Item 1.01 Entry into a Material Definitive Agreement.
Acceleration of Vesting of Stock Option Awards
On July 26, 2005, pursuant to and in accordance with the recommendation of the Compensation Committee (the “Committee”), the Board of Directors of MGI PHARMA, INC. (the “Company”) approved full acceleration of the vesting of each otherwise unvested stock option that had an exercise price of $26.21 or greater granted under the Company’s Amended and Restated 1997 Stock Incentive Plan (the “1997 Plan”) or Amended and Restated 1999 Non Employee Director Stock Option Plan (the “1999 Plan”) that were held by employees, officers and non-employee directors. Options to purchase approximately 2.7 million shares of the Company’s Common Stock (“Common Shares”), including approximately 842,500 options held by officers at or above the level of Vice President (including executive officers) and approximately 157,500 options held by non-employee directors, are subject to this acceleration which was effective as of July 26, 2005.
The Committee also required that as a condition to the acceleration, each officer at or above the level of Vice President (including the executive officers) and each non-employee director agree to refrain from selling Common Shares acquired upon the exercise of accelerated options (other than shares needed to cover the exercise price and satisfy withholding taxes) until the date on which the exercise would have been permitted under the option’s pre-acceleration vesting terms or, if earlier, the officer’s or director’s last day of employment or upon a “change in control” as defined in any Termination Agreement between the individual and the Company (the “Lock-Up”).
The decision to accelerate vesting of these underwater options was made primarily to minimize certain future compensation expense that the Company would otherwise recognize in its consolidated statements of operations with respect to these options pursuant to Financial Accounting Standards Board Statement No. 123 (revised 2004), “Share-Based Payment,” which becomes effective as to the Company for reporting periods beginning after December 31, 2005. The Company believes that the aggregate future expense that will be eliminated as a result of the acceleration of the vesting of these options is approximately $54.3 million (of which approximately $8.8 million is attributable to options held by executive officers and approximately $3.8 million is attributable to options held by non-employee directors). |
