<PAGE> 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:
_________________________________________________________
(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:
<PAGE> 2
[UNIMED LOGO]
UNIMED PHARMACEUTICALS, INC.
2150 EAST LAKE COOK ROAD
BUFFALO GROVE, IL 60089
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1998
------------------------
The Annual Meeting of Stockholders of UNIMED Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), will be held at Harris Trust and Savings
Bank, Presentation Room, Room 20C, 111 West Monroe Street, Chicago, Illinois
60603, on May 28, 1998, 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 2001) and until their successors are duly elected and qualified.
2. To consider and act upon a proposal to approve the Company's 1998
Long-Term Incentive Plan and in satisfaction of the requirements of
Section 162(m) of the Internal Revenue Code of 1986.
3. To consider and act upon a proposal to amend the Company's 1991 Stock
Option Plan.
4. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The Board of Directors has set April 3, 1998, 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 29, 1998
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.
<PAGE> 3
[UNIMED LOGO]
UNIMED PHARMACEUTICALS, INC.
2150 EAST LAKE COOK ROAD
BUFFALO GROVE, IL 60089
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1998
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 Harris Trust and Savings Bank,
Presentation Room, Room 20C, 111 West Monroe Street, Chicago, Illinois 60603 at
10:00 a.m., Chicago time, on May 28, 1998, and any and all adjournments thereof.
The Proxy Statement and the form of proxy enclosed herewith were first mailed on
or about April 29, 1998 to stockholders of record on April 3, 1998. 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 April 3, 1998 are entitled to notice of,
and to vote at, the Annual Meeting. The number of shares of Common Stock
outstanding on April 3, 1998, was 9,051,942. 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.
<PAGE> 4
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 III) whose term will expire at the 1998 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 five, of which two directors are
designated as Class III (term expiring 1998), one director is designated as
Class I (term expiring in 1999) and two directors are designated as Class II
(term expiring in 2000). The nominees for election as Class III directors to be
voted upon at the meeting are James J. Lempenau, a current director of the
Company, and Ronald L. Goode, Ph.D. Each of Mr. Lempenau and Dr. Goode is
nominated for election for a term of three years and until his successor is duly
elected and qualified. If a 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 DIRECTORS
(Class III)
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE PRINCIPAL OCCUPATION
---- --- -------- --------------------
<S> <C> <C> <C>
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 President, Chief Executive Officer and a
Class I Director of the Company since
November, 1997; Executive officer of G.D.
Searle & Co. from 1986 through October,
1997 holding positions of increasing
responsibility including Corporate Senior
Vice President and President Asia/Pacific
World Area, Executive Vice President of
International Operations, and Senior Vice
President of Commercial Development;
Officer in the areas of clinical research
and scientific affairs of Pfizer
Pharmaceuticals, Inc. from 1976 to 1986.
</TABLE>
2
<PAGE> 5
DIRECTORS WHOSE TERMS EXPIRE IN 2000
(Class II)
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE PRINCIPAL OCCUPATION
---- --- -------- --------------------
<S> <C> <C> <C>
John N. Kapoor, Ph.D...................... 54 1991 Non-executive Chairman of the Board of the
Company since October 1993; Chairman of the
Board and Chief Executive Officer of the
Company 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; Chief
Executive Officer of Akorn, Inc., an
ophthalmics company since May 1996, and a
Director since December 1991; Chairman of
Lyphomed, Inc., a pharmaceutical company,
from 1983 to 1990; Director of Bone Care
International, Inc., a pharmaceutical
development company; Director 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.
</TABLE>
DIRECTORS WHOSE TERM EXPIRE IN 1999
(Class I)
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE PRINCIPAL OCCUPATION
---- --- -------- --------------------
<S> <C> <C> <C>
Gilbert E. Dwyer.......................... 70 To be President, Chief Executive Officer and
appointed a Director of Southern Research
by Board 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.
</TABLE>
The Articles of Incorporation of the Company authorize only the Board of
Directors to elect directors to fill vacancies on the Board in classes that are
not then subject to election by the stockholders. Pursuant to this authority,
upon his appointment as President and Chief Executive Officer of the Company on
November 13, 1997, Dr. Goode was elected as a Class I director. Dr. Goode filled
the vacancy created by the resignation of the past president of the Company in
January 1997. Immediately preceding the Annual Meeting of Stockholders, Dr.
Goode will resign as a Class I director so that the stockholders of the Company
can vote on his election to the Board of Directors as a Class III director.
Pursuant to the Articles of Incorporation of the Company, the Board of Directors
intends to appoint Gilbert E. Dwyer to fill the vacancy created in Class I at
the annual meeting of the board of directors immediately following the 1998
Annual Meeting of Stockholders.
3
<PAGE> 6
As a Class I director, Mr. Dwyer's term will expire in 1999 and either Mr. Dwyer
or his successor will be presented to the stockholders at the 1999 Annual
Meeting of Stockholders for election as a Class I director.
The Board of Directors of the Company held four meetings during 1997. The
Company has an Audit Committee and a Compensation Committee. During fiscal 1997,
the Audit Committee met once and the Compensation Committee met two times. The
Compensation Committee also conferred numerous times by telephone during the
year. The Audit Committee consists of James J. Lempenau (Chairman), Roland
Weiser and Fred Holubow. 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 Roland Weiser (Chairman), Fred Holubow
and James J. Lempenau, 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 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 is the Trust's representative 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 RE-ELECTION OF
JAMES J. LEMPENAU AND THE ELECTION OF RONALD L. GOODE, PH.D TO THE COMPANY'S
BOARD OF DIRECTORS.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The following table summarizes the compensation for services to the Company
for fiscal 1997 to Ronald L. Goode, Ph.D., the President and Chief Executive
Officer of the Company, Robert E. Dudley, Ph.D. and Stephen M. Simes, Chief
Executive Officers of the Company during 1997, David E. Riggs, Chief Financial
Officer and Senior Vice President of the Company, and John E. Lee, former Vice
President, Sales and Marketing of the Company (together the "1997 Named
Officers"). No other person who served as an executive officer of the Company in
fiscal 1997 received more than $100,000 in salary and bonus in fiscal 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
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)
--------------------------- ---- ------ ----- ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald L. Goode(4)........... 1997 33,173 0 1,624 0 400,000 0
President and Chief
Executive Officer
Robert E. Dudley(5).......... 1997 204,000 50,000 7,200 0 125,000 4,750
Senior Vice President 1996 150,000 45,000 7,200 0 0 4,750
1995 140,000 42,000 7,200 0 100,000 51,765
Stephen M. Simes(6).......... 1997 220,000 0 12,000 0 0 1,413
Former President and Chief 1996 220,000 88,000 12,000 0 0 10,604
Executive Officer 1995 200,000 80,000 9,890 0 360,000(7) 10,570
David E. Riggs............... 1997 96,667 20,000 7,200 0 25,000 4,750
Senior Vice President,
Chief 1996 76,125 18,150 7,200 0 0 4,750
Financial Officer,
Secretary 1995 114,583 42,917 6,600 0 90,000(8) 4,620
and Treasurer
John E. Lee.................. 1997 165,000 0 7,200 0 65,000(9) 103,663
Former Vice President, 1996 77,500 23,250 3,000 0 100,000 1,615
Sales and Marketing
</TABLE>
- - ---------------
(1) Represents the compensation portion of car allowances advanced to the 1997
Named Officers.
(2) Except as otherwise noted in note (4), 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 ($4,750 per officer) made by the
Company to its 401(k) Plan for each of the executive officers listed above.
For Dr. Dudley in 1995, this amount represents the Company 401(k) matching
contribution, expenses paid by the Company related to Dr. Dudley's
relocation ($35,469) and the taxes associated with those relocation expenses
($11,676). For Mr. Simes, this amount includes insurance premiums ($4,181)
and taxes associated with those premiums ($1,673). For Mr. Lee in 1997, this
amount includes expenses paid by the Company related to Mr. Lee's relocation
($74,415) and the taxes associated with such relocation expenses ($24,498).
(4) Dr. Goode joined the Company as President and Chief Executive Officer on
November 13, 1997. Dr. Goode's Employment Agreement is described under
"Certain Transactions." The options granted to Dr. Goode include an
incentive stock option to purchase 66,665 shares of Common Stock exercisable
in five equal annual installments of 13,333 shares each beginning November
14, 1997, and non-qualified stock options to purchase 333,335 shares of
Common Stock, of which options to purchase 36,667 vested on November 14,
1997, and options to purchase 296,668 shares of Common Stock vest in 48
monthly installments beginning December 13, 1997; however, non-qualified
stock options to purchase up to
5
<PAGE> 8
100,000 shares shall not be exercisable unless and until certain mutually
agreed upon milestones are achieved.
(5) Dr. Dudley joined the Company in December 1994. He served as Chief Executive
Officer and interim President from January 13, 1997 to November 13, 1997.
Dr. Dudley served as Vice President-Clinical and Regulatory Affairs from
December, 1994 through January 13, 1997. He currently serves as a Senior
Vice President of the Company. Dr. Dudley's Employment Agreement is
described under "Certain Transactions."
(6) Mr. Simes joined the Company on October 25, 1994 and resigned as President
and Chief Executive Officer on January 13, 1997. The employment agreement
entered into between Mr. Simes and the Company provides for salary
continuation through February 12, 1998.
(7) The 360,000 options granted to Mr. Simes in 1995 represented 60,000 new
options and a repricing of 300,000 options granted to him in 1994. On
January 13, 1997, options to purchase 170,000 shares of Common Stock
terminated and soon thereafter options to purchase 190,000 shares of Common
Stock were exercised.
(8) The 90,000 options granted to Mr. Riggs in 1995 represents 10,000 new
options and the repricing of options granted in 1994 and repriced in each of
1994 and 1995.
(9) The 65,000 options granted to Mr. Lee represents 15,000 options granted to
Mr. Lee in 1997 and 50,000 options which were granted in 1996 and repriced
in 1997.
OPTION GRANTS IN FISCAL YEAR 1997
The following table sets forth information with respect to stock options
granted during the fiscal year ended December 31, 1997 to the 1997 Named
Officers. All options were granted under the Company's 1991 Stock Option Plan.
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
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$/SH DATE 5% 10%
---- ----------------- ---------- --------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Ronald L. Goode......... 400,000 35.96 7.50 11/13/07 1,886,684 4,781,227
Robert E. Dudley........ 75,000 6.74 5.13 04/24/07 241,967 613,192
50,000 4.49 7.50 11/13/07 235,835 597,653
Stephen M. Simes........ -- -- -- -- -- --
David E. Riggs.......... 25,000 2.25 5.13 04/24/07 80,656 204,397
John E. Lee............. 50,000 4.49 5.13 04/24/07 161,311 408,795
15,000 1.35 5.13 04/24/07 48,393 122,638
</TABLE>
6
<PAGE> 9
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR,
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to stock options
exercised during the fiscal year ended December 31, 1997, and the value at
December 31, 1997 of unexercised stock options held by the 1997 Named Officers:
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED OPTIONS
OPTIONS AT FISCAL IN-THE-MONEY AT
YEAR-END FISCAL YEAR END*
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) ($)
---- --------------- -------- ----------------- -------------------
<S> <C> <C> <C> <C>
Ronald L. Goode.................... 0 0 54,098/345,902 3,381/21,619
Robert E. Dudley................... 0 0 50,000/175,000 190,625/376,188
Stephen M. Simes................... 136,500 $656,906** 0/0 0/0
David E. Riggs..................... 0 0 77,500/37,500 360,469/108,469
John E. Lee........................ 0 0 25,000/90,000 35,813/308,175
</TABLE>
- - -------------------------
* Represents the fair market value at December 31, 1997, of the Common Stock
underlying the options minus the exercise price.
** Represents the aggregate amount of fair market value at the date of exercises
in excess of the aggregate exercise price of the options.
REPRICING OF EXISTING OPTIONS
In April 1997, the Compensation Committee of the Company, acting upon the
recommendation of the Board of Directors, determined that it would serve as a
strong motivating incentive to grant John E. Lee additional options and to
replace the options previously granted to Mr. Lee with new options priced at
current market values. In addition, the Committee, with the Board's
recommendation, determined on April 24, 1997 that it was in the best interest of
the Company to accelerate the vesting of the replacement options granted to Mr.
Lee in order to allow such replacement options to vest on the same dates as the
originally granted options would have vested.
The following table sets forth information with respect to stock options
granted to the 1997 Named Officers, the exercise price of which has been
repriced during the fiscal year ended December 31, 1997 and with respect to all
repricings of options held by any current executive officers during the last ten
completed fiscal years.
<TABLE>
<CAPTION>
MARKET PRICE EXERCISE PRICE LENGTH OF ORIGINAL
NUMBER OF SHARES OF SHARES AT OF SHARES AT NEW OPTION TERM
UNDERLYING OPTIONS TIME OF TIME OF EXERCISE REMAINING AT DATE
NAME DATE REPRICED(#) REPRICING($) REPRICING($) PRICE($) OF REPRICING(YRS)
---- ---- ------------------ ------------ -------------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
John E. Lee.......... 3/8/96 37,000 5.13 7.13 5.13 8.875
4/8/96 13,000 5.13 7.50 5.13 8.96
David E. Riggs....... 1/19/95 80,000 2.75 3.38 2.75 9.75
10/11/94 20,000 3.38 7.75 3.38 7.83
10/11/94 30,000 3.38 8.00 3.38 7.58
</TABLE>
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 1991 Stock Option Plan provides for
a grant of options to purchase 10,000 shares of Common
7
<PAGE> 10
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. If the proposals to adopt the 1998 Long-Term Incentive
Plan and to amend the 1991 Stock Option Plan are approved by the stockholders,
beginning in 1998, the 1998 Long-Term Incentive Plan, and not the 1991 Stock
Option Plan, will control the grant of options to non-employee directors. See
1998 Long-Term Incentive Plan -- Non-Employee Directors' Options, below. In
1997, Dr. John Kapoor, Chairman of the Company, was granted a non-qualified
option to purchase 100,000 shares of Common Stock at an exercise price of $5.13
per share, the fair market value of the Common Stock on the date of grant. The
option vests over a four year term.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors, consisting of three
non-employee directors, Roland Weiser, Chairman, Fred Holubow and James J.
Lempenau, 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 early 1997, 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 which were
adopted by 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 benefits long-term
incentive because management benefits only if the stockholders benefit by
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 under which the employee stock options are granted. If adopted, the
1998 Long-Term Incentive Plan also will be administered by the Committee.
All components of executive compensation are reviewed for competitiveness
by referring to a survey prepared by an independent professional
organization. The 1997 survey used by the Committee was prepared by an
executive compensation consultant and covered 376 public companies in the
biopharmaceutical industry.
BASE SALARY
The 1997 salary for the then President and Chief Executive Officer,
Stephen M. Simes, was consistent with the terms of Mr. Simes employment
agreement.
On January 13, 1997, Mr. Simes resigned his position as President and
Chief Executive Officer and a director of the Company. Dr. Robert Dudley,
the then Vice President of Clinical & Regulatory Affairs, was appointed by
the Board of Directors as Chief Executive Officer and interim President.
The 1997 salary for Dr. Dudley, was based upon his base salary in effect on
January 13, 1997 (in accordance with
8
<PAGE> 11
his employment agreement) plus an additional $4,000 per month for accepting
the additional responsibilities of Chief Executive Officer and interim
President.
The Committee also reviewed the salaries recommended by Dr. Dudley for
the executive officers reporting to him and recommended these for approval
to the Board. All these salaries were evaluated for competitiveness to the
previously mentioned industry survey.
The annual salary for Dr. Ronald Goode, President and Chief Executive
Officer of the Company beginning on November 13, 1997, was the result of
arm's-length negotiations of a comprehensive Employment Agreement between
Dr. Goode and Dr. Kapoor, Chairman of the Company, with Dr. Kapoor
following compensation levels recommended by the Committee. The annual
salary of $250,000 payable to Dr. Goode is commensurate with his many years
of experience as a pharmaceutical company executive officer and is within
the range of base salaries for chief executive officers as reported in the
1997 survey prepared by the Company's compensation consultants.
INCENTIVE BONUS AWARDS
Bonus awards for 1997 were granted on the basis of financial goals and
product development and product marketing objectives established in early
1997. For Dr. Dudley, the Committee considered the potential impact of the
goals achieved, and recommended to the Board that a stock bonus having a
total value of $50,000 be granted. As Dr. Goode's employment as Chief
Executive Officer did not begin until late in 1997, no bonus was awarded to
him for 1997. For the other officers, bonus awards were reviewed by the
Committee as recommended by Dr. Goode for approval by the Board in January
1998.
Beginning in 1998, Dr. Goode will be eligible to receive from the
Company annual bonuses of up to 50% of his base salary. These bonuses will
be determined based on the achievement of specific strategic plans and
goals for the applicable year. Bonuses may vary depending upon the
achievement of threshold, budget or target goals.
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 typically made
annually at fair market value at the time of grant.
Consistent with the Board's desire that all employees have an interest
in the Company and to best align the interest of senior management with
that of the stockholders, during 1997 the Committee granted options to
purchase 125,000 shares of Common Stock to Robert Dudley, the then Chief
Executive Officer. Similarly, options to purchase up to 400,000 shares of
Common Stock were granted to Dr. Goode in connection with his accepting the
position of President and Chief Executive Officer, of which 13,333
incentive stock options and 36,667 non-qualified stock options (50,000
total shares) vested on the day after his employment began, 53,332
incentive stock options are to vest in annual installments of 13,333 each,
and 296,668 options vest monthly beginning with the one month anniversary
of his employment (of which up to 100,000 options are subject to exercise
only upon the achievement of specific milestones negotiated between Dr.
Goode and the Committee).
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
9
<PAGE> 12
another percentage from time to time, as may be confirmed by the Board. In
April 1997, the Committee granted options to employees using the
guidelines.
Respectfully submitted,
Compensation Committee
Fred Holubow
James J. Lempenau
Roland Weiser (Chairman)
10
<PAGE> 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, 1997.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG
UNIMED PHARMACEUTICALS, INC., NASDAQ (US) STOCK MARKET INDEX
AND NASDAQ PHARMACEUTICALS STOCK INDEX
<TABLE>
<CAPTION>
NASDAQ
UNIMED NASDAQ MARKET
MEASUREMENT PERIOD PHARMACEUTICALS, PHARMACEUTICALS INDEX-U.S.
(FISCAL YEAR COVERED) INC. INDEX COS.
<S> <C> <C> <C>
1992 100 100 100
1993 35.56 89.13 114.80
1994 22.78 67.08 112.21
1995 58.89 122.72 158.70
1996 62.22 123.08 195.20
1997 67.22 127.18 239.53
</TABLE>
ASSUMES $100 INVESTED ON JANUARY 1, 1992 IN UNIMED COMMON STOCK, NASDAQ
(US) STOCK MARKET INDEX, AND NASDAQ PHARMACEUTICAL INDEX.
*TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS.
11
<PAGE> 14
UNIMED PHARMACEUTICALS, INC.
1998 LONG-TERM INCENTIVE PLAN
A proposal will be presented at the Annual Meeting of the Stockholders to
approve the Unimed Pharmaceuticals, Inc. 1998 Long-Term Incentive Plan (the
"Long-Term Incentive Plan").
The Board of Directors is recommending the adoption of the Long-Term
Incentive Plan which will permit the granting of nonqualified stock options,
incentive stock options, restricted stock, performance shares and performance
units. The objectives of the Long-Term Incentive Plan are: (i) to optimize the
profitability and growth of the Company through incentives which are consistent
with the Company's goals and which link the personal interests of the plan
participants to those of the Company's stockholders, (ii) to provide the plan
participants with an incentive for excellence in individual performance and
(iii) to promote teamwork among plan participants. In addition, the Long-Term
Incentive Plan is intended to provide flexibility to the Company in its ability
to motivate, attract, and retain the services of plan participants who make
significant contributions to the Company's success and to allow plan
participants to share in the success of the Company.
SUMMARY OF THE LONG-TERM INCENTIVE PLAN
In general, the Long Term Incentive Plan will be administered by a
committee (the "Committee") appointed by the board of directors to administer
the plan. Where appropriate to qualify awards under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), the Committee shall have
a minimum of two directors and shall consist solely of non-employee directors.
The members of the Committee shall be appointed from time to time by, and
shall serve at the discretion of, the board of directors. The Committee will
have the authority to select employees to participate in the Long-Term Incentive
Plan and to determine the size, terms and conditions of the awards in a manner
consistent with the Long-Term Incentive Plan. In no event may any grant or award
under the Long-Term Incentive Plan have a term of more than 10 years from the
date of grant.
An aggregate of 1,000,000 shares of Common Stock of the Company have been
reserved for issuance under the Long-Term Incentive Plan. All employees,
including employees who are members of the board of directors, and all directors
are eligible to participate in the Long-Term Incentive Plan. In addition,
consultants of the Company are eligible to participate in nonqualified stock
options under the Long-Term Incentive Plan. No participant may receive options,
restricted stock or performance shares in excess of one-half of the total shares
reserved for issuance under the Long-Term Incentive Plan. The stockholders of
the Company previously approved the 1991 Stock Option Plan, which plan will
continue in effect (subject to amendment as proposed herein). At March 13, 1998,
a total of 71,106 shares of Common Stock remained available for grant under the
1991 Stock Option Plan, and the Company intends to continue to grant options
under the 1991 Stock Option Plan until the plan expires.
STOCK OPTIONS
Incentive stock options ("ISOs") and non-qualified stock options ("NQSOs")
may be granted to employees and consultants of the Company in such number and
upon such terms, as determined by the Committee. The option price for each grant
of an option shall be at least equal to 85% of the fair market value of a share
on the date the option is granted in the case of a NQSO and 100% of the fair
market value of a share on the date the option is granted in the case of an ISO.
NONEMPLOYEE DIRECTOR STOCK OPTIONS
Each nonemployee director of the Company shall receive annually NQSOs to
acquire 7,500 shares concurrent with the Board of Directors meeting immediately
following the Company's annual meeting of stockholders. In the event that a
nonemployee director begins service other than in connection with an annual
meeting of the stockholders, such nonemployee director shall receive a grant of
NQSOs to acquire 10,000 shares on the date of the first meeting of the Board on
or after the date of the nonemployee director's election to the Board. In
addition, each nonemployee director of the Company that is the Chairman of a
standing
12
<PAGE> 15
committee of the Board shall receive NQSOs to acquire 1,000 shares concurrent
with the Board of Directors meeting at which the nonemployee director is elected
or re-elected Chairman of such standing committee. Each nonemployee director
that is a member of a standing committee of the Board shall receive NQSOs to
acquire 500 shares concurrent with the Board of Directors meeting at which the
nonemployee director is elected or re-elected as a member of such standing
committee. All NQSOs granted to non-employee directors will bear an exercise
price equal to 100% of the fair market value of a share on the date the option
is granted. The NQSOs granted to nonemployee directors shall become exercisable
on the date of the first annual meeting of the stockholders of the Company next
following the date of the grant, provided that the nonemployee director has been
in attendance in person at one-half or more of the regularly scheduled meetings
of the Board or committee, as the case may be, and subject to any restrictions
and conditions as the Board shall provide.
RESTRICTED STOCK
The Committee may also grant shares of restricted stock to employees in
amounts and subject to restrictions and conditions as the Committee may deem
advisable, including but not limited to, a requirement that employees pay a
stipulated purchase price for each share of restricted stock, restrictions based
upon the achievement of specific performance goals, time-based restrictions on
vesting following the attainment of the performance goals, and/or restrictions
under applicable federal or state securities laws.
PERFORMANCE UNITS AND PERFORMANCE SHARES
Performance units and/or performance shares may be granted to employees in
such amounts and upon such terms, and at any time from time to time, as
determined by the Committee. Each performance unit shall have an initial value
that is established by the Committee at the time of the grant and each
performance share shall have an initial value equal to the fair market value of
a share on the date of the grant. The Committee shall set performance goals in
its discretion which, depending on the extent to which they are met, will
determine the number and/or value of the performance units/shares that will be
paid to the employee.
The performance measures to be used in determining the degree of payout
and/or vesting with respect to awards to Named Executive Officers which are
intended to qualify for the performance-based exception from the tax
deductibility limitations of Code Section 162(m) shall be chosen by the
Committee from the following: earnings per share, economic value added, market
share, net income, operating profit, return on assets, return on equity, return
on investment, revenue, share price, stock price growth, total stockholder
return, debt reduction, cash flow, working capital management, bona fide
National Drug Act filings and National Drug Act approvals.
EXERCISE AND TRANSFER OF AWARDS
The exercise price of options granted under the Long-Term Incentive Plan is
payable (a) in cash or its equivalents, (b) by tendering previously acquired
shares of common stock having an aggregate fair market value at the time of
exercise equal to the option exercise price, or (c) a combination of cash and
shares of common stock. The Board also may allow cashless exercise of options as
permitted under Federal Reserve Board Regulation T, subject to applicable
securities law restrictions, or by other applicable means acceptable to the
Board.
Generally, options, restricted stock grants and performance awards are not
transferrable during the participant's lifetime. However, NQSOs granted to
non-employee directors may be transferred in connection with their estate and
tax planning.
AMENDMENT, MODIFICATION AND TERMINATION
The Long-Term Incentive Plan may be amended, suspended or terminated by the
Board of Directors in whole or in part at any time; provided, however that no
amendment which requires shareholder approval in order for the plan to continue
to comply with Rule 16b-3 under the Exchange Act shall be effective without the
requisite vote of the shareholders of the Company entitled to vote thereon.
13
<PAGE> 16
CHANGE IN CONTROL
Upon the occurrence of a Change in Control, as defined in the Long Term
Investment Plan, all options granted under the Long Term Incentive Plan will
become immediately exercisable and will remain exercisable throughout their
entire term. In addition, upon the occurrence of a Change in Control, all awards
of restricted stock, performance units and performance shares will be deemed to
have been fully earned. The vesting of all awards denominated in shares will be
accelerated as of the effective date of a Change in Control and plan
participants shall be paid out in cash the pro rata amount based upon an assumed
achievement of all relevant performance goals. The Board of Directors may modify
the Change of Control provisions of the Long-Term Incentive Plan any time before
a Change of Control occurs.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences of the Long Term Incentive Plan are
summarized in the following discussion, which is intended for general
information only. State and local income tax principles are not discussed and
may vary from locality to locality.
The grant of a stock option will not result in taxable income at the time
of grant for the grantee or the Company. The grantee will have no taxable income
upon exercising an ISO (except that the alternative minimum tax may apply), and
the Company will receive no deduction when an ISO is exercised. Upon exercising
a NQSO, the grantee will recognize ordinary income in the amount by which the
fair market value exceeds the option price; the Company will be entitled to a
deduction for the same amount. The treatment to a grantee of a disposition of
shares acquired through the exercise of an option depends on how long the shares
are held and on whether the shares were acquired by exercising an ISO or a NQSO.
Generally, there will be no tax consequence to the Company when shares acquired
under an option are disposed of except that the Company may be entitled to a
deduction if shares acquired upon exercise of an ISO are disposed of before the
applicable ISO holding periods have been satisfied.
A participant who receives a restricted stock grant under the Long Term
Incentive Plan will have taxable income upon receipt. The participant will
realize ordinary income, and the Company will be entitled to a deduction, in an
amount equal to the fair market value of the shares covered by the bonus stock
award on the date of award. The Company will be required to withhold taxes on
the income recognized by the participant.
Unless an election is made under Section 83(b) of the Code, a participant
who receives a grant of performance shares under the Long Term Incentive Plan
will not have taxable income upon receipt, and the Company will not then be
entitled to a deduction. However, when shares covered by such a grant become no
longer subject to forfeiture, the participant will realize ordinary income and
the Company will be entitled to a deduction in an amount equal to the fair
market value of the shares at the date such forfeiture provisions lapse. If an
election is made under Section 83(b), the participant will realize ordinary
income at the date of grant equal to the fair market value of the shares at that
date, and the Company will be entitled to a deduction in the same amount. If
shares subject to such election are subsequently forfeited, the participant will
not be allowed a deduction, refund or loss for tax purposes for such forfeited
shares. Generally, whether or not an election is made under Section 83(b), the
Company will be required to withhold taxes on the income recognized by
participant.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1998
LONG-TERM INCENTIVE PLAN.
14
<PAGE> 17
AMENDMENT OF THE
UNIMED PHARMACEUTICALS, INC.
1991 STOCK OPTION PLAN
In 1991, the Board of Directors and stockholders of the Company adopted the
Unimed Pharmaceuticals, Inc. 1991 Stock Option Plan (as amended on March 26,
1996, the "1991 Stock Option Plan"). The purpose of the 1991 Stock Option Plan
is to induce employees and non-employee directors of the Company to remain in
the employ of the Company, to attract new employees and non-employee directors
and to encourage such employees (including consultants) and non-employee
directors to secure or increase on reasonable terms their stock ownership in the
Company.
THE AMENDMENTS
The 1991 Stock Option Plan, as initially adopted, among other things,
authorized the grant of options to purchase shares of common stock to
non-employee directors of the Company. The Board of Directors has determined
that, with the approval of the stockholders of the Company, the Long-Term
Incentive Plan should be adopted. As described more fully herein, the Long-Term
Incentive Plan provides, in part, for the grant of non-qualified stock options
to nonemployee directors of the Company. The Board of Directors now recommends
that the 1991 Stock Option Plan be amended to supersede the authority to grant
options to non-employee directors under the 1991 Stock Option Plan with annual
award options granted under the Long-Term Incentive Plan and to make reasonably
comparable certain rights granted to non-employee directors as to options
granted under the two plans.
The proposed amendment to the 1991 Stock Option Plan provides that from the
effective date of the Long Term Incentive Plan no options shall be granted to
non-employee directors under the 1991 Stock Option Plan in any year in which an
annual award of options was granted to non-employee directors under the Long-
Term Incentive Plan.
In addition, the amendment to the 1991 Stock Option Plan permits up to 100%
of the payment of the option price payable upon the exercise of an option be
made in kind by the delivery of shares of common stock having a fair market
value equal to the portion of the option price. If adopted, the proposed
amendment would also expand on the transferability of options granted under the
1991 Stock Option Plan to allow the board of directors, in its sole discretion,
to permit a non-employee director to transfer an option to members of the
director's immediate family, including trusts for the benefit of such family
members and partnerships in which such family members are the only partners, or
to other persons or entities which are approved in advance by the board.
Furthermore, the proposed amendment to the 1991 Stock Option Plan will
allow each non-employee director's option agreement to govern such non-employee
director's rights to exercise the options following the termination of the
non-employee director's service with the Company, as opposed to the current
provision of the 1991 Stock Option Plan which provides that upon the termination
of a non-employee director, each option shall be terminated. As amended, the
1991 Stock Option Plan will also allow any non-employee director who is 65 years
or older and who has been terminated, for any reason, to exercise his or her
options through the tenth anniversary of the grant of such options.
SUMMARY OF THE 1991 STOCK OPTION PLAN
An aggregate of 1,800,000 shares of common stock of the Company have been
reserved for issuance under the 1991 Stock Option Plan. The 1991 Stock Option
Plan is administered by a committee consisting of two or more "disinterested
members" within the meaning of Rule 16b-3(c)(2)(i) of the Securities Exchange
Act of 1934, as amended, of the board of directors (the "1991 Committee"). The
1991 Committee is appointed annually by the board of directors, which may at any
time and from time to time remove any members of the Committee and fill
vacancies. The 1991 Committee has the discretion to determine which employees
will receive stock options, whether such stock options will be incentive or
non-incentive stock options and under what terms and prices such options shall
be granted.
15
<PAGE> 18
STOCK OPTIONS
Pursuant to the terms of the 1991 Stock Option Plan as originally adopted,
newly elected non-employee directors were granted an option to purchase 10,000
shares of common stock. In addition, each non-employee director was also
annually granted an option to purchase 7,500 shares of common stock.
The initial per share option price of any incentive stock option shall not
be less than the fair market value of a share of the common stock of the Company
on the date of the grant of such option; provided, however, that, in the case of
a plan participant who owns more than 10% of the total combined voting power of
the common stock of the Company at the time an incentive stock option is
granted, the initial per share option price shall not be less than 110% of fair
market value of a share of the common stock on the date of the grant.
The initial per share option price of any non-incentive stock option shall
not be less than 85% of the fair market value of a share of the common stock of
the Company and the date of the grant of such option; provided, however, that in
the case of a plan participant who is a non-employee director, the initial per
share option price shall be 100% of the fair market value of a share of the
common stock on the date of the grant.
The total number of options that have been granted under the 1991 Stock
Option Plan to all current executive officers of the Company, as a group, is
855,000. A total of 455,998 options has been granted to all current non-employee
directors and 429,375 options have been granted to all employees, including all
current officers who are not executive officers. Specific information regarding
the options granted to the 1997 Named Officers of the Company may be found in
the Summary Compensation Table and the Option Grants in Fiscal Year 1997 Table
herein.
OWNERSHIP OF SHARES
The following table presents information as of March 13, 1998 with respect
to the beneficial ownership of the Company's Common Stock by all directors, all
1997 Named Officers (other than Stephen Simes, who resigned from the Company in
January 1997), 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:
<TABLE>
<CAPTION>
SHARES OF
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
------------------------ ------------ ----------
<S> <C> <C>
John N. Kapoor, PhD(2)...................................... 2,416,429 24.63%
EJ Financial Enterprises, Inc.
225 E. Deerpath, Suite 250
Lake Forest, IL 60045
Robert E. Dudley, PhD(3).................................... 90,359 *
David E. Riggs(3)........................................... 85,594 *
Ronald L. Goode, PhD(3)..................................... 83,986 *
James J. Lempenau(3)........................................ 73,328 *
Roland Weiser(3)............................................ 62,160 *
Fred Holubow(3)............................................. 42,500 *
John E. Lee(3).............................................. 53,750 *
Gilbert E. Dwyer............................................ 0 *
All Directors and Executive Officers as a group (9
persons).................................................. 2,908,106(4) 29.64%
</TABLE>
- - -------------------------
* 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
16
<PAGE> 19
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
235,000 shares of Common Stock that may be purchased under stock options
exercisable within 60 days of March 13, 1998.
(3) Includes incentive stock options and nonqualified stock options exercisable
within 60 days of March 13, 1998 to purchase shares of Common Stock as
follows: 83,750 shares by Dr. Dudley; 83,750 shares by Mr. Riggs; 70,486
shares by Dr. Goode; 57,328 shares by Mr. Lempenau; 56,170 shares by Mr.
Weiser; 32,500 shares by Mr. Holubow; and 53,750 shares by Mr. Lee.
(4) Includes shares owned beneficially (including an aggregate of 672,734 shares
of Common Stock that may be purchased under stock options exercisable within
60 days of March 13, 1998) 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, entered into an agreement, terminating March
27, 1997, 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 1997, $50,000 for fiscal
1996 and $50,000 for fiscal 1995. EJ Financial principally provides consulting
support on strategic corporate objectives and operations' including sales and
marketing strategies, new product strategies and key contacts 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. 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. Goode is employed by the Company as its President and Chief Executive
Officer under an Employment Agreement dated as of November 13, 1997. Under the
Agreement, Dr. Goode's initial annual salary is $250,000 plus an automobile
allowance of $12,000, net of taxes. Dr. Goode is 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 is 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 has been 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. (See Executive Compensation -- Summary
Compensation Table and Option Grants in Fiscal Year 1997 Table, above). Dr.
Goode may request that the Company loan to him up to $750,000 to exercise the
options, in part. Any such loan would bear interest at an annual rate equal to
the Applicable Federal Rate, require annual payments of interest only with
principal repayment four years from the date of the loan or one year from the
date of termination of Dr. Goode's employment. The Employment Agreement may be
terminated for Cause (as defined in the Agreement) or without Cause at any time.
If Dr. Goode is terminated without Cause, or due to his death or disability, he
is to receive his then current base salary for 12 months, medical, dental and
disability benefits for 24 months, and a per diem share of his bonus for the
preceding year and unused vacation time. The Company also has agreed to develop
a compensation program for Dr. Goode and certain other persons in the event
their employment is terminated due to a change of control that is consistent
with industry programs in the pharmaceuticals industry. Dr. Goode is obligated
to
17
<PAGE> 20
maintain the confidentiality of Company information at all times during and
after termination of the Agreement.
Dr. Dudley is employed by the Company under an Employment Agreement dated
November 3, 1994. Under this agreement, Dr. Dudley received a base salary of
$150,000 in 1996 and $204,000 in 1997 plus an automobile allowance of $7,200 per
year and may receive bonuses based on a multiple of his annual salary, as may be
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. Dr. Dudley may be terminated immediately for cause (as defined in the
Employment Agreement) or upon 30 days notice without cause. If Dr. Dudley is
terminated without cause, he is to receive his then current base salary and
benefits for up to nine months after the date of termination. On January 13,
1997, the Board appointed Dr. Dudley Chief Executive Officer of the Company and
increased his base compensation by $4,000 per month during the 11 month period
that he served in that capacity.
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 1997 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 errors, a
purchase of shares of Common Stock by Dr. Kapoor and by Dr. Goode was not timely
reported to the SEC.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Coopers & Lybrand LLP was the Company's independent public accountant for
the 1997 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 1998 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 James J. Lempenau and Ronald L.
Goode, Ph.D. into the class of directors whose term will expire in 2001.
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, 1997 IS AVAILABLE WITHOUT CHARGE FROM THE CORPORATE SECRETARY,
UNIMED PHARMACEUTICALS, INC., 2150 EAST LAKE COOK ROAD, BUFFALO GROVE, ILLINOIS
60089, TELEPHONE: (847) 541-2525.
18
<PAGE> 21
1999 ANNUAL MEETING
Proposals of stockholders intended to be represented at the next Annual
Meeting of Stockholders to be held in 1999 must be received by the Company on or
before December 29, 1998 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 29, 1998
PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD NOW
19
<PAGE> 22
APPENDIX A
UNIMED PHARMACEUTICALS, INC.
1998 LONG-TERM INCENTIVE PLAN
<PAGE> 23
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
- - ------- ----
<C> <S> <C>
1. Establishment, Objectives, and Duration..................... 1
1.1. Establishment of the Plan............................. 1
1.2. Objectives of the Plan................................ 1
1.3. Duration of the Plan.................................. 1
2. Definitions................................................. 1
3. Administration.............................................. 3
3.1. The Committee......................................... 3
3.2. Authority of the Committee............................ 3
3.3. Decisions Binding..................................... 3
4. Shares Subject to the Plan and Maximum Awards............... 4
4.1. Number of Shares Available for Grants................. 4
4.2. Adjustments in Authorized Shares...................... 4
4.3. Maximum Awards........................................ 4
5. Eligibility and Participation............................... 4
5.1. Eligibility........................................... 4
5.2. Actual Participation.................................. 4
6. Stock Options............................................... 4
6.1. Grant of Options...................................... 4
6.2. Award Agreement....................................... 4
6.3. Option Price.......................................... 4
6.4. Duration of Options................................... 4
6.5. Exercise of Options................................... 5
6.6. Payment............................................... 5
6.7. Restrictions on Share Transferability................. 5
6.8. Termination of Employment............................. 5
6.9. Nontransferability of Options......................... 5
(a) Incentive Stock Options................................. 5
(b) Nonqualified Stock Options.............................. 5
(c) Limitations on ISOs..................................... 5
7. Nonemployee Director Stock Options.......................... 6
7.1. Grant of Options...................................... 6
7.2. Award Agreement....................................... 6
7.3. Option Price.......................................... 6
7.4. Duration of Options................................... 6
7.5. Exercise of Options................................... 6
7.6. Payment............................................... 6
7.7. Restrictions on Share Transferability................. 6
7.8. Termination of Service................................ 7
7.9. Nontransferability of Options......................... 7
7.10. Administration........................................ 7
8. Restricted Stock............................................ 7
8.1. Grant of Restricted Stock............................. 7
8.2. Restricted Stock Agreement............................ 7
8.3. Transferability....................................... 7
8.4. Other Restrictions.................................... 7
8.5. Voting Rights......................................... 8
8.6. Dividends and Other Distributions..................... 8
8.7. Termination of Employment............................. 8
</TABLE>
i
<PAGE> 24
<TABLE>
<CAPTION>
ARTICLE PAGE
- - ------- ----
<C> <S> <C>
9. Performance Units and Performance Shares.................... 8
9.1. Grant of Performance Units/Shares..................... 8
9.2. Value of Performance Units/Shares..................... 8
9.3. Earning of Performance Units/Shares................... 8
9.4. Form and Timing of Payment of Performance
Units/Shares................................................ 8
9.5. Termination of Employment............................. 9
9.6. Nontransferability.................................... 9
10. Performance Measures........................................ 9
10.1. Initial Performance Measures.......................... 9
10.2. Committee Discretion.................................. 9
11. Beneficiary Designation..................................... 9
12. Deferrals................................................... 9
13. Rights of Employees......................................... 9
13.1. Employment............................................ 9
13.2. Participation......................................... 10
14. Change in Control........................................... 10
14.1. Treatment of Outstanding Awards....................... 10
14.2. Termination, Amendment, and Modifications of
Change-in-Control Provisions................................ 10
15. Amendment, Modification, and Termination.................... 10
15.1. Amendment, Modification, and Termination.............. 10
15.2. Adjustment of Awards Upon the Occurrence of Certain
Unusual or Nonrecurring Events.............................. 10
15.3. Awards Previously Granted............................. 10
15.4. Compliance with Code Section 162(m)................... 11
16. Withholding................................................. 11
16.1. Tax Withholding....................................... 11
16.2. Share Withholding..................................... 11
17. Indemnification............................................. 11
18. Successors and Assigns...................................... 11
19. Legal Construction.......................................... 11
19.1. Gender and Number..................................... 11
19.2. Severability.......................................... 11
19.3. Requirements of Law................................... 12
19.4. Securities Law Compliance............................. 12
19.5. Governing Law......................................... 12
</TABLE>
ii
<PAGE> 25
UNIMED PHARMACEUTICALS, INC.
1998 LONG-TERM INCENTIVE PLAN
ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION
1.1. ESTABLISHMENT OF THE PLAN. Unimed Pharmaceuticals, Inc., a Delaware
corporation (hereinafter referred to as the "Company"), hereby establishes,
subject to approval by the Company's stockholders at the Company's 1998 annual
meeting of stockholders, an incentive compensation plan to be known as the
Unimed Pharmaceuticals, Inc. 1998 Long-Term Incentive Plan (hereinafter referred
to as the "Plan"), as set forth in this document.
The Plan permits the grant of Nonqualified Stock Options, Incentive Stock
Options, Stock Appreciation Rights, Restricted Stock, Performance Shares and
Performance Units.
The Plan shall become effective on May 28, 1998 (the Effective Date ) and
shall remain in effect as provided in Section 1.3 hereof.
1.2. OBJECTIVES OF THE PLAN. The objectives of the Plan are to optimize the
profitability and growth of the Company through incentives which are consistent
with the Company's goals and which link the personal interests of Participants
to those of the Company's stockholders; to provide Participants with an
incentive for excellence in individual performance; and to promote teamwork
among Participants. The Plan is further intended to provide flexibility to the
Company in its ability to motivate, attract, and retain the services of
Participants who make significant contributions to the Company's success and to
allow Participants to share in the success of the Company.
1.3. DURATION OF THE PLAN. The Plan shall commence on the Effective Date,
as described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 14 hereof, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions. However, in no event
may an Award be granted under the Plan on or after April 30, 2008.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1. "AFFILIATE" means any person who is, at the Effective Date,
controlling or controlled by, or under common control with, the Company.
2.2. "AWARD" means, individually or collectively, a grant under this Plan
of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock,
Performance Shares or Performance Units.
2.3. "AWARD AGREEMENT" means an agreement entered into by the Company and
each Participant setting forth the terms and provisions applicable to Awards
granted under this Plan.
2.4. "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
2.5. "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
2.6. "CONSULTANT" means Persons and employees of Persons who provide bona
fide services to the Company that are not Employees or Directors.
2.7. A "CHANGE IN CONTROL OF THE COMPANY" shall have occurred if, after the
Effective Date: (a) any Person (within the meaning of Section 13(d) of the
Exchange Act) other than the Company or an Affiliate shall become the Beneficial
Owner, directly or indirectly, of forty percent (40%) or more of the outstanding
Voting Stock (such Person's beneficial ownership to be determined, in the case
of rights to acquire Voting Stock, pursuant to paragraph (d) of Rule 13d-3 under
the Exchange Act); or (b) the stockholders of the Company shall approve: (i) the
dissolution of the Company; or (ii) any sale, lease, exchange, or other transfer
<PAGE> 26
of all or substantially all of the assets of the Company to any Person other
than an Affiliate; or (iii) a merger or consolidation of the Company with or
into, or the acquisition by the Company of any Person other than a merger or
consolidation with or into, or the acquisition by the Company of, another Person
in a transaction that results in the voting securities of the Company continuing
to represent (by conversion or otherwise) at least 50% of the combined voting
power of the voting securities of the surviving Person.
2.8. "CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
2.9. "COMMITTEE" means the Compensation Committee of the Board, as
specified in Article 3 herein, or such other committee appointed by the Board to
administer the Plan with respect to grants of Awards. Where appropriate to
qualify Awards for the Performance-Based Exception, the Committee shall have a
minimum of two (2) directors and shall consist solely of outside directors, as
required by Code Section 162(m).
2.10. "COMPANY" means Unimed Pharmaceuticals, Inc., a Delaware corporation,
and any successor or assign thereto as provided in Article 18 herein.
2.11. "DIRECTOR" means any individual who is a member of the Board of
Directors of the Company.
2.12. "DISABILITY" shall have the meaning ascribed to such term in the
discretion of the Committee.
2.13. "EFFECTIVE DATE" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.14. "EMPLOYEE" means any employee of the Company or its Subsidiaries.
Directors who are not employed by the Company shall not be considered Employees
under this Plan.
2.15. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.16. "FAIR MARKET VALUE" shall be determined on the basis of the closing
sale price, rounded, if necessary, the next full $.01 of the closing price, on
the NASDAQ Stock Exchange -- National Market, or if not listed on such exchange,
any other national exchange on which the Shares are listed or included for
quotation, if applicable, on which the Shares are traded or, if there is no such
sale on the relevant date, then on the last previous day on which a sale was
reported.
2.17. "INCENTIVE STOCK OPTION" or "ISO" mean an option to purchase Shares
granted under Article 6 herein and which is designated as an Incentive Stock
Option and which is intended to meet the requirements of Code Section 422.
2.18. "INSIDER" shall mean an individual who is, on the relevant date, an
officer, director or ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.
2.19. "NAMED EXECUTIVE OFFICER" means a Participant who, as of the date of
vesting and/or payout of an Award, as applicable, is one of the group of covered
employees, as defined in the regulations promulgated under Code Section 162(m),
or any successor statute.
2.20. "NONEMPLOYEE DIRECTOR" means an individual who is a member of the
Board of Directors of the Company but who is not an Employee of the Company.
2.21. "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to purchase
Shares granted under Articles 6 or 7 herein and which is not intended to meet
the requirements of Code Section 422.
2.22. "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Articles 6 or 7 herein.
2
<PAGE> 27
2.23. "OPTION PRICE" means the price at which a Share may be purchased by a
Participant pursuant to an Option.
2.24. "PARTICIPANT" means an Employee, Consultant or Director who has
outstanding an Award granted under the Plan.
2.25. "PERFORMANCE-BASED EXCEPTION" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).
2.26. "PERFORMANCE SHARE" means an Award granted to an Employee, as
described in Article 10 herein.
2.27. 'PERFORMANCE UNIT" means an Award granted to an Employee, as
described in Article 10 herein.
2.28. "PERIOD OF RESTRICTION" means the period during which the transfer of
Shares of Restricted Stock is limited in some way (based on the passage of time,
the achievement of performance goals, or upon the occurrence of other events as
determined by the Committee, at its discretion), and the Shares are subject to a
substantial risk of forfeiture, as provided in Article 8 herein.
2.29. "PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited partnership, limited
liability company, trust, unincorporated organization, government or agency or
political subdivision of any government. When the context of this Plan so
indicates, such term also has the meaning assigned to it in Section 13(d) of the
Exchange Act.
2.30. "RESTRICTED STOCK" means an Award granted to an Employee pursuant to
Article 9 herein.
2.31. "RETIREMENT" shall have the meaning ascribed to such term in the
discretion of the Committee.
2.32. "SHARES" means the shares of the Company's common stock, par value
$0.25 per share.
2.33. "SUBSIDIARY" means any corporation in which the Company owns
directly, or indirectly through subsidiaries, at least fifty percent (50%) of
the total combined voting power of all classes of stock, or any other entity
(including, but not limited to, partnerships and joint ventures) in which the
Company owns at least fifty percent (50%) of the combined equity thereof.
2.34. "VOTING STOCK" means shares of capital stock of the Company the
holders of which are entitled to vote for the election of directors of the
Company, but excluding shares entitled to vote only upon the occurrence of a
contingency unless that contingency shall have occurred.
ARTICLE 3. ADMINISTRATION
3.1. THE COMMITTEE. Except as provided in Article 7, the Plan shall be
administered by the Committee, or for Awards that are not intended to comply
with Code Section 162(m) by any other committee appointed by the Board to
administer the Plan with respect to the grant of Awards. The members of the
Committee shall be appointed from time to time by, and shall serve at the
discretion of, the Board of Directors.
3.2. AUTHORITY OF THE COMMITTEE. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Employees,
Consultants and Nonemployee Directors who shall participate in the Plan;
determine the sizes and types of Awards; determine the terms and conditions of
Awards in a manner consistent with the Plan; construe and interpret the Plan and
any agreement or instrument entered into under the Plan as they apply to
Employees; establish, amend, or waive rules and regulations for the Plan's
administration as they apply to Employees; and (subject to the provisions of
Article 15 herein) amend the terms and conditions of any outstanding Award to
the extent such terms and conditions are within the discretion of the Committee
as provided in the Plan. Further, except as provided in Article 7, the Committee
shall make all other determinations which may be necessary or advisable for the
administration of the Plan, as the Plan applies to Employees, Consultants and
Nonemployee Directors. As permitted by law, the Committee may delegate its
authority as identified herein.
3.3. DECISIONS BINDING. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding
3
<PAGE> 28
on all persons, including the Company, its stockholders, Directors, Employees,
Participants, and their estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1. NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to adjustment as
provided in Section 4.2 herein, there is hereby reserved for issuance under the
Plan a total of 1,000,000 shares of the authorized but unissued common stock of
the Company. If any Award shall expire, lapse, terminate or be cancelled without
having been exercised in full, the unissued Shares subject thereto shall be
again available for issuance under the Plan. The Committee shall determine the
appropriate methodology for calculating the number of Shares issued pursuant to
the Plan.
4.2. ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change in
corporate capitalization, such as a stock split, reverse stock split, or a
corporate transaction, such as any merger, consolidation, separation, including
a spin-off, or other distribution of stock or property of the Company, any
reorganization (whether or not such reorganization comes within the definition
of such term in Code Section 368) of the Company, such adjustment shall be made
in the number and class of Shares which may be delivered under Section 4.1, and
in the number and class of and/or price of Shares subject to outstanding Awards
granted under the Plan, as may be determined to be appropriate and equitable by
the Committee, in its sole discretion, to prevent dilution or enlargement of
rights; provided, however, that the number of Shares subject to any Award shall
always be a whole number.
4.3. MAXIMUM AWARDS. In no event shall the aggregate number of shares of
Common Stock for which any one Participant may be granted Options, or be issued
Restricted Stock or be issued Performance Shares for any given year exceed fifty
percent (50%) of the total number of Shares provided in Section 4.1, as adjusted
pursuant to Section 4.2, over the term of the Plan.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1. ELIGIBILITY. Persons eligible to participate in this Plan include all
Employees, including Employees who are members of the Board, and all
Non-Employee Directors. In addition, Consultants are eligible to participate in
NQSOs under the Plan.
5.2. ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees,
Consultants and Directors, those to whom Awards shall be granted and shall
determine the nature and amount of each Award.
ARTICLE 6. STOCK OPTIONS
6.1. GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted to Employees and Consultants in such number, and upon
such terms, and at any time and from time to time as shall be determined by the
Committee.
6.2. AWARD AGREEMENT. Each Option grant under this Article 6 shall be
evidenced by an Award Agreement that shall specify the Option Price, the
duration of the Option, the number of Shares to which the Option pertains, and
such other provisions as the Committee shall determine. The Award Agreement also
shall specify whether the Option is intended to be an ISO within the meaning of
Code Section 422, or an NQSQ whose grant is intended not to fall under the
provisions of Code Section 422.
6.3. OPTION PRICE. The Option Price for each grant of an Option under this
Article 6 shall be at least equal to eighty-five percent (85%) of the Fair
Market Value of a Share on the date the Option is granted in the case of an NQSO
and one hundred percent (100%) of the Fair Market Value of a Share on the date
the Option is granted in the case of an ISO.
6.4. DURATION OF OPTIONS. Each Option granted to an Employee or Consultant
shall expire at such time as the Committee shall determine at the time of grant;
provided, however, that no ISO shall be exercisable later than the tenth (10th)
anniversary date of its grant.
4
<PAGE> 29
6.5. EXERCISE OF OPTIONS. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Employee.
6.6. PAYMENT. Options granted under this Article 6 shall be exercised by
the delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares. The Option Price upon exercise of
any Option shall be payable to the Company in full either: (a) in cash or its
equivalent, or (b) by tendering previously acquired Shares having an aggregate
Fair Market Value at the time of exercise equal to the total Option Price, or
(c) by a combination of (a) and (b). The Committee also may allow cashless
exercise as permitted under Federal Reserve Board's Regulation T, subject to
applicable securities law restrictions, or by any other means which the
Committee determines to be consistent with the Plan's purpose and applicable
law. Subject to any governing rules or regulations, as soon as practicable after
receipt of a written notification of exercise and full payment, the Company
shall deliver to the Employee or Consultant, in the Employee's or Consultant's
name, Share certificates in an appropriate amount based upon the number of
Shares purchased under the Option(s).
6.7. RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such Shares.
6.8. TERMINATION OF EMPLOYMENT. Each Employee's Option Award Agreement
shall set forth the extent to which the Employee shall have the right to
exercise the Option following termination of the Employee's employment with the
Company. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with each
Employee, need not be uniform among all Options issued pursuant to this Article
6, and may reflect distinctions based on the reasons for termination of
employment.
6.9. NONTRANSFERABILITY OF OPTIONS.
(a) INCENTIVE STOCK OPTIONS. No ISO granted under the Plan may be sold, or
as otherwise determined by the Committee, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution. Further, all ISOs granted to an Employee under the
Plan shall be exercisable during his or her lifetime only by such Employee or by
the Employee's guardian or legal representative.
(b) NONQUALIFIED STOCK OPTIONS. Except as otherwise provided in an
Employee's or Consultant's Award Agreement, no NQSO granted under this Article 6
may be sold, or as otherwise determined by the Committee, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise provided in an
Employee's Award Agreement, all NQSOs granted to an Employee under this Article
6 shall be exercisable during his or her lifetime only by such Employee or by
the Employee's guardian or legal representative.
(c) LIMITATIONS ON ISOS.
(i) Notwithstanding anything in the foregoing to the contrary, any ISO
granted to an Employee that at the time of grant owns more than 10% of the
total combined voting power of the Company shall be granted at an Option
Price not less than 110% of the Fair Market Value of a Share on the date of
grant and shall not be exercisable later than the fifth (5th) anniversary
date of its grant;
(ii) Under no circumstances shall the aggregate Fair Market Value of
Shares for which any Employee may be granted ISOs which are exercisable for
the first time in any calendar year (whether under the terms of the Plan or
any other stock option plan of the Company) exceed $100,000. Any Options
granted as ISOs that exceed the limitations herein shall constitute NQSOs.
5
<PAGE> 30
ARTICLE 7. NONEMPLOYEE DIRECTOR STOCK OPTIONS
7.1. GRANT OF OPTIONS. Subject to the terms and provisions of the Plan:
(a) Each Nonemployee Director of the Company shall receive annually NQSOs
to acquire 7,500 Shares concurrent with the Board of Directors meeting following
the Company's annual meeting of stockholders;
(b) Each Nonemployee Director of the Company that is the Chairman of a
standing committee of the Board, including, without limitation, an executive
committee, audit committee, compensation committee and the Committee, shall
receive NQSOs to acquire 1,000 Shares concurrent with the Board of Directors
meeting at which the Nonemployee Director is elected or re-elected Chairman of
such standing committee of the Board; and
(c) Each Nonemployee Director of the Company that is a member (other than
Chairman) of a standing committee of the Board, including, without limitation,
an executive committee, audit committee, compensation committee and the
Committee, shall receive NQSOs to acquire 500 Shares concurrent with the Board
of Directors meeting at which the Nonemployee Director is elected or re-elected
a member of such standing committee of the Board.
If a Nonemployee Director begins service other than in connection with an
annual meeting of stockholders, such Nonemployee Director shall receive a grant
of NQSOs to acquire 10,000 Shares on the date of the first meeting of the Board
on or after the date of the Nonemployee's election to the board.
7.2. AWARD AGREEMENT. Each NQSO grant under this Article 7 shall be
evidenced by an Award Agreement that shall specify the Option Price, the
duration of the NQSO, the number of Shares to which the Option pertains, and
such other provisions as the Committee shall determine.
7.3. OPTION PRICE. The Option Price for each grant of an NQSO under this
Article 7 shall be equal to one hundred percent (100%) of the Fair Market Value
of a Share on the date the NQSO is granted.
7.4. DURATION OF OPTIONS. Each NQSO granted to a Nonemployee Director shall
expire on the tenth (10th) anniversary date of its grant.
7.5. EXERCISE OF OPTIONS. NQSOs granted under this Article 7 shall become
exercisable on the date of the first annual meeting of stockholders next
following the date of grant, provided that the Nonemployee Director has been in
attendance in person at one-half or more of the regularly scheduled meetings of
the Board or committee, as the case may be from the date of grant through the
annual meeting of stockholders next following the date of grant, and be subject
to such restrictions and conditions as the Board shall in each instance approve,
which need not be the same for each grant or for each Nonemployee Director. Any
NQSOs granted under this Article 7 that shall not become exercisable as
aforesaid, shall lapse and be of no further force or effect.
7.6. PAYMENT. Options granted under this Article 7 shall be exercised by
the delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the NQSO is to be exercised, accompanied
by full payment for the Shares. The Option Price upon exercise of any NQSO shall
be payable to the Company in full either: (a) in cash or its equivalent, or (b)
by tendering previously acquired Shares having an aggregate Fair Market Value at
the time of exercise equal to the total Option Price, or (c) by a combination of
(a) and (b). The Board also may allow cashless exercise as permitted under
Federal Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Board determines to be consistent
with the Plan's purpose and applicable law. Subject to any governing rules or
regulations, as soon as practicable after receipt of a written notification of
exercise and full payment, the Company shall deliver to the Nonemployee
Director, in the Nonemployee Director's name, Share certificates in an
appropriate amount based upon the number of Shares purchased under the NQSO(s).
7.7. RESTRICTIONS ON SHARE TRANSFERABILITY. The Board may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 7 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities laws, under the
requirements of
6
<PAGE> 31
any stock exchange or market upon which such Shares are then listed and/or
traded, and under any blue sky or state securities laws applicable to such
Shares.
7.8. TERMINATION OF SERVICE. Each Nonemployee Director's Option Award
Agreement shall set forth the extent to which the Nonemployee Director shall
have the right to exercise the Option following termination of the Nonemployee
Director's service with the Company. Such provisions shall be determined in the
sole discretion of the Board, shall be included in the Award Agreement entered
into with each Nonemployee Director, need not be uniform among all Options
issued pursuant to this Article 7, and may reflect distinctions based on the
reasons for termination of service.
Notwithstanding anything in the foregoing to the contrary, any Nonemployee
Director that shall have his or her service with the Company terminate, for any
reason, after achieving 65 years of age shall have the right to exercise his or
her Options through the tenth anniversary of the date of grant of the Option.
7.9. NONTRANSFERABILITY OF OPTIONS. No NQSO granted under this Article 7
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution.
Notwithstanding the foregoing, the Board may, in its sole discretion, permit a
Nonemployee Director to transfer an NQSO to members of the Nonemployee
Director's immediate family, including trusts for the benefit of such family
members and partnerships in which such family members are the only partners, or
to other persons or entities which are approved in advance by the Board.
Further, except as otherwise provided in a Nonemployee Director's Award
Agreement, all NQSOs granted to a Nonemployee Director under this Article 7
shall be exercisable during his or her lifetime only by such Nonemployee
Director.
7.10. ADMINISTRATION. Awards granted under this Article 7 shall be
administered by the Board or by such committee appointed by the Board to
administer Awards granted under this Article 7. The Board may delegate to such
committee any or all of the discretionary authority vested in the Board under
this Article 7.
ARTICLE 8. RESTRICTED STOCK
8.1. GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Employees in such amounts as the Committee shall determine.
8.2. RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the Period(s)
of Restriction, the number of Shares of Restricted Stock granted, and such other
provisions as the Committee shall determine.
8.3. TRANSFERABILITY. Except as provided in this Article 8, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated until the end of the applicable Period of
Restriction established by the Committee and specified in the Restricted Stock
Award Agreement, or upon earlier satisfaction of any other conditions, as
specified by the Committee in its sole discretion and set forth in the
Restricted Stock Award Agreement. All rights with respect to the Restricted
Stock granted to an Employee under the Plan shall be available during his or her
lifetime only to such Employee.
8.4. OTHER RESTRICTIONS. Subject to Article 10 herein, the Committee shall
impose such other conditions and/or restrictions on any Shares of Restricted
Stock granted pursuant to the Plan as it may deem advisable including, without
limitation, a requirement that Employees pay a stipulated purchase price for
each Share of Restricted Stock, restrictions based upon the achievement of
specific performance goals (Company-wide, divisional, and/or individual),
time-based restrictions on vesting following the attainment of the performance
goals, and/or restrictions under applicable federal or state securities laws.
The Company shall retain the certificates representing Shares of Restricted
Stock in the Company's possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied. Except as otherwise
provided in this Article 8, Shares of Restricted Stock covered by each
Restricted Stock grant made under the Plan shall become freely transferable by
the Employee after the last day of the applicable Period of Restriction.
7
<PAGE> 32
8.5. VOTING RIGHTS. During the Period of Restriction, Employees holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares.
8.6. DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction,
Employees holding Shares of Restricted Stock granted hereunder may be credited
with regular cash dividends paid with respect to the underlying Shares while
they are so held. The Committee may apply any restrictions to the dividends that
the Committee deems appropriate. Without limiting the generality of the
preceding sentence, if the grant or vesting of Restricted Shares granted to a
Named Executive Officer is designed to comply with the requirements of the
Performance-Based Exception, the Committee may apply any restrictions it deems
appropriate to the payment of dividends declared with respect to such Restricted
Shares, such that the dividends and/or the Restricted Shares maintain
eligibility for the Performance-Based Exception.
8.7. TERMINATION OF EMPLOYMENT. Each Restricted Stock Award Agreement shall
set forth the extent to which the Employee shall have the right to receive
unvested Restricted Shares following termination of the Employee's employment
with the Company. Such provisions shall be determined in the sole discretion of
the Committee, shall be included in the Award Agreement entered into with each
Employee, need not be uniform among all Shares of Restricted Stock issued
pursuant to the Plan, and may reflect distinctions based on the reasons for
termination of employment; provided, however that, except in the cases of
terminations connected with a Change in Control and terminations by reason of
death or Disability, the vesting of Shares of Restricted Stock which qualify for
the Performance-Based Exception and which are held by Named Executive Officers
shall occur at the time they otherwise would have, but for the employment
termination.
ARTICLE 9. PERFORMANCE UNITS AND PERFORMANCE SHARES
9.1. GRANT OF PERFORMANCE UNITS/SHARES. Subject to the terms of the Plan,
Performance Units and/or Performance Shares may be granted to Employees in such
amounts and upon such terms, and at any time and from time to time, as shall be
determined by the Committee.
9.2. VALUE OF PERFORMANCE UNITS/SHARES. Each Performance Unit shall have an
initial value that is established by the Committee at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value of
a Share on the date of grant. The Committee shall set performance goals in its
discretion which, depending on the extent to which they are met, will determine
the number and/or value of Performance Units/Shares that will be paid out to the
Employee. For purposes of this Article 9, the time period during which the
performance goals must be met shall be called a Performance Period.
9.3. EARNING OF PERFORMANCE UNITS/SHARES. Subject to the terms of this
Plan, after the applicable Performance Period has ended, the holder of
Performance Units/Shares shall be entitled to receive payout on the number and
value of Performance Units/Shares earned by the Employee over the Performance
Period, to be determined as a function of the extent to which the corresponding
performance goals have been achieved, as certified by the Committee.
9.4. FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/SHARES. Unless
otherwise determined by the Committee, payment of earned Performance
Units/Shares shall be made in a single lump sum following the close of the
applicable Performance Period. Subject to the terms of this Plan, the Committee,
in its sole discretion, may pay earned Performance Units/Shares in the form of
cash or in Shares (or in a combination thereof) which have an aggregate Fair
Market Value equal to the value of the earned Performance Units/ Shares at the
close of the applicable Performance Period. Such Shares may be granted subject
to any restrictions deemed appropriate by the Committee. At the discretion of
the Committee, Employees may be entitled to receive any dividends declared with
respect to Shares which have been earned in connection with grants of
Performance Units and/or Performance Shares which have been earned, but not yet
distributed to Employees (such dividends shall be subject to the same accrual,
forfeiture, and payout restrictions as apply to dividends earned with respect to
Shares of Restricted Stock, as set forth in Section 8.6 herein). In addition,
Employees may, at the discretion of the Committee, be entitled to exercise their
voting rights with respect to such Shares.
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9.5. TERMINATION OF EMPLOYMENT. Unless determined otherwise by the
Committee, in the event the employment of an Employee is terminated, all
Performance Units/Shares shall be forfeited by the Employee to the Company.
9.6. NONTRANSFERABILITY. Except as otherwise provided in an Employee's
Award Agreement, Performance Units/Shares may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise provided in an
Employee's Award Agreement, an Employee's rights under the Plan shall be
exercisable during the Employee's lifetime only by the Employee or the
Employee's legal representative.
ARTICLE 10. PERFORMANCE MEASURES
10.1. INITIAL PERFORMANCE MEASURES. Unless and until the Committee proposes
for shareholder vote and shareholders approve a change in the general
performance measures set forth in this Article 10, the attainment of which may
determine the degree of payout and/or vesting with respect to Awards to Named
Executive Officers which are designed to qualify for the Performance-Based
Exception, the performance measure(s) to be used for purposes of such grants
shall be chosen from among earnings per share, economic value added, market
share, net income, operating profit, return on assets, return on equity, return
on investment, revenue, share price, stock price growth, total stockholder
return, debt reduction, cash flow, working capital management, bona fide
National Drug Act filings and National Drug Act approvals.
10.2. COMMITTEE DISCRETION. The Committee shall have the discretion to
adjust the determinations of the degree of attainment of the preestablished
performance goals; provided, however, that Awards which are designed to qualify
for the Performance-Based Exception, and which are held by Named Executive
Officers, may not be increased (the Committee shall retain the discretion to
modify or cancel such Awards at any time). In the event that applicable tax
and/or securities laws change to permit Committee discretion to alter the
governing performance measures for the Performance-Based Exception without
obtaining shareholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining shareholder approval. In
addition, in the event that the Committee determines that it is advisable to
grant Awards which shall not qualify for the Performance-Based Exception, the
Committee may make such grants without satisfying the requirements of Code
Section 162(m).
ARTICLE 11. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Company during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
ARTICLE 12. DEFERRALS
The Committee may permit or require a Participant to defer such
Participant's receipt of the payment of cash or the delivery of Shares that
would otherwise be due to such Participant by virtue of the exercise of an
Option, the lapse or waiver of restrictions with respect to Restricted Stock, or
the satisfaction of any requirements or goals with respect to Performance
Units/Shares. If any such deferral election is required or permitted, the
Committee shall, in its sole discretion, establish rules and procedures for such
payment deferrals.
ARTICLE 13. RIGHTS OF EMPLOYEES
13.1. EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continue in the employ of the
Company.
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13.2. PARTICIPATION. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.
ARTICLE 14. CHANGE IN CONTROL
14.1. TREATMENT OF OUTSTANDING AWARDS. Upon the occurrence of a Change in
Control, unless otherwise determined by the Board in writing at or after grant
but prior to the occurrence of a Change of Control, specifically prohibited
under applicable laws, or by the rules and regulations of any governing
governmental agencies or national securities exchanges:
(a) Any and all Options granted hereunder shall become immediately
exercisable, and shall remain exercisable throughout their entire term;
(b) Any restriction periods and restrictions imposed on Restricted Shares
shall lapse;
(c) Unless otherwise provided in the Award Agreement, the target payout
opportunities attainable under all outstanding Awards of Restricted Stock,
Performance Units and Performance Shares shall be deemed to have been fully
earned for the entire Performance Period(s) as of the effective date of the
Change in Control. The vesting of all Awards denominated in Shares shall be
accelerated as of the effective date of the Change in Control, and there shall
be paid out in cash to Participants not more than thirty (30) days following the
effective date of the Change in Control a pro rata amount based upon an assumed
achievement of all relevant performance goals.
14.2. TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE-IN-CONTROL
PROVISIONS. Notwithstanding any other provision of this Plan or any Award
Agreement provision, the provisions of this Article 14 may not be terminated,
amended, or modified on or after the date of a Change in Control to affect
adversely any Award theretofore granted under the Plan without the prior written
consent of the Participant with respect to said Participant's outstanding
Awards; provided, however, the Board, upon recommendation of the Committee, may
terminate, amend, or modify this Article 14 at any time and from time to time
prior to the date of a Change in Control.
ARTICLE 15. AMENDMENT, MODIFICATION, AND TERMINATION
15.1. AMENDMENT, MODIFICATION, AND TERMINATION. The Board may at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part; provided, however, that no amendment which requires shareholder
approval in order for the Plan to continue to comply with Rule 16b-3 under the
Exchange Act, including any successor to such Rule, shall be effective unless
such amendment shall be approved by the requisite vote of shareholders of the
Company entitled to vote thereon.
The Plan, each Award and the grant and exercise thereof, and the obligation
of the Company to sell and issue shares under the Plan shall be subject to all
applicable laws, rules, regulations, and governmental and stockholder approvals,
and the Committee may make such amendment or modification thereto as it shall
deem necessary to comply with any such laws, rules, and regulations or to obtain
any such approvals.
15.2. ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.2 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan; provided that no such adjustment
shall be authorized to the extent that such authority would be inconsistent with
requirements of Section 162(m) of the Code.
15.3. AWARDS PREVIOUSLY GRANTED. No termination, amendment, or modification
of the Plan shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant holding
such Award.
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15.4. COMPLIANCE WITH CODE SECTION 162(M). At all times when Code Section
162(m) is applicable, all Awards to Named Executive Officers granted under this
Plan shall comply with the requirements of Code Section 162(m). However, in the
event the Committee determines that such compliance is not desired with respect
to any Award or Awards available for grant under the Plan, then compliance with
Code Section 162(m) will not be required, except that an Award that is intended
to comply with the requirements of Code Section 162(m) may not be amended in a
manner inconsistent with the requirements of Code Section 162(m). In addition,
in the event that changes are made to Code Section 162(m) to permit greater
flexibility with respect to, and prior to the issuance of, any Award or Awards
available under the Plan, the Committee may, subject to this Article 15, make
any adjustments it deems appropriate.
ARTICLE 16. WITHHOLDING
16.1. TAX WITHHOLDING. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of this Plan.
16.2. SHARE WITHHOLDING. With respect to withholding required upon the
exercise of Options, upon the lapse of restrictions on Restricted Stock, or upon
any other taxable event arising as a result of Awards granted hereunder,
Participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares having a Fair Market Value on the date the tax is to be determined equal
to the minimum statutory total tax which could be imposed on the transaction.
All such elections shall be irrevocable, made in writing, signed by the
Participant, and shall be subject to any restrictions or limitations that the
Committee, in its sole discretion, deems appropriate.
ARTICLE 17. INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgment in any such action, suit, or proceeding against him or her, provided he
or she shall give the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf. The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such persons may be entitled under
the Company's Articles of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
ARTICLE 18. SUCCESSORS AND ASSIGNS
All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company or the
Company's assigns, whether the existence of such successor or assign is the
result of a direct or indirect purchase, merger, consolidation, or otherwise, of
all or substantially all of the business and/or assets of the Company.
ARTICLE 19. LEGAL CONSTRUCTION
19.1. GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
19.2. SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
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19.3. REQUIREMENTS OF LAW. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
19.4. SECURITIES LAW COMPLIANCE. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the 1934 Act. To the extent any provision of the
plan or action by the Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Committee.
19.5. GOVERNING LAW. To the extent not preempted by federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the state of Delaware.
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APPENDIX B
AMENDMENT
TO
UNIMED PHARMACEUTICALS, INC.
1991 STOCK OPTION PLAN
The Unimed Pharmaceuticals, Inc. 1991 Stock Option Plan, as amended on
March 26, 1996 (the "Plan"), is hereby amended as follows (capitalized terms
used but not defined herein shall have the meanings ascribed to them in the
Plan):
WHEREAS, the Plan provides, in part, for the grant of Options to purchase
shares of Common Stock to Outside Directors of the Company;
WHEREAS, the Company is adopting the Unimed Pharmaceuticals, Inc. Long-Term
Incentive Plan which, among other things provides for the grant of non-qualified
stock options to the non-employee directors of the Company; and
WHEREAS, the Board of Directors has determined that it is in the best
interest of the Company to amend the Plan to (a) supersede the authority to
grant Options to Outside Directors, as such, under the Plan with annual award
Options granted under the Long-Term Incentive Plan, and (b) made reasonably
comparable certain rights granted to Outside Directors as to Options granted
under the Plan with rights granted under the Long-Term Incentive Plan.
NOW, THEREFORE, the Plan is hereby amended as follows:
A. Notwithstanding anything in Section 8.D of the Plan to the
contrary, from and after the effective date of the Unimed Pharmaceuticals,
Inc. Long-Term Incentive Plan, no Options shall be granted to Outside
Directors under the Plan in any year in which annual award Options are
granted to Outside Directors under said Long-Term Incentive Plan.
B. Notwithstanding anything in Section 10.C to the contrary, from and
after the effective date of this Amendment, up to 100% of the payment of
the option price payable upon exercise of an Option may be made in kind by
the delivery of shares of common stock having a fair market value equal to
the portion of the option price as paid.
C. Section 11 is hereby amended by adding the following after the
first sentence:
"Notwithstanding the foregoing, the Board may, in its sole
discretion, permit an Outside Director to transfer an Option to members
of the Outside Director's immediate family, including trusts for the
benefit of such family members and partnerships in which such family
members are the only partners, or to other persons or entities which are
approved in advance by the Board."
D. Section 12.B is hereby deleted and is replaced and superseded by
the following:
"Each Outside Director's Option Agreement shall set forth the
extent to which the Outside Director shall have the right to exercise
the Option following termination of the Outside Director's service with
the Company. Such provisions shall be determined in the sole discretion
of the Board, shall be included in the Option Agreement entered into
with each Outside Director, need not be uniform among all Options, and
may reflect distinctions based on the reasons for termination of
service.
Notwithstanding anything in the foregoing to the contrary, any
Outside Director that shall have his or her service with the Company
terminate, for any reason, after achieving 65 years of age shall have
the right to exercise his or her Options through the tenth anniversary
of the date of grant of the Option."
E. The foregoing amendments shall be applicable to Options granted and
to be granted under the Plan.
<PAGE> 38
F. Except as provided herein, the Plan shall continue unchanged and in
full force and effect.
G. The Amendment shall be effective upon approval of the holders of a
majority of the shares of the Common Stock present in person or by proxy at
a meeting of the stockholders at which the Amendment is considered and
voted upon.
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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 MAY 28, 1998.
The undersigned hereby appoints Dr. John N. Kapoor, Dr. Ronald L.
Goode, 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 Harris
Trust and Savings Bank, Presentation Room, Room 20C, 111 West Monroe Street,
Chicago, Illinois 60603 on May 28, 1998 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, FOR PROPOSALS 2 AND 3, 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.
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THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN.
1. For the election of JAMES J. LEMPENAU and RONALD L. GOODE,
Ph.D. as Class III directors, to hold office until the
Annual Meeting in 2001 or until their successors are duly
elected and qualified.
TO WITHHOLD AUTHORITY TO VOTE FOR A NOMINEE, LINE THROUGH OR
OTHERWISE STRIKE OUT THE NAME OF THE NOMINEE.
2. Approval of the 1998 Long-Term Incentive Plan and in
satisfaction of the requirements of Section 162(m) of the
Internal Revenue Code of 1986.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. For the approval of the amendment of the Company's 1991
Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To transact such other business as may properly come before
the meeting.
Signatures: ____________________________
____________________________
Dated: _____________________, 1998
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.
24
