15, 2010 5, 2010 financial on this proposal. ”), dated as of March 16, 2010, by and among the Company, Victory Park Management, LLC, as administrative agent and collateral agent, and Victory Park Credit Opportunities Master Fund, Ltd. (together with its affiliates, “VPC” or “Victory Park”), in March 2010 Richard Levy became a member of the Board, Chairman of the Board and a member of the Company’s Nominating and Corporate G overnance Committee. We maintain separate roles between the Chief Executive Officer and Chairman of the Board in recognition of the differences between the two responsibilities. Our Chief Executive Officer is responsible for the Company’s performance while setting our strategic direction and providing day-to-day leadership. The Chairman of the Board provides guidance to the Chief Executive Officer, sets the agenda for Board meetings, and presides over meetings of the full Board of Directors. As set forth in the Restated Financing Agreement, as Chairman of the Board, Richard Levy's powers and authorities include the following: (i) presiding as Chairman at all meetings of the Board and at all meetings of Company stockholders; (ii) developing, in consultation with the Chief Executive Officer and the Lead Director, and approving the agenda for each Board meeting; (iii) reviewing in advance all information sent to the Board as a whole; (iv) calling meet ings of the Board; (v) attending meetings of each committee of the Board of which he is not a member; (vi) serving as the Board’s liaison with the Chief Executive Officer; (vii) serving as a designated contact for stockholder communication to non-management directors, including for consultation and direct communication with major stockholders; (viii) leading and coordinating the annual evaluation of the Chief Executive Officer with the applicable committees of the Board; and (ix) leading and reviewing the Board’s self-assessment and evaluation process. In addition, our Board of Directors has appointed Dr. Allen Bloom as Lead Director. As Lead Director, Dr. Bloom's responsibilities include the following: (i) enhancing communication between the independent directors and the Chief Executive Officer; (ii) serving as a Board representative in communications with stockholders; (iii) providing input to the Chairman of the Board and the Chief Executive Officer on the agenda for Boar d meetings; and (iv) serving as an advisor to the Chief Executive Officer. President. During 2009, 50% of the annual Chairmen and Lead Director retainers were paid in Unigene Common Stock. During 2010, all retainers will be paid in Unigene Common Stock and meeting fees will be reduced by 20%. under the 2006 Plan. Therefore, upon the recommendations of the Compensation Committee, the Board of Directors adopted the following policy that, beginning in 2007, each non-employee director will receive, (1) on the date of his initial election, an option to purchase 30,000 shares of Common Stock (an Name J. Thomas August* Allen Bloom * Robert F. Hendrickson * Jay Levy Ronald S. Levy (5) Warren P. Levy (5) Marvin L. Miller * Bruce Morra * Peter Slusser * are not counted in determining whether directors are elected. Name Position Warren P. Levy (1) Ronald S. Levy (1) Jay Levy (1) James P. Gilligan Nozer M. Mehta Paul P. Shields William Steinhauer J. Thomas August Allen Bloom Zvi Eiref Marvin L. Miller Bruce Morra Peter Slusser He brings to the Board in-depth experience in corporate operations and biotechnology research. He brings to the Board diverse expertise in financial and legal matters. He brings to the Board financial and corporate operations expertise. He brings to the Board extensive experience in the biotechnology and pharmaceutical industries, as well as strategic planning. He provides to the Board a broad knowledge of corporate operations and corporate strategy. He brings to the Board financial and corporate development experience. 2009 BOARD OF DIRECTOR RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE COMPANY’S INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 135,000,000 TO 275,000,000 SHARES. 4 2006 STOCK-BASED INCENTIVE PLANTO INCREASE BY 5,000,000 SHARES THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE FOR ISSUANCE THEREUNDER Quarterly Report on Form 10-Q for the quarter ended June 30, 2009. The general purpose of the 2006 Plan is to assist the Company in attracting and retaining valued employees, consultants and non-employee directors by offering them a greater stake in the Company’s success and a closer identity with it, and to encourage ownership of the Company’s stock by such employees, consultants and non-employee directors. In addition, it gives the Company flexibility to reward employees with an alternative to cash awards. Name and Principal Position Warren P. Levy, President, Chief Executive Officer and Director Ronald S. Levy, Executive Vice President, Secretary and Director William Steinhauer, Vice President of Finance James P. Gilligan, Vice President of Product Development Paul P. Shields, Vice President, Manufacturing Nozer M. Mehta, Vice President, Biological R&D Executive Group Non-Executive Director Group Non-Executive Officer Employee Group the grant date fair value of Common Stock in accordance with ASC 718. Plan category Equity compensation plans approved by security holders Equity compensation plans not approved by security holders Total 2009: Acusphere, Inc. BioCryst Pharmaceuticals, Inc. Cell Therapeutics Inc. DepoMed, Inc. Durect Corporation Dyax Corporation Emisphere Technologies, Inc. Encysive Pharmaceuticals, Inc. Immunomedics Inc. Inspire Pharmaceuticals, Inc. Introgen Therapeutics Inc. We are asking our stockholders to approve an amendment to increase by 5,000,000 shares the number of shares available for issuance under the 2006 Plan (see Proposal 4 above). termination for any other reasons (other than cause), vested options typically may be exercised for 90 days. Options will expire immediately in the event of a for-cause termination, as defined in the 2006 Plan. 2009. 1, 2010 Name and Principal Position Warren P. Levy, President, Chief Executive Officer and Director Ronald S. Levy, Executive Vice President, Secretary and Director William Steinhauer, Vice President of Finance James P. Gilligan, Vice President of Product Development Paul P. Shields, Vice President, Manufacturing Nozer M. Mehta, Vice President, Biological R&D Name Warren P. Levy Ronald S. Levy William Steinhauer James P. Gilligan Paul P. Shields Nozer M. Mehta Name Warren P. Levy Ronald S. Levy William Steinhauer James P. Gilligan Paul P. Shields Nozer M. Mehta Name Warren P. Levy Ronald S. Levy William Steinhauer James P. Gilligan Paul Shields Nozer M. Mehta Name Warren P. Levy (1) Ronald S. Levy (1) William Steinhauer James P. Gilligan Paul P. Shields Nozer M. Mehta (1) Agreements. Name and Address of Beneficial Owner Victory Park Capital Advisors, LLC Victory Park Special Situations Master Fund Ltd. Victory Park Credit Opportunities Master Fund, Ltd. Jacob Capital, L.L.C. Richard Levy 227 West Monroe St., Ste 3900, Chicago, IL 60606 Wynnefield Partners Small Cap Value, L.P. 450 Seventh Avenue, Suite 509, New York, NY 10123 Based on information contained in a Questionnaire for Directors, Executive Officers and 5% Stockholders dated March Name of Beneficial Owner Warren P. Levy Ronald S. Levy Jay Levy James P. Gilligan Nozer M. Mehta Paul P. Shields William Steinhauer J. Thomas August Allen Bloom Zvi Eiref Robert F. Hendrickson Marvin L. Miller Bruce Morra Peter Slusser Officers and Directors as a Group (14 persons) 2009 and through the date of this proxy statement. Loans Ronald Levy, two of our executive officers. At May 10, Jay Levy long-term loan (1) Levy Partnership long-term loan (1) Accrued interest Total loans and interest due to stockholders The process for identifying and evaluating nominees has been assigned by the Board to the Nominating and Corporate Governance Committee and is as follows. In the case of incumbent directors whose terms of office are set to expire, we review such directors’ overall service to the Company, including the number of meetings attended, level of participation and quality of performance. In the case of new candidates, the Nominating and Corporate Governance Committee considers recommendations of potential director candidates from current directors, management, stockholders and other business contacts. The Nominating and Corporate Governance Committee may also consult with outside advisors or retain search firms to assist in the search for qualified candidates. Then the Nominating and Corporate Governance Committee meets to discuss such candidates, interviews candidates, considers his or her qualifications and makes recommendations to the Board, which chooses a candidate by majority vote. Grant Thornton LLP is expected to attend the Annual Meeting, will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions. 5, 2010 Bruce Morra and ñ¨oPreliminary 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 Sec. 240.14a-12 (Name of Person(s) Filing Proxy Statement, if other than Registrant)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)x No fee required. ¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. and 0-11. 1) Title of each class of securities to which transactionstransaction 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 0-11(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: 25, 2009“Company”“Company”), will be held at The Ramada Inn, 130 Route 10 West, East Hanover, NJ 07936 on June 25, 2009,15, 2010, at 11:00 A.M., Eastern Daylight Time, for the following purposes:20092010 fiscal year;Plan;Plan, as amended, to increase by 5,000,000 shares the number of shares of Common Stock, par value $.01 per share, available for issuance thereunder; and4.30, 200920, 2010 as the record date for the determination of stockholders who are entitled to notice of and to vote at the meeting.20082009 is being sent to you along with the Proxy Statement.By Order of the Board of DirectorsRONALD S. LEVYSecretaryBy Order of the Board of Directors WARREN P. LEVY Secretary 12, 200920082009 Annual Report are available at:unigene.com/www.unigene.com/investor_relations/financial_reports“Company”“Company”), for the Annual Meeting of Stockholders of the Company to be held at The Ramada Inn, 130 Route 10 West, East Hanover, NJ 07936 on June 25, 2009,15, 2010, at 11:00 A.M., Eastern Daylight Time.the accompanying form ofa proxy and returning it to the Company in the enclosed envelope.Company. The proxy may be revoked at any time before it is exercised by written notice to the Company bearing a later date than the date on the proxy, provided such notice is received by the Company prior to the start of the meeting, by delivering a subsequently dated proxy, or by attending the Annual Meeting, withdrawing the proxy and voting in person. Any stockholder attending the meeting may vote in person whether or not he or she has previously submitted a proxy. Attendance at the Annual Meeting will not have the effect of revoking a proxyp roxy unless you give proper written notice of revocation to our Secretary before the proxy is exercised or you vote by written ballot at the Annual Meeting. Where instructions are indicated, a duly executed proxy will be voted in accordance with such instructions. Where no instructions are indicated, a duly executed proxy will be voted for each of the director nominees named herein and in favor of the proposals set forth in the attached Notice of Annual Meeting of Stockholders.30, 200920, 2010 as the record date (the “Record Date”“Record Date”) for the determination of stockholders who are entitled to notice of and to vote at the meeting. As of April 17, 2009,1, 2010, the outstanding shares of the Company entitled to vote were 90,262,76392,136,551 shares of common stock, par value $.01 per share (“Common Stock”Stock”), the holders of which are each entitled to one vote per share.The affirmativeBroker non-votes occur when nominees, such as banks and brokers, holding shares on behalf of beneficial owners do not receive voting instructions from the beneficial owners by the tenth day before the Annual Meeting and the nominees may only vote those shares on matters deemed routine. For purposes of this proxy, banks and brokers can vote on the ratification of Grant Thornton LLP as our independent auditors for the year ending December 31, 2010 even if the bank or broker does not receive voting instructions from you. However, your bank or broker does not have discretionary authority to vote on the election of directors, the amendment to our Certificate of Incorporation or the amendment to our 2006 Stock-Based Incentive Compensation Plan (as amended to date, the “2006 Plan”) without instructions from you, in which case a broker non-vote will occur and your shares will not be voted on these matters.holdersvotes of a majority of the shares present and entitled to votecast at the Annual Meeting is required forMeeting. This means that the seven nominees receiving the highest number of “FOR” votes will be elected and abstentions and broker non-votes will have no effect on the election of director nominees (Proposal 1). The ratification of the appointment of Grant Thornton LLP, as auditors offor which there can be no broker non-votes since the Company and for the approval of the amendment to the Company’s 2006 Stock-Based Incentive Compensation Plan. For adoption of matters that requirebroker’s discretionary authority on such matter is not limited, requires the affirmative vote of a majority of the shares of Common Stock present, in person or by proxy, and entitled to vote abstentions(Proposal 2). Abstentions are considered as shares present and entitled to vote and, therefore, have the effect of a “no” vote. Brokervote on this proposal. ;The approval of the increase in our authorized shares of Common Stock requires the affirmative vote of the holders of a majority of the outstanding stock entitled to vote at the Annual Meeting (Proposal 3). Abstentions and broker non-votes however, are not countedconsidered as shares outstanding and entitled to vote and, therefore, have the effect of a “no” vote on this proposal. The approval of the amendment to our 2006 Plan requires the affirmative vote of a majority of the shares of Common Stock present, in person or by proxy, and entitled to vote (Proposal 4). Abstentions are considered as shares present and entitled to be voted with respect tovote and, therefore, have the matters which the broker has not expressly voted. If your shares are held byeffect of a broker, the broker will ask you how you want your shares to be voted. If you give the broker instructions, your shares will be voted as you direct. If you do not give instructions, one of two things can happen, depending“no” vote on the type ofthis proposal. For the election of directors and the ratification of auditors, under the rules of various stock exchanges, the broker may vote your shares in its discretion. For the approval of the amendment to the Company’s 2006 Stock-Based Incentive Compensation Plan and other proposals, the broker may not vote your shares at all. When that happens, it is called a “broker non-vote.” Since a broker’s discretionary authority to vote in an uncontested election of directors and to ratify the Company’s auditors is not limited there cannot be any brokerBroker non-votes regarding these matters. There can be broker non-votes for the approval of the amendment to the Company’s 2006 Stock-Based Incentive Compensation Plan. Such broker non-votes will be treated as shares that are not present andconsidered as shares entitled to vote, and arewill not be counted in determining whetheras voted, and, therefore, will not have any effect on the alternativeoutcome of the vote required to approve Proposal 3 has been cast.(i)(1) this Proxy Statement, (ii)(2) the accompanying Notice of Annual Meeting of Stockholders, (iii)(3) the proxy card and (iv)(4) the Company’s Annual Report for the year ended December 31, 2008.2009. Information included in our website, other than the Notice of Annual Meeting of Stockholders, the Proxy Statement, the proxy card and the Annual Report for the year ended December 31, 2008,2009, is not part of the proxy soliciting materials. In addition, this Proxy Statement and the accompanying Notice of Annual Meeting of Stockholders and form of proxy are being mailed to the stockholders on or about May 15, 2009.5, 2010. A copy of the Company’s Annual Report for the year ended December 31, 20083 1, 2009 is also enclosed.22008,2009, there were eleven meetings of the Board of Directors. Except for unusual circumstances, all directors are expected to attend the Company’s Annual Meeting. All incumbent directors, except for Richard Levy, attended the Company’s 20082009 Annual Meeting. Each member of the Board of Directors attended more than 75 percent of the combined total meetings of the Board of Directors and of the committees of the Board of Directors on which such member served for the period of 20082009 during which he served as a Director.JayRichard Levy, Chairman of the Board, Unigene Laboratories, Inc., 81 Fulton Street, Boonton, NJ 07005. The Chairman will review the correspondence and forward it to the Chairman of the appropriate committee or to any individual director or directors to whom the communication is directed, unless the communication is unduly hostile, threatening, illegal, does not reasonably relate to Unigene or its business, or is similarly inappropriate. The Chairman has the authority to discard or disregard any inappropriate communications or to take other appropriate actions with respect to any such inappropriate communications.Robert Hendrickson, Marvin Miller, Bruce Morra and Peter Slusser. Mr. Eiref was elected by the Board of Directors to serve as a director effective January 5, 2009, after being recommended by a stockholder.fivenine meetings during 2008.2009. The Board of Directors adopted a written Audit Committee charter in 2005 and revised it in 2007, and that charter is availableav ailable on our website,http://www.unigene.com. All members of the Audit Committee are considered to be “independent” as that term is defined under the listing standards of the Nasdaq Stock Market, LLC and as that term is used in Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”“Exchange Act”). In addition, two members, Zvi Eiref and Peter Slusser are considered by the Board of Directors to be “audit committee financial experts” as described in Rule 407(d)(5) of Regulation S-K, promulgated under the Securities Act of 1933, as amended (the “Securities Act”“Securities Act”).Robert F. Hendrickson (Chairman), Marvin Miller, Bruce Morra and Peter Slusser. The Compensation Committee held fivesix meetings during 2008.2009. The Board of Directors adopted a written Compensation Committee charter in 2005 and that charter is available on our website,http://www.unigene.com. All members of the Compensation Committee are considered to be “independent” as that term is defined under the listing standards of the Nasdaq Stock Market, LLC and they all meet the definitions of “non-employee director” for purposes of Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act and “outside director” for purposes of Section 162(m) of the Internal Revenue Code, as amended. In addition, subject to the limitations set forth in the 2006 Stock-Based Incentive Compensation Plan, (the “2006 Plan”), the Compensation Committee oversees the 2006 Plan and (i) selects the employees to be granted stock-based awards; (ii) fixes the number of shares to be covered by the stock-based awards granted; and (iii) determines the exercise price and other terms and conditions of the stock-based awards.3, published by Aon Consulting, which is a resource of competitive intelligence for positions in the biotechnology and pharmaceutical industries as well as compensation informationinfor mation on companies considered to be Unigene’s peers.Chief Executive Officer’s and Executive Vice President’s compensationexecutive officers’ compensatio n are subject to approval of the Board of Directors, with the Chief Executive Officer abstaining from the vote regarding compensation to be paid to him and the Executive Vice President abstaining from the vote.2008,2009, the Compensation Committee engaged Frederick Cook & Sons, a third-party compensation consultantconsulting firm, to assistadvise it in fulfilling its duties. connection with the Company’s restructuring plan, announced in December 2009, that included a reduction in workforce, salary reductions at all levels in 2010 and other cost savings. In addition, the Compensation Committee’s charter authorizes the Committee to form and delegate authority, as it deems appropriate, to subcommittees.In February 2007, the Board of Directors established aThe Nominating and Corporate Governance Committee which held threesix meetings in 2008.2009. The responsibilities of the Nominating and Corporate Governance Committee are to (i) establish the criteria for, and the qualifications of, people suitable for nomination as directors and to report its recommendations to the Board; and (ii) consider corporate governance matters. The Board of Directors adopted a written Nominating and Corporate Governance Committee charter in 2007 and that charter is available on our website,http://www.unigene.com. The Nominating and Corporate Governance Committee will consider recommendations by stockholders, as more fully described in the section entitled “Submission of Stockholder ProposalsPr oposals and Director Nominations” in this proxy statement. The current members of the Nominating and Corporate Governance Committee are Allen Bloom, Robert Hendrickson,Richard Levy, Marvin Miller (Chairman) and Bruce Morra. All members of the Nominating and Corporate Governance Committee, except for Richard Levy, are considered to be “independent” as that term is defined under the listing standards of the Nasdaq Stock Market, LLC.Code In light of Ethics.the Company’s need for additional sources of cash to maintain all of its operations prior to the debt restructuring transaction with Victory Park, the Board determined that the Restated Financing Agreement, including its provision that Richard Levy serve on the Nominating and Corporate Governance Committee, was required in the best interests of the Company and its stockholders.a code of ethics.an ethics and business conduct policy. It describes specific policies concerning the ethical conduct of the Company’s business and applies to all officers, directors and employees. Our code of ethicspolicy is posted on our website,http://www.unigene.com.www.unigene.com/legal.html. Upon written request to Unigene Laboratories, Inc., 81 Fulton Street, Boonton, NJ 07005, we will provide to stockholders without charge a copy of our code of ethics.ethics and business conduct policy.20082009 of $18,000, as well as a fee of $1,500 for each Board of Directors meeting attended and $750 for any Board of Directors meeting conducted via conference call. During 2009, 50% of the annual retainer was paid in Unigene common stock. J. Thomas August, Allen Bloom, Robert F. Hendrickson,Zvi Eiref, Marvin L. Miller, Bruce Morra and Peter Slusser are the current directors who received such fees in 2008.2009. Non-employee Board members earn additional compensation for service on the Audit, Compensation and Nominating and Corporate Governance Committees as follows: $500 per committee conference call, $1,000 per meeting of the committee if such meeting is convened solely to transact committee business, or $500 per meeting if such meeting is convened ono n a date or in conjunction with other activities of the Company or its Board of Directors or other committees for purposes in addition to committee business. In addition, the Chairmen of the Audit, Compensation and Nominating and Corporate Governance Committees receive annual retainers of $10,000, $6,000 and $6,000, respectively, in addition to the annual Board retainer. In 2009, Jay Levy receivesreceived annual compensation of $75,000 in his capacities as Treasurer and Assistant Secretary. Allen Bloom was elected Lead Director in 2008.2009. He receives an additional annual retainer of $8,000 in this capacity.4“Initial Option”“Initial Option”) and (2) on May 1stst of each year, an option to purchase 20,000 shares of Common Stock if he or she has served as a non-employee director for at least six months prior to the May 1stst grant (an “Additional Option”“Additional Option”). Generally, each Initial Option will vest in equal installments of 1/3 over a period of three years, commencing on the date of the grant, and each Additional Option will vest in its entirety on the first anniversary of the date of grant.2008.2009. Fees Earned or
Paid in Cash
($) (1) Stock Awards
($) Option Awards
($) (2) Non-Equity
Incentive Plan
Compensation
($) Change
in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($) All Other
Compensation
($) Total
($) 31,500 — 20,435 — — 73,500 (3) 125,435 54,250 — 20,435 — — — 74,685 42,750 — 20,435 — — — 63,185 — — — — — 75,000 (4) 75,000 — — — — — — — — — — — — — — 46,250 — 20,435 — — — 66,685 37,000 — 20,435 — — — 57,435 40,750 — 20,435 — — — 61,185 Name J. Thomas August* 22,500 17,000 (4) (5) 4,963 Allen Bloom * 41,500 26,000 (4) (7) 4,963 Zvi Eiref* 31,750 10,500 (8) 10,674 Robert F. Hendrickson (9)* 13,000 14,000 (4) (9) 9,718 Jay Levy -- -- -- Ronald S. Levy (11) Warren P. Levy (11) Marvin L. Miller * 37,000 20,000 (4) (12) 4,963 Bruce Morra * 24,500 17,000 (4) (5) 4,963 Peter Slusser * 31,500 17,000 (4) (5) 4,963 *Non-employee director.(1)Reflects annual retainers, Board of Director and committee meeting fees and committee chairman fees for fiscal year 2008 described above under “Director Compensation.”(2)Amounts are calculated in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R) “Share-based Payments.” See Note 16 of the financial statements of the Company’s Annual Report for the year endedAt December 31, 2008 regarding assumptions underlying valuation2009, the aggregate number of equity awards. These figures represent thestock options outstanding for each director was as follows: J. Thomas August 80,000; Allen Bloom 260,000; Zvi Eiref 30,000; Jay Levy 350,000; Ronald Levy 370,000; Warren Levy 510,000; Marvin L. Miller 81,000; Bruce Morra 71,000; and Peter Slusser 71,000.(4) Includes 10,000 shares of Common Stock granted as restricted stock on May 1, 2009 with a grant date fair market value of stock options to purchase 20,000$8,000. These shares vest in one year from the date of grant.(5) Includes 7,759 shares of our Common Stock which were awarded to all non-employee directors in May 2008.granted on January 6, 2009 and 3,214 shares of Common Stock granted on July 6, 2009 as Board retainer fees with a grant date fair market value of $4,500 for each grant.At December 31, 2008, the aggregate number of stock options outstanding for each director was as follows: J. Thomas August 231,000; Allen Bloom 260,000; Robert F. Hendrickson 81,000; Jay Levy 420,000; Ronald Levy 250,000; Warren Levy 350,000; Marvin L. Miller 71,000; Bruce Morra 61,000; and Peter Slusser 61,000.(3)$73,500.$73,500 in 2009.(4)receivesreceived annual compensation of $75,000 in his capacities as Treasurer and Assistant Secretary.Secretary through March 17, 2010.(5)2008.2009.NineThe Board currently consists of eight directors (one of whom, J. Thomas August, is not standing for re-election) and one vacancy. Seven directors of the Company are to be elected at the Annual Meeting.Meeting and two vacancies will remain. Pursuant to the Restated Financing Agreement, Victory Park has the right, subject to certain conditions, to designate an individual to fill one of the vacant seats and the second vacancy may only be filled by the new Chief Executive Officer upon his or her hiring and appointment. Accordingly, proxies cannot be voted for more than seven nominees. The directors will be elected to serve until the AnnualAnnua l Meeting of Stockholders to be held in 20102011 and until their respective successors shall have been elected and qualified.Zvi Eiref,Richard Levy, were elected as directors at the Company’s Annual Meeting of Stockholders in 2008. Robert F. Hendrickson, who is currently serving on the Board of Directors, wishes to retire and is not standing for re-election and the Board of Directors will be reduced by one immediately prior to the Annual Meeting.2009. The Board of Directors has no reason to believe that any of the nominees are or will become unavailable for election as a director. However, should any of them become unwilling or unable to serve as a director, the individuals named in the enclosed proxy will vote for the election of a substitute nominee selected by the Board of Directors or, if no such person is nominated, the Board of Directors will reduce the number of directors to be elected.5uncontested election of directors is not limited so there cannot be anyand broker non-votes regarding this proposal. Age Year
Joined
Unigene 57 1980 President, CEO and Director 60 1980 Executive Vice President, Secretary and Director 85 1980 Treasurer, Chairman of the Board and Director 57 1981 Vice President of Product Development 61 1982 Vice President, Biological R & D 48 1989 Vice President, Mfg. Operations 54 1987 Vice President of Finance 81 1990 Director of Research and Director 65 1998 Director 70 2009 Director 72 2005 Director 55 2006 Director 79 2006 Director (1)Warren P. Levy and Ronald S. Levy are brothers and are the sons of Jay Levy.Name Age Position Richard Levy (1) 38 2010 Chairman of the Board and Director Warren P. Levy (1) 58 1980 President, CEO, Secretary, Treasurer and Director Ronald S. Levy (1) 61 1980 Executive Vice President James P. Gilligan 58 1981 Vice President of Product Development Nozer M. Mehta 62 1982 Vice President, Biological R & D Paul P. Shields 49 1989 Vice President, Mfg. Operations William Steinhauer 55 1987 Vice President of Finance Allen Bloom 66 1998 Director Zvi Eiref 71 2009 Director Marvin L. Miller 73 2005 Director Bruce Morra 56 2006 Director Peter Slusser 80 2006 Director (1) Warren P. Levy and Ronald S. Levy are brothers and neither of them is related to Richard Levy. 1980.1980 and as Secretary and Treasurer since March 2010. Dr. Levy holds a Ph.D. in biochemistry and molecular biology from Northwestern University and a bachelor’s degree in chemistry from the Massachusetts Institute of Technology.sincefrom May 1986.1986 until March 2010. From November 1980 through March 1999, he served as Vice President of the Company. Dr. Levy holds a Ph.D. in bioinorganic chemistry from Pennsylvania State University and a bachelor’s degree in chemistry from Rutgers University.Mr. Jay Levy, a founder of the Company, has served as Chairman of the Board of Directors and Treasurer of the Company since its formation in November 1980. Mr. Levy was Chief Financial Officer of the Company from 1980 through February 2005. He holds a B.B.A. degree from City College of New York and has more than 25 years of progressively responsible experience leading to senior accounting and financial management positions with several internationally known manufacturing corporations. For 17 years he was the principal financial advisor for the late Nathan Cummings, a noted industrialist and philanthropist. From 1985 through 1991 he served in similar capacity to the estate of Nathan Cummings and to the Nathan Cummings Foundation, a large charitable foundation. Mr. Levy is a part-time employee and devotes approximately 15% of his time to the Company.6Dr. J. Thomas August is a Distinguished Service Professor of the Departments of Oncology, Pharmacology and Molecular Sciences at the Johns Hopkins University School of Medicine, where he has been employed since 1976. He is also Director, Johns Hopkins Singapore Biomedical Centre. Dr. August, an outside consultant, has served as Unigene’s Director of Research since 1990. He serves on the Board of Directors of Bioqual, Inc. and is also a consultant for various biotechnology and medical companies. Dr. August received his medical degree from Stanford University School of Medicine.SchoolS chool and a B.S. in chemistry from Brooklyn College.boardsboard of Physicians Formula Holdings, Inc. and previously also served on the board of FGX International Holdings Ltd. and Physicians Formula Holdings, Inc. Mr. Eiref graduated from Oxford University, and is an English Chartered Accountant.is currentlypreviously was a director of GTC Biotherapeutics, Inc., Onconova Therapeutics, Inc. and Tepnel Life Sciences PLC. Mr. Miller received a B.S. degree in pharmacy from the Philadelphia College of Pharmacy & Science and an M.B.A. degree from the University of Wisconsin.thean independent consultant and board member for various public and private life science companies since February 2000. From January through August 2009, Dr. Morra served as President and CEO of SCOLR Pharma, Inc. since January 2009. He has been an independent consultant since February 2000. He was the President of West Drug Delivery Systems, a division of West Pharmaceutical Services, Inc.,’s Drug Delivery and Contract Clinical Research businesses from April 2003 through Decemberthe end of 2004. He also held the position of Chief Business Officer for Progenitor Cell Therapy, LLC from 2002 to 2003. From 1998 to 2002, Dr. Morra served as the President, COO, CFO and board member of two related companies, Biopore Corporation and Polygenetics, Inc., two related companies developing technology for drug delivery and medical devices for biomedical and industrial applications from 1998 through 2002, then servedcontinued as Executive Vice President, Chief Business Officer anda board member from 2002 to 2004. From 1993 through 2000, he served as President and COO of Flamel Technologies, Inc., a company developing, manufacturing and licensing drug and agrochemical delivery technologies and products. Dr. Morra previously served as director of Unigene from 2001 to 2003. He currentlycurren tly serves as a director for SCOLR Pharma, Inc. and InforMedix Holdings, Inc. Dr. Morra holds a Ph.D. in polymer science and engineering and an M.B.A. from the University of Massachusetts, Amherst and a B.S.E. in chemical engineering from Princeton University.Corporation.Corporation, a manufacturer of electronic parts, medical equipment and sonobuoys for the U.S. Navy, and was previously a director of Ampex Corporation a manufacturer of recording equipment. Mr. Slusser received a B.A. degree from Stanford University and an M.B.A. degree from Harvard University.2009.2010. Although not required by the Company’s Certificate of Incorporation or By-Laws, the Board of Directors believes that it is in the best interests of the stockholders to ratify the appointment of Grant Thornton. If stockholders vote against the ratification of Grant Thornton, the Audit Committee will consider other alternatives. Grant Thornton served as the independent auditors for the Company for the year ended December 31, 2008.2009. A representative of the firm is expected to be present at the meeting to respond to appropriate questions and he or she will have the opportunity to make a statement, if such representativere presentative desires to do so.720082009 and December 31, 2007,2008, the fees billed by the principal accountant for the audit of the Company’s financial statements for such fiscal years and for the reviews of the Company’s interim financial statements were approximately $436,000 and $394,000, and $404,000, respectively.20082009 and December 31, 2007,2008, Grant Thornton did not bill the Company for any audit-related fees, nor did they provide any tax services to the Company.20082009 and December 31, 2007,2008, Grant Thornton did not provide any professional services other than audit services to the Company.20092010 FISCAL YEAR.2008approvingapp roving both audit and non-audit services to be provided by the outside auditors.18, 2008,17, 2009, the Audit Committee received from Grant Thornton LLP the written disclosures and the letter regarding Grant Thornton LLP’s independence required by Public Company Accounting Oversight Board Rule 3526.Company’sCompany's financial reporting process, we have: (1) reviewed and discussed with management the audited financial statements for the year ended December 31, 2008;2009; (2) discussed with Grant Thornton, the Company’s independent registered public accounting firm, the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T; (3) received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’saccountant's communications with the Audit Committee concerningco ncerning independence; (4) discussed with the independent registered public accounting firm its independence; and (5) considered whether the provision of nonaudit services by the independent registered public accounting firm is compatible with maintaining its independence and concluded that it is compatible at this time.20082009 conferring with management and Grant Thornton regarding the Company’s compliance with Section 404 of the Sarbanes-Oxley Act of 2002.820082009 for filing with the Securities and Exchange Commission and selected Grant Thornton LLP as the independent auditors for fiscal year 2009.2010. The Board is recommending that stockholders ratify that selection at the Annual Meeting.AUDIT COMMITTEEBOARDCERTIFICATE OF DIRECTORSAllen Bloom, ChairmanZvi EirefMarvin L. MillerPeter SlusserApril 17, 20093PLANUnigene Laboratories, Inc. 2006 Stock-Based Incentive Compensation Plan (the “2006 Plan”) to increase by 2,000,0005,000,000 shares the number of shares of Common Stock available for issuance thereunder. The 2006 Plan was previously filed as Appendix Ban exhibit to the Company’s Proxy Statement filed May 8, 2006.retainingretaini ng qualified key personnel.March 31, 2009,April 1, 2010, there were approximately 1,701,0001,682,529 shares of Common Stock remaining available for grant under the 2006 Plan. Subject to stockholder approval, the Board approved an amendment to the 2006 Plan that increases by 2,000,0005,000,000 shares the number of shares available for issuance thereunder. As of April 1, 2010, the number of shares underlying awards outstanding under the 2006 Plan, plus the number of shares available for grant thereunder after giving effect to approval of this proposal represents approximately 12% of the Company’s issued and outstanding Common Stock, on a fully-diluted basis (without giving effect to conversion of the Notes described in Proposal 3 above). The Board believes that this increase in authorized shares will meet the Company’s needs underun der the 2006 Plan for the foreseeable future, including the need to offer incentive compensation in connection with the hiring of a new Chief Executive Officer, and recommends that the stockholders vote FOR approval of the amendment. The proposed amendment is attached to this Proxy Statement as ExhibitAppendix A.hereinbelow to the “2006 Plan” shall be deemed to be references to the 2006 Plan, as amended to date and as proposed to be amended.) Capitalized terms not otherwise defined in this summary have the meanings given to them in the 2006 Plan.Purpose9General. The 2006 Plan authorizes the grant of Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Phantom Stock, and other stock-based awards (collectively, “Awards”“Awards”). Options granted under the 2006 Plan may be either “incentive stock options” as defined in section 422 of the Internal Revenue Code (the “Code”“Code”), or nonqualified stock options, as determined by the Committee.initially available for award under the 2006 Plan is 5,000,00010,000,000 shares, increased by (i) any shares reserved but not subject to awards under the Unigene Laboratories, Inc. Directors’ Stock Option Plan (the “Directors’ Plan”“Directors’ Plan”) and the Unigene Laboratories, Inc. 2000 Stock Option Plan (the “2000 Plan”“2000 Plan”), and (ii) shares subject to awards under the Directors’ Plan or the 2000 Plan that are forfeited, cancelled or expire thereunder. All shares of Common Stock reserved under the 2006 Plan may be issued pursuant to Incentive Stock Options.“Committee”“Committee”) will administer the 2006 Plan. The full Board of the Company or a Secondary Committee designated by the Board, shall administer the 2006 Plan and exercise the Committee’s authority with respect to grants made to non-employee directors. Subject to the other provisions of the 2006 Plan, the Committee has the authority to:select the employees, consultants and non-employee directors who will receive Awards pursuant to the 2006 Plan;determine the type or types of Awards to be granted to each participant;· select the employees, consultants and non-employee directors who will receive Awards pursuant to the 2006 Plan; determine the number of shares of Common Stock to which an Award will relate, the terms and conditions of any Award granted under the 2006 Plan (including, but not limited to, restrictions as to vesting, transferability or forfeiture, exercisability or settlement of an Award and waivers or accelerations thereof, and waivers of or modifications to performance goals relating to an Award, based in each case on such considerations as the Committee shall determine) and all other matters to be determined in connection with an Award;· determine the type or types of Awards to be granted to each participant; determine whether, to what extent, and under what circumstances an Award may be canceled, forfeited, or surrendered;· determine the number of shares of Common Stock to which an Award will relate, the terms and conditions of any Award granted under the 2006 Plan (including, but not limited to, restrictions as to vesting, transferability or forfeiture, exercisability or settlement of an Award and waivers or accelerations thereof, and waivers of or modifications to performance goals relating to an Award, based in each case on such considerations as the Committee shall determine) and all other matters to be determined in connection with an Award; determine whether, and to certify that, performance goals to which the settlement of an Award is subject are satisfied;· determine whether, to what extent, and under what circumstances an Award may be canceled, forfeited, or surrendered; correct any defect or supply any omission or reconcile any inconsistency in the 2006 Plan, and adopt, amend and rescind such rules, regulations, guidelines, forms of agreements and instruments relating to the 2006 Plan as it may deem necessary or advisable; and make all other determinations as it may deem necessary or advisable for the administration of the 2006 Plan.· determine whether, and to certify that, performance goals to which the settlement of an Award is subject are satisfied; · correct any defect or supply any omission or reconcile any inconsistency in the 2006 Plan, and adopt, amend and rescind such rules, regulations, guidelines, forms of agreements and instruments relating to the 2006 Plan as it may deem necessary or advisable; and make all other determinations as it may deem necessary or advisable for the administration of the 2006 Plan. establishedestablished: on a Company-wide basis; with respect to one or more subsidiary corporations, business units, divisions, department,departments, or functions,functions; and in either absolute terms or relative to the performance of one or more comparable companies or an index covering multiple companies. Performance goals, the number of shares or units to which they pertain, the time and manner of payment of the Award shall be specified in the Award agreement.Awards”Awards”), the Committee may modify performance goals in whole or in part, during the performance period, as it deems appropriate and equitable. In the case of Qualified Performance-Based Awards, the applicable performance goals are limited to one or more of the following:specified levels of or increases in the Company’s, a division’s or a Subsidiary’s return on capital, equity or assets;· specified levels of or increases in the Company’s, a division’s or a Subsidiary’s return on capital, equity or assets; earnings measures/ratios (on a gross, net, pre-tax or post-tax basis), including diluted earnings per share, total earnings, operating earnings, earnings growth, earnings before interest and taxes (EBIT) and earnings before interest, taxes, depreciation and amortization (EBITDA);· earnings measures/ratios (on a gross, net, pre−tax or post−tax basis), including diluted earnings per share, total earnings, operating earnings, earnings growth, earnings before interest and taxes (EBIT) and earnings before interest, taxes, depreciation and amortization (EBITDA); net economic profit (which is operating earnings minus a charge to capital);· net economic profit (which is operating earnings minus a charge to capital); 10net income;· net income; operating income;· operating income; sales;· sales; sales growth;· sales growth; gross margin;· gross margin; direct margin;· direct margin; share price (including but not limited to growth measures and total shareholder return);· share price (including but not limited to growth measures and total shareholder return); operating profit;· operating profit; per period or cumulative cash flow (including but not limited to operating cash flow and free cash flow) or cash flow return on investment (which equals net cash flow divided by total capital);· per period or cumulative cash flow (including but not limited to operating cash flow and free cash flow) or cash flow return on investment (which equals net cash flow divided by total capital); inventory turns;· inventory turns; financial return ratios;· financial return ratios; market share;· market share; balance sheet measurements such as receivable turnover;· balance sheet measurements such as receivable turnover; improvement in or attainment of expense levels;· improvement in or attainment of expense levels; improvement in or attainment of working capital levels;· improvement in or attainment of working capital levels; debt reduction;· debt reduction; strategic innovation;· strategic innovation; customer or employee satisfaction;· customer or employee satisfaction; individual objectives;· individual objectives; any other financial or other measurement deemed appropriate by the Committee as it relates to the results of operations or other measurable progress of the Company and Subsidiaries (or any business unit thereof); and· any other financial or other measurement deemed appropriate by the Committee as it relates to the results of operations or other measurable progress of the Company and Subsidiaries (or any business unit thereof); and any combination of any of the foregoing criteria.· any combination of any of the foregoing criteria. anyan y calendar year to exceed $100,000.“10% Stockholder”“10% Stockholder”) will not be eligible for the grant of an incentive stock option unless the exercise price of the incentive stock option is at least 110% of the fair market value of the Common Stock on the date of grant.“cashless exercise”“cashless exercise”), with the Committee’s consent, in whole or in part with shares of Common Stock, or a combination of the foregoing methods. The Committee may also permit Options to be exercised with such other consideration as it deems appropriate, as reflected in the applicable Award agreement.11SAR”SAR”) entitles the recipient to receive, upon exercise of the SAR, the increase in the fair market value of a specified number of shares of Common Stock from the date of the grant of the SAR to the date of exercise, payable in cash, shares of Common Stock, or any combination thereof. The Committee shall set the exercise price of an SAR which shall not be less than the Fair Market Value of the underlying Common Stock on the date of the grant. Each grant of SARs shall specify the length of service and/or any applicable performance goals that must be achieved before it becomes exercisable and may specify permissible dates or periods on or during which the SAR shall be exercisable. No SAR may be exercised more than ten years after the grant date.whichthat are subject to forfeiture upon specified events during the restriction period. Each grant of Restricted Stock shall specify the duration of the restriction period and any other conditions under which the Restricted Stock would be forfeitable to the Company, including any applicable performance goals, and will include restrictions on transfer to third parties during the restriction period.Vesting. Any Award may provide for full vesting, early exercise rights or termination of a restriction or deferral period in the event of a Change in Control or similar transaction or event.whichthat it believes equitable under the circumstances or in the best interests of the Company with respect to Awards that are not fully vested in the event of termination of employment or service by reason of death, disability, normal retirement, early retirement with the consent of the Committee, other termination or a leave of absence that is approved by the Committee, or in thet he event of hardship or other special circumstances that are approved by the Committee.1213d–13d−3 under the 1934 Act) of thirty-five percent (35%) or more of the combined voting power of the Company’s then outstanding voting securities (the “Voting Securities”“Voting Securities”);“Incumbent Board”“Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that if the election, or nomination for election by the Company’s Stockholders, of any new director was approved by a vote of at least a majority of the Incumbent Board, such new director shall be considered as a member of the Incumbent Board, and provided further that any reductions in the size of the Board that are instituted voluntarily by the Incumbent Board shall not constitute a Change in Control, and after any such reduction the “Incumbent Board” shall mean the Board as so reduced;13holdingholdin g period for the shares will begin when the forfeiture restrictions lapse. Upon sale of the shares, the participant will realize short-term or long-term gain or loss, depending upon whether the shares have been held for more than one year at the time of sale. Such gain or loss will be equal to the difference between the amount realized upon the sale of the shares and the tax basis of the shares in the participant’s hands.area re sold. The participant’s tax basis in the shares with respect to which a Section 83(b) election is made will be equal to their fair market value when received by the participant, and the participant’s holding period for such shares begins at that time. If, however, the shares are subsequently forfeited to the Company, the participant will not be entitled to claim a loss with respect to the shares to the extent of the income realized by the participant upon the making of the Section 83(b) election. To make a Section 83(b) election, a participant must file an appropriate form of election with the Internal Revenue Service and with his or her employer, each within 30 days after shares of restricted stock are received, and the participant must also attach a copy of his or her election to his or her federal income tax return for the year in which the shares are received.short-termsh ort-term or long-term capital gain or loss, depending upon whether the shares have been held for more than one year. The amount of such gain or loss will be equal to the difference between the amount realized in connection with the sale of the shares, and the participant’s tax basis in such shares.14“disqualifying disposition”“disqualifying disposition”), the participant will realize ordinary income at that time equal to the excess of the fair market value of the shares on the exercise date over the exercise price of the incentive stock option. Any amount realized upon a disqualifying disposition in excess of the fair market value of the shares on the exercise date of the incentive stock option will be treated as capital gain and will be treated as long-term capital gain if the shares have been held for more than one year. If the sales price is less than the sum of the exercise price of the incentive stock option and the amount included in ordinary income due to the disqualifying disposition, this amount will be treated as a short-term or long-term capital loss, depending upon whether the shares have been held for more than one year. Notwithstanding the above, individuals who are subject to Alternative Minimum Tax may recognize ordinary income upon exercise of an incentive stock option.theth e shares have been held for more than one year. The amount of such gain or loss will be equal to the difference between the amount realized in connection with the sale of the shares, and the participant’s tax basis in such shares.will be countedare considered as votes againstshares present and entitled to vote and, therefore, have the effect of a “no” vote on this Proposal, while brokerproposal. Broker non-votes are not considered as shares entitled to vote, and will not be counted as voted on this proposal, and, therefore, will not have any effect on the outcome of the vote on this proposal. 2006 Stock-Based Incentive Compensation Plan Name and Principal Position Number of Options — — $58,880 160,000 Ronald S. Levy, Executive Vice President — — $44,160 120,000 William Steinhauer, Vice President of Finance — — $22,080 60,000 James P. Gilligan, Vice President of Product Development — — $25,760 70,000 Paul P. Shields, Vice President, Manufacturing — — $22,080 60,000 Nozer M. Mehta, Vice President, Biological R&D — — $23,920 65,000 Executive Group — — $196,880 535,000 Non-Executive Director Group (2) $121,500 151,886 $36,271 90,000 Non-Executive Officer Employee Group — — $19,460 46,000 determining the fiscal year ending on December 31, 2009. The amount and timing of awards granted under the 2006 Plan are determined in the sole discretion of the Compensation Committee and therefore cannot be determined in advance. The future awards that would be received under the 2006 Plan by executive officers and other individuals are discretionary and are therefore not determinable at this time, except as set forth below in footnote 2.votes castshares of stock to be received by each non-executive director will be determined based on this Proposal.15PLAN BENEFITS (1)2006 Stock-Based Incentive Compensation Plan Dollar Value of
Stock Awards ($) Number of
Units of Stock Dollar Value of
Options ($) Number of
Options 60,000 42,105 356,250 250,000 40,000 28,070 213,750 150,000 20,000 14,035 128,250 90,000 20,000 14,035 135,375 95,000 20,000 14,035 114,000 80,000 20,000 14,035 121,125 85,000 180,000 126,315 1,068,750 750,000 — — 226,800 120,000 49,598 52,646 324,560 359,000 (1)In accordance with SEC rules, the Plan Benefits table indicates the benefits that were received by the indicated individual or group for the fiscal year ending on December 31, 2008.2008: Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a) Weighted-average
exercise price of
outstanding
options,
warrants and
rights
(b) Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column
(a))
(c) 4,594,315 $ 1.42 1,856,449 2,391,571 $ 2.67 — 6,985,886 $ 1.85 1,856,449 Plan category 4,512,915 $ 1.42 3,156,063 330,000 $ 0.77 — Total 4,842,915 $ 1.38 3,156,063 20082009 compensation for the Company’s executive officers identified in the Summary Compensation Table (“Named Executive Officers”Officers”).16Committee”Committee”) makes recommendations to the Board of Directors regarding the compensation – including base salary, annual bonus and long-term incentive opportunities – of the Company’s Named Executive Officers including the Chief Executive Officer (the “CEO”“CEO”).20082009 was composed of threefour non-employee Directors, all of whom are independent directors under the listing standards of The Nasdaq Stock Market, LLC and the Securities and Exchange Commission rules. The Committee has responsibility for determining and implementing the Company’s philosophy with respect to executive compensation. Accordingly, the Committee has overall responsibility for approving and evaluating the various components of the Company’s executive compensation program. At least once a year, the Committee evaluates the performance of, and determines the compensation of, the Named Executive Officers. a. Provide compensation that is as competitive as possible, given the financial constraints of the Company, measured against companies of similar size in our industry. b. Reward individual performance in achieving Company goals and objectives. c. Assure that executive interests are aligned with stockholder interests by providing long-term equity incentives. d. Provide sufficient flexibility to ensure that the Company can respond promptly to changing needs through a variety of cash and equity compensation incentives. e. Reward both group and individual performance in the Company’s achievement of both short-term and long-term successes. Base salary and benefits are intended to attract and retain executives and to reward skills, experience and performance in the roles they play within the Company. These components of compensation are designed to reflect the practices in the biotechnology and pharmaceutical industries where we compete for talent.· Base salary and benefits are intended to attract and retain executives and to reward skills, experience and performance in the roles they play within the Company. These components of compensation are designed to reflect the practices in the biotechnology and pharmaceutical industries where we compete for talent. Annual cash bonuses, when awarded, are designed to help keep employees focused on meeting or exceeding short-term business objectives and individual performance goals. Such bonuses are not a significant part of total compensation.· Annual cash bonuses, when awarded, are designed to help keep employees focused on meeting or exceeding short-term business objectives and individual performance goals. Such bonuses have not been a significant part of total compensation. Long-term incentives, which consist primarily of stock options and restricted stock, focus executives’ efforts on achieving the multi-year financial-performance and strategic objectives of moving the Company toward profitability and reducing the reliance on outside financing, and link management compensation with the interests of stockholders.· The benefits provided by change-in-control severance agreements encourage certain key employees to continue managing the Company’s business in the face of rumored or actual fundamental corporate changes without being unduly distracted by the uncertainties of their personal affairs.· The benefits provided by change-in-control severance agreements encourage certain key employees to continue managing the Company’s business in the face of rumored or actual fundamental corporate changes without being unduly distracted by the uncertainties of their personal affairs. Compensation is reviewed at least annually in comparison to peers within the Company and similarly sized peers within the biotechnology and pharmaceutical industries to ensure that Company compensation levels serve both incentive and retention purposes. In 2008, the Company engaged the services of Frederick Cook & Sons, a compensation consulting firm, to review the Company’s overall compensation program and to develop a group of peer companies to be used for comparison purposes. The peer group consisted of companies engaged in the biopharmaceutical industry and, to the extent possible, those generally similar in revenue and market cap. The Compensation Committee considered, as part of its evaluation and recommendation of base salary, annual cash incentive compensation and long-term equity incentive compensation, levels of such compensation in the peer group.17· Compensation is reviewed at least annually in comparison to peers within the Company and similarly sized peers within the biotechnology and pharmaceutical industries to ensure that Company compensation levels serve both incentive and retention purposes. In 2008, the Compensation Committee engaged the services of Frederick Cook & Sons, a compensation consulting firm, to review the Company’s overall compensation program and to develop a group of peer companies to be used for comparison purposes. The peer group consisted of companies engaged in the biopharmaceutical industry and, to the extent possible, those generally similar in revenue and market cap. The Compensation Committee considered, as part of its evaluation and recommendation of base salary, annual cash incentive compensation and long-term equity incentive compensation, levels of such compensation in the peer gro up. Nastech Pharmaceutical Company NeurogesX, Inc. Penwest Pharmaceuticals Co. Peregrine Pharmaceuticals Inc. Pharmacopeia Inc. SCOLR Pharma, Inc. SciClone Pharmaceuticals, Inc. SuperGen, Inc. Targacept Inc. Telik, Inc. · Compensation is also reviewed in comparison to the practices of companies with 50-149 employees as shown in the latest Radford Biotechnology Executive Compensation Survey, published by Aon Consulting which is a resource of competitive intelligence for positions in the biotechnology and pharmaceutical industries (the “Radford Data”). Compensation is also reviewed in comparison to the practices of companies with 50-149 employees as shown in the latest Radford Biotechnology Executive Compensation Survey, published by Aon Consulting which is a resource of competitive intelligence for positions in the biotechnology and pharmaceutical industries (the “Radford Data”).· Competitiveness of the compensation program is also evaluated based on the personal knowledge of Committee members having familiarity with various forms and types of compensation both from public reports issued by other companies and from their own business experience in other companies. Competitiveness of the compensation program is also evaluated based on the personal knowledge of Committee members having familiarity with various forms and types of compensation both from public reports issued by other companies and from their own business experience in other companies.Additional weighting is applied to individual compensation levels based on the personal contributions made by the individual executive and the recommendations of the CEO.In addition to the above, actual cash compensation changes reflect the current cash position of the Company and its historical practice of emphasizing equity compensation.The Company historically and currently provides long-term incentive compensation through the granting of stock options and, beginning in 2008, grants of restricted stock in lieu of a portion of additional cash compensation. The 2006 Plan permits the Committee to grant a variety of equity for both incentive and retention purposes. Equity compensation has historically been an important element of compensation due to the Company’s need to conserve cash.· Additional weighting is applied to individual compensation levels based on the personal contributions made by the individual executive and the recommendations of the CEO. · In addition to the above, actual cash compensation changes reflect the current cash position of the Company and its historical practice of emphasizing equity compensation. · The Company historically and currently provides long-term incentive compensation through the granting of stock options and, beginning in 2008, grants of restricted stock in lieu of a portion of additional cash compensation. The 2006 Plan permits the Committee to grant a variety of equity for both incentive and retention purposes. Equity compensation has historically been an important element of compensation due to the Company’s need to conserve cash. Stock-Based Incentive Compensation Plan (the “2006 Plan”).Plan. All employees and directors, as well as certain consultants, are eligible to receive grants under the 2006 Plan. Allowable grants under the 2006 Plan include stock options, phantom stock,st ock, appreciation rights, restricted stock, deferred stock and other stock-based awards. Options granted under the 2006 Plan have a ten-year term and an exercise price equal to the market price of the common stock on the date of the grant. The 2006 Plan replaced our older stock option plans and, together with shares remaining under those predecessor plans, initially had 3,426,000 shares authorized for issuance. In June 2009, our stockholders approved an amendment to the 2006 Plan that increased by 2,000,000 shares the number of shares available for issuance thereunder. At December 31, 2008,2009, we had reserved approximately 1,856,0003,156,000 shares for future grants under the 2006 Plan.18base salary;· base salary; annual discretionary cash bonuses;· annual discretionary cash bonuses; long-term incentives, consisting of restricted stock and stock option awards; and· long-term incentives, consisting of restricted stock and stock option awards; and non-qualified deferred compensation.· non-qualified deferred compensation. Company.InCompany. In addition to the compensation components listed above, these contracts provide for post-employment severance payments and benefits in the event of termination under certain circumstances. The terms of these contracts are described in more detail below (see the section entitled “Potential Payments Upon Termination or a Change in Control”). The Committee believes that these contracts provide an incentive to these executives to remain with the Company and serve to align the interest of these executives and stockholders in the event of a potential acquisition of the Company.th percentile of companies our size in our industry although no salaries have yet reached that target. The target is considered appropriate given the current stage of the Company.WeCompany. We have continued to rely on the periodic grant of stock options as well as the grant of restricted stock as an alternative to more substantial base salary increases reflecting the multiple cash needs of the Company. In addition, salary levels vary according to the executive’sexecu tive’s experience, length of service in the position, the Committee’s view of personal performance and the influence of compensation structures in the New York/New Jersey market where the Company competes for talent.2008The20082009 to not increase base salaries for the CEO’s salary by 21% to $345,000CEO and to increasethe other Named Executive Officers’Officers. Previously, base salaries by 10-11% each, except for the CEO and the Executive Vice President who received a 16% salary increase. These decisions were increased in November 2008 and for the other Named Executive Officers in June 2008 (with such changes for the other Named Executive Officers retroactive to March 1, 2008), primarily based primarily on the need to move salaries closer to the 50% target for recruiting, incentive and retention purposes. These increases were also based upon the Committee’s business judgment in consultation with the CEO concerning each of the other Named Executive Officers.2008During 2008, the only cash bonus paid was to James P. Gilligan, Vice President of Product Development who received a $10,000 bonus for his efforts related to a $2,000,000 investment in Unigene by our joint venture partner. other cash bonuses should be paid in 20082009 due to the Company’s cash position and the Company’s continuing dependence on outside financing and lack of profitability.TheTypically, the exercise price of stock option grants is the closing price of Unigene common stock on the grant date. Stock options have various vesting periods and generally have a term of 10 years from the grant date. Options that are vested – i.e., exercisable – at the time of an employee’s death or disability will remain exercisable for up to 180 days. Upon19200820082009 to recommend for Board approval options to the Named Executive Officers. In granting these options to the Named Executive Officers the Committee considered prior grants, the desire to assist retention, as well as the linking of Named Executive Officer interest with stockholder interest.vestsvested in one year to Named Executive Officers. These awards were made as part of compensation to conserve cash, and to further align Named Executive Officers with stockholder interests.compensationc ompensation plan. The major features of the plan are as follows: the Company agreed to credit a book account with $25,000 per year on January 1stst of such year beginning on January 1, 2006 and ending on January 1, 2014 for an aggregate of $225,000 for each participant. These annual credits are included in the All Other Compensation column of the Summary Compensation Table for each of the years 20062007 through 2008.2009. The credits to the accounts are immediately 100% vested; upon the death of a participant, any remaining contributions would immediately be made to his account; and in the event of a “change in control” of Unigene, all remaining contributions would immediately be made to each participant’s account. The entire value of the account would be distributed as follows: upon attainment of age 75, 25% of balance, upon attainment of age 76, 33.33% of remainingremainin g balance, upon attainment of age 77, 50% of remaining balance, and the remainder of the balance upon attainment of age 78; in the event of a participant’s death or disability, 50% of the participant’s account balance would be distributed following his death or disability and the remainder distributed on the first anniversary of his death or disability. The non-qualified deferred compensation program is intended to operate in a manner consistent with Internal Revenue Code Section 409A.TheHistorically, the Company makesmade a matching contribution of 50% of the first 4% of pay contributed by the employee to the 401(k) Plan. There will be no matching contribution for 2010. All contributions made by a participant,p articipant, as well as matching contributions by the Company, vest immediately.20–SFAS 123(R)Effective January 1, 2006, we–ASC 718SFAS 123(R)ASC 718 in our financial statements. The non-cash accounting charge for equity compensation has not been a primary factor considered in determining the size of individual awards granted to employees, consultants and directors. We will continue to carefully quantify and monitor the non-cash accounting expense of our equity programs.2008.Robert F. Hendrickson,Bruce MorraZvi Eiref17, 2009212008.2009. While we are only required to report on the next three highest paid executive officers, we have included four individuals as this more appropriately reflects our leadership structure. Year Salary
($) Bonus
($) Stock
Awards
($) (1) Option
Awards
($) (2) Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($) All Other
Compensation
($) (3) Total
($) 2008 292,962 — 60,000 34,195 — 93,604 480,761 2007 281,593 24,000 — — — 30,914 336,507 2006 246,591 19,800 — — — 30,814 297,205 2008 260,308 — 40,000 20,517 — 102,215 423,040 2007 252,702 22,000 — — — 33,907 308,609 2006 228,614 18,900 — — — 33,705 281,219 2008 206,667 — 20,000 86,497 — 33,150 346,314 2007 188,686 17,500 — 25,405 — 25,057 256,648 2006 174,182 14,400 — 222,314 — 22,396 433,292 2008 252,833 10,000 20,000 161,369 — 22,323 466,525 2007 230,354 19,000 — 66,473 — 20,930 336,757 2006 212,284 17,550 — 446,028 — 16,130 691,992 2008 218,667 — 20,000 114,804 — 20,821 374,292 2007 200,591 16,500 — 31,016 — 16,544 264,651 2006 185,068 15,300 — 201,410 — 16,943 418,721 2008 240,833 — 20,000 115,488 — 28,485 404,806 2007 218,449 17,500 — 42,835 — 17,261 296,045 2006 201,398 16,650 — 213,229 — 19,592 450,869 Name and Principal Position Year Salary ($) Bonus ($) Ronald S. Levy, Executive Vice President, Secretary and Director James P. Gilligan, Vice President of Product Development Paul P. Shields, Vice President, Manufacturing (1) The amounts in this column represent the dollar amount recognized for financial statement reporting purposes with respect to thegrant date fair value of restricted stock granted in the year indicated in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123(R) “Share Based Payments.”ASC 718. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For restricted stock, fair value is calculated using the closing price of our Common Stock on April 17, 2008, the date of grant. See Note 16 of the financial statements of the Company’s Annual Report for the year ended December 31, 20082009 regarding assumptions underlying valuation of equity awards.(2) Amounts are calculated in accordance with SFAS 123(R).ASC 718. See Note 16 of the financial statements of the Company’s Annual Report for the year ended December 31, 20082009 regarding assumptions underlying valuation of equity awards. These figures represent non-cash expenses with respect to the grant date fair value of stock options to purchase shares of our Common Stock for options granted inunder the 2006 which vested in 2008, as well as for options granted in 2008.Plan.22(3) All Other Compensation includes: Year Nonqualified
Deferred
Compensation Reimbursement
for Unused
Vacation Days
($) Matching
Contribution
to 401(k)
Plan
($) Health/Life
Insurance
Premiums
($) Other
($) Total
($) 2008 25,000 62,578 (1) 4,600 426 1,000 93,604 2007 25,000 — 4,500 414 1,000 30,914 2006 25,000 — 4,400 414 1,000 30,814 2008 25,000 68,213 (1) 4,600 4,402 — 102,215 2007 25,000 — 4,500 4,407 — 33,907 2006 25,000 — 4,400 4,305 — 33,705 2008 — 24,352 4,467 3,581 750 33,150 2007 — 15,620 4,303 4,384 750 25,057 2006 — 13,292 4,049 4,305 750 22,396 2008 — 13,344 4,600 4,379 — 22,323 2007 — 12,046 4,500 4,384 — 20,930 2006 — 7,425 4,400 4,305 — 16,130 2008 — 11,911 4,531 4,379 — 20,821 2007 — 7,692 4,468 4,384 — 16,544 2006 — 8,238 4,400 4,305 — 16,943 2008 — 19,506 4,600 4,379 — 28,485 2007 — 8,377 4,500 4,384 — 17,261 2006 — 10,887 4,400 4,305 — 19,592 Name Year Nonqualified Deferred Compensation Reimbursement for Unused Vacation Days ($) Matching Contribution to 401(k) Plan ($) Health/Life Insurance Premiums ($) Other ($) Total ($) (1) In 2008, the Board of Directors adopted a policy prohibiting the carryover of vacation days for periods beyond one year and began a program of phasing our existing obligations to pay for days beyond that period over five equal annual payments. However, no payments were made during 2009. 20082009 to each of our executive officers listed in the Summary Compensation Table above. Grant
Date All Other Option
Awards:
Number of
Securities
Underlying
Options
(#) (1) All Other Stock
Awards:
Number of
Shares of
Stock
(#) (2) Exercise or
Base Price
Of Option
Awards
($ /Sh) Grant Date
Fair Value of
Stock and Option
Awards
($) (3) April 17, 2008 250,000 $ 1.425 356,250 April 17, 2008 42,105 60,000 April 17, 2008 150,000 $ 1.425 213,750 April 17, 2008 28,070 40,000 April 17, 2008 90,000 $ 1.425 128,250 April 17, 2008 14,035 20,000 April 17, 2008 95,000 $ 1.425 135,375 April 17, 2008 14,035 20,000 April 17, 2008 80,000 $ 1.425 114,000 April 17, 2008 14,035 20,000 April 17, 2008 85,000 $ 1.425 121,125 April 17, 2008 14,035 20,000 Name Warren P. Levy April 6, 2009 160,000 -- $0.60 Ronald S. Levy April 6, 2009 120,000 $0.60 William Steinhauer April 6, 2009 60,000 $0.60 James P. Gilligan April 6, 2009 70,000 $0.60 Paul P. Shields April 6, 2009 60,000 $0.60 Nozer M. Mehta April 6, 2009 65,000 $0.60 (1) Options vest in four equal installments on each of April 17, 2009, April 17,6, 2010, April 17,6, 2011, April 6, 2012 and April 17, 2012.6, 2013.(2)Restricted stock vests in full on April 17, 2009(3)Amounts shown in this column represent the full grant date fair market value of stock option and restricted stock awards, granted in 2008, as determined pursuant to FAS 123(R) without regard to vesting requirements.23 OPTION AWARDS STOCK AWARDS Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable (1) Option
Exercise
Price
($) Option
Expiration
Date Number of Shares
of Stock that
Have Not
Vested
(2) (#) Market Value of
Shares of Stocks that
Have Not
Vested
(3) 100,000 — $ 0.47 12/4/11 42,105 $ 26,526 — 250,000 $ 1.43 4/16/18 100,000 — $ 0.47 12/4/11 28,070 $ 17,684 — 150,000 $ 1.43 4/16/18 17,000 — $ 0.63 11/4/09 14,035 $ 8,842 5,000 — $ 1.88 5/25/10 14,000 — $ 0.31 4/13/13 30,000 — $ 2.30 2/28/15 10,000 — $ 1.58 4/5/15 65,000 — $ 4.02 4/19/16 — 90,000 $ 1.43 4/16/18 115,000 — $ 0.63 11/4/09 14,035 $ 8,842 80,000 — $ 0.40 7/17/11 30,000 — $ 0.31 4/13/13 45,000 — $ 2.30 2/28/15 75,000 — $ 1.58 4/5/15 125,000 — $ 4.02 4/19/16 — 95,000 $ 1.43 4/16/18 42,750 — $ 0.63 11/4/09 14,035 $ 8,842 10,000 — $ 1.88 5/25/10 25,000 — $ 0.31 4/13/13 40,000 — $ 2.30 2/28/15 55,000 — $ 4.02 4/19/16 — 80,000 $ 1.43 4/16/18 10,000 — $ 1.88 5/25/10 14,035 $ 8,842 75,000 — $ 0.31 4/13/13 40,000 — $ 2.30 2/28/15 25,000 — $ 1.58 4/5/15 55,000 — $ 4.02 4/19/16 — 85,000 $ 1.43 4/16/18 OPTION AWARDS STOCK AWARDS Name Exercisable Unexercisable Warren P. Levy 100,000 -- $0.47 12/4/11 -- -- 62,500 $1.43 4/16/18 -- $0.60 4/5/19 Ronald S. Levy 100,000 -- $0.47 12/4/11 -- -- 37,500 $1.43 4/16/18 -- $0.60 4/5/19 William Steinhauer 5,000 -- $1.88 5/25/10 -- -- 14,000 -- $0.31 4/13/13 30,000 -- $2.30 2/28/15 10,000 -- $1.58 4/5/15 65,000 -- $4.02 4/19/16 22,500 $1.43 4/16/18 -- 4/5/19 James P. Gilligan 80,000 -- $0.40 7/17/11 -- -- 30,000 -- $0.31 4/13/13 45,000 -- $2.30 2/28/15 75,000 -- $1.58 4/5/15 125,000 -- $4.02 4/19/16 23,750 $1.43 4/16/18 -- $0.60 4/5/19 Paul Shields 10,000 -- $1.88 5/25/10 -- -- 40,000 -- $2.30 2/28/15 55,000 -- $4.02 4/19/16 20,000 $1.43 4/16/18 -- $0.60 4/5/19 Nozer M. Mehta 10,000 -- $1.88 5/25/10 -- -- 75,000 -- $0.31 4/13/13 40,000 -- $2.30 2/28/15 25,000 -- $1.58 4/5/15 55,000 -- $4.02 4/19/16 21,250 $1.43 4/16/18 -- $0.60 4/5/19 (1) These unexercisable option shares at December 31, 20082009 were granted in April 2008 and vest 25% per year from April 2009 –through April 2012.(2) Represents grant of restricted stock on April 17, 2008. Shares vest on April 17, 2009.(3)Market value is based on the closing market price of the Company’s common stock of $0.63 onThese unexercisable option shares at December 31, 2008.2009 were granted in April 2009 and vest 25% per year from April 2010 through April 2013.24 Executive
Contributions
in Last FY
($) Registrant
Contributions
in Last FY
($) Aggregate
Earnings
(Losses)
in Last FY
($) Aggregate
Withdrawals/
Distributions
($) Aggregate
Balance
at Last FYE
($) — 25,000 2,115 — 80,540 — 25,000 (30,485 ) — 61,820 — — — — — — — — — — — — — — — — — — — Warren P. Levy (1) -- 25,000 4,339 -- 109,879 Ronald S. Levy (1) -- 25,000 39,972 -- 126,792 William Steinhauer -- -- -- -- -- James P. Gilligan -- -- -- -- -- Paul P. Shields -- -- -- -- -- Nozer M. Mehta -- -- -- -- -- Chief Executive OfficerCEO and Director of the Company. The major features of the plan are as follows: the Company agreed to credit a book account with $25,000 per year on January 1stst of such year beginning on January 1, 2006 and ending on January 1, 2014 for an aggregate of $225,000 for each participant. These annual credits are included in the All Other Compensation column of the Summary Compensation Table for each of the years 20062007 through 2008.2009. The credits to the accounts are immediately 100% vested; upon the death of a participant, any remaining contributions would immediately be made to his account; and in the event of a “change in control” of Unigene, all remaining contributions would immediately be made to each participant’s account. The entire value of the account would be distributed as follows: upon attainment of age 75, 25% of balance, upon attainment of age 76, 33.33% of remaining balance, upon attainment of age 77, 50% of remaining balance, and the remainder of the balance upon attainment of age 78; in the event of a participant’s death or disability, 50% of the participant’s account balance would be distributed following his death or disability and the remainder distributed on the first anniversary of his death or disability.Chief Executive OfficerCEO of the Company. after the initial two-year term, the agreement will be renewed on a year-to-year basis unless either party notifies the other of the desire not to renew the agreement no later than three months prior to the scheduled termination date.Each agreement The Second Amendment establishes the annual salaries of Warren Levy and Ronald Levy (the “Executives”) at $327,750 and $280,250, respectively. It also grants each executive an option to purchase 100,000 shares of the Company’s Common Stock, exercisable at $1.20 per share. The option will vest upon the three-month anniversary of the hiring and appointment of a new CEO of the Company and will be exercisable (to the extent vested) until the earlier of three and one-half years fol lowing the vesting date or ten years following the grant date.consent)consent, which includes Unigene’s hiring of a new CEO, provided that, after the Company’s hiring of a new CEO the executive agrees that he will not resign for good reason due to material diminution for three months thereafter), the Company will make a lump-sum severance payment to the executive payable six months following termination equal to the executive’s then-current annual salary plus the cash value of all accrued vacation days. In addition, the Company will make a payment eq ual to six months of Executive’s then-current annual salary, which will be paid over the six month period immediately following the twelve month anniversary of the termination date. In addition, upon termination or resignation as described above, all of the executive’s outstanding and unvested stock options will vest in full immediately and any of the executive’s options will remain exercisable until the earlier of three and one-half years following such termination date or until the termination date of the option. If permitted pursuant to the Unigene healthcare plan, Executive will continue to receive healthcare benefits under Unigene’s healthcare plan, with Unigene paying the portion of the premium associated with the coverage that it would pay if Executive was then a current eligible employee and with family coverage at least as favorable to Executive as the most extensive healthcare benefit offered by Unigene to any employee, for a period of 18 months followi ng the date of termination. The agreements further provide that, upon the executive’s termination of employment due to disability, the Company will make a lump-sum severance payment to the executive equal to the executive’s then-current annual salary. Under the deferred compensation plan described above, upon a change in control, any remaining contributions would be made to the accounts of Warren Levy and Ronald Levy.25containcontains a non-disparagement clause, as well as non-competition clauseand non-solicitation clauses that appliesapply for one year following the executive’s termination of employment for any reason, and they obligateobligates the executivesexecutive to maintain the confidentiality of any business or scientific information that they receivehe receives during the course of theirhis employment.Agreements2008.2008 and each of these agreements was amended and restated in 2010. Each agreement provides that (i) if the executive is not hired by the Company following a change in control other than for cause (each, as defined in the agreement), or (ii) the executive’s employment with the Company is terminated (x) within 12twelve months following a change in control, (as defined in the agreement), if the executive’s employment with the Company (i) is terminated by the Company without cause or (ii) is terminated by the executive for good reason (which is defined to mean a material diminution, without the executive’s consent, a material diminution in the executive’s base salary a material diminution inor the executive’s authority, duties or responsibilities, or a relocation, without the executive’s consent, of the executive’sexe cutive’s primary site of employment to a location greater than fifty (50) miles from the executive’s primary site of employment immediately preceding such relocation), (y) within twelve months following the Victory Park debt restructuring transaction, by the Company without cause, or (z) within six months following the Company’s hiring of a new CEO (provided that such new CEO is hired within the twelve months following the Victory Park debt restructuring transaction), by the Company without cause, the Company will provide severance to the executive equal to the executive’s then-current annual salary. The severance payments will be paid in the form of base salary continuation, commencing with the first regular pay cycle following sixty days after the executive’s termination of employment.aas well as non-competition clauseand non-solicitation clauses which appliesapply for one year following the executive’s termination of employment for any reason, and a requirement that the executive will maintain the confidentiality of any business or scientific information which they receivehe receives during the course of theirhis employment.20082009 was determined by the Compensation Committee of the Company, which in 20082009 consisted of Robert F. Hendrickson,Zvi Eiref, Marvin Miller, Bruce Morra and Peter Slusser. NoneNo member of Mr. Hendrickson, Dr. Morra or Mr. Slusserthe Compensation Committee currently serves as an officer of the Company or was an employee of the Company in 20082009 or an officer of the Company at any time. There are no compensation committee interlocks between the Company and any other entity involving the Company’s or such entity’s executive officers or board members.20082009 fiscal year that requires disclosure under Item 404 of Regulation S-K. Amount and Nature
Of Beneficial
Ownership Percentage of
Outstanding
Shares 7,970,814 (1) 8.8 % 5,009,355 (2) 5.5 % (1)Name and Address of Beneficial Owner9.4% 5.1% 13G/A13D filed February 12, 2009.March 17, 2010. Victory Park Special SituationsCredit Opportunities Master Fund, Ltd. (“VPSSMF”VPCOMF”) has shared voting and dispositive power for 3,091,946 of the reported shares and Victory Park Credit Opportunities Master Fund, Ltd. (“VPCOMF”) has shared voting and dispositive power for 4,878,868 of the reported shares. Victory Park Capital Advisors, LLC (“Victory Park”VPCA”), as the investment manager for VPSSMF and VPCOMF, Jacob Capital, L.L.C., as the manager of Victory Park,VPCA, and Richard Levy, as the sole member of Jacob Capital, L.L.C., each have shared voting and dispositive power for allthe reported shares. None of these parties should be deemed to be the beneficial owner of shares of Common Stock issuable upon conversion of the Notes described above in Proposal 3 because the Notes are not currently convertible or convertible within 60 days and, consequently, no shares of Common Stock issuable upon conversion of the Notes have been included in the shares reported shares.above.(2) 3, 200930, 2010 completed by the Wynnefield Reporting Persons.Persons, each of whom has shared voting and dispositive power for the reported shares. The “Wynnefield Reporting Persons” are Wynnefield Partners Small Cap Value, L.P. (“Wynnefield Partners”), Wynnefield Small Cap Value Offshore Fund, Ltd. (“Wynnefield Offshore”), Wynnefield Partners Small Cap Value, L.P. I, (“Wynnefield Partners I”), Nelson Obus and Joshua Landes. Wynnefield Partners has sole voting and dispositive power for 1,581,214 of the reported shares, Wynnefield Offshore has sole voting and dispositive power for 1,564,127 of the reported shares, Wynnefield Partners I has sole voting and dispositive power for 1,864,014 of the reported shares, Wynnefield Capital Management, LLC has sole voting and dispositive power for 3,445,228 of the reported shares, Wynnefield Capital, Inc. has sole voting and dispositive power for 1,564,127 of the reported shares and Messrs. Obus and Landes each26have sole voting and dispositive power for 5,009,355 of the reported shares. Messrs. Obus and Landes each disclaim any beneficial ownership of these shares. The Wynnefield Reporting Persons are each separate and distinct entities with different beneficial owners (whether designated as limited partners or stockholders).17, 2009,1, 2010, concerning the beneficial ownership of Common Stock by each director and nominee for director of the Company, each Named Executive Officer and all directors and executive officers of the Company as a group. Amount and Nature
of Beneficial
Ownership
(1) Percent
of
Class 2,185,310 (2)(3) 2.4 % 1,961,275 (4) 2.2 % 943,255 (5)(6) 1.0 572,645 (7) * 340,445 (8) * 206,945 (9) * 216,695 (10) * 251,311 (11) * 286,517 (12) * 57,759 * 151,345 (13) * 82,345 (14) * 169,759 (15) * 70,759 (16) * 7,496,365 (2)(5)(17) 8.1 % Name of Beneficial Owner Richard Levy 8,645,814 (2) 9.4 % Warren P. Levy 2,105,110 (3) 2.3 % Ronald S. Levy 2,043,575 (4) 2.2 % James P. Gilligan 541,895 (5) * Nozer M. Mehta 390,245 (6) * Allen Bloom 327,946 (7) * J. Thomas August 287,025 (8) * William Steinhauer 264,695 (9) * Bruce Morra 205,473 (10) * Paul P. Shields 171,100 (11) * Marvin L. Miller 123,298 (12) * Peter Slusser 106,473 (13) * Zvi Eiref 88,712 (14) * 15,301,361 (15) 16.2 % * Less than one percent. (1) Unless otherwise noted, each person or group member has reported sole voting and sole dispositive power with respect to securities shown as beneficially owned by him. (2) Includes 200,000heldissuable upon conversion of the Notes described above in a family trust over which Warren P. LevyProposal 3 because the Notes are not currently convertible or convertible within 60 days, and, consequently, no shares of Common Stock issuable upon conversion of the Notes have been included in his capacity as trustee has voting and dispositive power. Warren Levy disclaims beneficial ownership of thosethe shares reported securities, except to the extent of his pecuniary interest therein.above.(3) Includes 162,500265,000 shares of Common Stock that Warren P. Levy has the right to acquire upon the exercise of stock options that are exercisable either immediately or within 60 days.(4) Includes 137,500205,000 shares of Common Stock that Ronald S. Levy has the right to acquire upon the exercise of stock options that are exercisable either immediately or within 60 days.(5) Includes 250,009 shares of Common Stock beneficially owned by Jay Levy’s spouse. Jay Levy disclaims beneficial ownership of those reported securities, except to the extent of his pecuniary interest therein.(6)Includes 420,000 shares of Common Stock that Jay Levy has the right to acquire pursuant to stock options that are exercisable either immediately or within 60 days.(7)Includes 493,750 shares of Common Stock that James P. Gilligan has the right to acquire pursuant to stock options that are exercisable either immediately or within 60 days.(8)(6) Includes 226,250263,750 shares of Common Stock that Nozer M. Mehta has the right to acquire pursuant to stock options that are exercisable either immediately or within 60 days.27(9)Includes 192,750 shares of Common Stock that Paul P. Shields has the right to acquire pursuant to stock options that are exercisable either immediately or within 60 days.(10)Includes 163,500 shares of Common Stock that William Steinhauer has the right to acquire pursuant to stock options that are exercisable either immediately or within 60 days.(11)Includes 231,000 shares of Common Stock that J. Thomas August has the right to acquire pursuant to stock options that are exercisable either immediately or within 60 days.(12)(7)Includes 260,000 shares of Common Stock that Allen Bloom has the right to acquire pursuant to stock options that are exercisable either immediately or within 60 days. (13)(8) Includes 81,00080,000 shares of Common Stock that Robert F. HendricksonJ. Thomas August has the right to acquire pursuant to stock options that are exercisable either immediately or within 60 days.(14)(9) Includes 184,000 shares of Common Stock that William Steinhauer has the right to acquire pursuant to stock options that are exercisable either immediately or within 60 days. (10) Includes 71,000 shares of Common Stock that Bruce Morra has the right to acquire pursuant to stock options that are exercisable either immediately or within 60 days. (11) Includes 160,000 shares of Common Stock that Paul P. Shields has the right to acquire pursuant to stock options that are exercisable either immediately or within 60 days. (12) Includes 81,000 shares of Common Stock that Marvin L. Miller has the right to acquire pursuant to stock options that are exercisable either immediately or within 60 days. (15)(13) Includes 61,000 shares of Common Stock that Bruce Morra has the right to acquire pursuant to stock options that are exercisable either immediately or within 60 days.(16)Includes 61,00071,000 shares of Common Stock that Peter Slusser has the right to acquire pursuant to stock options that are exercisable either immediately or within 60 days.(17)(14) Includes 10,000 shares of Common Stock that Zvi Eiref has the right to acquire pursuant to stock options that are exercisable either immediately or within 60 days. (15) Includes an aggregate of 2,561,2502,070,750 shares of Common Stock that such persons have the right to acquire pursuant to stock options that are exercisable either immediately or within 60 days.2008.Three of the current ten member Board of Directors, Warren P. Ronald S. Levy and Jay Levy, are executive officers of the Company. Jay Levy is the father of Warren and Ronald Levy.the Jay Levy, Jean Levy, Warren Levy and Ronald Levy (the “Levys”) from time to time (prior to 2003) made loans to us. We did not make principalJay Levy, our former director, Chairman of the Board, Treasurer and interest payments on certain loans when due. However,Assistant Secretary, and Jean Levy are the Levys waived all default provisions including additional interest penalties due under these loans through December 31, 2000. Beginning January 1, 2001parents of Warren Levy and ending May 10, 2007, interest on loans originated through March 4, 2001 increased an additional 5% per year and was calculated on both past due principal and interest. 2007, after principal repayments of $1,010,000 during 2007 the outstanding principal and interest were $7,095,000 and $8,642,517, respectively, with interest rates ranging from 8.5% to 14.2%. The total owed on May 10, 2007 aggregated $15,737,517, of which approximately $8,900,000 in principal and interest were in default and was restructured as eight-year term notes, none of which are in default, with a fixed simple interest rate of 9% per annum.& #160; No gain or loss was recognized on the restructuring transaction. Required quarterly payments of principal and interest under these new notes was to begin in May 2010 and continue over a five-year period, but payments may be made earlier without penalty.period. Total interest expense on all Levy loans was approximately $1,403,000, $1,301,000 $1,348,000 and $1,532,000,$1,348,000, respectively, for the years ended 2009, 2008 2007 and 2006.2007. As of December 31, 2008,2009, total accrued interest on all Levy loans was $2,083,973$3,487,071 and the outstanding loans by these persons to us classified as long-term debt, totaled $15,737,517, for an aggregate owed to them of $17,821,490.$19,224,588. These loans are collateralized by secondary security interests in our equipment, real property and certain of our patents.2820082009 and December 31, 20072008 (in thousands): 2008 2007 $ 8,319 $ 8,319 7,419 7,419 15,738 15,738 2,084 783 $ 17,822 $ 16,521 (1)These loans, held by Jay Levy and the Jaynjean Levy Family Limited Partnership (the “Levy Partnership”), resulted from the May 2007 restructuring of notes and accrued interest. Warren Levy and Ronald Levy are general partners of the Levy Partnership. These loans consist of eight-year term notes with fixed simple interest rates of 9% per annum. Interest expense is calculated using an effective interest method, at a rate of 7.6%, over the life of the notes due to the deferred payment schedule contained in the notes. Quarterly payments of principal and interest will be made over a five-year period beginning in May 2010. Accrued interest on these loans at December 31, 2008 was approximately $2,084,000. The Jay Levy loan is collateralized by secondary security interests in certain of our fixed and other assets, including real property. The Levy Partnership loan is collateralized by secondary security interests in certain of our patents and patent applications. These loans have been subordinated to a senior lender as of September 30, 2008. On September 30, 2008 we entered into a financing agreement with Victory Park Management, LLC (“Victory Park”) pursuant to which we borrowed $15,000,000 from Victory Park and, in connection therewith, we issued to Victory Park a three-year variable rate (currently 14%) senior secured non-convertible term note. 2009 2008 Long-term loans, current portion (1) $ 2,361 $ -- Long-term loans (1) 13,377 15,738 15,738 15,738 Accrued interest, short-term 1,298 -- Accrued interest, long-term 2,189 2,084 Total loans and interest $ 19,225 $ 17,822 individual’sindividual's private interest interferes, or appears to interfere, in any way with our interests. We expect our directors, officers and employees to act and make decisions that are in our best interests and our code of ethics encourages them to avoid situations that present a conflict between our interests and their own personal or professional interests. A copy of our code of ethics is available on our website,websi te, http://www.unigene.com.20102011 Annual Meeting must be received by the Company on or before January 12, 20105, 2011 in order to be considered for inclusion in the Company’s proxy statement and form of proxy for the Annual Meeting, and must also meet the other requirements set forth in the rules of the Securities and Exchange Commission relating to such stockholder proposals. If the proposal is received by the Company less than 45 days prior to the anniversary of the date when this proxy statement was sent, the persons named as proxies in the Company’s proxy material for the 20102011 Annual Meeting will have the discretionary authority to vote on the matter in accordance with their best judgment without disclosure in the proxy statement of such matter or of how the proxy holders intend to exerciseex ercise their discretionary voting authority.292010,2011, the name of the proposed nominee and the supporting documentation must be received no later than January 12, 2010.5, 2011. The Nominating and Corporate Governance Committee does not intend to alter the method of evaluation if the candidate is recommended by a stockholder.Regan & Associates, Inc.The Altman Group to aid in the solicitation of proxies, for which such firm will be paid a fee of $16,000.By Order$5,500 plus expenses.Boardfiscal year ended December 31, 2009, which is enclosed with this Proxy Statement, are incorporated by reference into this Proxy Statement:· Financial Statements and Supplementary Data (Part II, Item 8); · Management’s Discussion and Analysis of Financial Condition and Results of Operations (Part II, Item 7); and · Qualitative and Quantitative Disclosures About Market Risk (Part II, Item 7A). DirectorsRONALD S. LEVYSecretaryBy Order of the Board of Directors WARREN P. LEVY Secretary 12, 200930Exhibit2,000,0005,000,000 share increase in the number of shares available for award under the Unigene Laboratories, Inc. 2006 Stock-Based Incentive Compensation Plan (the “2006 Plan”“2006 Plan”). In order to reflect this change, Section 5.1 of the 2006 Plan was amended in its entirety, subject to stockholder approval, as follows:5,000,00010,000,000 shares increased by any shares of Common Stock that were reserved under the Predecessor Plans but which, as of the effective date of this Plan, (i) are not subject to grants under such Predecessor Plans, or (ii) are subsequently forfeited, cancelled or expire unexercised under the terms of such Predecessor Plans.”31YOUR VOTE IS IMPORTANT!Annual Meeting Materials are available on-line at:http://unigene.com/investor_relations/financial_reportsYou can vote in one of three ways:1. Call toll free 1-866-239-6507 on a Touch-Tone Phone. There is NO CHARGE to youfor this call.or2. Via the Internet at https://www.proxyvotenow.com/ugne and follow the instructions.or3. Mark, sign and date your proxy card and return it promptly in the enclosed envelope.PLEASE SEE REVERSE SIDE FOR VOTING INSTRUCTIONSANNUAL MEETING OF STOCKHOLDERSJune 25, 200911:00 A.M.PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORSThe undersigned stockholder of Unigene Laboratories, Inc. hereby appoints Warren P. Levy, Ronald S.EXAMPLEFor 1. Election of directors ¨ ¨ ¨ The undersigned stockholder of Unigene Laboratories, Inc. hereby appoints Richard Levy and JayLevy, and each of them, as the undersigned’s proxies (with the power of substitution), to vote all the shares of CommonStock of Unigene Laboratories, Inc. which the undersigned would be entitled to vote at the Annual Meeting of Stockholdersof Unigene Laboratories, Inc. to be held on June 25, 2009 at 11:00 A.M., Eastern Daylight time, and any adjournmentsthereof, on the following matters.PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY CARD PROMPTLY IN THE ENCLOSEDPOSTAGE-PAID ENVELOPE OR PROVIDE YOUR INSTRUCTIONS TO VOTE VIATHE INTERNET OR BY TELEPHONE.çç(Continued, and to be marked, dated and signed, on the other side)FOLD AND DETACH HEREUNIGENE LABORATORIES, INC. — ANNUAL MEETING, JUNE 25, 20092838DateSign abovePlease be sure to date and signthis proxy card in the box below.1. Election of directors(01)J. Thomas August, (02) Allen Bloom, (03) Zvi Eiref, (04) Jay Levy,(05)Ronald S. Levy, (06) Warren P. Levy (07)as the undersigned’s proxies (each of them with the power of substitution) to vote all the shares of Common Stock of Unigene Laboratories, Inc. which the undersigned would be entitled to vote at the Annual Meeting of Stockholders of Unigene Laboratories, Inc. to be held on June 15, 2010 at 11:00 A.M., Eastern Daylight time, and any adjournments thereof, on the following matters:(08)(09) Peter SlusserFor Against Abstain 2. Ratification of the appointment of Grant Thornton LLP as independent auditors of the Company for the Company’s 2010 fiscal year. ¨ ¨ ¨ For Against Abstain 3. To approve an amendment to the Certificate of Incorporation of the Company to increase the number of authorized shares of Common Stock, par value $.01 per share, from 135,000,000 shares to 275,000,000 shares. ¨ ¨ ¨ For Against Abstain 4. To approve an amendment to the Company’s 2006 Stock-Based Incentive Compensation Plan, as amended, to increase by 5,000,000 shares the number of shares of Common Stock, par value $.01 per share, available for issuance thereunder; and ¨ ¨ ¨ 5. In their discretion, in the transaction of any other business that may properly come before such meeting. The undersigned hereby revokes any proxy heretofore given. Withhold For AllFor All ExceptIF YOU WISH TO PROVIDE YOUR INSTRUCTIONS TO VOTE BY TELEPHONE OR INTERNET, PLEASE READ THE INSTRUCTIONS BELOW2. Ratification of the appointment of Grant ThorntonLLP as independent auditors of the Company.3. To approve an amendment to the Company’s 2006Stock-Based Incentive Compensation Plan.4. In their discretion Date Please sign exactly as your name appears on this card. If stock is registered in the names of two or more joint owners or trustees, each joint owner or trustee should sign this proxy. When signing as an executor, administrator, trustee, guardian, agent or attorney, please give your full title as such. Stockholder sign above Co-holder (if any) sign above the transaction of any other business that may properlycome before such meeting.The undersigned hereby revokes any proxy heretofore given.This proxy will be voted in accordance with instructions specified above, butin the absence of any instructions will be voted “FOR” Items 1, 2 and 3. If anyother business is presented at the meeting, the proxies are authorized to votethereon in their discretion. The Board of Directors recommends a vote FOR items1, 2 and 3 noted above.Mark here if you plan to attend the meetingMark here for address change and note changePlease sign exactly as your name appears on this card. If stock is registered in thenames of two or more joint owners or trustees, each joint owner or trustee shouldsign this proxy. When signing as an executor, administrator, trustee, guardian, agentor attorney, please give your full title as such.SFor Against AbstainINSTRUCTION: To withhold authority to vote for any nominee(s), mark “For All Except”and write that nominee(s’) name(s) or number(s) in the spacepostage paid envelope provided below.Your vote is important!PROXY VOTING INSTRUCTIONSStockholders of record have three ways to vote:1. By Mail; or2. By Telephone (using a Touch-Tone Phone); or3. By Internet.A telephone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated and returned thisproxy. Please note telephone and Internet votes must be cast prior to 3 a.m., June 25, 2009. It is not necessary to return this proxy if you vote bytelephone or Internet.ççFOLD AND DETACH HERE IF YOU ARE VOTING BY MAILVote by TelephoneCall Toll-Free on a Touch-Tone Phone anytime prior to3a.m., June 25, 2009:1-866-239-6507Vote by Internetanytime prior to3a.m., June 25, 2009 go tohttps://www.proxyvotenow.com/ugnePlease note that the last vote received, whether by telephone, Internet or by mail, will be the vote counted.ON-LINE ANNUAL MEETING MATERIALS: http://unigene.com/investor_relations/financial_reportsREVOCABLE PROXYMARK VOTESX ASCORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND RETURN THIS EXAMPLE Annual Meeting of StockholdersPORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.JUNE 25, 2009