1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-11(c) or Rule 14a-12
UNIMED PHARMACEUTICALS, 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)
and 0-11.
(1) Title of each class of securities to which transaction
applies:__________
(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:______________
2
(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 O-ll(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:_______________________________________
(2) Form, schedule or registration statement no.:_________________
(3) Filing party:_________________________________________________
(4) Date filed:___________________________________________________
3
UNIMED LOGO
UNIMED PHARMACEUTICALS, INC.
2150 EAST LAKE COOK ROAD
BUFFALO GROVE, IL 60089
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 29, 1999
------------------------
The Annual Meeting of Stockholders of UNIMED Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), will be held at the Northbrook Hilton
Hotel, 2855 North Milwaukee Avenue, Northbrook, Illinois 60062, on April 29,
1999, at 10:00 a.m., Chicago time, for the following purposes:
1. To elect two nominees as directors for a term of three years (expiring
in 2002) and until their successors are duly elected and qualified.
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has set March 19, 1999, as the record date for the
meeting. Only holders of the Company's Common Stock of record at the close of
business on such date will be entitled to notice of, and to vote at, the Annual
Meeting. The stock transfer books will not be closed.
By Order of the Board of Directors,
DAVID E. RIGGS,
Secretary
Dated: April 2, 1999
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED. PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY
CARD IN THE POSTAGE PAID ENVELOPE PROVIDED. YOUR PROMPT RESPONSE WILL
ASSURE A QUORUM AT THE MEETING, THEREBY SAVING YOUR COMPANY THE EXPENSE OF
FURTHER SOLICITATION OF PROXIES.
4
UNIMED LOGO
UNIMED PHARMACEUTICALS, INC.
2150 EAST LAKE COOK ROAD
BUFFALO GROVE, IL 60089
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 29, 1999
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of Unimed
Pharmaceuticals, Inc. (the "Company") to be voted at the Annual Meeting of
Stockholders of the Company to be held at the Northbrook Hilton Hotel, 2855 N.
Milwaukee Avenue, Northbrook, Illinois 60062, at 10:00 a.m., Chicago time, on
April 29, 1999, and any and all adjournments thereof. The Proxy Statement and
the form of proxy enclosed herewith were first mailed on or about April 2, 1999
to stockholders of record on March 19, 1999. Any stockholder who executes and
delivers a proxy may revoke it by written communication to the Secretary of the
Company at any time prior to its use or by voting in person at the Annual
Meeting.
The cost of soliciting proxies will be borne by the Company. Directors,
officers and regular employees of the Company may solicit proxies by telephone,
telegram and personal interview. The Company may also hire a proxy solicitor.
The Company also will bear the expense of brokers who, at the request of the
Company, mail to their customers copies of the enclosed Annual Report, Notice of
Meeting and Proxy Statement, and form of Proxy.
Only holders of issued and outstanding shares of the Company's Common Stock
of record at the close of business on March 19, 1999 are entitled to notice of,
and to vote at, the Annual Meeting. The number of shares of Common Stock
outstanding on March 19, 1999, was 9,146,312. The presence in person or by
properly executed proxy of the holders of a majority of the outstanding shares
of Common Stock entitled to vote is necessary to constitute a quorum.
Each holder of shares of Common Stock is entitled to one vote per share on
all matters properly coming before the Meeting. Stockholders are not permitted
to cumulate votes for purposes of electing directors or otherwise. A plurality
of the votes cast in person or by proxy is necessary to elect the directors. An
affirmative vote of a majority of the votes cast at the meeting, in person or by
proxy, is required for approval of each other item being submitted to the
stockholders for consideration. Abstentions and "broker non-votes" are each
included in the determination of the number of shares present and voting, with
each tabulated separately. Abstentions are counted in tabulations of the votes
cast on a matter presented to the stockholders. Broker non-votes are not counted
for purposes of determining whether a matter has been approved. Any unmarked
proxies, including those submitted by brokers or nominees, will be voted for the
candidates nominated and for all items submitted by management to the
stockholders for approval.
5
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes in accordance with the
Company's Certificate of Incorporation, as amended. The class of directors
(Class I) whose term will expire at the 1999 Annual Meeting currently consists
of two directors. Pursuant to the Company's bylaws, the Board of Directors has
set the number of directors of the Company at seven, of which two directors are
designated as Class I, and three directors are designated as Class II (term
expiring in 2000), and two directors are designated as Class III (term expiring
2001). The nominees for election as Class I director to be voted upon at the
meeting are Mr. Gilbert F. Dwyer, and Dr. Mahendra G. Shah, both current
directors of the Company. Each of Mr. Dwyer and Dr. Shah is nominated for
election for a term of three years and until his successor is duly elected and
qualified. If either nominee becomes unavailable for election for any reason,
the persons named in the form of proxy will vote for any nominee who shall be
designated by the present Board of Directors.
The following table presents the names, ages and principal occupations of
the nominees and the other members of the Board of Directors. Information
concerning their beneficial ownership of Company Common Stock is presented under
Ownership of Shares below.
MEMBERS OF THE BOARD OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTOR
(Class I)
DIRECTOR
NAME AGE SINCE PRINCIPAL OCCUPATION
---- --- -------- --------------------
Gilbert F. Dwyer.......................... 70 1998 Class I Director of the Company since May
1998; President, Chief Executive Officer
and a Director of Southern Research
Institute, a scientific research
organization since January, 1997; Founder
and a Director of Marine Trade and
Development International, Inc., a marine
resources development organization since
January, 1996; President of Dwyer
Consulting Group, Inc., a corporate
strategy and organization consulting firm
from 1985 through 1996.
Mahendra G. Shah, Ph.D.................... 54 1998 Class I Director of the Company since
December 1998; Vice President of Corporate
and Business Development of NeoPharm, Inc.,
an oncology company, since October 1991;
Vice President of EJ Financial Enterprises,
Inc., a consulting and private investment
firm since October 1991.
2
6
DIRECTORS WHOSE TERMS EXPIRE IN 2000
(Class II)
DIRECTOR
NAME AGE SINCE PRINCIPAL OCCUPATION
---- --- -------- --------------------
John N. Kapoor, Ph.D...................... 54 1991 Chairman of the Board of the Company since
May 1992, and Chief Executive Officer from
May 1992 through October 1993; Chairman of
OptionCare, Inc., a franchisor of home
infusion therapy businesses, since October
1990; President of EJ Financial
Enterprises, Inc., a consulting and private
investment firm, since 1990; Chairman of
Akorn, Inc., an ophthalmics company since
May 1995, Chief Executive Officer from May
1996 to 1998, and a Director since December
1991; Chairman of Lyphomed, Inc., a
pharmaceutical company, from 1983 to 1990;
Director of Bone Care International, Inc.,
a d-hormone therapies development company;
Chairman of NeoPharm, Inc., an oncology
company.
Roland Weiser............................. 67 1989 Chairman of Intervista, an international
pharmaceutical consulting group, since
1985; Director, GAM Funds, Inc., a
diversified open end investment company
since 1988; Senior Vice President of
Schering-Plough Corp. (International) from
1978 to 1984.
Robert E. Dudley, Ph.D.................... 44 1999 President, Chief Executive Officer and
Director of the Company since February
1999; Senior Vice President of the Company
from November 1997 to February 1999, Chief
Executive Officer and Interim President of
the Company from January 1997 through
November 1997 and Vice President of
Clinical and Regulatory Affairs of the
Company from December 1994 through December
1996; Vice President of Clinical
Development of Bio-Technology General
Corp., a biotechnology company, from August
1993 through November 1994; Vice President
of Research and Development of Gynex
Pharmaceuticals, Inc., a pharmaceutical
company, from May 1989 through August 1993.
3
7
DIRECTORS WHOSE TERMS EXPIRE IN 2001
(Class III)
DIRECTOR
NAME AGE SINCE PRINCIPAL OCCUPATION
---- --- -------- --------------------
James J. Lempenau......................... 68 1983 Chartered Financial Analyst; President and
a Director since 1981 of The Income
Builder, Inc., an investment advisory firm.
Ronald L. Goode, Ph.D..................... 52 1997 Director of the Company since November
1997; President and Chief Executive Officer
of the Company from November, 1997 through
February 1999; Executive officer of G.D.
Searle & Co. from 1986 through October,
1997 holding positions of increasing
responsibility including Corporate Senior
Vice President.
The Board of Directors of the Company held four meetings during 1998. The
Company has an Audit Committee and a Compensation Committee. During fiscal 1998,
the Audit Committee met twice and the Compensation Committee met two times. The
Compensation Committee also conferred numerous times by telephone during the
year. The Audit Committee consists of Gilbert Dwyer (Chairman), James Lempenau
and Roland Weiser. The Audit Committee acts as a liaison between the Company and
its independent auditors and reports on matters pertaining to the Company's
independent audit and the Company's accounting policies. The Compensation
Committee, which consists of James Lempenau (Chairman), Roland Weiser and
Gilbert Dwyer, evaluates and determines executive officer compensation. The
Company does not have a standing nominating committee. Each director attended or
participated in at least 75% of the board meeting and meetings of committees of
which he is a member. The Company has an executive committee which did not meet
during 1998. Drs. John N. Kapoor and Ronald L. Goode were members of the
executive committee in 1998. Currently, Drs. John N. Kapoor and Robert E. Dudley
are members of the Executive Committee.
The John N. Kapoor Trust (the "Trust"), an affiliate of John N. Kapoor,
Ph.D., Chairman of the Company, has the right to nominate two persons to the
Board of Directors as long as the Trust owns beneficially 880,000 shares of
securities of the Company entitled to vote for the election of directors (the
"Voting Securities"). The Trust may continue to nominate one person as long as
the Trust owns beneficially less than 880,000 shares, but at least 220,000
shares, plus an additional number of shares equal to 5% of future issuances of
Voting Securities (other than shares issued upon the exercise of options and
warrants outstanding on the date the Trust agreed to purchase Common Stock of
the Company). Dr. Kapoor and Dr. Mahendra G. Shah are the Trust's
representatives on the Board of Directors.
The Company's By-laws permit any stockholder to nominate one or more
persons for election as directors at an Annual Meeting of Stockholders, provided
such stockholder's intent to make such nomination(s) has been personally
delivered or mailed to the Secretary of the Company no later than 60 days in
advance of the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE ELECTION OF
GILBERT F. DWYER AND MAHENDRA G. SHAH TO THE COMPANY'S BOARD OF DIRECTORS.
4
8
EXECUTIVE COMPENSATION
The following table summarizes the compensation for services to the Company
for fiscal 1998, 1997 and 1996 attributed to Robert E. Dudley, Ph.D., the
current President and Chief Executive Officer of the Company, to Ronald L.
Goode, Ph.D., the President and Chief Executive Officer of the Company in 1998,
and David E. Riggs, Chief Financial Officer and Senior Vice President of the
Company (together the "1998 Named Officers"). No other person who served as an
executive officer of the Company in fiscal 1998 received more than $100,000 in
salary and bonus in fiscal 1998.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
-------------------------------------- --------------------------------------
RESTRICTED
OTHER ANNUAL STOCK OTHER
SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR $ $ $(1) $ #(2) $(3)
--------------------------- ---- ------ ----- ------------ ---------- ------- ------------
Robert E. Dudley(4).......... 1998 200,000 37,500(6) 7,200 0 50,000(7) 5,000
President and Chief 1997 204,000 50,000 7,200 0 (7) 4,750
Executive Officer, Past 1996 150,000 7,200 0 50,000 4,750
Senior Vice President 45,000
75,000
Ronald L. Goode(5)........... 1998 250,000 57,600 35,773 0 400,000(7) 5,000
Past President and Chief 1997 33,173 0 1,624 0 (7) 0
Executive Officer 400,000
David E. Riggs Senior........ 1998 170,000 30,600(6) 7,200 0 0 5,000
Vice President, Chief 1997 96,667 20,000 7,200 0 25,000 4,750
Financial Officer, 1996 76,125 7,200 0 0 4,750
Secretary and Treasurer 18,150
- - - - - - - - - - - - - ---------------
(1) Represents the compensation portion of car allowances advanced to all of the
1998 Named Officers and charitable contributions and related travel and club
dues for Dr. Goode in 1998.
(2) Except as otherwise noted in note (7), the stock options become exercisable
25% on the anniversary of the date of grant and an additional 25% on each
anniversary date thereafter until exercisable in full. Exercisability will
be accelerated in the event of a "change of control."
(3) Represents the matching contribution made by the Company to its 401(k) Plan
for each of the executive officers listed above.
(4) Dr. Dudley was elected President and Chief Executive Officer of the Company
in February 1999. During 1998, Dr. Dudley served as Senior Vice President of
the Company. In 1997, Dr. Dudley served as Chief Executive Officer for 10
months and Senior Vice President for two months. Dr. Dudley's Employment
Agreement is described under "Certain Transactions."
(5) Dr. Goode was President and Chief Executive Officer from November 13, 1997
until February 5, 1999. Dr. Goode's Employment Agreement is described under
"Certain Transactions."
(6) Includes bonuses paid in cash and bonus paid in shares of Company Common
Stock valued at market value on the date of award.
(7) The option to purchase 50,000 shares granted to Dr. Dudley and the option to
purchase 400,000 shares granted to Dr. Goode reflect the repricing of
options previously granted pursuant to the Company's repricing program
adopted by the Compensation Committee of the Board of Directors on May 28,
1998. The initial vesting date of the repriced options granted to Dr. Dudley
was deferred from November 13, 1998 to May 13, 1999. The initial vesting
dates of repriced options granted to Dr. Goode were deferred to June 14,
1998 for monthly vesting options, November 28, 1998 as to 87,080 shares
under options previously vested, and May 13, 1999 as to the remaining
options.
5
9
OPTION GRANTS IN FISCAL YEAR 1998
The following table sets forth information with respect to stock options
granted during the fiscal year ended December 31, 1998 to the 1998 Named
Officers. All options were granted under the Company's 1991 Stock Option Plan
and/or the 1998 Long Term Incentive Plan. The options shown as granted to Drs.
Dudley and Goode are repricings of options granted in 1997. (See "Repricing of
Existing Options" below.)
INDIVIDUAL GRANTS
POTENTIAL REALIZABLE
$ VALUE ASSUMING
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
% OF TOTAL OPTION TERM
NO. OF SECURITIES OPTIONS EXERCISE EXPIRATION ----------------------
NAME UNDERLYING GRANT GRANTED PRICE$/SH DATE 5% 10%
---- ----------------- ---------- --------- ---------- -- ---
Robert E. Dudley........ 50,000 6.84% 5.875 11/13/07 184,750 468,150
Ronald L. Goode......... 400,000 54.68% 5.875 11/13/07 1,478,000 3,745,200
David E. Riggs.......... 0 -- -- -- -- --
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR,
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to stock options
exercised during the fiscal year ended December 31, 1998, and the value at
December 31, 1998 of unexercised stock options held by the 1998 Named Officers:
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED OPTIONS
OPTIONS AT FISCAL IN-THE-MONEY AT
YEAR-END FISCAL YEAR END*
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) ($)
---- --------------- -------- ----------------- -------------------
Robert E. Dudley.................... 0 0 93,750/131,250 70,313/23,438
Ronald L. Goode..................... 0 0 120,223/279,777 0/0
David E. Riggs...................... 0 0 93,750/21,250 93,750/31,250
- - - - - - - - - - - - - -------------------------
* Represents the fair market value at December 31, 1998, of the Common Stock
underlying the options minus the exercise price.
REPRICING OF EXISTING OPTIONS
In May 1998 the Compensation Committee of the Board of Directors determined
that it would be in the best interest of the Company and its shareholders to
express confidence in the employees of the Company and in the future activities
of the Company and to incentivize the Company's employees to continue their high
quality efforts on behalf of the Company by replacing the options granted to
certain employees in 1997 with new options to purchase shares of common stock,
$0.25 par value per share, of the Company in accordance with the terms of the
Company's 1991 Stock Option Plan at a per share price of $5.875, the market
price per share on the effective date of the repricing.
6
10
The following table sets forth information with respect to stock options
granted to the 1998 Named Officers, the exercise price of which has been
repriced during fiscal year 1998 and with respect to all repricings of options
held by the 1998 Named Officers during the last ten completed fiscal years.
MARKET PRICE EXERCISE PRICE LENGTH OF ORIGINAL
NUMBER OF SHARES OF SHARES AT OF SHARES AT NEW OPTION TERM
UNDERLYING OPTIONS TIME OF TIME OF EXERCISE REMAINING AT DATE
NAME DATE REPRICED(#) REPRICING($) REPRICING($) PRICE($) OF REPRICING(YRS)
---- ---- ------------------ ------------ -------------- -------- ------------------
David E. Riggs....... 1/19/95 80,000 2.75 3.38 2.75 9.75
Senior Vice 10/11/94 20,000 3.38 7.75 3.38 7.83
President, Chief 10/11/94 30,000 3.38 8.00 3.38 7.58
Financial Officer,
Secretary and
Treasurer
Ronald L. Goode...... 5/28/98 400,000 5.875 7.50 5.875 9.50
Past President and
Chief Executive
Officer
Robert E. Dudley..... 5/28/98 50,000 5.875 7.50 5.875 9.96
President and Chief
Executive and Past
Senior Vice President
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive an annual stipend of
$6,000 for serving on the Board and its committees, an additional $1,000 for
each directors' meeting which they attend (excluding meetings held by
telephone), $500 for each committee meeting they attend (excluding meetings held
by telephone) and reimbursement of out-of-pocket expenses in connection with
their attendance at directors' meetings. The 1998 Long-Term Incentive Plan
provides for a grant of options to purchase 10,000 shares of Common Stock to
each new non-employee director on the date he or she first becomes a director,
and annual stock option grants of 7,500 shares of Common Stock to non-employee
directors. The 1998 Long Term Incentive Plan also provides that each chairman of
a standing committee shall be granted an option to purchase 1,000 shares on the
date he or she first becomes a committee chairman and an option to purchase 500
shares to each member on the date he or she first becomes a committee member.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors, consisting of three
non-employee directors, James Lempenau, Chairman, Roland Weiser and Gilbert
Dwyer, has issued the following report with respect to executive compensation:
The Company's compensation policies applicable to its executive
officers are administered by the Compensation Committee of the Board of
Directors. These policies are designed to strengthen the capabilities and
financial performance of the Company by aligning the financial interests of
its executive officers with those of its stockholders.
The three primary components of executive compensation are base
salary, incentive bonuses, and long-term incentive compensation. All three
are administered according to compensation guidelines approved by the Board
of Directors. These guidelines provide that a significant portion of
management's compensation be tied to the performance of the Company.
In 1998, the Compensation Committee engaged a national consulting firm
to advise it with regard to executive compensation. The consulting firm
reviewed the compensation guidelines and practices applied by the
Compensation Committee and made certain recommendations, some of which were
adopted by
7
11
the Committee. The consulting firm confirmed the importance of the long
established, Board approved, principle that a significant portion of
management's compensation be tied to the performance of the Company. In
that regard, stock options have been the preferred long-term incentive
because management benefits only if the stockholders benefit through higher
market prices for the Company common stock.
Base salaries are expected to be at the median of those paid by
comparable companies. Incentive bonuses are to be awarded at the discretion
of the board only in reward for the achievement of targets, which are set
annually, to drive the Company towards its strategic objectives. Bonuses,
in cash or shares of Company common stock, are calculated on the basis of
measurable goals, some quantitative and others related to strategic
objectives.
The Committee recommends the salaries of the executive officers and
the yearly incentive bonus program, and administers the 1991 Stock Option
Plan and the 1998 Long-Term Incentive Plan under which the employee stock
options and other awards are granted. All components of executive
compensation are reviewed for competitiveness by referring to a survey
prepared by an independent professional organization. The consultant to the
Compensation Committee reported to it that executive compensation was
competitive to that of small public companies in the biopharmaceutical
industry.
BASE SALARY
The 1998 salary for the then President and Chief Executive Officer,
Ronald L. Goode, Ph.D., was consistent with the terms of Dr. Goode's
employment agreement.
On February 5, 1999, Dr. Goode's employment as President and Chief
Executive Officer was terminated. Robert E. Dudley, Ph.D., a Senior Vice
President, was appointed by the Board of Directors as Chief Executive
Officer and President. Dr. Dudley's salary was established at $225,000 and
he was granted options to purchase 100,000 shares of common stock. The
compensation committee determined that these compensation features were
consistent with Dr. Dudley's new responsibilities.
The Committee also reviewed the salary of David Riggs, Senior Vice
President and Chief Financial Officer for competitiveness with the
previously mentioned industry survey.
INCENTIVE BONUS AWARDS
Bonus awards for 1998 were granted on the basis of financial goals and
product development and product marketing objectives established in early
1998. The bonus awarded Dr. Goode and other officers for 1998 was
determined in accordance with benchmarks previously established by the
Committee.
STOCK OPTION PLAN GRANTS
The Board has determined that all employees should have an interest in
the Company and its stock. Therefore, options are granted to every employee
at the time of hire. The number of options granted to new employees varies
directly with responsibilities and salary level. Awards are made at fair
market value at the time of grant.
In May 1998 the Compensation Committee recommended that stock options
granted in November 1997 be repriced. Dr. Dudley and Dr. Goode benefitted
from the May 1998 repricing.This action was taken to incentivize employees
after the Company elected to discontinue clinical testing for one of its
products, Cryptaz.
In September 1995, the Board recommended to the Committee that a pool
of shares be set aside each year, and as a guideline this pool will be
equal to a maximum of 1% of the outstanding stock of the Corporation. This
pool is to be used as an allotment for existing employees, with option
grants to new employees and others exempt from this established annual
pool. However, the Committee may use
8
12
another percentage from time to time, as may be confirmed by the Board.
During fiscal 1998 the Committee granted options to employees using the
guidelines.
Respectfully submitted,
Compensation Committee
James J. Lempenau (Chairman)
Gilbert Dwyer
Roland Weiser
9
13
PERFORMANCE GRAPH
The following performance graph compares the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock to the
cumulative return* of the NASDAQ (U.S.) Stock Market Index and the NASDAQ
Pharmaceutical Stock Index for the five fiscal years ended December 31, 1998.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
UNIMED PHARMACEUTICALS, INC., NASDAQ (US) STOCK MARKET INDEX
AND NASDAQ PHARMACEUTICALS STOCK INDEX
UNIMED PEER GROUP BROAD MARKET
------ ---------- ------------
'1993' 100 100 100
'1994' 64.06 75.26 97.75
'1995' 165.63 138.04 138.26
'1996' 175 138.47 170.01
'1997' 189.06 142.98 208.58
'1998' 107.81 183.02 293.21
ASSUMES $100 INVESTED ON JANUARY 1, 1994 IN UNIMED COMMON STOCK, NASDAQ (US)
STOCK MARKET INDEX, AND NASDAQ PHARMACEUTICALS INDEX.
* TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS.
10
14
OWNERSHIP OF SHARES
The following table presents information as of March 19, 1999 with respect
to the beneficial ownership of the Company's Common Stock by all directors, all
1998 Named Officers, all persons known to the Company to own beneficially 5% or
more of the Company's Common Stock, all nominees for election as director, and
all current officers and directors as a group. The Company's only class of
equity securities outstanding is its Common Stock:
SHARES OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
------------------------ -------------------- ----------
John N. Kapoor, PhD(2)...................................... 2,441,429 25.96%
EJ Financial Enterprises, Inc.
225 E. Deerpath, Suite 250
Lake Forest, IL 60045
Robert E. Dudley, PhD(3).................................... 134,109 1.45%
David E. Riggs(3)........................................... 101,844 1.10%
Ronald L. Goode, PhD(3)..................................... 138,273 1.49%
James J. Lempenau(3)........................................ 82,328 *
Roland Weiser(3)............................................ 76,380 *
Gilbert E. Dwyer(3)......................................... 11,500 *
Mahendra G. Shah, Ph.D(3)................................... 12,500 *
All Directors and Executive Officers as a group (8
persons).................................................. 2,998,363(4) 30.62%
- - - - - - - - - - - - - -------------------------
* Less than 1%
(1) Beneficial and Percentage Ownership have been determined pursuant to Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Under this Rule, shares of Common Stock that may be acquired upon
exercise of stock options within 60 days of the measurement date are deemed
beneficially owned by the optionholder and included in calculating the
optionholder's percentage ownership of Common Stock.
(2) Includes 1,676,429 shares of Common Stock beneficially owned by the John N.
Kapoor Trust (the "Trust"), an affiliate of Dr. Kapoor; 485,000 shares of
Common Stock held by a limited partnership created for the benefit of Dr.
Kapoor's family members, of which Dr. Kapoor is the general partner; 20,000
shares held in trust for family members of which Dr. Kapoor's spouse is the
Trustee and as to which Dr. Kapoor disclaims beneficial ownership; and
260,000 shares of Common Stock that may be purchased under stock options
exercisable within 60 days of March 19, 1999.
(3) Includes incentive stock options and nonqualified stock options exercisable
within 60 days of March 19, 1999 to purchase shares of Common Stock as
follows: 127,500 shares by Dr. Dudley; 100,000 shares by Mr. Riggs; 124,773
shares by Dr. Goode; 54,000 shares by Mr. Lempenau; 53,500 shares by Mr.
Weiser; 11,500 shares by Mr. Dwyer; and 10,000 shares by Dr. Shah.
(4) Includes shares owned beneficially (including an aggregate of 741,273 shares
of Common Stock that may be purchased under stock options exercisable within
60 days of March 19, 1999) and of record by the above-named officers and
directors.
CERTAIN TRANSACTIONS
The Company and EJ Financial Enterprises, Inc. ("EJ Financial"), an
affiliate of Dr. John N. Kapoor and Dr. Mahendra G. Shah, are parties to an
agreement, pursuant to which EJ Financial provides independent consulting
services to the Company at a fee to be determined on a yearly basis. The
agreement may be terminated by either party upon 30 days' prior written notice
and is subject to annual renewal by the parties. The Company paid $50,000 to EJ
Financial under the contract with respect to fiscal 1998, $50,000 for fiscal
1997 and $50,000 for fiscal 1996. EJ Financial principally provides consulting
support on strategic corporate objectives and operations' including sales and
marketing strategies, new product strategies and key contacts
11
15
within the industry and financial community. EJ Financial is engaged in a number
of business activities, including consulting services to the Company and the
payment to EJ Financial is not intended primarily to furnish compensation to Dr.
Kapoor or Dr. Shah. In addition, for his services rendered as the Chairman of
the Company, Dr. Kapoor was granted an option purchase 100,000 shares of Common
Stock on April 24, 1997 of which 25,000 shares vest annually, commencing on the
first anniversary of such grant.
Dr. Ronald L. Goode was employed by the Company as its President and Chief
Executive Officer under an Employment Agreement from November 13, 1997 to
February 5, 1999. Under the Agreement, Dr. Goode's initial annual salary was
$250,000 plus an automobile allowance of $12,000, net of taxes. Dr. Goode was
eligible to receive incentive compensation bonuses of up to 50% of his salary
upon the achievement of specific strategic goals determined by the Board
following its consideration of recommendations from Dr. Goode. The Company was
obligated to maintain a life insurance policy for Dr. Goode with the benefits
payable to his estate, pay up to $10,000 per year of country club dues and
expenses, and make certain charitable donations at the direction of Dr. Goode.
Under the Agreement, Dr. Goode was granted options to purchase 400,000 shares of
Common Stock under the 1991 Stock Option Plan at an exercise price of $7.50 per
share, the fair market value on the date of grant. The exercise price was
adjusted to $5.875 by the Company in the Company's May, 1998 regrant program.
Under his Agreement, Dr. Goode could have requested that the Company loan to him
up to $750,000 to exercise the options, in part. Dr. Goode's employment was
terminated in February, 1999 and pursuant to his Agreement he will receive his
then current base salary for 12 months, medical, dental and disability benefits
for 24 months, a per diem share of his 1998 bonus, and his unused vacation time.
Dr. Goode is obligated to maintain the confidentiality of Company information at
all times during and after termination of the Agreement.
During 1998 Dr. Robert E. Dudley was employed by the Company under an
Employment Agreement dated November 3, 1994. Under this Agreement, Dr. Dudley
received a base salary of $204,000 in 1997 and $200,000 in 1998, an automobile
allowance of $7,200 per year and bonuses based on a multiple of his annual
salary, as determined by the Board; and may participate in the Company's
insurance and retirement programs. The Agreement also provided for the grant of
options to purchase 60,000 shares of Common Stock under the 1991 Stock Option
Plan, as amended. In connection with Dr. Dudley's promotion to President and
Chief Executive Officer of the Company in February 1999, he and the Company have
entered into a new Employment Agreement that provides for a base salary of
$225,000 per year, an automobile allowance of $12,000 per year, bonuses based on
a multiple of his annual salary based on the achievement of specific strategic
goals determined by the Board, and participation in the Company's insurance and
retirement programs. Pursuant to the terms of the Agreement, the Company will
provide Dr. Dudley with a term life insurance policy with coverage of $1.5
million, the benefits of which are payable to his estate or other beneficiary,
as directed by Dr. Dudley. The Agreement also provides for the grant of an
option to purchase 100,000 shares of common stock under the 1991 Stock Option
Plan. Dr. Dudley may be terminated immediately for Cause (as defined in the
Employment Agreement) or without Cause. If Dr. Dudley is terminated without
Cause, he is to receive his then current base salary and benefits for up to 12
months after the date of termination, subject to Dr. Dudley resigning from the
Board concurrent with the termination of his employment. In the event that Dr.
Dudley is terminated without Cause within 12 months of a Change of Control (as
defined in the Agreement), Dr. Dudley is entitled to receive a severance package
consisting of (i) a lump-sum payment equal to two times his then current base
salary; (ii) a per diem share of the bonus he was awarded the prior year and
(iii) continuation of his health benefits. Dr. Dudley is required to maintain
the confidentiality of Company information at all times during and after the
termination of the Agreement.
Mr. David E. Riggs is employed by the Company under an Employment Agreement
dated as of February 19, 1999. Under this Agreement, Mr. Riggs will receive a
base salary of $175,000 in 1999 plus an automobile allowance of $10,800 per year
and bonuses based on a multiple of his annual salary as may be determined by the
Board. Mr. Riggs may also participate in the Company's insurance and retirement
program. The Agreement also provided for the grant of options to purchase 35,000
shares of common stock under the 1991 Stock Option Plan, as amended. Pursuant to
the terms of the Agreement, the Company will provide Mr. Riggs with a term life
insurance policy with coverage of $1 million, the benefits of which are payable
to his estate or other beneficiary, as directed by Mr. Riggs. Mr. Riggs may be
terminated immediately for Cause (as
12
16
defined in the Employment Agreement) or without Cause. If he is terminated
without Cause, Mr. Riggs is to receive his then current base salary and benefits
for up to 12 months after the date of termination. In the event that Mr. Riggs
is terminated without Cause within 12 months of a Change of Control (as defined
in the Agreement), Mr. Riggs is entitled to receive a severance package
consisting of (i) a lump-sum payment equal to two times his then current base
salary; (ii) a per diem share of the bonus he was awarded the prior year; and
(iii) continuation of his health benefits. Mr. Riggs is required to maintain the
confidentiality of Company information at all times during and after the
termination of the Agreement.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires officers, directors, and persons
who own more than 10% of the Company's equity securities to file statements of
beneficial ownership (Form 3) and statements of changes in beneficial ownership
(Forms 4 or 5) with the Securities and Exchange Commission (the SEC) and to
furnish the Company with copies of all such forms they file. To the Company's
knowledge based solely on the review of the copies of such forms received by it,
the Company believes that during 1998 all filing requirements applicable to its
officers, directors, and greater than 10% beneficial owners were complied with
and were timely filed except that as a result of administrative error, the
initial statement of beneficial ownership (Form 3) for Dr. Shah was not timely
filed with the SEC.
RELATIONSHIP WITH INDEPENDENT AUDITORS
PriceWaterhouseCoopers LLP was the Company's independent public accountant
for the 1998 fiscal year. A representative from the Company's independent public
accountants customarily attends the Annual Meeting and has the opportunity to
make a statement if he or she so desires. This representative also is available
to respond to appropriate questions. The Company has not yet selected its
independent public accountant for the 1999 fiscal year.
MISCELLANEOUS
As of the date of this Proxy Statement, management does not know of any
other matters that will come before the Annual Meeting. In the event that any
other matter properly comes before the Annual Meeting, the persons named in the
enclosed form of proxy intend to vote all proxies in accordance with their best
judgment on such matters.
It is the intention of the persons named in the enclosed form of proxy,
unless otherwise directed by stockholders executing proxies, to vote all proxies
received by them in time FOR the election of Mr. Gilbert F. Dwyer and Dr.
Mahendra G. Shah into the class of directors whose term will expire in 2002.
All shares represented by proxies to be voted at the Annual Meeting will be
voted if received in time.
A COPY OF THE COMPANY'S FORM 10-K ANNUAL REPORT FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1998 IS AVAILABLE WITHOUT CHARGE FROM THE CORPORATE SECRETARY,
UNIMED PHARMACEUTICALS, INC., 2150 EAST LAKE COOK ROAD, BUFFALO GROVE, ILLINOIS
60089, TELEPHONE: (847) 541-2525.
13
17
2000 ANNUAL MEETING
Proposals of stockholders intended to be represented at the next Annual
Meeting of Stockholders to be held in 2000 must be received by the Company on or
before December 29, 1999 for inclusion in the Company's Proxy Statement and form
of proxy relating to that Annual Meeting.
UNIMED PHARMACEUTICALS, INC.
DAVID E. RIGGS
Secretary
Dated: April 2, 1999
PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD NOW
14
18
PROXY
UNIMED PHARMACEUTICALS, INC.
2150 E. LAKE COOK RD.,
BUFFALO GROVE, ILLINOIS 60089
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF STOCKHOLDERS ON APRIL 29, 1999.
The undersigned hereby appoints Dr. John N. Kapoor, Dr. Robert E.
Dudley, and David E. Riggs, and each of them, as proxies with the powers the
undersigned would possess if personally present, and with full power of
substitution, to vote all common shares of the undersigned in Unimed
Pharmaceuticals, Inc. at the Annual Meeting of Stockholders to be held at the
Northbrook Hilton Hotel, 2855 North Milwaukee Avenue, Northbrook, Illinois
60062, on April 29, 1999 at 10:00 a.m., Chicago time, and at any adjournment
thereof, upon all subjects that may properly come before the meeting, subject to
any directions indicated on the reverse side of this card. IF NO DIRECTIONS ARE
GIVEN, THE PROXIES WILL VOTE FOR THE ELECTION OF THE NOMINEES LISTED ON THE
REVERSE SIDE, AND AT THEIR DISCRETION ON ANY OTHER MATTER THAT MAY PROPERLY COME
BEFORE THE MEETING.
PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND MAIL
PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU DO NOT SIGN AND RETURN A PROXY, OR
ATTEND THE MEETING AND VOTE BY BALLOT, YOUR SHARES CAN NOT BE VOTED.
19
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN.
1. For the election of MR. GILBERT F. DWYER and DR. MAHENDRA G.
SHAH as Class I directors, to hold office until the Annual
Meeting in 2002 or until their successors are duly elected and
qualified.
TO WITHHOLD AUTHORITY TO VOTE FOR THE NOMINEE, LINE THROUGH OR
OTHERWISE STRIKE OUT THE NAME OF THE NOMINEE.
/ / FOR / / AGAINST / / ABSTAIN
2. To transact such other business as may properly come before the
meeting.
Signatures:
Dated: , 1999
Please sign exactly as name appears above. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee, guardian, or corporate
officer, please give full title or capacity as such.