SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
[ X ] Filed by the registrant
[ ] 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
Unigene Laboratories, Inc.
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(Name of Registrant as Specified in Its Charter)
[GRAPHIC-UNIGENE LOGO]
Unigene Laboratories, Inc.
110 Little Falls Road
Fairfield, New Jersey 07004
(973) 882-0860
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on June 30, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Unigene
Laboratories, Inc., a Delaware corporation (the "Company"), will be held at the
offices of the Company, 83 Fulton Street, Boonton, New Jersey 07005 on June 30,
1998, at 11:00 A.M., Eastern Daylight Time, for the following purposes:
1. To elect directors of the Company;
2. To ratify the appointment of KPMG Peat Marwick LLP as auditors of the
Company; and
3. To transact such other business as may properly come before the meeting
and any and all adjournments thereof.
The Board of Directors has fixed the close of business on May 1, 1998, as
the record date for the determination of stockholders who are entitled to notice
of and to vote at the meeting.
A copy of the Company's Annual Report for the year ended December 31, 1997
is sent to you herewith.
To assure your representation at the meeting, please sign, date and return
your proxy in the enclosed envelope, which requires no postage if mailed in the
United States.
By Order of the Board of Directors
/s/RONALD S. LEVY
-----------------
Secretary
May 11, 1998
[GRAPHIC-UNIGENE LOGO]
Unigene Laboratories, Inc.
110 Little Falls Road
Fairfield, New Jersey 07004
(973) 882-0860
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Unigene Laboratories, Inc., a Delaware
corporation (the "Company"), for the Annual Meeting of Stockholders of the
Company to be held at the offices of the Company, 83 Fulton Street, Boonton, New
Jersey 07005, on June 30, 1998, at 11:00 A.M., Eastern Daylight Time.
You are requested to complete, date and sign the accompanying form of proxy
and return it to the Company in the enclosed envelope. The proxy may be revoked
at any time before it is exercised by written notice to the Company bearing a
later date than the date on the proxy, provided such notice is received by the
Company prior to the start of the meeting. Any stockholder attending the meeting
may vote in person whether or not he or she has previously submitted a proxy.
Where instructions are indicated, a duly executed proxy will be voted in
accordance with such instructions. Where no instructions are indicated, a duly
executed proxy will be voted for each of the director nominees named herein and
in favor of each of the proposals set forth in the attached Notice.
The Board of Directors has fixed the close of business on May 1, 1998, as
the record date (the "Record Date") for the determination of stockholders who
are entitled to notice of and to vote at the meeting. As of the Record Date, the
outstanding shares of the Company entitled to vote were 38,529,432 shares of
common stock, par value $.01 per share ("Common Stock"), the holders of which
are entitled to one vote per share.
A majority of the outstanding shares of Common Stock, present in person or
represented by proxy, will constitute a quorum for the conduct of business at
the Annual Meeting. Directors will be elected by a plurality of the votes cast.
The affirmative vote of a majority of the votes present and entitled to vote is
required for the ratification of the appointment of KPMG Peat Marwick LLP as
auditors of the Company. For matters that require for adoption the affirmative
vote of a majority of the shares of Common Stock present and entitled to vote,
abstentions are considered as shares present and entitled to vote and,
therefore, have the effect of a no vote, whereas broker non-votes are considered
shares not present and entitled to vote and, therefore, have no impact on the
outcome of the vote.
This Proxy Statement and the accompanying Notice of Annual Meeting of
Stockholders and form of proxy are being mailed to the stockholders on or about
May 11, 1998. A copy of the Company's Annual Report for the year ended December
31,1997, is also enclosed.
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of May 1, 1998, concerning
the persons who are known by the Company to own beneficially more than 5 percent
of the outstanding shares of Common Stock, other than persons who are identified
under the heading "Security Ownership of Management".
Name and Address of Amount of Beneficial Percentage of
Beneficial Owner Ownership Outstanding Shares
---------------- --------- ------------------
Loews Corporation (1) 3,000,000 7.6%
CNA Plaza
Chicago, IL 60685
(1) Based on information furnished by Loews Corporation in a Schedule 13G, dated
March 4, 1997, filed with the Securities and Exchange Commission in which it
reports that the securities, which consist of 2,000,000 shares of Common Stock
and warrants to purchase 1,000,000 shares of Common Stock, are owned by
Continental Casualty Company, which is owned by CNA Financial Corp., a company
in which Loews Corporation has an 84% equity interest.
-1-
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of May 1, 1998, concerning
the beneficial ownership of Common Stock by each director of the Company, each
executive officer of the Company listed in the Summary Compensation Table, and
all directors and executive officers of the Company as a group.
Name of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership(1) Class
---------------- ----------------------- -----
Warren P. Levy 1,926,000 (2) 5.0%
Ronald S. Levy 1,941,000 (2) 5.0%
Jay Levy 468,550 1.2%
Allen Bloom -- --
Robert F. Hendrickson 25,000 (3) 0.1%
Robert G. Ruark 30,000 (4) 0.1%
Directors and Executive Officers
as a Group (6 persons) 4,190,550 (2)(5) 10.9%
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(1) Unless otherwise noted, each listed person and each member of the group has
reported that he has sole voting and sole dispositive power with respect to
securities shown as beneficially owned by him.
(2) Includes 200,000 shares of Common Stock held in a family trust over on
which Warren P. Levy and Ronald S. Levy in their capacity as trustees share
voting and dispositive power.
(3) Includes 10,000 shares of Common Stock that Mr. Hendrickson has the right
to acquire pursuant to stock options that are exercisable immediately.
(4) Consists solely of shares of Common Stock that Mr. Ruark has the right to
acquire pursuant to stock options that are exercisable immediately.
(5) Includes an aggregate of 40,000 shares of Common Stock that such persons
have the right to acquire pursuant to stock options that are exercisable
immediately.
PROPOSAL 1
ELECTION OF DIRECTORS
Six directors of the Company are to be elected at the Annual Meeting. The
directors will serve until the Annual Meeting of Stockholders to be held in
1999, and until their respective successors shall have been elected and
qualified.
Each of the persons named below is currently a director of the Company and,
except for Allen Bloom, each was elected as a director at the Company's Annual
Meeting of Stockholders in 1997. Dr. Bloom was elected a director by the Board
of Directors as of May 1, 1998. The Board of Directors of the Company has no
reason to believe that any of the nominees will be unavailable for election as a
director. However, should any of them become unwilling or unable to accept
nomination for election, the individuals named in the enclosed proxy will vote
for the election of a substitute nominee selected by the Board of Directors or,
if no such person is nominated, the Board of Directors will reduce the number of
Directors to be elected.
The following table sets forth certain information with respect to the six
nominees.
Served
Continuously
Name Age as Director Since
---- --- -----------------
Warren P. Levy (1) 46 1980
Ronald S. Levy (1) 49 1980
Jay Levy (1) 74 1980
Allen Bloom 54 1998
Robert F. Hendrickson 65 1997
Robert G. Ruark 56 1993
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(1) Dr. Warren P. Levy and Dr. Ronald S. Levy are brothers and are the sons of
Mr. Jay Levy.
Dr. Warren P. Levy, a founder of the Company, has served as President,
Chief Executive Officer and Director of the Company since its formation in
November 1980. Dr. Levy holds a Ph.D. in biochemistry and molecular biology from
Northwestern University and a bachelor's degree in chemistry from the
Massachusetts Institute of Technology.
-2-
Dr. Ronald S. Levy, a founder of the Company, has served as Vice President
and Director of the Company since its formation in November 1980 and as
Secretary since May 1986. Dr. Levy holds a Ph.D. in bioinorganic chemistry from
Pennsylvania State University and a bachelor's degree in chemistry from Rutgers
University.
Mr. Jay Levy, a founder of the Company, has served as Chairman of the Board
of Directors and Treasurer of the Company since its formation in November 1980.
Mr. Levy is a part-time employee of the Company and devotes approximately 15% of
his time to the Company. From 1985 through February 1991, he served as the
principal financial advisor to the Estate of Nathan Cummings and its principal
beneficiary, The Nathan Cummings Foundation, Inc., a large charitable
foundation. For the seventeen years prior thereto, he performed similar services
for the late Nathan Cummings, a noted industrialist and philanthropist.
Dr. Allen Bloom, a patent attorney, has been a partner in Dechert Price &
Rhoads, a law firm, for the past four years where he established and headed the
patent practice group which focused on biotechnology, pharmaceuticals and
medical devices. For the nine years prior thereto, he was Vice President,
General Counsel and Secretary of The Liposome Company, Inc., a biotechnology
company. His responsibilities there included patent, regulatory and licensing
activities. Dr. Bloom holds a Ph.D. in Organic Chemistry from Iowa State
University.
Mr. Robert F. Hendrickson has been a director since January 1997. Mr.
Hendrickson was Senior Vice President, Manufacturing and Technology, for Merck &
Co., Inc., an international pharmaceutical company, from 1985 to 1990. Since
1990, Mr. Hendrickson has been a management consultant with a number of
biotechnology and pharmaceutical companies among his clients. He is currently
Chairman of the Board of Envirogen, Inc. an environmental biotechnology company,
and a director of Cytogen, Inc. and The Liposome Co., Inc., both of which are
biotechnology companies.
Mr. Robert G. Ruark has been an independent consultant since June 1993.
Prior thereto, he had been employed by Merck and Co., Inc., an international
pharmaceutical company, for 25 years in various legal and administrative
capacities. Mr. Ruark, an attorney, has extensive experience in international
licensing and business development. When he retired in 1993, Mr. Ruark was Vice
President of the Merck Human Health Division.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company does not have standing nominating or
compensation committees. The members of the Audit Committee are Jay Levy and
Robert G. Ruark. The Audit Committee consults with the independent certified
public accountants and reviews the reports submitted by such auditors.
During 1997, there were five meetings of the Board of Directors and one
meeting of the Audit Committee.
Directors who are neither employees nor consultants on retainer receive a
fee of $1,000 for each Board meeting attended. Mr. Robert G. Ruark, Mr. Robert
F. Hendrickson and Dr. Allen Bloom are the directors who qualified for such
fees. Although not on retainer, Mr. Ruark has an agreement with the Company
pursuant to which he is entitled to receive consulting fees of either $500 or
$1,000 per day, depending on the type of project. In January 1998, $16,000 of
such fees were paid to Mr. Ruark for consulting services rendered in 1996 and
1997. The Company believes that the fee arrangement with Mr. Ruark is no more
favorable than would be paid to unaffiliated third parties. Audit Committee
members do not earn additional compensation.
In 1994, the Company's stockholders approved the adoption of the 1994
Outside Directors Stock Option Plan (the "Plan"). Under the Plan, each person
who was an outside director at the time of the adoption of the Plan was granted,
and each person who subsequently is elected as an outside director is granted, a
ten-year option to purchase 30,000 shares of Common Stock at an exercise price
equal to the market price of the Common Stock on the date of the grant. The
options vest in equal increments over the three-year period following the grant.
If the recipient's service as a director terminates, the option will expire
three (3) months after the date of such termination. Messrs. Hendrickson, Ruark
and Bloom each have received under the Plan grants of options to purchase 30,000
shares.
REPORT OF THE BOARD OF DIRECTORS ON 1997 EXECUTIVE COMPENSATION
The entire Board of Directors was responsible for determining the 1997
compensation of the three executive officers of the Company. This Report
describes the policies and other considerations used by the Board in
establishing such compensation.
The members of the Board are familiar with various forms and types of
remuneration from reports of other public corporations and their own business
experience.
The Board has determined that, because the Company was still in a research
and preproduction phase in 1997, compensation for 1997 for executive officers
could not be related primarily to the performance of the Company's stock or to
the annual profit performance of the Company. A primary consideration for the
compensation of an executive officer of the Company is his leadership effort in
the development of proprietary products and processes, and in planning for
future growth and profitability. Other significant factors considered by the
Board of Directors in determining executive officers' compensation were salaries
paid by other public companies in the health-care related biotechnology field to
comparable officers, the duties and responsibilities of the executive officers
in the past and as projected, their past performance and commitment to the
Company, and incentives for future performance although no specific weighting
was allocated to any of these considerations. The executive officers were also
consulted with respect to their compensation and their plans for compensation
for other personnel in order to coordinate all compensation policies of the
Company.
-3-
The Board of Directors determined that no bonuses or salary increases
should be paid to executive officers in 1997, primarily on the basis of the
Company's losses and the projected expenses and cash flow required for the
further development of the Company's oral calcitonin product as well as the
regulatory expenses and regulatory filing fees for the Company's injectable form
of calcitonin.
The Board also determined that no stock options be awarded to executive
officers for 1997, at the request of such executive officers.
The compensation for the Chief Executive Officer for 1997 was based on the
same policies and considerations set forth above for executive officers
generally.
Warren P. Levy
Ronald S. Levy
Jay Levy
Robert F. Hendrickson
Robert G. Ruark
George M. Weimer
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Executive compensation for 1997 was determined by the Board of Directors of
the Company consisting of Messrs. Warren P. Levy, Ronald S. Levy, Jay Levy,
Robert F. Hendrickson, Robert G. Ruark, and George M. Weimer (retired May 1,
1998).
Three of the members of the six member Board of Directors, Warren P. Levy,
Ronald S. Levy and Jay Levy, are executive officers of the Company. Jay Levy is
the father of Warren and Ronald Levy.
During 1995, Warren P. Levy, Ronald S. Levy, Jay Levy, and another family
member loaned a total of $1,905,000 to the Company of which $1,850,000 was
secured by secondary liens on the Fairfield plant and equipment and the Boonton
manufacturing equipment. The notes bear interest at the Merrill Lynch Margin
Loan Rate plus .25% (8.875% at April 1, 1998). Under the terms of the Company's
9.5% Senior Secured Convertible Debentures, for so long as the Debentures are
outstanding, repayment of the loans is contingent upon the achievement of
certain corporate benchmarks and is subject to a maximum limitation of
$1,250,000. A total of $440,000 in principal payments was made during 1996. In
1997, an aggregate of $200,000 in principal amount of these loans was converted
into 57,200 shares of Common Stock leaving an outstanding balance of $1,265,000
at December 31, 1997. No interest has been paid to date.
EXECUTIVE COMPENSATION
The following table sets forth for the years 1997, 1996 and 1995
compensation paid to the Chief Executive Officer of the Company and to each
other executive officer whose compensation in 1997 exceeded $100,000 for
services rendered by such executive officers in all capacities in which they
served:
SUMMARY COMPENSATION TABLE
All Other
Annual Compensation Long Term Compensation Compensation(1)
------------------- ---------------------- ---------------
Awards Payouts
------ -------
Other Restricted
Name and Annual Stock Options/ LTIP
Principal Position Year Salary Bonus Compensation Award SARs Payouts
- ------------------ ---- ------ ----- ------------ ----- ---- -------
Warren P. Levy, 1997 $145,549 $ -0- $ -0- $ -0- $ -0- $ -0- $ 13,810
President, Chief 1996 145,454 -0- -0- -0- -0- -0- 13,806
Executive Officer 1995 145,394 -0- -0- -0- -0- -0- 13,811
and Director
Dr. Ronald S. Levy, 1997 140,895 -0- -0- -0- -0- -0- 16,756
Vice President and 1996 140,889 -0- -0- -0- -0- -0- 16,746
Director 1995 140,829 -0- -0- -0- -0- -0- 16,616
- -------
(1) Represents premium paid by the Company on executive split-dollar life
insurance.
-4-
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock against
the cumulative total return of the NASDAQ Market Index and of a peer group index
determined by Standard Industrial Classification (SIC) code.
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
[GRAPHIC-GRAPH PLOTTED TO POINTS LISTED BELOW]
FISCAL YEAR ENDING
------------------------------------------------------------
1992 1993 1994 1995 1996 1997
UNIGENE LABS INC 100 59.70 56.72 31.34 48.51 62.69
INDUSTRY INDEX 100 83.01 55.72 108.16 96.21 109.74
BROAD MARKET 100 119.95 125.94 163.35 202.99 248.30
Assumes $100 Invested on January 1, 1993
Assumes Dividends Reinvested
Fiscal Years Ending December 31.
-5-
The industry index chosen was:
SIC Code 8731 - Commercial Physical & Biological Research
The Broad Market index chosen was:
NASDAQ Market Index
The current composition of the industry index is as follows:
Abiomed Inc. Kendle Internat Inc.
AC Nielsen Corp. KFX Inc.
Affymetrix Inc. Kopin Corp.
Agritope Inc. Krug Internat Corp
Aura Systems Inc. Lifecell Corporation
Aurora Biosciences Corp. Liposome Co. Inc.
Bioreliance Corp. Megabios Corp.
Cadus Pharmaceutical CP Myriad Genetics Inc.
Catalytica Inc. Neopharm Inc.
Celgene Corp. Neose Technologies Inc.
Cocensys Inc. Neotherapeutics Inc.
Collaborative Clin Res Neurocrine Biosciences
Commonwealth Biotech Inc. Organogenesis Inc.
Conductus Inc. Pacific Biometrics Inc.
Covance Inc. Parexel Internat CP
Cree Research Inc. Pharmaceutical Prod Dev
CV Therapeutics Inc. Pharmacopeia Inc.
Cyclo 3 PSS Corp. Polymer Research of Amer
Depomed Inc. Primark Corp.
Ecogen Inc. Protein Polymer Tech
Ecoscience Corp Quest Diagnostics Inc.
Electronic Designs Inc. Quintiles Transnational
Electrosource Inc. Research Frontiers Inc.
Energy Biosystems Corp. Satcon Technology Corp.
Energy Conversn Devices SI Diamond Technol
Excel Technology Inc. Spire Corp.
Fiberchem Inc. Summit Technology Inc.
Gene Logic Inc. Superconductor Tech.
Genset ADR Synaptic Pharmaceutical
Illinois Superconductor Valence Technology Inc.
Incyte Pharmaceuticals Xenova GR PLC ADS
Innerdyne Inc. XXSYS Technologies Inc.
Integrated Process Equip.
Irvine Sensors Corp.
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG Peat Marwick LLP, independent
public accountants, to serve as the Company's independent auditors for the
fiscal year commencing January 1, 1998. Although not required by the Company's
Certificate of Incorporation or By-Laws, the Board of Directors is submitting to
a vote of the stockholders a proposal to ratify the appointment of KPMG Peat
Marwick LLP. KPMG Peat Marwick LLP served as the independent auditors for the
Company for the year ended December 31, 1997. A representative of the firm will
be present at the meeting to respond to appropriate questions and will have the
opportunity to make a statement, if such representative desires to do so.
Ratification of the appointment of KPMG Peat Marwick LLP requires the
affirmative vote of a majority of the shares of Common Stock present and
entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF KPMG PEAT
MARWICK LLP.
OTHER MATTERS
The Board of Directors of the Company does not know of any other matters
that are likely to be brought before the meeting. However, in the event that any
other matters properly come before the meeting, the persons named in the
enclosed form of proxy will vote all proxies received in accordance with their
judgment on such matters.
PROPOSALS BY STOCKHOLDERS
Proposals of stockholders intended to be presented at the Annual Meeting of
Stockholders of the Company to be held in 1999, must be received by January 11,
1999, if they are to be included in the Company's Proxy Statement and form of
proxy relating to such meeting.
SOLICITATION OF PROXIES
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Meeting and the enclosed form of proxy will be borne by the Company.
In addition to the solicitation of proxies by use of the mails, the Company may
utilize the services of some of its officers and regular employees (who will
receive no compensation therefor in addition to their regular salaries) to
solicit proxies personally and by telephone and telefax.
By Order of the Board of Directors
/s/RONALD S. LEVY
-----------------
Ronald S. Levy
Secretary
Fairfield, New Jersey
May 11, 1998
REVOCABLE PROXY
UNIGENE LABORATORIES, INC.
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING
JUNE 30, 1998
The undersigned stockholder of Unigene Laboratories, Inc. hereby appoints
Warren P. Levy, Ronald S. Levy and Jay Levy, and each of them, as the
undersigned's proxies (with the power of substitution), to vote all the shares
of Common Stock of Unigene Laboratories, Inc. which the undersigned would be
entitled to vote at the Annual Meeting of Stockholders of Unigene Laboratories,
Inc. to be held on June 30, 1998 at 11:00 A.M., Eastern Daylight time, and any
adjournments thereof, on the following matters:
1. Election of directors
Jay Levy, Ronald S. Levy,
Warren P. Levy, Robert G. Ruark,
Robert F. Hendrickson and Allen Bloom.
FOR ALL
[ ] FOR [ ] WITHHOLD [ ] EXCEPT
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
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2. Ratification of the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion in the transaction of any other business that may
properly come before such meeting.
The undersigned hereby revokes any proxy heretofore given.
Please sign exactly as your name appears on this card. If stock is registered
in the names of two or more joint owners or trustees, each joint owner or
trustee should sign this proxy. When signing as an executor, administrator,
trustee, guardian, agent or attorney, please give your full title as such.
Please be sure to sign and date
this Proxy in the box below.
_________________________________________
Date
_________________________________________
Stockholder sign above
_________________________________________
Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
UNIGENE LABORATORIES, INC.
This proxy will be voted in accordance with instructions specified above, but
in the absence of any instructions will be voted "FOR" Items 1 and 2. If any
other business is presented at the meeting, the proxies are authorized to vote
thereon in their discretion.
The Board of Directors recommends a vote FOR Items 1 and 2 noted above.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY