the shares on the date of option exercise over the
option price will be treated as ordinary income to the participant. This excess
will constitute ordinary income in the year of sale or other disposition even if
no gain is realized on the sale or a gratuitous transfer of the shares is made.
The balance of any gain will be treated as capital gain. Even if the shares are
sold for less than their fair market value on the date of option exercise, the
same amount of ordinary income is attributed to a participant and a capital loss
is recognized equal to the difference between the sales price and the value of
the shares on such date of option exercise. The Company ordinarily will be
allowed a tax deduction at the time and in the amount of the ordinary income
recognized by the participant, but may also be required to withhold income tax
upon such amount or report such amount to the Internal Revenue Service.
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock represented at the meeting and entitled to vote on this
matter is necessary for approval of the Stock Purchase Plan. Proxies will be
voted in favor of such proposal unless otherwise specified. THE BOARD OF
DIRECTORS AND MANAGEMENT RECOMMEND THAT YOU VOTE FOR APPROVAL OF THE ABOVE
PROPOSAL TO INCREASE THE NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK THAT ARE
AUTHORIZED FOR ISSUANCE UNDER THE STOCK --- PURCHASE PLAN AND TO EXTEND THE TERM
OF THE STOCK PURCHASE PLAN.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed KPMG Peat Marwick as independent
auditors for the Company for the fiscal year ending December 31, 1998. A
proposal to ratify that appointment will be presented at the Annual Meeting.
KPMG Peat Marwick has served as the Company's auditors since the Company's
incorporation and has no relationship with the Company other than that arising
from its employment as independent auditors. Representatives of KPMG Peat
Marwick are
-21-
<PAGE>
expected to be present at the Annual Meeting, will have an opportunity to make a
statement if they desire to do so, and will be available to respond to
appropriate questions from shareholders. If the appointment of KPMG Peat Marwick
is not ratified by the shareholders, the Board of Directors is not obligated to
appoint other auditors, but the Board of Directors will give consideration to
such unfavorable vote. THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND THAT YOU
VOTE FOR RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK AS THE COMPANY'S
INDEPENDENT AUDITORS.
-22-
<PAGE>
PROPOSALS FOR THE NEXT ANNUAL MEETING
Any proposal by a shareholder to be presented at the next annual meeting of
shareholders must be received at the Company's principal executive offices,
Suite 300E, Opus Center, 9900 Bren Road East, Minnetonka, Minnesota 55343, no
later than November 28, 1998.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Lori-jean Gille
Lori-jean Gille
Secretary
April 7, 1998
-23-
<PAGE>
EXHIBIT A
MGI PHARMA, INC.
AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE PLAN
On May 12, 1988, MGI PHARMA, INC. (the "Company") adopted its Employee
Stock Purchase Plan providing for the purchase of shares of the Company's common
stock, $.01 par value per share, through payroll deductions. On May 12, 1993,
the Company amended and restated its Plan to provide for two six-month purchase
periods, to increase the number of shares which may be purchased under the Plan
and to make certain other changes. On May 12, 1998, the Company amended and
restated its Plan to increase the number of shares which may be purchased under
the Plan and to make certain other changes. The following terms and conditions
restate and amend in their entirety the Company's Employee Stock Purchase Plan,
superseding in all respects the Plan adopted on May 12, 1988 and amended and
restated on May 12, 1993.
ARTICLE I. INTRODUCTION
SECTION 1.01 Purpose. The purpose of the Employee Stock Purchase Plan is to
provide the employees of the Company and certain related corporations with an
opportunity to share in the ownership of the Company by providing them a
convenient means for regular and systematic purchases of the Company's Common
Stock and, thus, to develop a stronger incentive to work for the continued
success of the Company.
SECTION 1.02 Rules of Interpretation. It is intended that the Plan be an
"employee stock purchase plan" as defined in Section 423(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), and Treasury Regulations
promulgated thereunder, if approved by the Company's shareholders. Accordingly,
the Plan will be interpreted and administered in a manner consistent therewith
if so approved. All Participants in the Plan will have the same rights and
privileges consistent with the provisions of the Plan.
SECTION 1.03 Definitions. For purposes of the Plan, the following terms
will have the meanings set forth below:
(a) "Acceleration Date" means either an Acquisition Date or a Transaction
Date.
(b) "Acquisition Date" means (i) the date of public announcement of the
acquisition of "beneficial ownership" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934 (the "Exchange Act") or any successor rule
thereto) of more than 50% of the outstanding voting stock of the Company by any
"person" (as
A-1
<PAGE>
defined in Section 13(d) of the Exchange Act) other than the Company, by means
of a tender offer, exchange offer or otherwise; and (ii) the date five business
days after the date of public announcement of the acquisition of beneficial
ownership (as so defined) of more than 25% but not more than 50% of the
outstanding voting stock of the Company by any person (as so defined) other than
the Company, by means of a tender offer, exchange offer or otherwise if, during
such five-business-day period, the Board or the Committee has not, by resolution
duly adopted, elected that such acquisition not give rise to an Acquisition
Date. In any such resolution, the Board or Committee may elect that any
continued acquisition or acquisitions by the same person (as so defined) which
would otherwise trigger an Acquisition Date under clause (ii) above shall also
not give rise to an Acquisition Date.
(c) "Affiliate" means any parent or subsidiary corporation of the Company,
as defined in Sections 425(e) and 425(f) of the Code.
(d) "Board" means the Board of Directors of the Company.
(e) "Committee" means the committee appointed under Section 10.01.
(f) "Company" means MGI PHARMA, INC., a Minnesota corporation, and its
successors by merger or consolidation as contemplated by Article XI herein.
(g) "Current Compensation" means the gross cash compensation (including
wage, salary and overtime earnings) paid by the Company or a Participating
Affiliate to a Participant in accordance with the terms of employment, but
excluding all bonus payments, expense allowances and compensation payable in a
form other than cash.
(h) "Employer" means the Company or a Participating Affiliate, as the case
may be.
(i) "Fair Market Value" as of a given date means such value of the Stock
which is equal to (i) the last sale price of the Stock as reported on the NASDAQ
National Market System on such date, if the Stock is then quoted on the NASDAQ
National Market System; (ii) the average of the closing representative bid and
asked prices of the Stock as reported on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") on such date, if the Stock is then
quoted on NASDAQ; or (iii) the closing price of the Stock on such date on a
national securities exchange, if the Stock is then quoted on a national
securities exchange. If on a given date the Stock is not traded on an
established securities market, the Committee shall make a good faith attempt to
satisfy the requirements of this Section 1.03(i) and in connection therewith
shall take such action as it deems necessary or advisable.
A-2
<PAGE>
(j) "Participant" means a Permanent Full-Time Employee who is eligible to
participate in the Plan under Section 2.01 and who has elected to participate in
the Plan.
(k) "Participating Affiliate" means an Affiliate which has been designated
by the Committee in advance of the Purchase Period in question as a corporation
whose eligible Permanent Full-Time Employees may participate in the Plan.
(l) "Permanent Full-Time Employee" means an employee of the Company or a
Participating Affiliate as of the first day of a Purchase Period, including an
officer or director who is also an employee, except an employee whose customary
employment is less than 20 hours per week or any employee who has not been
employed by the Company or its Participating Affiliates for more than three
months.
(m) "Plan" means the MGI PHARMA, INC. Amended and Restated Employee Stock
Purchase Plan, the provisions of which are set forth herein.
(n) "Purchase Period" means the approximate 6-month periods beginning on
the first business day in January and ending on the last business day in June
and beginning on the first business day of July and ending on the last business
day in December of each year; provided however, the then current Purchase Period
will end upon the occurrence of an Acceleration Date.
(o) "Stock" means the Company's Common Stock, $.01 par value, as such stock
may be adjusted for changes in the stock or the Company as contemplated by
Article XI herein.
(p) "Stock Purchase Account" means the account maintained in the books and
records of the Company recording the amount received from each Participant
through payroll deductions made under the Plan.
(q) "Transaction Date" means the date of shareholder approval of (i) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Company stock
would be converted into cash, securities or other property, other than a merger
of the Company in which shareholders immediately prior to the merger have the
same proportionate ownership of stock of the surviving corporation immediately
after the merger; (ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all, of
the assets of the Company; or (iii) any plan of liquidation or dissolution of
the Company.
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ARTICLE II. ELIGIBILITY AND PARTICIPATION
SECTION 2.01 Eligible Employees. All Permanent Full-Time Employees shall be
eligible to participate in the Plan beginning on the first day of the first full
Purchase Period to commence after such person becomes a Permanent Full-Time
Employee. Subject to the provisions of Article VI, each such employee will
continue to be eligible to participate in the Plan so long as he or she remains
a Permanent Full-Time Employee.
SECTION 2.02 Election to Participate. An eligible Permanent Full-Time
Employee may elect to participate in the Plan for a given Purchase Period by
filing with his or her Employer in advance of that Purchase Period a form
provided by such Employer for such purpose (which authorizes regular payroll
deductions from Current Compensation beginning with the first payday in that
Purchase Period and continuing until the employee withdraws from the Plan or
ceases to be eligible to participate in the Plan).
SECTION 2.03 Limits on Stock Purchase. No employee shall be granted any
right to purchase hereunder if such employee, immediately after a right to
purchase is granted, would own, directly or indirectly, within the meaning of
Section 423(b)(3) and Section 425(d) of the Code stock possessing 5% or more of
the total combined voting power or value of all the then classes of the capital
stock of the Company or of all Affiliates.
SECTION 2.04 Voluntary Participation. Participation in the Plan on the part
of the Participant is voluntary and such participation is not a condition of
employment nor does participation in the Plan entitle a Participant to be
retained as an employee.
ARTICLE III. PAYROLL DEDUCTIONS AND STOCK PURCHASE ACCOUNT
SECTION 3.01 Deduction from Pay. The form described in Section 2.02 will
permit a Participant to elect payroll deductions of any whole percentage from 1%
through 15% of Current Compensation for each pay period. The Participant may
reduce or increase future payroll deductions (within the foregoing limitations)
by filing with such Participant's Employer a form provided by such Employer for
such purpose. The effective date of any reduction in future payroll deductions
will be the first day of the next succeeding pay period. The effective date of
any increase in future payroll deductions will be the first day of the next
succeeding Purchase Period. Also, the Participant may cease making payroll
deductions at any time, as provided in Section 6.01.
SECTION 3.02 Credit to Account. Payroll deductions will be credited to the
Participant's Stock Purchase Account on each payday.
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SECTION 3.03 Interest. No interest will be paid upon payroll deductions or
on any amount credited to, or on deposit in, a Participant's Stock Purchase
Account.
SECTION 3.04 Nature of Account. The Stock Purchase Account is established
solely for accounting purposes, and all amounts credited to the Stock Purchase
Account will remain part of the general assets of the Company or the
Participating Affiliate (as the case may be).
SECTION 3.05 No Additional Contributions. A Participant may not make any
payment into the Stock Purchase Account other than the payroll deductions made
pursuant to the Plan.
ARTICLE IV. RIGHT TO PURCHASE SHARES
SECTION 4.01 Number of Shares. Each Participant will have the right to
purchase on the last business day of the Purchase Period all, but not less than
all, of the largest number of whole shares of Stock that can be purchased at the
price specified in Section 4.02 with the entire credit balance in the
Participant's Stock Purchase Account, subject to the limitations that no more
than $25,000 in Fair Market Value (determined at the beginning of each Purchase
Period) of Stock and other stock may be purchased under the Plan and all other
employee stock purchase plans (if any) of the Company and the Affiliates by any
one Participant for each calendar year. If the purchases for all Participants
would otherwise cause the aggregate number of shares of Stock to be sold under
the Plan to exceed the number specified in Section 10.03, however, each
Participant shall be allocated a pro rata portion of the Stock to be sold.
SECTION 4.02 Purchase Price. The purchase price for any Purchase Period
will be the lesser of (a) 85% of the Fair Market Value of the Stock on the first
business day of that Purchase Period or (b) 85% of the Fair Market Value of the
Stock on the last business day of that Purchase Period, in each case rounded up
to the next higher full cent.
ARTICLE V. EXERCISE OF RIGHT
SECTION 5.01 Purchase of Stock. On the last business day of a Purchase
Period, the entire credit balance in each Participant's Stock Purchase Account
will be used to purchase the largest number of whole shares of Stock purchasable
with such amount (subject to the limitations of Section 4.01) unless the
Participant has filed with the Committee in advance of that date a form provided
by his or her Employer (which elects to receive the entire credit balance in
cash).
SECTION 5.02 Cash Distributions. Any amount remaining in a Participant's
Stock Purchase Account after the last business day of a Purchase Period will be
paid to the Participant in cash within 30 days after the end of that Purchase
Period;
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provided, however, that if the amount remaining in the Participant's Stock
Purchase Account at the end of a Purchase Period results from the fact that such
amount was not sufficient to purchase a whole share of Stock, such amount will
be transferred to the Participant's Stock Purchase Account for the immediately
succeeding Purchase Period.
SECTION 5.03 Notice of Acceleration Date. The Company shall use its best
efforts to notify each Participant in writing at least 10 days prior to any
Acceleration Date that the then current Purchase Period will end on such
Acceleration Date.
ARTICLE VI. WITHDRAWAL FROM PLAN
SECTION 6.01 Voluntary Withdrawal. A Participant may, at any time, withdraw
from the Plan and cease making payroll deductions by filing with such
Participant's Employer a form provided for this purpose. In such event, the
entire credit balance in the Participant's Stock Purchase Account will be paid
to the Participant in cash within 30 days. A Participant who withdraws from the
Plan will not be eligible to reenter the Plan until the beginning of the next
Purchase Period following the date of such withdrawal.
SECTION 6.02 Death. Participation in the Plan will cease on the date of the
Participant's death, and the entire credit balance in the Stock Purchase Account
will be paid to the Participant's estate in cash within 30 days. Each
Participant, however, may designate one or more beneficiaries who, upon death,
are to receive the amount that otherwise would have been paid to the
Participant's estate and may change or revoke any such designation from time to
time. No such designation, change or revocation will be effective unless made by
the Participant in writing and filed with the Participant's Employer during the
Participant's lifetime. Unless the Participant has otherwise specified in the
beneficiary designation, the beneficiary or beneficiaries so designated will
become fixed as of death so that, if a beneficiary survives the Participant but
dies before the receipt of the payment due such beneficiary, the payment will be
made to such beneficiary's estate.
SECTION 6.03 Termination of Employment. Participation in the Plan also will
cease on the date the Participant ceases to be a Permanent Full-Time Employee
for any reason other than death. In such event, the entire credit balance in the
Participant's Stock Purchase Account will be paid to the Participant in cash
within 30 days. For purposes of this Section, a leave of absence which has been
approved by the Committee will not be deemed a termination of employment as a
Permanent Full-Time Employee
ARTICLE VII. NONTRANSFERABILITY .
SECTION 7.01 Nontransferable Right to Purchase. The right to purchase Stock
hereunder may not be assigned, transferred, pledged or hypothecated (whether
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by operation of law or otherwise) and will not be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition or levy of attachment or similar process upon
the right to purchase will be null and void and without effect.
SECTION 7.02 Nontransferable Account. The amounts credited to a Stock
Purchase Account may not be assigned, transferred, pledged or hypothecated in
any way, and any attempted assignment, transfer, pledge, hypothecation or other
disposition of such amounts will be null and void and without effect.
ARTICLE VIII. STOCK CERTIFICATES .
SECTION 8.01 Delivery. Within 30 days after the last day of each Purchase
Period, the Company will cause to be delivered to the Participant a certificate
representing the Stock purchased on the last business day of such Purchase
Period.
SECTION 8.02 Securities Laws. The Company shall not be required to issue or
deliver any certificate representing Stock prior to registration under the
Securities Act of 1933, as amended, or registration or qualification under any
state law if such registration is required. The Company will use its best
efforts to accomplish such registration (if and to the extent required) not
later than a reasonable time following the Purchase Period, and delivery of
certificates may be deferred until such registration is accomplished.
SECTION 8.03 Completion of Purchase. A Participant will have no interest in
the Stock purchased until a certificate representing the same is issued.
SECTION 8.04 Form of Ownership. The certificates representing Stock issued
under the Plan will be registered in the name of the Participant or jointly in
the name of the Participant and another person, as the Participant may direct on
a form provided by the Participant's Employer.
ARTICLE IX. EFFECTIVE DATE AND AMENDMENT .
OR TERMINATION OF PLAN .
SECTION 9.01 Effective Date. The Plan will become effective on July 1,
1998, but only if the Plan is approved by the Company's shareholders at their
1998 annual meeting.
SECTION 9.02 Powers of Board. The Board may at any time amend or terminate
the Plan, except that no amendment will be made without prior approval of the
shareholders which would (a) authorize an increase in the number of shares of
Stock which may be purchased under the Plan, except as provided in Section
11.01, (b) permit the issuance of Stock before payment therefor in full, (c)
increase the rate of payroll deductions above 15% of Current Compensation, (d)
reduce the
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price per share at which the Stock may be purchased, or (e) absent such
shareholder approval, cause Rule 16b-3 to become unavailable with respect to the
Plan.
SECTION 9.03 Automatic Termination. The Plan will terminate automatically
on June 30, 2003, unless extended by the Board. The Board may by resolution
extend the Plan for one or more additional periods of five years each.
ARTICLE X. ADMINISTRATION .
SECTION 10.01 Appointment of Committee. The Plan shall be administered by a
committee (the "Committee") established by the Board and meeting the
requirements of Rule 16b-3 as in effect from time to time.
SECTION 10.02 Powers of Committee. Subject to the provisions of the Plan,
the Committee will have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan, to establish
deadlines by which the various administrative forms must be received in order to
be effective, and to adopt such other rules and regulations for administering
the Plan as it may deem appropriate. Decisions of the Committee will be final
and binding on all parties who have an interest in the Plan.
SECTION 10.03 Stock to be Sold. The Stock to be issued and sold under the
Plan may be treasury Stock or authorized but unissued Stock, or the Company may
go into the market and purchase Stock for sale under the Plan. Except as
provided in Section 11.01, the aggregate number of shares of Stock to be sold
under the Plan will not exceed 400,000 shares.
SECTION 10.04 Notices. Notices to the Committee should be addressed as
follows:
MGI PHARMA, INC.
Attention: Corporate Secretary
Suite 300E, Opus Center
9900 Bren Road East
Minnetonka, MN 55343-9667
ARTICLE XI. ADJUSTMENT FOR CHANGES IN STOCK OR COMPANY
SECTION 11.01 Stock Dividend or Reclassification. If the outstanding shares
of Stock are increased, decreased, changed into or exchanged for a different
number or kind of securities of the Company, or shares of a different par value
or without par value, through reorganization, recapitalization,
reclassification, stock dividend, stock split, amendment to the Company's
Articles of Incorporation, reverse stock split or otherwise, an appropriate
adjustment shall be made in the maximum
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numbers and/or kind of securities to be sold under this Plan with a
corresponding adjustment in the purchase price to be paid therefor.
SECTION 11.02 Merger or Consolidation. If the Company is merged into or
consolidated with one or more corporations during the term of the Plan,
appropriate adjustments will be made to give effect thereto on an equitable
basis in terms of issuance of shares of the corporation surviving the merger or
of the consolidated corporation, as the case may be.
ARTICLE XII. APPLICABLE LAW
Rights to purchase Stock granted under this Plan shall be construed and
shall take effect in accordance with the laws of the State of Minnesota.
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MGI PHARMA, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having duly received the notice of annual meeting of
shareholders and proxy statement dated April 7, 1998, revoking all prior
proxies, hereby appoints Charles N. Blitzer, Lori-jean Gille and James V. Adam,
and each of them, with power to appoint a substitute, to vote all shares the
undersigned is entitled to vote at the Annual Meeting of Shareholders of MGI
PHARMA, INC. (the "Company") to be held on May 12, 1998, and at all
adjournments thereof, as specified below on each matter referred to, and, in
their discretion, upon any other matters which may be brought before the
meeting.
1. ELECTION OF CHARLES N. BLITZER, ANDREW J. FERRARA, JOSEPH S. FRELINGHUYSEN,
MICHAEL E. HANSON, HUGH E. MILLER, TIMOTHY G. ROTHWELL AND LEE J. SCHROEDER AS
DIRECTORS FOR THE TERM DESCRIBED IN THE PROXY STATEMENT.
[_] VOTE FOR all nominees listed above (except as marked to the contrary
below).
[_] WITHHOLD AUTHORITY to vote for all nominees listed above.
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. APPROVAL OF THE AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN.
[_] FOR [_] AGAINST [_] ABSTAIN
3. RATIFICATION AND APPROVAL OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE
INDEPENDENT AUDITORS FOR THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31,
1998.
[_] FOR [_] AGAINST [_] ABSTAIN
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR NAMED IN ITEM 1,
FOR ITEMS 2 AND 3 AND IN THE DISCRETION OF THE NAMED PROXIES ON ALL OTHER
MATTERS.
(continued and to be dated and signed on other side)
P
R
O
X
Y
Please sign exactly as name appears below. When shares are held by joint
tenants, both must sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
have signed in full corporate name by President or other authorized officer.
If a partnership, please have signed in partnership name by an authorized
person.
---------------------------------
Signature
---------------------------------
Signature (if held jointly)
DATED: ____________________, 1998
PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
