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 23, 1999
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 23,
1999, at 11:00 A.M., Eastern Daylight Time, for the following purposes:
1. To elect directors of the Company;
2. To approve the adoption of the Company's Directors Stock Option Plan;
3. To ratify the appointment of KPMG LLP as auditors of the Company; and
4. To transact such other business as may properly come before the
meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on May 3, 1999, 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, 1998
is sent to you along with the Proxy Statement.
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
----------------------------------
RONALD S. LEVY
Secretary
May 14, 1999
Unigene
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 23, 1999, 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 3, 1999, 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 40,122,421 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 at
the Annual Meeting is required for the approval of the adoption of the Company's
Directors Stock Option Plan and for the ratification of the appointment of KPMG
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 14, 1999. A copy of the Company's Annual Report for the year ended December
31,1998, is also enclosed.
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of May 3, 1999, 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
---------------- --------- ------------------
The Tail Wind Fund, Ltd. (1) 3,151,720 7.4%
Windermere House
404 East Bay Street
P.O. Box SS-5539
Nassau, Bahamas
Loews Corporation (2) 3,000,000 7.3%
CNA Plaza
Chicago, IL 60685
- ----------
(1) Tail Wind is the holder of 5% Convertible Debentures that are convertible
into Common Stock and Warrants to purchase Common Stock at a floating
conversion price that is tied to the market price of the Common Stock. The
amount and percentage of shares shown as beneficially owned includes
462,605 shares of Common Stock; 26,620 shares of Common Stock issuable upon
the exercise of Warrants; and 2,662,495 shares of Common Stock issuable
upon (a) conversion of 5% Convertible Debentures in the principal amount of
$1,800,000 and (b) exercise of Warrants issuable upon conversion of the
Debentures, which 2,662,495 shares is the maximum number issuable within
the next 60 days under the terms of the Debentures. Tail Wind has reported
that it has sole voting power and sole dispositive power with respect to
such shares.
(2) 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.
Loews reports that it has sole voting power and sole dispositive power with
respect to such shares.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of May 3, 1999, 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 1,980,545 (2) 5.0%
Ronald S. Levy 1,995,545 (2) 5.0%
Jay Levy 523,095 1.3%
Robert F. Hendrickson 35,000 (3) 0.1%
Allen Bloom 11,000 (4) --
Robert G. Ruark 30,000 (5) 0.1%
Officers and Directors
as a Group (7 persons) 4,641,845 (2) (6) 11.5%
- ----------
(1) Unless otherwise noted, each person or group has reported 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 20,000 shares of Common Stock that Mr. Hendrickson has the right
to acquire pursuant to stock options, which are exercisable immediately.
(4) Includes 10,000 shares of Common Stock that Mr. Bloom has the right to
acquire pursuant to stock options which are exercisable immediately.
(5) Consists solely of shares of Common Stock that Mr. Ruark has the right to
acquire pursuant to stock options which are exercisable immediately. Mr.
Ruark, a director of the Company, is retiring from the Board prior to the
1999 stockholders' meeting.
(6) Includes an aggregate of 302,000 shares of Common Stock that such persons
have the right to acquire pursuant to stock options, which are exercisable
immediately.
PROPOSAL 1
ELECTION OF DIRECTORS
Five 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
2000, 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
each was elected as a director at the Company's Annual Meeting of Stockholders
in 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 five
nominees.
Served
Continuously
Name Age as Director Since
---- --- -----------------
Warren P. Levy (1) 47 1980
Ronald S. Levy (1) 50 1980
Jay Levy (1) 75 1980
Allen Bloom 55 1998
Robert F. Hendrickson 66 1997
- ----------
(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.
Dr. Ronald S. Levy, a founder of the Company, has served as Director of the
Company since its formation in November 1980, as Executive Vice President since
April 1999 and as Secretary since May 1986. From November 1980 through March
1999, he served as Vice President of the Company. 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 five years where he established and heads the
patent practice group which focuses 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 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 a director of Envirogen, Inc. an environmental biotechnology company,
and a director of Cytogen, Inc. and The Liposome Co., Inc., both of which are
biotechnology companies.
BOARD OF DIRECTORS AND COMMITTEES
During 1998, there were five meetings of the Board of Directors.
Several important functions of the Board of Directors may be performed by
committees that are comprised of members of the Board of Directors. The
Company's By-laws authorize the formation of these committees and grant the
Board the authority to prescribe the functions of each committee and the
standards for membership of each committee. The Board has four standing
committees: an Audit Committee, a Compensation Committee, a Stock Option
Committee for the employee stock option plans and a Stock Option Committee for
the directors stock option plan.
The responsibilities of the Audit Committee include (i) annually to
recommend a firm of independent public accountants to the Board of Directors to
act as auditors of the Company; (ii) review the scope of the annual audit with
the auditors in advance of the audit, (iii) review the results of the audit and
the adequacy of the Company's accounting, financial and operating controls; (iv)
review the Company's accounting and reporting principles, policies and
practices; and (v) approval of fees paid to the auditors for audit and non-audit
services. The current members of the Audit Committee are Messrs. Jay Levy, Allen
Bloom and Robert Hendrickson. The Audit Committee held one meeting during 1998.
The responsibilities of the Compensation Committee include (i) review and
approval of the compensation (including salaries and bonuses) of the Company's
officers; (ii) overseeing the administration of the Company's 401(k) Plan; (iii)
review and approve general benefits and compensation strategies; and (iv)
preparation or approval of the Compensation Committee report included in the
Company's proxy statement. The current members of the Compensation Committee are
Messrs. Jay Levy, Allen Bloom and Robert Hendrickson. The Compensation Committee
was established in December 1998 and held no meetings during 1998.
Subject to the limitations set forth in the plans, the Stock Option
Committee for the employee stock option plans (i) selects the employees to be
granted options; (ii) fixes the number of shares to be covered by the options
granted; and (iii) determines the exercise price and other terms and conditions
of each option. The current members of the Committee are Allen Bloom and Robert
Hendrickson. There were no meetings held by this Committee during 1998.
Subject to the limitations set forth in the plan, the Stock Option
Committee for the directors stock option plan interprets the plan and makes all
determinations necessary for the plan's administration. The current members of
the Committee are Jay Levy, Warren Levy and Ronald Levy. There were no meetings
held by this committee during 1998.
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 were the directors who received such fees in
1998. Board members do not earn additional compensation for service on a
committee.
Under the 1994 Outside Directors Stock Option 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 and Bloom each
have received under the Plan grants of options to purchase 30,000 shares. A new
stock option plan for directors to replace the Plan is being submitted to a vote
of stockholders at the Annual Meeting. See "Approval of Adoption of the
Directors Stock Option Plan".
REPORT OF THE BOARD OF DIRECTORS ON 1998 EXECUTIVE COMPENSATION
The entire Board of Directors was responsible for determining the 1998
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 1998, compensation for 1998 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.
The Board of Directors determined that no bonuses or salary increases
should be paid to executive officers in 1998, 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 for the Company's injectable form of calcitonin.
The Board also determined that no stock options be awarded to executive
officers for 1998, at the request of such executive officers.
The compensation for the Chief Executive Officer for 1998 was based on the
same policies and considerations set forth above for executive officers
generally.
Warren P. Levy Robert F. Hendrickson
Ronald S. Levy Robert G. Ruark
Jay Levy Allen Bloom
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Executive compensation for 1998 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 Allen Bloom.
Three 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% (8.125% at April 1, 1999). A total of $440,000 in principal
repayments was made during 1996. In 1997, an aggregate of $200,000 in principal
amount was converted into 57,200 shares of Common Stock. In 1998, an aggregate
of $225,000 in principal amount of these loans was converted into 163,635 shares
of Common Stock, leaving an outstanding balance of $1,040,000 at December 31,
1998. In each case, such conversions were at a price slightly higher than the
then market price of the Common Stock. No interest has been paid to date on the
loans. As of December 31, 1998, accrued interest totalled $493,515.
EXECUTIVE COMPENSATION
The following table sets forth, for the years 1998, 1997 and 1996,
compensation paid to the Chief Executive Officer of the Company and to each
other executive officer whose compensation in 1998 exceeded $100,000, for
services rendered by such executive officers in all capacities in which they
served:
SUMMARY COMPENSATION TABLE
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, 1998 $146,231 $-0- $-0- $-0- $-0- $-0- $13,830
President, Chief 1997 145,549 -0- -0- -0- -0- -0- 13,810
Executive Officer 1996 145,454 -0- -0- -0- -0- -0- 13,806
and Director
Dr. Ronald S. Levy, 1998 141,618 -0- -0- -0- -0- -0- 16,792
Executive Vice 1997 140,895 -0- -0- -0- -0- -0- 16,756
President and 1996 140,889 -0- -0- -0- -0- -0- 16,746
Director
- ----------
(1) Represents premium paid by the Company on executive split-dollar life
insurance.
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 to 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 PLOTTED TO POINTS IN CHART BELOW]
FISCAL YEAR ENDING
COMPANY/INDEX/ MARKET 12/31/1993 12/31/1994 12/31/1995 12/31/1996 12/31/1997 12/31/1998
Unigene Laboratories, Inc. 100.00 95.00 52.50 81.25 105.00 47.50
Commercial Physical Research 100.00 67.12 130.29 115.90 132.20 145.12
NASDAQ Market Index 100.00 104.99 136.18 169.23 207.00 291.96
Assumes $100 Invested on January 1, 1994
Assumes Dividends Reinvested
Fiscal Years Ending December 31.
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. Ecogen Inc. Neopharm Inc
AC Nielsen Corp. Ecoscience Corp. Neose Technologies Inc.
Affymetrix Inc. Electronic Designs Inc. Neotherapeutics Inc
Agritope Inc. Electrosource Inc.. Neurocrine Biosciences
Aura Systems Inc. Energy Biosystems Corp. Ophidian Pharmaceuticals
Aurora Biosciences Corp. Energy Conversn Devices Organogenesis Inc
Bioreliance Corp. Excel Technology Inc Pacific Biometrics Inc.
Cadus Pharmaceutical CP Gene Logic Inc. Parexel Internat CP.
Catalytica Inc. Genset ADR Pharmaceutical Prod. Dev.
Celgene Corp. Illinois Superconductor Pharmacopeia Inc.
Cocensys Inc. Incyte Pharmaceuticals Polymer Research of Amer.
Collaborative Clin. Res. Innerdyne Inc. Protein Polymer Tech.
Collateral Therapeutics Integrated Process Equip. Quest Diagnostics Inc.
Combichem Inc. Irvine Sensors Corp. Quintiles Transnational
Commonwealth Biotech Inc. Kendle Internat Inc. Research Frontiers Inc..
Conductus Inc. KFX Inc. Ribogene Inc..
Covance Inc. Kopin Corp. Satcon Technology Corp.
Cree Research Inc. Krug Internat Corp. Spire Corp.
Curagen Corp. Lifecell Corporation Summit Technology Inc.
CV Therapeutics Inc. Liposome Co. Inc.. Superconductor Tech.
Depomed Inc. Megabios Corp. Synaptic Pharmaceutical
Myriad Genetics Inc. Valence Technology Inc.
Xenova GR PLC ADS
XXSYS Technologies Inc.
PROPOSAL 2
APPROVAL OF ADOPTION OF THE DIRECTORS STOCK OPTION PLAN
The Board of Directors is submitting to stockholders for approval at the
1999 Annual Meeting a proposal to adopt a Directors Stock Option Plan (the "New
Plan") to replace the 1994 Outside Directors Stock Option Plan (the "1994
Plan").
BACKGROUND
The 1994 Plan was approved by stockholders at the Company's 1994 Annual
Meeting. The 1994 Plan provides for a one-time grant of an option to purchase
30,000 shares of Common Stock (i) to each outside director who was a member on
the Board of Directors at the time of the adoption of the 1994 Plan and (ii) to
each person who subsequently becomes an outside director at the time of their
first election to the Board. However, there is no provision in the 1994 Plan for
the granting of any additional options to outside directors after the initial
grant. The Company feels that it is in the best interests of the Company, as
well as its stockholders, to be able to issue additional options to outside
directors. The Company believes that this would provide additional incentives to
current directors, and would also enhance the Company's ability to attract new
directors of quality and experience.
TERMS OF THE NEW PLAN
The following is a summary of the material terms of the New Plan. This
summary is qualified in its entirety by reference to the text of the New Plan,
which is included as Attachment A to this Proxy Statement.
Eligibility. Only directors who are not employees of the Company are
eligible to participate in the New Plan ("non-employee directors").
Awards. After the effective date of the New Plan (which is the day on which
stockholders' approval is obtained), each person elected to the Board who is not
an employee will receive, on the date of his initial election, an option to
purchase 21,000 shares of Common Stock (an "Initial Option"). On May 1st of each
year, commencing May 1, 1999, each non-employee director will receive an option
to purchase 10,000 shares of Common Stock if he has served as a non-employee
director for at least six months prior to the May 1st grant (an "Additional
Option").
Term. Each option granted under the New Plan will have a ten-year term.
Exercise Price. The exercise price of each option will be equal to the market
price of the Common Stock on the date of the grant.
Vesting. Each Initial Option will vest in equal installments of 1/3 over a
period of three years, commencing on the date of the grant. Each Additional
Option will vest in its entirety on the first anniversary of the grant.
Exercise of Options. All options will become exercisable upon the vesting
thereof, and shall remain exercisable for the remaining term of the option,
unless the director's service as a non-employee director terminates prior to the
expiration of the term. If the grantee's service as a director terminates prior
to the expiration of the option, the options will remain exercisable for a
90-day period following termination of service, except (i) if a non-employee
director resigns due to disability, the options will remain exercisable for 180
days following termination, and (ii) if a non-employee director dies while
serving as a director, or within 90 days following termination of service (180
days in the case of disability), the options will remain exercisable for 180
days following the person's death. After such period, the options will terminate
and cease to be exercisable.
Administration. The New Plan will be administered by a committee appointed
by the Board of Directors consisting of directors who are not eligible to
participate in the New Plan (the "Committee").
Number of Shares Available for Issuance. A total of 350,000 shares of
Common Stock will be reserved for issuance under the Plan.
AWARDS UNDER THE NEW PLAN
The stock option holdings (consisting entirely of a grant under the 1994
Plan) of the current outside directors who are standing for re-election, as well
as the vesting schedule, are as follows:
Vesting Schedule
----------------
Total Number Exercise Through
of Shares Price 1998 1999 2000 2001
------ ------ ------ ------ ------ ------
Allen Bloom 30,000 $2.75 -- 10,000 10,000 10,000
Robert Hendrickson 30,000 $2.81 10,000 10,000 10,000 --
------ ------ ------ ------ ------
Totals 60,000 10,000 20,000 20,000 10,000
====== ====== ====== ====== ======
The last sale price of the Common Stock on April 30, 1999, as reported by
Nasdaq, was $.75 per share.
If the Plan is approved by the stockholders, the 1994 Plan will be
terminated, except for options currently outstanding. The current non-employee
directors will not receive an Initial Option under the New Plan. However, they
will each receive Additional Options to purchase 10,000 shares of Common Stock
effective as of May 1, 1999, and on each anniversary thereafter.
The following table summarizes the stock option grants that would be made
under the New Plan assuming that it is approved at the 1999 Annual Meeting. The
exercise price of the options will be equal to the market price of the Common
Stock on May 1, 1999.
New Plan Benefits
Number of Shares
Name Underlying Additional Options
---- -----------------------------
Allen Bloom 10,000
Robert Hendrickson 10,000
FEDERAL INCOME TAX CONSEQUENCES
All options granted under the New Plan will be non-qualified stock options.
In general, a holder will not recognize income when an option is granted.
When a holder exercises an option, the holder generally will recognize ordinary
income equal to the excess of the fair market value (as of the exercise date) of
the shares of Common Stock purchased over the exercise price. The holder's tax
basis in the shares generally will be the sum of the amount that the holder pays
for the shares and the ordinary income that the holder recognizes as income as a
result of exercising the option. Accordingly, the tax basis of the shares
generally will equal the fair market value of the shares on the date when the
holder exercises the option.
The Committee may permit a holder to surrender shares of Common Stock in
payment of the exercise price under an option. To the extent that the holder
receives shares that are equal in number to the shares that the holder
surrenders, the holder's tax basis in the shares that he receives will equal his
tax basis in the surrendered shares. To the extent that the holder receives
shares in excess of the number of shares that the holder surrenders, the holder
will recognize ordinary income, at the time of exercise, equal to the fair
market value of the additional shares reduced by any cash that the holder pays
as part of the exercise price. The holder's tax basis in the additional shares
will be the sum of the amount that the holder recognizes as ordinary income and
any cash that the holder pays as part of the exercise price.
If a holder disposes of shares acquired by the exercise of an option, the
holder will recognize gain (or loss) in the year of the disposition. The gain
(or loss) will equal the difference between any amount that the holder realizes
on the disposition and the holder's tax basis in the shares.
The Company generally will be entitled to a tax deduction in an amount
equal to the ordinary income recognized by a holder, provided that the amount
qualifies as an ordinary and necessary business expense. The Company will be
entitled to claim the deduction in the same year in which the holder recognizes
ordinary income.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or represented by proxy and entitled to vote at the
Annual Meeting is required to approve the adoption of the New Plan. The Board of
Directors recommends a vote FOR approval of the New Plan.
PROPOSAL 3
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG LLP, independent public
accountants, to serve as the Company's independent auditors for the fiscal year
commencing January 1, 1999. 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 LLP. KPMG LLP
served as the independent auditors for the Company for the year ended December
31, 1998. 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 LLP requires the affirmative vote
of a majority of the shares of Common Stock present and entitled to vote at the
Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF KPMG 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
Stockholder proposals intended to be presented at the 2000 Annual Meeting
must be received by the Company on or before January 15, 2000, in order to be
considered for inclusion in the Company's proxy statement and form of proxy for
the Annual Meeting, and must also meet the other requirements set forth in the
rules of the Securities and Exchange Commission relating to such stockholder
proposals. If the proposal is received by the Company less than 45 days prior to
the anniversary of the mailing date of this proxy statement, the persons named
as proxies in the Company's proxy material for the 2000 Annual Meeting will have
the discretionary authority to vote on the matter in accordance with their best
judgment without disclosure in the proxy statement of such matter or of how the
proxyholders intend to exercise their discretionary voting authority.
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. The Company has
retained Regan & Associates, Inc. to aid in the solicitation of proxies, for
which such firm will be paid a fee of $4,500, plus reimbursable expenses.
By Order of the Board of Directors
RONALD S. LEVY
Secretary
Fairfield, New Jersey
May 14, 1999
Attachment A
UNIGENE LABORATORIES, INC.
DIRECTORS STOCK OPTION PLAN
1. Purpose of the Plan.
The purpose of the Directors Stock Option Plan of Unigene Laboratories,
Inc., is to promote the interests of the Company by enhancing the Company's
ability to attract and retain as non-employee directors persons of experience
and ability, and to encourage the highest level of non-employee director
performance by providing such directors with a proprietary interest in the
Company's growth and financial success.
2. Definitions.
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations thereunder.
(c) "Committee" means a committee consisting of members of the Board who
shall be appointed by the Board from time to time, none of whom shall
be eligible to participate in the Plan. Members of the Committee shall
serve at the pleasure of the Board and may resign at any time upon
written notice to the Board.
(d) "Common Stock" means the $.01 par value common stock of the Company.
(e) "Company" means Unigene Laboratories, Inc.
(f) "Date of Grant" means the date of grant of an Option.
(g) "Election Date" means the day of the initial election or appointment
to the Board (whether by the stockholders of the Company or the Board)
of a Non-employee Director.
(h) "Non-employee Director" means a member of the Board who is not an
Employee at the time that a grant of an Option is made to such person
under the terms of the Plan.
(i) "Employee" means any full-time employee of the Company, or any present
or future parent or subsidiary of the Company.
(j) "Fair Market Value" means the last sale price of Common Stock
immediately prior to the close of business on the date Fair Market
Value is to be determined as reported by the Nasdaq Stock Market, or,
if the Common Stock is not subject to last sale reporting, the average
of the bid and asked quotations as reported by the Nasdaq Stock Market
at the close of business on such date. If no such last sale report or
quotations are available on such date, such determination shall be
made as of the next preceding date on which a last sale report or
quotations were available.
(k) "1994 Plan" means the 1994 Outside Directors Stock Option Plan of the
Company.
(l) "Option" means a right granted to purchase Common Stock under the
Plan.
(m) "Participant" means a Non-employee Director who holds an Option.
(n) "Plan" means the Directors Stock Option Plan of the Company as set
forth herein and as it may be amended from time to time.
3. Shares of Common Stock Eligible for Issuance Under the Plan.
(a) Subject to the provisions of Section 7, the aggregate number of shares
of Common Stock that may be issued or transferred pursuant to exercise
of Options under the Plan shall not exceed 350,000 shares. Such shares
may be either authorized but unissued shares or treasury shares.
(b) In the event that an Option previously granted shall for any reason
expire or be terminated without being exercised in whole or in part,
the unpurchased shares of Common Stock subject to the Option shall be
restored to the total number of shares of Common Stock with respect to
which Options may be granted under the Plan.
4. Administration of the Plan.
(a) The Plan shall be administered by the Committee, which shall have the
sole and complete authority to interpret the Plan and amend and
rescind rules and to make all other determinations necessary for the
Plan's administration.
(b) All action taken by the Committee in the administration and
interpretation of the Plan shall be final and binding on all
concerned.
(c) The Committee may designate officers or employees of the Company to
assist the Committee in the administration of the Plan and to execute
documents on behalf of the Committee, and the Committee may delegate
to such officers and employees such other ministerial and limited
discretion duties as it sees fit.
5. Eligibility and Awards.
(a) Only directors of the Company who are Non-employee Directors shall be
eligible to participate in the Plan.
(b) Options shall be granted under the Plan as follows:
(i) on the Election Date of a Non-employee Director that occurs on or
after the effective date of the Plan, such Non-employee Director
shall be granted an Option to purchase 21,000 shares of Common
Stock (an "Initial Option");
(ii) commencing on May 1, 1999, and on each succeeding May 1st
thereafter, each Non-employee Director shall be granted an Option
to purchase 10,000 shares of Common Stock if such Non-employee
Director has served as a Non-employee Director for at least six
months prior to each May 1st (an "Additional Option").
(c) Each Option shall be evidenced by a written instrument that includes
such terms and conditions, consistent with the Plan, as the Committee
may determine (a "Stock Option Agreement").
6. Terms and Conditions of Options.
(a) The purchase price of Common Stock under each Option shall be equal to
the Fair Market Value of the Common Stock on the Date of Grant.
(b) Each Option shall expire on the tenth anniversary of its Date of
Grant, unless it expires sooner pursuant to the provisions of the Plan
or the Stock Option Agreement.
(c) Each Initial Option shall become exercisable with respect to 7,000
shares on each of the first, second and third anniversaries of its
Date of Grant. Each Additional Option shall become exercisable with
respect to all 10,000 shares of Common Stock on the first anniversary
of its Date of Grant. In no event, however, shall any Option become
exercisable with respect to any shares of Common Stock after the
Participant ceases to be a director of the Company for any reason.
(d) Any Option that has not theretofore expired shall terminate 90 days
following the termination of the Participant's service as a director
of the Company for any reason, and no shares of Common Stock may
thereafter be purchased pursuant to such Option, except that:
(i) Upon the resignation of a Participant as a director due to
disability, the Participant may, within a 180-day period after
the date of such termination, purchase all or any part of the
shares of Common Stock that such Participant was entitled to
purchase under such Option on the date of such termination.
(ii) Upon the death of a Participant while serving as a director or
within the 90-day period referred to above, the Participant's
estate or the person to whom such Participant's rights under the
Option are transferred by will or the laws of descent and
distribution may, within a 180-day period after the date of such
Participant's death, purchase all or any part of the shares of
Common Stock that such Participant was entitled to purchase under
such Option on the date of death.
(e) Upon the exercise of an Option, the purchase price shall be payable in
full in cash; provided, however, that the Committee may determine
acceptable methods for tendering shares of Common Stock in payment of
the exercise price, and may impose such other limitations and
prohibitions on the tendering of such shares as it deems appropriate.
Any shares so tendered to the Company in payment or partial payment of
the purchase price shall be valued at their Fair Market Value on the
exercise date.
(f) No Option shall be exercisable in whole or in part and no certificates
representing shares of Common Stock subject to the Option shall be
delivered,
(i) If any requisite approval or consent of any governmental
authority having jurisdiction over the exercise of Options shall
not have been secured or if the issuance of shares of Common
Stock subject to the Option would violate any federal, state or
local law, regulation or order;
(ii) At any time that the Common Stock of the Company is listed on a
stock exchange or the Nasdaq Stock Market, if the shares of
Common Stock subject to the Option shall not have been
effectively listed on such exchange or the Nasdaq Stock Market,
unless the Company is advised by its counsel that such listing is
not required; or
(iii)At any time that the Company shall determine that any applicable
withholding tax or other withholding obligations have not been
satisfied.
7. Adjustment Provisions.
If any subdivision or combination of shares of Common Stock or any stock
dividend, capital reorganization or recapitalization occurs after the effective
date of the Plan, the Committee shall make such proportionate adjustments as are
appropriate in the number of shares of Common Stock that may be issued under
Section 3 and in the purchase price of, and the number of shares underlying,
outstanding Options in order to prevent the dilution or enlargement of the
rights of each Participant.
8. Effect of Merger or Other Reorganization.
If the Company dissolves, sells substantially all of its assets, is
acquired in a stock-for-stock or securities exchange, or is a party to a merger,
consolidation or other reorganization in which it is not the surviving
corporation, then each Option shall be exercisable in full for a period
commencing upon the date the action of the stockholders (or of the Board, if
stockholder action is not required) is taken to approve the transaction and
ending on the date of consummation of such transaction, and upon the expiration
of that period all Options and all rights with respect thereto shall
automatically terminate; except that, if following such approval no such
transaction is consummated, all outstanding Options not exercised during the
period will be restored to their original vesting schedule.
9. General Provisions.
(a) Nothing in the Plan or in any instrument executed pursuant to the Plan
shall confer upon any Participant any right to continue to serve as a
director of the Company.
(b) No shares of Common Stock shall be issued pursuant to the exercise of
an Option unless and until all requirements imposed by federal and
state securities and other laws, rules and regulations and by any
regulatory agencies having jurisdiction, and by any stock exchanges or
the Nasdaq Stock Market upon which the Common Stock may be listed,
have been fully satisfied. As a condition precedent to the issuance of
shares pursuant to the exercise of an Option, the Company may require
the Participant to take any reasonable action to meet such
requirements.
(c) No Participant shall be entitled to the rights and privileges of stock
ownership relating to any shares of Common Stock underlying an Option
granted hereunder until such Option is exercised and the shares are
issued.
(d) Each Option is personal to the grantee, is not transferable by the
Participant other than by will or by the laws of descent and
distribution or a "qualified domestic relations order" as defined by
the Code, and is exercisable, during the Participant's lifetime, only
by the Participant or his legal representative.
10. Amendment and Termination.
The Board shall have the power, in its sole discretion, to amend, suspend
or terminate the Plan at any time; provided that no such amendment, suspension
or termination of the Plan shall, without the consent of the Participant, alter,
terminate, impair or adversely affect any right or obligation under any Option
previously granted under the Plan.
11. Effective Date and Duration of Plan.
This Plan shall become effective on the date that it is approved by
stockholders of the Company at the Company's 1999 Annual Meeting. No Option
shall be granted under the Plan after the tenth anniversary of such effective
date or, if earlier, the termination of the Plan pursuant to Section 10.
12. Termination of 1994 Plan.
On the effective date of the Plan, the 1994 Plan shall terminate, except
for currently issued and outstanding options that shall remain outstanding and
subject to the terms of the 1994 Plan.
REVOCABLE PROXY
UNIGENE LABORATORIES, INC.
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING
JUNE 23, 1999
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 23, 1999 at 11:00 A.M., Eastern Daylight time, and any
adjournments thereof, on the following matters:
1. Election of directors For All
[ ] For [ ] Withhold [ ] Except
Jay Levy, Ronald S. Levy,
Warren P. Levy, Robert F. Hendrickson
and Allen Bloom.
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. Approval of the adoption of the Company's Directors Stock Option Plan.
[ ] For [ ] Against [ ] Abstain
3. Ratification of the appointment of KPMG LLP as independent auditors of the
Company.
[ ] For [ ] Against [ ] Abstain
4. 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.
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This proxy will be voted in accordance with instructions specified above, but
in the absence of any instructions will be voted "FOR" Items 1, 2 and 3. 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, 2 and 3 noted above.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY