FORM 10K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from_______________ to ___________________
Commission file number 0-16005
Unigene Laboratories, Inc.
(Exact name of registrant as specified in its charter)
Delaware 22-2328609
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
110 Little Falls Road, Fairfield, New Jersey 07004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 882-0860
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $.01 Par Value Not Applicable
Redeemable Class B Common Stock
Purchase Warrants Not Applicable
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X. No __.
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing.
Aggregate market value as of February 28, 1996:
$ 46,513,211
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes__. No__.
APPLICABLE ONLY TO CORPORATE REGISTRANTS:
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 Par Value-- 24,205,461 shares as of March 1, 1996
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K into which the document is incorporated: (1) Any annual report
to security holders; (2) Any proxy or information statement; and (3) Any
prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of
1933. The listed documents should be clearly described for identification
purposes.
PART III Definitive Proxy Statement of Unigene Laboratories, Inc., to be filed
in connection with the Annual Meeting of Stockholders to be held on June 20,
1996.
<PAGE>
PART I
Item 1. Business.
Unigene Laboratories, Inc. ("Unigene" or "Company"), incorporated under the
laws of the State of Delaware in 1980, is a health-care oriented biotechnology
company which is engaged in research and production of laboratory grade
Calcitonin and is currently planning to engage in the production and marketing
in bulk of pharmaceutical grade calcitonin. It is changing its primary business
from a research oriented business to a pharmaceutical production business. The
Company has succeeded in combining its proprietary amidation process with
bacterial recombinant DNA technology to develop a peptide hormone production
process. The Company believes that its proprietary amidation process will be a
key step in the more efficient and economical commercial production of certain
peptide hormones with extensive therapeutic applications. Many of these hormones
cannot be produced at a reasonable cost in sufficient quantities for clinical
testing or commercial use by currently available production processes. Using its
proprietary process, Unigene has produced laboratory-scale quantities of seven
such peptide hormones: human Calcitonin, salmon Calcitonin, human Growth Hormone
Releasing Factor, human Calcitonin Gene-Related Peptide, human Corticotropin
Releasing Factor, human Amylin and a human Magainin. During 1991, a study
commissioned by the Company was prepared by a professor of chemical engineering
at the Massachusetts Institute of Technology. The study evaluated the economics
for producing multi-kilogram quantities of Calcitonin and indicated that the
Company's process for producing Calcitonin should reduce the cost and time
required for commercial production by up to 95%.
The Company's strategy is to develop proprietary products and processes
with applications in human health-care, independently or in conjunction with
pharmaceutical and chemical companies, in order to generate revenues from
license fees, royalties and product sales in bulk. Generally, the Company seeks
sponsors and licensees to provide research funding and assume responsibility for
obtaining appropriate regulatory approvals, clinical testing, production and
marketing of products derived from Unigene's research activities. It has
concentrated most of its efforts on one product - calcitonin for the treatment
of osteoporosis. The Company has built a production facility and plans to
undertake production of pharmaceutical grade calcitonin and will assume
responsibility for some clinical testing and possibly for obtaining regulatory
approval.
Since 1992, the Company has been producing and from time to time
selling small quantities of research-grade salmon Calcitonin. During 1993, the
Company began construction of a Good Manufacturing Practice ("GMP") facility for
the production of pharmaceutical-grade calcitonin in leased premises located in
Boonton, New Jersey which was mechanically completed during the fourth quarter
of 1994. The facility will also produce Unigene's proprietary amidating enzyme
for use in producing Calcitonin. The initial production capacity of the facility
is expected to be between 0.5-1.0 kilograms of bulk Calcitonin per year,
representing approximately 10% of the current estimated world supply for this
leading osteoporosis drug.
The Company is taking steps to secure the validation of the facility by
the U.S. Food and Drug Administration ("FDA") which is required to allow Unigene
to provide its Calcitonin for human use. The Company believes that validation of
the facility should be completed in the early spring of 1996. Although the
facility is expected to be validated first by an independent consultant and
later by the FDA, there can be no assurance that this will occur. In addition
there is no assurance that the facility production goals will be achieved, that
there will be a market for the Company's products, that such production will be
profitable to the Company, that others will not develop processes and products
superior to, or otherwise precluding the commercial utilization of, the
processes or products developed by the Company. The design of the facility is
intended to allow for substantial increases in Calcitonin production utilizing
the existing equipment with no additional capital expenditures or personnel.
Although the facility will initially be exclusively devoted to Calcitonin
production, it would be suitable for producing other peptide hormone products in
the future. There can be no assurance that there will be sufficient acceptance
of the Company's products in the marketplace for successful commercialization.
In addition to the validation and FDA approval of the new facility, it
is necessary to obtain FDA approval for human use of the salmon Calcitonin to be
produced in the facility. This will require various human and animal studies.
The Company will then apply to the FDA for approval of the Company's Calcitonin
for human use. The Company expects an expedited approval process. However, there
can be no assurance that necessary governmental approvals will be obtained as
projected. Expanded consumer acceptance of pharmaceutical-grade Calcitonin may
be dependent on development of a consumer acceptable delivery system. A major
pharmaceutical company has recently received approval of the FDA for the
marketing of a nasal spray delivery system for Calcitonin, which should enlarge
the market for Calcitonin. The Company and others are conducting research on
oral delivery systems for Calcitonin. There can be no assurance that suitable
delivery systems will be developed or that governmental approval of such
delivery systems will be obtained.
The Company is continuing its efforts to develop a calcitonin pill. In
December 1995, the Company successfully tested its proprietary calcitonin pill
in a Phase I clinical trial. Preliminary results of these studies indicated that
the majority of those who received the pill showed levels of the hormone in
blood samples taken during the trial. The Company believes that this is the
first time significant blood levels of calcitonin have been observed in humans
following oral administration of the hormone. Preliminary results of a second
Phase I trial also showed that blood levels of the drug were obtained in several
of the recipients. However, there is no assurance that these results will be
replicated in further studies. The Company plans to file an Investigational New
Drug (IND) application with the U.S. Food and Drug Administration as well as a
patent application with the U.S. Patent & Trademark Office. There can be no
assurance that either application will be approved as projected or that the
Company will be successful in marketing its products.
The planned activities of the Company are all subject to obtaining
adequate financing. There can be no assurance that the Company will have
sufficient resources to complete the preproduction process, to produce and
market its products and to carry on its other projects. See Part II "Liquidity
and Capital Resources."
In June, 1995, the Company entered into an agreement for a joint
venture with the Qingdao General Pharmaceutical Company and its Huanghai factory
for the production and marketing in China of Calcitonin utilizing the Company's
amidation technology. Under the agreement, the Chinese partners would finance
the project, including the construction and operation of a dedicated
manufacturing facility in China. Unigene would provide the technology and
training and its proprietary enzyme to the joint venture at a discounted price.
Unigene would also receive a combination of fixed fees and minimum annual
royalties based upon sales of the end product. There is no assurance that the
joint venture will be successful or that Unigene will receive significant income
from this joint venture.
The Company has been engaged in four collaborative research programs.
Two collaborations, one with Rutgers University College of Pharmacy and a second
with an independent company, seek to develop an oral drug delivery system for
Calcitonin. The third collaboration, performed in conjunction with Yale
University, is investigating novel applications for certain amidated peptide
hormones. The fourth collaboration, with Johns Hopkins School of Medicine, is
investigating changes in certain cancerous cells which, if successful, may allow
for early diagnosis and treatment. At present, the Company has no third party
sponsored research agreements in effect. The Company is currently conducting
discussions with major pharmaceutical companies regarding licensing and/or
research agreements.
There can be no assurance that such discussions will result in new
research or licensing agreements or that the Company will be able to obtain
adequate funding for its current or new projects. The Company is dependent on
large pharmaceutical companies, having much greater resources than the Company,
for revenues from sales of product, research sponsorship, joint ventures and
licensing arrangements.
Foreign Sponsorship
The Company's potential major customers, partners and licensees are
likely to be foreign corporations or corporations with significant international
business. Such corporations' business operations and their ability to pay
license fees, royalties and other amounts due and otherwise perform their
obligations to the Company under agreements with the Company, are subject to
regulation and approval by foreign governments and to international political
and currency fluctuation problems. There can be no assurance that required
approvals will be received. Such political and currency problems, governmental
regulation, or failure to receive required approvals may have a material adverse
effect on the ability of the Company to earn or receive payments pursuant to
such agreements and, in such event, may have a material adverse effect on the
Company's future operations.
Government Regulation
The laboratory research activities of the Company and its sponsors,
collaborators and potential licensees and the processes and products which may
be developed by them and the new production facility, are subject to significant
regulation by numerous federal, state, local and foreign governmental
authorities. The regulatory process for a pharmaceutical product may take a
number of years and requires substantial resources. In the case of the
regulatory process for the Company's Calcitonin product, which may be handled by
the Company as well as other entities, the Company believes that the process
will be expedited. There can be no assurance that regulatory approval will be
obtained for the new facility or any of its products. The inability to obtain,
or delays in obtaining, such approval would adversely affect the Company's
ability to receive royalties or product revenues. Furthermore, the extent of any
adverse governmental regulation which may arise from future legislative and
administrative action cannot be predicted.
Competition
The Company's primary business activity to date has been biotechnology
research. Beginning in 1996, the Company intends to commence the manufacture and
sale of amidated peptide hormones, beginning with calcitonin. Biotechnology
research is highly competitive, particularly in the field of human health-care.
Unigene competes with specialized biotechnology companies, major pharmaceutical
and chemical companies, universities and other non-profit research
organizations, many of which can devote considerably greater financial resources
to research activities.
In the manufacture and sale of amidated peptide hormones, the Company
and its licensees, if any, will be competing with contract laboratories and
major pharmaceutical companies, many of whom can devote considerably greater
financial resources to manufacturing and selling activities. However, the
Company believes that its patented hormone manufacturing process will enable it
to greatly reduce manufacturing time and costs in order to successfully compete
with these companies.
The Company believes that success in competing with others in the
biotechnology industry will be based primarily upon scientific expertise and
technological superiority, the ability to identify and pursue scientifically
feasible and commercially viable opportunities and to obtain proprietary
protection for research achievements, the availability of adequate funding and
the success in developing, testing, protecting, producing and marketing products
and obtaining timely regulatory approval. There can be no assurance that others
will not develop processes or products which are superior to, or otherwise
preclude the commercial utilization of, processes or products developed by the
Company.
Human Resources
On March 1, 1996, the Company had 60 full-time employees of whom 25 were
engaged in research and development activities, 24 were engaged in preproduction
activities and 11 were engaged in general and administrative functions. Ten of
the Company's employees hold Ph.D. degrees. The Company's employees have
expertise in molecular biology, including DNA cloning, synthesis, sequencing and
expression; protein chemistry, including purification, amino acid analysis,
synthesis and sequencing of proteins; immunology, including tissue culture,
monoclonal and polyclonal antibody production and immunoassay development;
chemical engineering; pharmaceutical production; quality assurance; and quality
control. None of the Company's employees is covered by a collective bargaining
agreement.
Research and Development
The Company has established a multidisciplinary research team to adapt
current genetic engineering technologies to the development of proprietary
products and processes. Approximately half of the Company's employees are
directly engaged in activities relating to plant validation processes and
research and development of new, and improvement of existing, products and
processes. During the years ended December 31, 1995, 1994 and 1993 approximately
$6,876,000, $5,137,000, and $3,357,000, respectively, were spent on these
activities.
Patents and Proprietary Technology
The Company has filed applications for U.S. patents relating to the
proprietary amidation and immunization processes invented in the course of its
research. To date, the following two patents have issued in the U.S.:
Immunization By Immunogenic Implant, a process patent, and Alpha-Amidation
Enzyme, a process and product patent. Other applications are pending. Filings
relating to the amidation process have been made in selected foreign countries;
nine such foreign patents have issued. There can be no assurance that any of
Unigene's applications will issue as patents or that Unigene's patents will
provide the Company with significant competitive advantages. Furthermore, there
can be no assurance that others will not independently develop similar or
superior technologies. Although the Company believes its patents and patent
applications are valid, the invalidation of its Alpha-Amidation Enzyme patent or
the failure of certain of its pending Alpha-Amidation Enzyme-related
applications to issue as patents could have a material adverse effect upon its
business. Difficulties in detecting and proving infringement are generally
greater with process patents than with product patents. In addition, the value
to the Company of a process patent may be reduced if products which can be
derived from such process have been patented by others. For example, Ciba-Geigy
Corporation and the Salk Institute hold U.S. patents for human Calcitonin and
human Growth Hormone Releasing Factor, respectively. The cooperation of these
patent holders or their sub-licensees would be needed for the commercialization
of the aforementioned patented products in countries where these companies hold
valid patents.
Executive Officers of the Registrant
Served in Such
Position or Office
Name Age Continually Since Position(1)
- ------------------ ----- -------------------- ----------------
Dr. Warren P. Levy(2)(3) 44 1980 President (Chief
Executive Officer)
Dr. Ronald S. Levy(2)(4) 47 1980 Vice President
and Secretary
Jay Levy(2)(5) 72 1980 Treasurer
NOTES:
(1) Each executive officer's term of office is until the first meeting
of the Board of Directors of Unigene following the annual meeting of
stockholders and until the election and qualification of his successor.
Officers serve at the discretion of the Board of Directors. The term of
office of each director will expire on the date of the Company's annual
meeting of stockholders and upon the election and qualification of each
such director's successor.
(2) Dr. Warren P. Levy and Dr. Ronald S. Levy are brothers and are the
sons of Mr. Jay Levy.
(3) Dr. Warren P. Levy, a founder of the Company, has served as
President, Chief Executive Officer and Director of the Company since
its formation in November 1980. Dr. Levy holds a Ph.D. in biochemistry
and molecular biology from Northwestern University and a bachelor's
degree in chemistry from the Massachusetts Institute of Technology.
(4) Dr. Ronald S. Levy, a founder of the Company, has served as Vice
President and Director of the Company since its formation in November
1980, and as Secretary since May 1986. Dr. Levy holds a Ph.D. in
bioinorganic chemistry from Pennsylvania State University and a
bachelor's degree in chemistry from Rutgers University.
(5) Mr. Jay Levy, a founder of the Company, has served as Chairman of
the Board of Directors and Treasurer of the Company on a part- time
basis since its formation in November 1980. He also served as Secretary
from 1980 to May 1986. Mr. Levy devotes approximately 15% of his time
to the Company. From 1985 through February 1991, he served as the
principal financial advisor to The Nathan Cummings Foundation, Inc., a
large charitable foundation. From 1968 through 1985, he performed
similar services for the late Nathan Cummings, a noted industrialist
and philanthropist.
Item 2. Properties
In 1983, Unigene completed the construction of a one-story office and
laboratory facility consisting of approximately 12,500 square feet. The facility
is located on a 2.2 acre site in Fairfield, New Jersey which the Company
purchased in 1982.
The Company's 32,000 square foot GMP facility of which 18,000 square feet
will be used for the production of pharmaceutical-grade Calcitonin and other
peptide hormones was constructed in a building located in Boonton, New Jersey,
that is being leased under a 10-year agreement which began in February 1994. The
Company has two 10-year renewal options as well as an option to purchase the
facility. The facility was mechanically completed during 1994 and is currently
undergoing the validation process.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 1995.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
-------------------------------------------------------------
The Company has not declared or paid any cash dividends since inception,
and does not anticipate paying any in the near future.
The Company's Common Stock began trading on August 12, 1987 in the
over-the-counter market with the NASDAQ symbol UGNE. The Company's Class B
Warrants began trading on May 28, 1991 in the over-the-counter market with the
NASDAQ symbol UGNEZ. There were 607 Common Stockholders and 53 Class B
Warrantholders of record as of February 28, 1995. The Company's Common Stock is
listed on the NASDAQ National Market System. The prices below are as reported to
the Company by the National Association of Securities Dealers, Inc.
1995
-------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
High-Low High-Low High-Low High-Low
------------ --------------- ------------- -------------
Common Stock 2 7/8-1 1/2 2 1/8 - 1 2 1/8-1 9/32 2 1/16-1 3/16
Class B Warrants 7/8-5/16 11/16-1/4 9/16-1/4 15/32 - 5/32
1994
-------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
High-Low High-Low High-Low High-Low
------------ --------------- ------------- -------------
Common Stock 3 5/8-2 5/16 3 11/16-2 7/16 3 3/8-2 5/8 3 5/8-2 1/4
Class B Warrants 27/32-1/2 27/32-3/8 7/8-1/2 1 5/16-7/16
The prices presented for the Class B Warrants for 1994 are bid prices,
which represent prices between broker-dealers and may not include mark-ups or
commissions to broker-dealers and may not reflect prices in actual transactions.
The prices for the Common Stock and for the Class B Warrants for 1995 represent
high and low sale prices.
<TABLE>
<CAPTION>
Item 6. Selected Financial Data
(In thousands, except per share data)
Years Ended December 31 1995 1994 1993 1992 1991
- ----------------------- ------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Research and development
contracts and licensing fees $ 8 $ 258 $ 12 $ 10 $ 2
Research and development
expenses $ 6,876 $ 5,137 $ 3,357 $ 2,998 $ 2,486
Net loss $(9,435) $(6,319) $(3,739) $(3,019)$(2,825)
Net loss per share $ (.44) $ (.32) $ (.19) $ ( .16)$ (.17)
At December 31
- --------------
Working capital (deficiency) $(6,111) $(1,907) $11,380 $16,936 $18,759
Total assets $13,332 $14,211 $15,665 $19,286 $20,898
Long-term debt $ 3,955 $ -- $ -- $ -- $ --
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
-----------------------------------------------------------
RESULTS OF OPERATIONS
Revenues for 1995, 1994 and 1993 from hormone and enzyme sales were $8,000,
$8,000 and $12,000, respectively. Revenues in 1994 included $250,000 from a
final payment from a prior research agreement.
Research and development, the Company's largest expense, increased 34% in 1995
to $6,876,000 from $5,137,000 in 1994, after increasing 53% in 1994 from
$3,357,000 in 1993. The increases were related to the Company's manufacturing
facility, including depreciation charges and expenditures for pre-production
salaries, the development program for the calcitonin pill, regulatory consulting
fees, as well as the sponsorship of collaborative research programs for which
the company spent $483,000, $301,000 and $93,000 in 1995, 1994 and 1993
respectively.
General and administrative expenses increased 29% in 1995 to $2,158,000 from
$1,671,000 in 1994, after increasing 36% in 1994 from $1,230,000 in 1993. The
1995 increase was primarily due to legal and other expenses associated with the
Company's ongoing financing activities . The 1994 increase was primarily due to
higher legal fees relating to licensing and joint venture negotiations and to
patent matters.
Interest and other income decreased $163,000 or 70% in 1995 from 1994 after
decreasing $606,000 or 72% in 1994 from 1993. The decreases were due to a
reduction in total monies available to be invested.
The Company incurred $477,000 in interest expense in 1995, up from $1,000 in
1994. This was due to increased borrowings in 1995.
During 1994 the Company constructed and staffed its manufacturing facility and
hired regulatory consultants in the U.S. and in Europe. During both 1995 and
1994, the Company concentrated on internally-sponsored research programs and
collaborations, and post research development programs, including the scale-up
and production of research grade calcitonin and the development of a calcitonin
pill. Therefore, operating expenses increased, and cash decreased causing a
decrease in interest income. In addition, increased borrowings in 1995 increased
interest expense. As a result, the net loss increased $3,115,000 and $2,581,000
for the years ended December 31, 1995 and 1994, respectively, from the prior
years.
As of December 31, 1995, the Company had available for income tax reporting
purposes net operating loss carryforwards in the approximate amount of
$34,000,000, expiring from 1996 through 2010, which are available to reduce
future earnings which would otherwise be subject to federal income taxes. In
addition, the Company has investment tax credits and research and development
credits in the amounts of $69,000 and $1,594,000, respectively, which are
available to reduce the amount of future federal income taxes. These credits
expire from 1996 through 2010.
The Company follows Statement of Financial Accounting Standards No. 109 (FASB
109), "Accounting for Income Taxes". Given the Company's past history of
incurring operating losses, any deferred tax assets that are recognizable under
FASB 109 have been fully reserved. As of January 1, 1995 and 1994, under FASB
109, the Company had deferred tax assets of approximately $11,100,000 and
$8,400,000, respectively, subject to valuation allowances of $11,100,000 and
$8,400,000, respectively. The deferred tax assets were generated primarily as a
result of the Company's net operating losses and tax credits generated. At
December 31, 1995, the Company's deferred tax assets and valuation allowances
each increased by approximately $4,000,000.
Statement of Financial Accounting Standards ("SFAS") No. 121, issued March 1995,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be
Disposed Of", is effective for the Company beginning in 1996. The statement
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment loss is recognized if the sum of the expected future
cash flows is less than the carrying amount of the asset. Management does not
expect the implementation of SFAS No. 121 to have a material impact on the
Company's financial position or results of operations, assuming successful
commercialization of the Company's product and/or the signing of licensing/joint
venture agreements with pharmaceutical companies (see Note 12).
SFAS No. 123, "Accounting for Stock-based Compensation", issued in October 1995,
established financial accounting and reporting standards for stock-based
employee compensation plans. These plans include all arrangements by which
employees receive shares of stock or other equity investments of the employer or
the employer incurs liabilities to employees in amounts based on the price of
the employer's stock. This statement also applies to transactions in which an
entity issues its equity instruments to acquire goods or services from
non-employees. The Company will elect the disclosure requirements only of FASB
123 and such additional disclosure requirements are not effective for the
Company until 1996.
LIQUIDITY AND CAPITAL RESOURCES
During 1994, the Company completed construction of its peptide production
facility in Boonton, New Jersey. The facility was constructed in a shell
building that is being leased under a 10-year net lease which began in February
1994. The Company has two 10-year renewal options as well as an option to
purchase the facility. The total cost of leasehold improvements and process
equipment for this facility, including current validation costs, is
approximately $11.9 million. The Company is undertaking steps to secure the
validation of the facility by the U.S. Food and Drug Administration to allow
Unigene to provide its calcitonin for human pharmaceutical use.
The Company, at December 31, 1995, had cash and cash equivalents of $259,000, a
decrease of $333,000 from December 31, 1994.During 1995, Warren P. Levy, Ronald
S. Levy, and Jay Levy, officers and directors of the Company, and a member of
their family loaned a total of $1,905,000 to the Company. A total of $1,850,000
of these loans is secured by liens on the Fairfield plant and equipment. In
March 1995, the Company borrowed $1,000,000 from an unrelated third party. This
loan was paid off in May 1995 with the proceeds of a new $2,000,000 loan from an
unrelated third party. The new loan was on a short-term basis secured by all of
the assets of the Company. In connection with that loan, the members of the Levy
family agreed to subordinate their security interests in the Fairfield plant and
equipment to the secured lender and received a subordinated security interest on
the equipment at the Boonton plant. This $2,000,000 loan was originally due on
July 7, 1995 with interest at 13% per annum however, it was extended to
November, 1995 with an interest rate of 24.5% per annum. In November 1995, the
$2,000,000 loan was repaid from the proceeds of a $3,000,000 debt financing from
two unrelated third parties collateralized by almost all of the Company's
assets. In December 1995 these two parties loaned the Company an additional
$300,000. These loans accrue interest at a rate of 9.5% per annum. On March 6,
1996 this $3,300,000 loan was exchanged for 9.5% Senior Secured Convertible
Debentures in the principal amount of $3,300,000. The Debentures mature November
15, 1998 and are convertible into shares of the Company's common stock at a
conversion rate of $1.15 per share, subject to certain reset provisions.
From July 1 through December 31, 1995, the Company sold in private placements
approximately 2.8 million shares of its common stock at a price of $1 per share,
which after expenses netted the Company $2.6 million. From January through March
1996, the Company sold in private placements an aggregate of 371,000 shares of
common stock receiving net proceeds of $370,000.
In March 1996 the Company completed a private placement of $9.08 million in 10%
Convertible Debentures. The Company received net proceeds of $8,172,000 as a
result of this placement. These Debentures mature March 4, 1999. The debentures
are convertible into common stock for up to one-third of the principal amount on
each of April 27, 1996, May 27, 1996 and June 26, 1996. The debentures are
convertible at the lower of $2.00 per share or 85% of the market price per share
of the Company's common stock at the date of conversion.
The Company's ability to generate additional cash from operations depends
primarily upon signing research or licensing agreements, achieving defined
benchmarks in such agreements, completion of plant validation, receiving
regulatory approval for its products, and marketing hormones and enzyme
products. The Company has signed one joint venture agreement. However, the
Company has not yet received any revenue from this agreement, and there is no
assurance that any revenues will be received.
The Company requires additional working capital to continue its operations.
Management believes that the Company has sufficient cash through at least the
third quarter of 1996. The Company requires additional funds through financing
or licensing agreements to ensure continued operations. There is no assurance
that sufficient funds will be obtained.
Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements and Related Information
(1) Financial Statements:
Independent Auditors' Report
Balance Sheets at December 31, 1995 and 1994
Statements of Operations for the three years
ended December 31, 1995
Statements of Stockholders' Equity for the
three years ended December 31, 1995
Statements of Cash Flows for the three
years ended December 31, 1995
Notes to Financial Statements
(2) Financial Statement Schedules:
All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
<PAGE>
Independent Auditors' Report
The Stockholders and Board of Directors
Unigene Laboratories, Inc.:
We have audited the financial statements of Unigene Laboratories, Inc. as listed
in the accompanying index. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Unigene Laboratories, Inc. as
of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1995, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 12 to the
financial statements, the Company has suffered recurring losses from operations
and has a net working capital deficiency which raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 12. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
KPMG PEAT MARWICK LLP
New York, New York
March 22, 1996
<PAGE>
UNIGENE LABORATORIES, INC.
BALANCE SHEETS
DECEMBER 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 258,627 $ 592,011
Prepaid expenses and other
current assets 434,159 394,553
---------- -----------
Total current assets 692,786 986,564
Property, plant and equipment-net of
accumulated depreciation
and amortization (Note 4) 11,513,019 12,221,504
Patents and other assets 1,125,828 1,003,276
----------- -----------
$13,331,633 $14,211,344
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,859,264 $ 2,399,663
Accrued expenses 644,663 494,091
Notes payable - stockholders (Note 3) 1,250,000 ---
----------- -----------
Total current liabilities 4,753,927 2,893,754
Notes payable - stockholders (Note 3) 655,000
Note payable - other (Note 5) 3,300,000
Stockholders' equity (Note 7):
Common stock-par value $.01 per share,
authorized 48,000,000 shares, issued
and outstanding 23,813,171 shares in
1995 and 20,918,399 shares in 1994 238,132 209,184
Additional paid-in capital 38,110,512 35,399,473
Accumulated deficit (33,724,907) (24,290,036)
Less: Treasury stock, at cost,
7,290 shares (1,031) (1,031)
----------- -----------
Total stockholders' equity 4,622,706 11,317,590
---------- -----------
$ 13,331,633 $14,211,344
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
UNIGENE LABORATORIES, INC.
STATEMENTS OF OPERATIONS
Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
Sales and other revenue $ 7,531 $ 258,393 $ 11,777
--------- ---------- ----------
Operating expenses:
Research and
development 6,876,253 5,137,011 3,357,202
General and
administrative 2,157,777 1,670,502 1,229,960
---------- ---------- ----------
9,034,030 6,807,513 4,587,162
---------- ---------- ----------
Operating loss (9,026,499) (6,549,120) (4,575,385)
---------- ---------- ----------
Other income (expense):
Interest/other income 68,133 230,686 836,705
Interest expense (476,505) (1,055) --
---------- ---------- ----------
(408,372) 229,631 836,705
---------- ---------- ----------
Net loss $(9,434,871) $(6,319,489) $(3,738,680)
========== ========= =========
Net loss per share $ (.44) $ (.32) $ (.19)
========== ========== ==========
Weighted average number
of shares outstanding 21,657,549 19,730,246 19,620,859
========== ========== ==========
See accompanying notes to financial statements.
<PAGE>
UNIGENE LABORATORIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1995, 1994 and 1993
<TABLE>
Common Stock
------------------ Additional
Number of Par Paid-in Accumulated Treasury
Shares Value Capital Deficit Stock Total
--------- --------- ----------- ---------- -------- ----------
<C> <C> <C> <C> <C> <C>
Balance,
January 1, 1993 19,628,149 $196,281 $32,988,202 $(14,231,867) $(1,031) $18,951,585
Net loss -- -- -- (3,738,680) -- (3,738,680)
---------- -------- ----------- ------------ --------- -----------
Balance,
December 31, 1993 19,628,149 196,281 32,988,202 (17,970,547) (1,031) 15,212,905
Sales of
stock 1,135,000 11,350 2,198,586 -- -- 2,209,936
Exercise of
stock options 155,250 1,553 212,685 -- -- 214,238
Net loss -- -- -- (6,319,489) -- (6,319,489)
---------- -------- ----------- ------------ ---------- ----------
Balance,
December 31,1994 20,918,399 209,184 35,399,473 (24,290,036) (1,031) 11,317,590
Sales of
stock 2,802,022 28,020 2,561,044 -- -- 2,589,064
Exercise of
stock options 92,750 928 149,995 -- -- 150,923
Net loss -- -- -- (9,434,871) -- (9,434,871)
---------- -------- ----------- ------------ ---------- ----------
Balance,
December 31,
1995 23,813,171 $238,132 $38,110,512$(33,724,907) $(1,031) $4,622,706
========== ======== =========== =========== ======== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
UNIGENE LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................ $ (9,434,871) $ (6,319,489) $ (3,738,680)
------------ ------------ ------------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization .............. 1,445,596 573,830 327,187
Decrease in interest receivable ............ -- 120,610 254,797
(Increase) decrease in prepaid
expenses and other current assets ....... (39,606) 61,411 (148,501)
Increase in operating accounts
payable and accrued expenses* ........... 1,457,187 981,835 117,537
------------ ------------ ------------
Total adjustments ............................... 2,863,177 1,737,686 551,020
------------ ------------ ------------
Net cash used for
operating activities ......................... (6,571,694) (4,581,803) (3,187,660)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturity of marketable securities ............ -- 3,000,000 12,000,000
Purchase of marketable securities ............ -- -- (1,000,000)
Construction of leasehold improvements* ...... (939,947) (5,746,782) (1,398,698)
Purchase of furniture and equipment* ......... (635,198) (2,681,814) (258,524)
Increase in patents and other assets ......... (131,532) (40,184) (399,899)
------------ ------------ ------------
Net cash (used in) provided by
investing activities ......................... (1,706,677) (5,468,780) 8,942,879
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of stock, net of related expenses ...... 2,589,064 2,209,936 --
Issuance of debt ............................. 8,205,000 -- --
Repayment of debt ............................ (3,000,000) -- --
Exercise of stock options .................... 150,923 214,238 --
------------ ------------ ------------
Net cash provided by
financing activities ......................... 7,944,987 2,424,174 --
------------ ------------ ------------
Net increase (decrease) in cash and
cash equivalents .............................. (333,384) (7,626,409) 5,755,219
Cash and cash equivalents at
beginning of period ........................... 592,011 8,218,420 2,463,201
------------ ------------ ------------
Cash and cash equivalents at
end of period ................................ $ 258,627 $ 592,011 $ 8,218,420
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
* Does not include 1995 and 1994 non-cash activity: $612,000 and $1,459,000
in accounts payable and accrued expenses for construction of leasehold
improvements and purchases of furniture and equipment.
<PAGE>
UNIGENE LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
1. Description of Business- Unigene Laboratories, Inc. (the "Company"), a
health-care oriented biotechnology research company, was incorporated in the
State of Delaware in 1980. The Company is in the process of changing its primary
business from a research oriented business to a pharmaceutical production
business. The Company has concentrated most its efforts to date on one product -
calcitonin, for the treatment of osteoporosis. The Company's calcitonin product
will require clinical trials, FDA approval as well as acceptance in the
marketplace prior to commercialization. Although the Company believes its
patents and patent applications are valid, the invalidation of its
Alpha-Amidation Enzyme patent or the failure of certain of its pending
Alpha-Amidation Enzyme-related applications to issue as patents could have a
material adverse effect upon its business. The Company competes with specialized
biotechnology companies, major pharmaceutical and chemical companies and
universities and research institutions. Many of these competitors have
substantially greater resources than does the Company.
The Company has incurred annual operating losses since its inception and, as a
result, at December 31, 1995, had an accumulated deficit of $33,700,000 and a
working capital deficiency at December 31, 1995 of $2,800,000. Cost of
improvements, equipment and validation through December 31, 1995 total
$11,900,000. In 1995, the Company borrowed $3,300,000 from two unrelated third
parties (see Note 5). Although the Company sold convertible debentures in the
principal amount of $9,080,000 in March 1996 (see Note 12) management believes
that the Company requires additional funds through financing or licensing
agreements to ensure continued operations. There is no assurance that sufficient
funds will be obtained.
2. Summary of Significant Accounting Policies & Practices
Property, Plant and Equipment- Property, plant and equipment are carried at
cost. Depreciation is computed using the straight-line method. Amortization of
leasehold improvements is computed over the remaining life of the lease using
the straight-line method. The cost of maintenance and repairs is charged to
expense as incurred. Significant renewals and betterments are capitalized.
Research and Development- Research and development contract revenues are accrued
based upon the successful completion of various benchmarks as set forth in the
individual agreements. Research and development expenditures are expensed as
incurred.
Patents- Patent costs are deferred pending the outcome of patent applications.
Successful patent costs are amortized using the straight-line method over the
lives of the patents. Unsuccessful patent costs are expensed when determined
worthless. As of December 31, 1995, two of the Company's patents had issued in
the U.S. and nine have issued in various foreign countries. Various other
applications are still pending.
Net Loss per Share- Net loss per share is computed using the weighted average
number of shares outstanding during the period. Stock options and warrants have
not been included in the calculation since the inclusion of such shares would be
anti-dilutive.
Statements of Cash Flows- The Company considers all highly liquid securities
purchased with an original maturity of three months or less to be cash
equivalents. Interest expense paid was $240,000 in 1995, $1,000 in 1994 and $0
in 1993.
Use of Estimates- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. Related Party Transactions
In connection with loans made to the Company by certain stockholders in 1984 and
1985, which loans were repaid in 1989, the former lenders received options to
purchase 400,950 shares of the common stock of the Company, at prices ranging
from $1.37 to $1.65 per share. During 1994, options to purchase 145,800 shares
of common stock were exercised and options to purchase 72,900 shares of common
stock expired. During 1995, options to purchase 80,750 shares of common stock
were exercised and options to purchase 101,500 shares of common stock expired.
During 1994, the Company's stockholders approved the adoption of a stock option
plan for outside directors. This plan replaced a plan previously adopted in
1991. As a result, the three outside members of the Board of Directors at that
time were granted options, expiring in 2004 except if the individual is no
longer a director, to purchase a total of 90,000 shares of the Company's common
stock at $3.00 per share. During 1995, one outside director retired and his
options totaling 30,000 shares were cancelled. New outside directors will
automatically receive stock options for 30,000 shares of common stock upon their
election to the Board of Directors at a price equal to the fair market value on
the date of grant. At December 31, 1995, options representing 60,000 shares were
outstanding of which 50,000 shares were exercisable; however, none have been
exercised.
Notes payable - stockholders, totaling $1,905,000 at December 31, 1995, consist
of notes to Warren P. Levy, Ronald S. Levy and Jay Levy, officers and directors
of the Company, who in the aggregate own 17% of the Company's outstanding common
stock, and a member of their family. These notes bear interest at the Merrill
Lynch Margin Loan Rate (approximately 9% at December 31, 1995) and are
collateralized by subordinated security interests in the Company's Fairfield
plant and Boonton equipment. Notes for $1,255,000 were originally payable on
demand. A note for $650,000 is due on February 10, 1997 and is classified as
long-term. Under the terms of the $9.08 million Convertible Debentures (see Note
12), $1,250,000 of these loans is payable over time based upon the achievement
of certain corporate benchmarks. Since management expects these benchmarks to be
achieved during 1996, $1,250,000 of these loans has been classified as
short-term as of December 31, 1995.
4. Property, Plant and Equipment
Property, plant and equipment consisted of the following at December 31, 1995
and 1994:
Estimated
Depreciable
1995 1994 Lives
---------- ---------- -----------
Building and
improvements $1,373,975 $1,373,975 25 years
Leasehold improvements 8,437,674 7,890,989 Remaining Life of Lease
Manufacturing equipment 3,420,757 3,297,855 10 years
Laboratory equipment 2,332,272 2,302,264 5 years
Other equipment 466,523 466,523 10 years
Office equipment and
furniture 179,574 151,038 5 years
---------- ----------
16,210,775 15,482,644
Less accumulated
depreciation and
amortization 4,818,923 3,382,307
---------- ----------
11,391,852 12,100,337
Land 121,167 121,167
---------- ----------
$11,513,019 $12,221,504
========== ==========
Depreciation and amortization expense on property, plant and equipment was
$1,437,000, $531,000 and $236,000 in 1995, 1994 and 1993, respectively.
5. Note Payable - Other
Represents a $3.3 million debt financing received in November and December 1995
from two unrelated third parties. A total of $2.2 million was used to pay off
other short-term debt plus accrued interest. This note is secured by all of the
Company's assets and accrues interest at the rate of 9.5% per annum. The note
was due in February, 1996. However, on March 6, 1996 the note was exchanged for
Senior Secured Convertible Debentures with interest at the rate of 9.5% per
annum, secured by all of the Company's assets, maturing in 1998. The debentures
are convertible into shares of the Company's common stock at a conversion rate
of $1.15 per share, subject to certain reset provisions. As a result of the
exchange, the $3.3 million note at December 31, 1995 has been classified as
long-term.
6. Lease
The Company is obligated under a 10 year net-lease which began in February 1994
for its manufacturing facility located in Boonton, New Jersey. The Company has
two 10-year renewal options as well as an option to purchase the facility. Total
future minimum rentals under this noncancelable operating lease as of December
31, 1995 are as follows:
YEAR RENT
---- ----
1996 $ 185,323
1997 185,323
1998 185,323
1999 185,323
2000 185,323
Thereafter 571,409
-------
$1,498,024
==========
Total rent expense for 1995, 1994 and 1993 was $185,000, $140,000 and $0,
respectively.
7. Stockholders' Equity
The Company has outstanding Class B Warrants which entitle the holder of each
warrant to purchase one share of Common Stock for an adjusted price of $4.1694
per share on or before the extended due date of August 11, 1996. The Class B
Warrants are subject to redemption by the Company if the closing bid price of
the Common Stock, as reported by NASDAQ, average in excess of an adjusted price
of $5.8372 per share for thirty consecutive business days.
In November and December 1994, the Company sold in two separate transactions,
1,135,000 shares of its Common Stock and received net proceeds of $2,200,000.
During 1995, the Company sold an aggregate of 2.8 million shares of its Common
Stock and received total net proceeds of $2.6 million. As a result of these
sales and of prior transactions for which no adjustment was required, and
pursuant to the requirements of the Class B Warrant Agreement, Unigene adjusted
the exercise price of its Class B Warrants, as indicated above, to $4.1694 per
share and adjusted the number of shares of Common Stock thereby exercisable for
each Class B Warrant to 1.1992 shares of Common Stock. As a consequence of the
adjustment of the price of the Class B Warrants, the Redemption Price of the
Class B Warrants was adjusted to $0.0417 per Warrant and the market price of the
Common Stock required to be exceeded in order for the Company to exercise its
right of redemption was adjusted to $5.8372 per share.
In October 1994, the Company entered into a consulting agreement with Broad
Capital Associates, Inc. ("Broad"). Broad's compensation for its services
included the issuance of warrants, exercisable at $3.00 per share, for the
purchase of 1,000,000 shares of Common Stock. During 1995, these warrants were
sold by Broad to an unrelated third party. No proceeds were received by the
Company in connection with this transaction. These warrants expire in April
1997.
In connection with the issuance of stock as discussed above and of debt (see
Note 5) during 1995, the Company issued an aggregate of 2,164,000 stock purchase
warrants , expiring from 2000 to 2001, exercisable at prices ranging from $1.44
to $3.00 per share. The exercise prices of the warrants were at or above the
fair market value of the common stock at their dates of issue; therefore no
value was ascribed to the warrants at the time of their issuances.
8. Stock Option Plans
Under the Unigene Laboratories, Inc. 1984 Non-Qualified Stock Option Plan for
Selected Employees (the "1984 Plan") 2,916,000 shares of Common Stock were
reserved for issuance upon the exercise of options granted. Each option granted
expires no later than the tenth anniversary of the date of its grant. The 1984
Plan terminated in November 1994, however 329,650 options previously granted
continue to be exercisable under that plan.
During 1994 the Company's stockholders approved the adoption of the 1994
Employee Stock Option Plan (the "1994 Plan"). All employees of the Company are
eligible to participate in the 1994 Plan, including executive officers and
directors who are employees of the Company. The 1994 Plan is being administered
by the Employee Stock Option Committee which selects the employees to be granted
options, fixes the number of shares to be covered by the options granted and
determines the exercise price and other terms and conditions of each option.
During 1995, options for 582,750 shares of Common Stock were issued under the
1994 Plan. This total includes options for an aggregate of 538,750 shares of
Common Stock which were issued pursuant to an employee "swap" agreement. Under
the terms of this offer, employees were eligible to exchange higher priced stock
options for new stock options having an exercise price of $1.625 per share, the
fair market value at the date of the new agreements. Old options that were
currently vested received new extended vesting periods, while certain other
vesting periods were accelerated. A maximum of 1,500,000 shares of Common Stock
is reserved for issuance under the 1994 Plan. Options granted under the 1994
Plan will continue in effect for a maximum of ten (10) years from the date
granted. The purchase price of the shares issuable upon the exercise of each
option cannot be less than the fair market value of the Common Stock at the time
the option is granted. The 1994 Plan will terminate on June 16, 2004, unless
earlier terminated.
Transactions under the plans are as follows:
Option
Options Price
Outstanding Per Share
----------- -----------
January 1, 1993 469,250 $1.00-$6.38
----------- ------------
1993: Granted 11,000 $2.56-$4.13
Cancelled ( 9,000)
----------- ------------
December 31, 1993 471,250 $1.00-$5.00
----------- ------------
1994: Granted 447,350 $2.38-$3.25
Cancelled ( 9,750)
Exercised ( 9,450) $1.19-$2.75
----------- ------------
December 31, 1994 899,400 $1.00-$5.00
----------- ------------
1995: Granted 582,750 $1.44-$2.69
Cancelled (590,750)
Exercised (12,000) $1.50
----------- ------------
December 31, 1995 879,400 $1.00-$3.00
----------- ------------
As of December 31, 1995, options to purchase 891,250 shares were available for
grant under the 1994 Plan and options for 690,167 shares were exercisable under
the 1994 and 1984 plans.
During 1993, a consultant received options to purchase 5,000 shares of the
Company's common stock at $4.56 per share, all of which options are currently
exercisable. During 1995, the Company granted a stock option to a consultant to
purchase 10,000 shares of the Company's common stock. The consultant is entitled
to purchase an additional 50,000 shares of the Company's common stock if certain
conditions are met. These options are exercisable at $1.44 per share. In
addition, another consultant will receive 10,000 shares of the Company's common
stock when certain conditions are met.
In addition, at December 31, 1995, there are 60,000 options outstanding and
shares reserved under agreements referred to in note 3.
9. Income Taxes
As of December 31, 1995, the Company had available for income tax reporting
purposes net operating loss carryforwards in the amount of approximately
$34,000,000, expiring from 1996 through 2010, which are available to reduce
future earnings which would otherwise be subject to federal income taxes. In
addition, the Company has investment tax credits and research and development
credits in the amounts of $69,000 and $1,594,000, respectively, which are
available to reduce the amount of future federal income taxes.
These credits expire from 1996 through 2010.
The Company follows Statement of Financial Accounting Standards No. 109 (FASB
109), "Accounting for Income Taxes." Given the Company's past history of
incurring operating losses, any deferred tax assets that are recognizable under
FASB 109 have been fully reserved. As of January 1, 1995 and 1994, under FASB
109, the Company had deferred tax assets of approximately $11,100,000 and
$8,400,000, respectively, subject to valuation allowances of $11,100,000 and
$8,400,000, respectively. The deferred tax assets were generated primarily as a
result of the Company's net operating losses and tax credits generated. At
December 31, 1995, the Company's deferred tax assets and valuation allowances
each increased by approximately $4,000,000.
10. Employee Benefit Plan
The Company, in 1989, implemented a deferred compensation plan covering all
full-time employees. The plan allows participants to defer a portion of their
compensation on a pre-tax basis pursuant to Section 401(k) of the Internal
Revenue Code, as amended, up to a maximum for each employee of $9,240 for 1995.
11. Research Contract
In September 1989, the Company executed a letter of intent with Berlex
Laboratories, Inc. ("Berlex"), a subsidiary of Schering A.G., Berlin, West
Germany, to investigate novel peptide-based approaches in the treatment of
certain cardiovascular disorders. The letter of intent provided for Berlex to
obtain a license to proprietary technology already developed by Unigene and
Berlex was to sponsor the collaborative research effort. If the research program
proved to be successful, product development and marketing would be the
responsibility of Berlex, while Unigene would retain a royalty on any resulting
sales. Under the letter of intent, $270,800 and $362,500 were recognized as
revenue during 1990 and 1989, respectively. The letter of intent was terminated
in June 1990 and a final payment of $250,000 was received and included in Sales
and Other Revenue in 1994. The Company has no further obligations under this
letter of intent.
12. Subsequent Events
The Company has incurred annual operating losses since its inception and in 1994
completed construction of an $11,900,000 manufacturing facility. At December 31,
1995, the Company had a working capital deficiency of $2,800,000. In March 1996,
the Company sold $9.08 million of 10% Convertible Debentures due in 1999 in a
private placement and received net proceeds of approximately $8,200,000. The
debentures are convertible into common stock for up to one-third of the
principal amount on each of April 27,1996, May 27, 1996 and June 26, 1996. The
debentures are convertible at the lower of $2.00 per share or 85% of the market
price per share at the date of conversion. The Placement Agent in connection
with the issuance of the debentures received a five-year warrant to purchase
454,000 shares of the Company's common stock at $2.10 per share.
From January through March 1996, the Company sold in private placements an
aggregate of 371,000 shares of common stock receiving net proceeds of $370,000.
In March 1996, the Company exchanged its outstanding $3.3 million secured
indebtedness with the holders thereof for $3.3 million in Senior Secured
Convertible Debentures. The senior debentures mature on November 15, 1998, bear
interest at the rate of 9.5% per annum and are secured by substantially all of
the assets of the Company. In accordance with the terms on which the holders
initially assumed the indebtedness in November 1995, the senior debentures are
convertible into shares of the Company's common stock at a conversion rate of
$1.15 per share, subject to certain reset provisions.
The Company is seeking to commercialize its calcitonin by producing and selling
calcitonin from its manufacturing plant, by signing licensing/joint venture
agreements with pharmaceutical companies and by developing a calcitonin pill.
There can be no assurance that these goals will be achieved. Management believes
that the Company requires additional funds through financing or license
agreements to ensure continued operations. There is no assurance that sufficient
funds will be obtained.
<PAGE>
PART III
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
Item 10. Directors and Executive Officers of the Registrant.
The information required by this item with respect to Directors is included
in the section entitled "Election of Directors" on Pages 2 and 3 of the
Registrant's definitive proxy statement in connection with the Annual Meeting of
Stockholders to be held on June 20, 1996 and is hereby incorporated by
reference. Information concerning the Executive Officers of the Registrant is
included in Item I of Part I above, in the section entitled "Executive Officers
of the Registrant".
Item 11. Executive Compensation.
The information required by this item is included in the sections entitled
"Compensation of Directors" and "Executive Compensation" on Pages 3 and 4 of the
Registrant's definitive proxy statement in connection with the Annual Meeting of
Stockholders to be held on June 20, 1996 and is hereby incorporated by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item is included in the sections entitled
"Principal Stockholders" and "Security Ownership of Management" on Pages 1 and 2
of the Registrant's definitive proxy statement in connection with the Annual
Meeting of Stockholders to be held on June 20, 1996 and is hereby incorporated
by reference.
Item 13. Certain Relationships and Related Transactions.
The information required by this item is included in the section entitled
"Compensation of Directors" on Page 3 of the Registrant's definitive proxy
statement in connection with the Annual Meeting of Stockholders to be held on
June 20, 1996 and is hereby incorporated by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K
(a) (1) and (2). Financial Statement Schedules.
None.
(b) Exhibits.
See Index to Exhibits which appears on Pages 29 and 30.
(c) Reports on Form 8-K:
During the last fiscal quarter of 1995, the Registrant did not file any
current reports on Form 8-K.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
UNIGENE LABORATORIES, INC.
March 28, 1996 /s/ Warren P. Levy
-----------------------------
Warren P. Levy, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
March 28, 1996 /s/ Warren P. Levy
-----------------------------
Warren P. Levy, President,
Chief Executive Officer and
Director
March 28, 1996 /s/ Jay Levy
-----------------------------
Jay Levy, Treasurer,
Chief Financial Officer, Chief
Accounting Officer and Director
March 28, 1996 /s/ Ronald S. Levy
-----------------------------
Ronald S. Levy, Secretary,
Vice President and Director
March 28, 1996 /s/ Robert G. Ruark
-----------------------------
Robert G. Ruark, Director
/s/ George M. Weimer
March 28, 1996 -----------------------------
George M. Weimer, Director
<PAGE>
INDEX TO EXHIBITS
-----------------
3.1(1) Certificate of Incorporation and Amendments to July 1, 1986.
3.1.1(1) Amendments to Certificate of Incorporation filed July 29, 1986
and May 22, 1987.
3.2(1) By-Laws.
4.1(1) Amended Form of Unit Purchase Option.
4.1.1(1) Amended Proposed Form of Warrant Agreement, Specimen Class A
Warrant and Specimen Class B Warrant.
4.2(1) Specimen Certificate for Common Stock, par value $.01 per
share.
10.2(3) Lease agreement between the Company and Fulton Street
Associates, dated May 20, 1993.
10.6(1) Agreement between the Company and George M. Weimer dated
February 10, 1984.
10.7 1994 Employee Stock Option Plan which is incorporated by
refer- ence to the Company's Definitive Proxy Statement dated
April 28, 1994, which is set forth as Appendix A to Exhibit 28
to the Company's Form 10-K for the year ended December 31,
1993.
10.8 1994 Outside Directors Stock Option Plan which is incorporated
by reference to the Company's Definitive Proxy Statement dated
April 28, 1994 which is set forth as Appendix B to Exhibit 28
to the Company's Form 10-K for the year ended December 31,
1993.
10.9(2) Mortgage and Security Agreement between the Company and Jean
Levy dated February 10, 1995.
10.10(2) Loan and Security Agreement between the Company and Jay Levy,
Warren P. Levy and Ronald S. Levy dated March 2, 1995.
10.11(1) Non-Competition Agreements with Warren P. Levy and Ronald S.
Levy dated May 29, 1987.
10.14(4) Split Dollar Agreement dated September 30, 1992 between
Unigene Laboratories, Inc. and Warren P. Levy.
10.15(4) Split Dollar Agreement dated September 30, 1992 between
Unigene Laboratories, Inc. and Ronald S. Levy.
10.16(2) Loan and Security Agreement between the Company and Dejufra,
Inc. dated March 15, 1995.
10.17 Consulting Agreement, dated October 25, 1994, between the
Company and Broad Capital Associates, Inc. which is
incorporated by reference as Exhibit 1 to the Company's Form
10Q for the period ended September 30, 1994.
10.18(2) Amendment to Loan Agreement and Security Agreement between the
Company and Jay Levy, Warren P. Levy and Ronald S. Levy dated
March 20, 1995.
10.19 Amended and Restated Securities Purchase Agreement dated March
6, 1996 by and among Olympus Securities, Ltd., Nelson Partners
and Unigene Laboratories, Inc.
10.20 Regulation S Securities Subscription Agreement.
10.20.1 Registration Rights Agreement between the Company and Swartz
Investments, LLC dated March 12, 1996.
10.21 Amendment to Loan and Security Agreement between the Company
and Jay Levy, Warren P. Levy and Ronald S. Levy dated June 29,
1995.
10.22 Promissory Note between the Company and Jay Levy, Warren P.
Levy and Ronald S. Levy dated June 29, 1995.
23 Independent Auditor's Consent
28(5) Additional Exhibit - Definitive Proxy Statement dated April
29, 1996.
(1) Incorporated by reference to the exhibit of same number to the
Company's Registration Statement No. 33-6877 on Form S-1.
(2) Incorporated by reference to the exhibit of same number to the
Company's Form 10-K for the year ended December 31, 1994.
(3) Incorporated by reference to the exhibit of same number to the
Company's Form 10-K for the year ended December 31, 1993.
(4) Incorporated by reference to the exhibit of same number to the
Company's Form 10-K for the year ended December 31, 1992.
(5) Only those portions of these exhibits which are specifically
incorporated by reference in this report shall be deemed to be "filed"
herewith.
EXHIBIT 10.19
EXECUTION COPY
AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
by and among
OLYMPUS SECURITIES, LTD.
and
NELSON PARTNERS
(the "Purchasers")
and
UNIGENE LABORATORIES, INC.
("Unigene")
Dated as of March 6, 1996
<PAGE>
AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT dated as of
March 6, 1996 (the "Agreement"), by and among OLYMPUS SECURITIES, LTD., a
Bermuda international business company ("Olympus"), and NELSON PARTNERS, a
Bermuda general partnership ("Nelson") (collectively, the "Purchasers"), and
UNIGENE LABORATORIES, INC., a Delaware corporation with a principal place of
business at 110 Little Falls Road, Fairfield, New Jersey 07004 ("Unigene").
R E C I T A L:
- - - - - - -
A. Unigene is engaged principally in research and development in the
field of biotechnology and plans to commence manufacturing peptide hormones. Its
common stock is currently traded on the NASDAQ market.
B. Purchasers are private investment companies.
C. Pursuant to a certain Assignment Agreement (the "Assignment
Agreement") dated November 17, 1995, among the Purchasers, Unigene and The
Microcap Fund, Inc. (the "Fund"), the Purchasers have acquired from the Fund:
(i) all rights of the Fund in the Note dated May 8, 1995 (the "Original Note")
with an original principal amount of $2,000,000 (the "Initial Principal Amount")
plus accrued and unpaid interest through such date in an amount equal to
$221,330 (the "Initial Accrued Interest"); (ii) all rights of the Fund in
225,000 warrants (the "Purchased Warrants"), expiring July 7, 2000, to purchase
Unigene's Common Stock (the "Common Stock") at a price of $1.375 per share
(subject to certain anti-dilution provisions); (iii) all rights of the Fund
under that certain Securities Purchase Agreement dated as of May 8, 1995 by and
between the Fund and Unigene (the "Original Agreement"), including the Original
Note and the Documents as defined therein (the "Original Documents"); and (iv)
all security interests, liens and collateral assignment interests of the Fund
arising under and with respect to the Original Documents and securing Unigene's
obligations evidenced by or arising under or in connection with the Original
Agreement and Original Note (such obligations being hereinafter referred to as
the "Original Obligations").
D. The Purchasers entered into the transaction described in the
foregoing recital solely as an accommodation to Unigene (and with the full
knowledge and consent of Unigene), and as an interim step toward receiving from
Unigene certain Senior Secured Convertible Debentures and an amendment and
restatement of the Original Agreement in its entirety.
E. The Purchasers and Unigene entered into a Securities Issuance
Commitment Agreement dated November 17, 1995 (the "Commitment"), which (i)
provided for the Purchasers to lend $778,670 to Unigene (the "Initial Interim
Loan") and (ii) set forth the parties' mutual intention that Unigene issue to
the Purchasers the aforesaid Senior Secured Convertible Debentures in the
aggregate principal amount of $3,000,000 to substitute, amend, restate and
re-evidence (but not as a novation or refinancing of) the Original Obligations
(including the Initial Principal Amount and the Initial Accrued Interest) as
well as to evidence the Initial Interim Loan.
F. On or about December 21, 1995, the Purchasers loaned an additional
$300,000 to Unigene (the "Second Interim Loan"), and the parties desire that
Unigene issue and the Purchasers receive additional Senior Secured Convertible
Debentures, of the same tenor as, but of different date than, the aforesaid
Senior Secured Convertible Debentures, in said $300,000 principal amount to
re-evidence and restate the Second Interim Loan.
G. Unigene has hereby agreed to enter into an Amended and Restated
Security Agreement, an Amended and Restated Trademark Security Agreement, an
Amended and Restated Patent Security Agreement, a Leasehold Mortgage, an Amended
and Restated Collateral Assignment of License Rights, an Amended and Restated
Mortgage and Security Agreement, and an Amended and Restated Lender and
Mortgagee's Consent and Waiver, in each case among Unigene and various other
parties and certain other security documents.
H. Unigene now proposes to issue and sell to Purchasers, and the
Purchasers desire to purchase, two 9.5% Senior Secured Convertible Debentures in
the principal amounts of $3,000,000 (Debenture A) and $300,000 (Debenture B),
respectively, and on the terms and conditions hereinafter set forth -- which
modify the terms of the Commitment in certain respects -- the Debentures to bear
interest from November 17, 1995 ($3,000,000) and December 21, 1995 ($300,000),
respectively, but to otherwise be of like and similar tenor.
I. Unigene and the Purchasers agree that, effective as of the date
hereof, (i) the Original Agreement, Original Note and any and all other
agreements and understandings governing the terms of repayment of or evidencing
the Original Obligations, the Initial Interim Loan and the Second Interim Loan
shall be hereby amended and restated in their entirety by this Agreement and by
the issuance of "Debenture A" and "Debenture B" referred to and defined below.
It is the intention of the parties hereto that the execution and delivery of
this Agreement and the issuance of such Debentures hereby not effect a novation,
payment, discharge or extinguishment of any of the Original Obligations, the
Initial Interim Loan or the Second Interim Loan, but merely constitute a
restatement and substitution of the terms of their repayment and security.
J. The Purchasers hereby acknowledge and agree that as of the date of
hereof Unigene is not, and has not been, in default under the Original Note,
Debenture A or Debenture B, as applicable, by reason of the occurrence of the
existing Maturity Date (as defined in the Original Note).
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions
1.1 Definitions. For purposes hereof, the following
terms have the following meanings:
1.1.1 "Affiliate" shall have the meaning ascribed
to such term in Rule 405 promulgated under the Securities Act.
1.1.2 "Assignees' Rights" means all of the
rights, title and interest of the Fund under the Original Documents (other than
the warrants retained by the Fund) subsequently sold and assigned to the
Purchasers under the terms of the Assignment Agreement.
1.1.3 "Associate" shall have the meaning ascribed
to such term in Rule 405 promulgated under the Securities Act.
1.1.4 "cGMP" means that Unigene's Boonton, New
Jersey facility has achieved a status sufficient to allow Unigene to conduct
Phase III (clinical) pivotal trials with the calcitonin produced therein.
1.1.5 "Claim" refers to any and all actions,
causes of action, suits, liabilities, dues, sums of money, accounts, reckonings,
bonds, bills, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, executions, and demands whatsoever,
in law or equity.
1.1.6 "DEA" means the United States Drug
Enforcement Administration.
1.1.7 "Encumbrance" means any title defect,
conflicting claim of ownership, order, decree, judgment, stipulation,
settlement, attachment, restriction, lien, pledge, right of first refusal,
option, security interest, mortgage, covenant, or any other encumbrance on
Unigene's right to transfer the "Collateral" (as defined in the Amended and
Restated Security Agreement (the "Security Agreement") to be executed and
delivered by Unigene in connection with this Agreement or any of its other
property other than (i) liens for taxes, assessments and other governmental
charges or levies not due and payable or which are currently being contested in
good faith by appropriate proceedings, and have been adequately reserved for in
the Financial Statements, (ii) mechanics', workmen's, repairmen's,
materialmen's, warehousemen's, vendors', and carriers', liens, and other similar
liens arising in the ordinary course of business for charges which are not
delinquent, or which are being contested in good faith by appropriate
proceedings and have not proceeded to judgment, and have been adequately
reserved for, and (iii) liens in respect of judgments or awards with respect to
which there shall be a good faith current prosecution of an appeal or
proceedings for review which is secured by an appropriate bond or a stay of
execution pending such appeal or proceedings for review and which have been
adequately reserved for.
1.1.8 "FDA" means the United States Food and Drug
Administration.
1.1.9 "Financial Statements" means the (i)
financial statements of Unigene as contained in its Form 10-K for its fiscal
year ended December 31, 1994, (ii) financial statements of Unigene as contained
in its Form 10-Q for its fiscal quarter ended September 30, 1995, (iii)
unaudited balance sheet of Unigene as of November 30, 1995 and, (iv) unaudited
statements of operations, cash flows and shareholders' equity for the months
ended October 31 and November 30, 1995.
1.1.10 "Funding Event" means (i) Strategic
Partner or other corporate partner financing (only that portion received in cash
upfront or to be received in substantially equal installments over a period of
no more than 12 months), (ii) the issuance of Common Stock, (iii) Preferred
Stock with an average life of no less than two years, (iv) debt securities
(including term bank loans) with a maturity of no less than two years, or (v)
any other non-refundable investments made by third parties. For greater
certainty and not by way of limitation, the sale of the Unigene convertible
debentures pursuant to the Regulation S offering managed by Swartz Investments
LLC shall constitute a "Funding Event."
1.1.11 "GAAP" means Generally Accepted Accounting
Principles as in effect from time to time in the United States.
1.1.12 "Intellectual Property" means Copyrights,
Patent Rights, Trademarks and Trade Secrets. For purposes of this Agreement, (i)
"Copyrights" means United States and foreign copyrights, whether registered or
unregistered, and pending applications to register the same; (ii) "Patent
Rights" means United States and foreign patents, patent applications,
continuations, continuations-in-part, divisions, reissues, patent disclosures or
improvements thereto; (iii) "Trademarks" means United States, state and foreign
trademarks, service marks, logos, trade dress and trade names, whether
registered or unregistered, and pending applications to register the foregoing;
and (iv) "Trade Secrets" shall have the meaning of the term "trade secret" as
such term is defined in the Illinois Trade Secrets Act, 765 ILCS 1605 et seq.,
any amendments thereto and any successor statute thereto.
1.1.13 "Market Value" of the Common Stock on a
given day shall mean the average bid price on the Common Stock on the NASDAQ or
a national securities exchange, as applicable, for the ten trading days
immediately preceding the date for which the Market Value is being calculated.
1.1.14 "Net Proceeds" means the gross proceeds
received by Unigene from any Funding Events minus any banker's, underwriter's,
finder's, accountant's, printer's, filing, legal and other transaction expenses.
1.1.15 "Permits" means permits, licenses, orders,
authorizations, certification or approvals of any federal, state, local or
foreign governmental or regulatory body, including, without limitation, the DEA
and the FDA.
1.1.16. "Permitted Liens" means:
(a) the liens arising under this Agreement or the
Documents in favor of the Purchasers;
(b) with respect to any Person, liens for taxes not
yet due and payable or which are being contested in good faith by
appropriate proceedings diligently pursued; provided that (i) any
proceedings commenced for the enforcement of such liens shall have been
duly suspended and (ii) full provision for the payment of all such
taxes known to such Person has been made on the books of such Person if
and to the extent required by GAAP; and provided further that no liens
arising under the Employee Retirement Income Security Act, as amended
("ERISA"), or relating to environmental obligations or liabilities
shall be deemed "Permitted Liens";
(c) with respect to any Person, mechanics',
materialmen's, carriers', warehousemen's and similar liens arising by
operation of law and in the ordinary course of business and securing
obligations of such Person that are not yet delinquent or are being
contested in good faith by appropriate proceedings diligently pursued,
provided that in the case of any such contest (i) any proceedings
commenced for the enforcement of such liens shall have been duly
suspended and (ii) full provision of the payment of such liens has been
made on the books of such Person if and to the extent required by GAAP;
(d) with respect to any Person, liens arising in
connection with worker's compensation, unemployment insurance, old age
pensions and social security benefits and deposits in connection with
self-insurance arrangements, in each case that are not overdue or are
being contested in good faith by appropriate proceedings diligently
pursued, provided that in the case of any such contest (i) any
proceeding commenced for the enforcement of such liens shall have been
duly suspended, and (ii) full provision for the payment of such liens
has been made on the books of such Person if and to the extent required
by GAAP;
(e) with respect to any Person, liens incurred or
deposits made in the ordinary course of business to secure the
performance of bids, tenders, statutory obligations, trade contracts
(exclusive of obligations incurred in connection with the borrowing of
money or the payment of the deferred purchase price of property),
surety, indemnity, performance, appeal and release bonds and other
obligations of a like nature incurred in the ordinary course of
business, provided that full provision for the payment of all such
obligations has been made on the books of such Person if and to the
extent required by GAAP;
(f) imperfections of title, covenants, restrictions,
easements and other encumbrances on real property that (i) do not arise
out of the incurrence of any indebtedness for money borrowed and (ii)
do not interfere with or impair in any material respect the utility,
operation, value or marketability of the real property on which such
lien is imposed;
(g) liens securing indebtedness in respect of capital
leases, provided that no such lien shall extend to or cover any
property of such Person other than the respective property financed by
such indebtedness and the principal amount of indebtedness secured
thereby is not increased; and
(h) liens which are in existence as of the date
hereof, including extensions and renewals thereof, provided that no
such lien covers any additional property and the principal amount of
indebtedness secured thereby is not increased.
1.1.17 "Person" means an individual, partnership,
corporation, trust, unincorporated organization, government or any department or
agency thereof and any other entity.
1.1.18 "Securities Act" means the Securities Act
of 1933, as amended.
1.1.19 "Strategic Partner" means any Person which
has entered into an agreement with Unigene which provides (a) that such Person
will arrange for marketing, manufacturing and/or distribution services for
Unigene's amidated peptide products developed and/or manufactured utilizing
Unigene's proprietary technology and (b) that such Person or entity will, at
Unigene's option, either (1) make an aggregate payment of at least $2,000,000 to
Unigene in up-front fees and/or scheduled, already known fixed payments over the
term of the agreement or (2) if the marketing territory covered by the agreement
includes the United States, Japan, or European countries, pay Unigene at least a
5% royalty over the term of the agreement.
1.2 Accounting Terms. Any accounting terms used in
this Agreement shall, unless otherwise specifically provided, have the meanings
customarily given them in accordance with GAAP.
2. Issuance of Debentures and Warrants.
2.1 Closing.
(a) On the date hereof, the Purchasers and Unigene
having as of such time and date executed and delivered this Agreement,
Unigene shall deliver to the Purchasers the Senior Secured Convertible
Debentures in the aggregate principal amount of $3,300,000 duly
executed by Unigene, in the forms of Exhibit A and Exhibit B hereto.
(b) This Agreement is being executed and delivered on
March 6, 1996. On or before the end of the fifth business day after the
date hereof, Unigene will deliver or cause to be delivered to
Purchaser:
(i) an Amended and Restated Security Agreement;
(ii) certain amended and restated Subordination
Agreements;
(iii) an amended and restated first mortgage on
Unigene's real property located at 110 Little Falls
Road, Fairfield, New Jersey 07004 (the "Mortgage");
(iv) certain UCC financing statements and UCC-3
statements of assignment executed by Unigene;
(v) Amended and Restated Patent Security Agreement
and Trademark Security Agreements and related
documents; and
(vi) Amended and Restated Collateral Assignment of
License Agreements.
Failure timely to deliver the foregoing shall cause
Unigene forthwith to be in default under this Agreement as well as
under the Debentures.
Unigene shall use best efforts to cause Mrs. Jean
Levy to execute and deliver certain amended and restated Subordination
Agreements on or before the fifth business day after the date hereof,
but shall only be deemed in default (as contemplated by the preceding
paragraph) if the agreements referred to in (ii) are not delivered by
March 31, 1996.
Unigene shall also use best efforts to (i) cause the
Fund to execute and deliver the UCC financing statements and UCC-3
statements of assignment set forth in clause (iv) above, (ii) deliver
to the Purchaser a Leasehold Mortgage with respect to Unigene's rights
under its lease of the premises located at 83 Fulton Street, Boonton,
New Jersey, together with an Amended and Restated Landlord and
Mortgage's Consent and Waiver, (iii) certain UCC-3 termination
statements and subordination agreements, and such other instruments of
similar effect, duly executed by any party (other than the parties
hereto, and including specifically and without limitation the Levy
Family) that has a lien or security interest in any of Unigene's
assets, (iv) title insurance regarding the real property located at 110
Little Falls Road, Fairfield, New Jersey 07004, and (v) a lien search
report regarding the real property located at 83 Fulton Street,
Boonton, New Jersey. Failure to deliver the documents identified in
clauses (i) through (v) in the immediately preceding sentence shall
not, however, in the absence of bad faith, constitute a default
hereunder or under the Debentures.
(b) As of the date hereof, the Purchasers shall
transfer to Unigene the Original Note, after first affixing the
following legend thereto:
"The indebtedness evidenced by this promissory note
(as well as certain other indebtedness for money
borrowed) has been re-evidenced and substituted by
that certain Debenture A dated November 17, 1995
executed by Unigene Laboratories, Inc., a Delaware
corporation ("Unigene"), and made payable to
Purchasers pursuant to that certain Amended and
Restated Securities Purchase Agreement dated as of
March 6, 1996 among Unigene and such Purchasers. Such
substitution did not constitute a repayment or
novation of the indebtedness evidenced by this
promissory note."
(c) Unigene shall use best efforts to deliver to
Purchasers the favorable opinions of counsel to Unigene, in form and
substance satisfactory to the Purchasers and substantially similar to
those opinions delivered in connection with the Original Documents.
Failure to deliver such opinions shall not, however, in the absence of
bad faith, constitute a default under this Agreement or under the
Debentures.
2.2 Terms of Debentures. Unigene shall issue to the
Purchasers two Senior Secured Convertible Debentures having the terms described
in this Agreement. Debenture A shall be issued in the principal amount of
$3,000,000 -- relating to the amounts due to Purchasers based upon the November
17, 1995 transactions described above ("Debenture A"). Debenture B shall be
issued in the principal amount of $300,000 -- relating to the amounts due to
Purchasers based upon the December 21, 1995 transaction described above
("Debenture B"). Collectively, Debenture A and Debenture B shall be referred to
herein as the "Debentures".
2.2.1 Maturity Date. The Debentures shall all
mature on November 15, 1998 (the "Maturity Date"). Debenture A shall bear
interest from November 17, 1995 and Debenture B from December 21, 1995.
Debenture A shall be dated November 17, 1995 and Debenture B shall be dated
December 21, 1995.
2.2.2 Principal and Interest. Interest shall
accrue on each Debenture at the rate of nine and one-half percent (9.5%) per
annum, from the date of each Debenture (not the date hereof) until all principal
and interest due on such Debenture are paid in full. Interest on the Debentures
shall be paid in cash semi-annually, on May 15 and November 15 of each year
(each an "Interest Payment Date") commencing May 15, 1996. Interest shall be
calculated on the basis of a 360-day year of 12 30-day months.
Payment of the principal of and interest on the
Debentures shall be made by Unigene to the Purchasers by wire transfer of
immediately available funds.
2.2.3 Conversion.
(a) The Debentures are convertible into Common Stock,
at any time and from time to time, through the Maturity Date. The
Debentures are initially convertible at a price per share equal to
$1.15, subject to the following adjustments (the "Conversion Price").
(b) On April 1, 1996, July 1, 1996, and thereafter
annually on July 1 of each subsequent year (each a "Reset Date"), the
Conversion Price shall be reset to the lower of (i) the Conversion
Price then in effect, or (ii) 85% of the Market Value of the Common
Stock.
(c) In the event that during the Registration Period
(as hereinafter defined) an effective registration statement covering
the public resale of the Common Stock issuable upon conversion of the
Debentures is not in effect for more than five (non-consecutive or
consecutive) months, the Conversion Price then in effect on the
Debentures shall be reduced by 5% each. Subsequent 5% Conversion Price
reductions shall occur if such registration statement is not in effect
as of more than ten, fifteen, twenty, etc. (non-consecutive or
consecutive) month-ends during the Registration Period. Once reduced
under the preceding sentence, the Conversion Price shall not be
adjusted back, regardless of any future effective registration
statements.
2.2.4 Anti-Dilution.
(a) Effectiveness. The anti-dilution provisions
described in this Section 2.2.4 shall be effective with respect to each
Debenture from such Debenture's date of issuance until each such
Debenture is paid in full, including all principal and interest due
thereon, in accordance with the terms thereof.
(b) Computation of Adjusted Conversion Price. The
Conversion Price of the Debentures shall be adjusted proportionately
downward as provided in this Section 2.2.4(b), in the event that
Unigene issues, other than pursuant to the exercise or conversion of a
Convertible Security (as hereinafter defined), or sells any shares of
its Common Stock (including shares held in Unigene's treasury) for a
price below the higher of the then-current Conversion Price or the
then-current Market Value of the Common Stock. Forthwith upon any such
issuance or sale, the Conversion Price shall be reduced to the price
calculated by multiplying the Conversion Price by a fraction, the
numerator of which shall be the sum of (a) the number of shares of
Common Stock outstanding prior to the issuance on a fully-diluted
basis, plus (b) the number of shares of Common Stock which the
aggregate cash consideration received by the Company for such issuance
would have purchased at the higher of the then-current Market Value or
the then-current Conversion Price, and the denominator of which shall
be the number of shares of Common Stock outstanding immediately
following such issuance on a fully-diluted basis.
(c) Options, Rights, Warrants and Convertible and
Exchangeable Securities. Except with respect to rights described in
Section 2.2.4(i), if Unigene issues or sells options, rights or
warrants to subscribe for shares of Common Stock, or issues any
securities or instruments convertible into or exchangeable for shares
of Common Stock (collectively, the "Convertible Securities"), which
Convertible Securities have an exercise, conversion or exchange price
(in the case of warrants or options, when added to the amount paid
therefor) below the higher of the then-current Conversion Price or the
then-current Market Value of the Common Stock, the Conversion Price in
effect immediately prior to the issuance of such Convertible Securities
shall be reduced to a price determined by making a computation in
accordance with the provisions of Section 2.2.4(b) above. The
Conversion Price shall be further adjusted in the manner provided for
herein, and only downwards, in the event that the conversion, exercise
or exchange price of Convertible Securities is reset subsequent to the
issuance thereof. For such purposes, all cash consideration received by
Unigene upon issuance thereof and which Unigene would be entitled to
receive upon exercise, conversion or exchange of such Convertible
Securities, shall be deemed to have been received upon issuance of such
Convertible Securities, and the maximum number of shares (without
giving effect to the anti-dilution provisions of such instruments)
issuable upon full exercise thereof shall be deemed outstanding after
the issuance of such Convertible Securities for which adjustment has
been made hereunder for purposes of the Section 2.2.4(b) calculation.
No adjustment shall be made for the issuance of shares upon the
exercise, conversion or exchange of any Convertible Security if any
adjustment was made with respect to the issuance of such Convertible
Security.
(d) Subdivisions and Combinations. In the event that
Unigene authorizes a stock split of or otherwise subdivides the
outstanding shares of Common Stock, the Conversion Price shall
forthwith be proportionately decreased by multiplying it by a fraction,
the numerator of which shall be one and the denominator of which shall
be the number of shares of Common Stock into which each share existing
before the subdivision was subdivided. Reverse stock splits and similar
combinations of the outstanding shares of Common Stock shall result in
an adjustment reciprocal to that which is described above.
(e) Reclassifications, Consolidations, Mergers, etc.
In case of any reclassification or change of the outstanding shares of
Common Stock (other than a change from par value to no par value, or
from no par value to par value, or as a result of a subdivision or
combination), or in the case of any consolidation of Unigene with, or
merger of Unigene into, another corporation (other than a consolidation
or merger in which Unigene is the surviving corporation and which does
not result in any reclassification or change of the outstanding shares
of Common Stock, except a change as a result of a subdivision or
combination of such shares or a change in par value, as aforesaid), or
in the case of a sale or conveyance to another corporation of the
property of Unigene as an entirety or substantially as an entirety, the
Purchasers shall have the right to convert the Debentures, as of the
date of such reclassification, change, consolidation, merger, sale or
conveyance so as to acquire the kind and number of shares of Common
Stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance due
to the Purchasers or the owners of the shares of Common Stock
underlying the Debentures acquired at the conversion price in effect
immediately prior to the record date for such reclassification, change,
consolidation, merger, sale or conveyance; provided that in the event
of a sale or conveyance to another corporation of the property of
Unigene as an entirety or substantially as an entirety or in the case
of a consolidation of Unigene with or a merger of Unigene into another
corporation (hereinafter a "Sale Transaction"), Purchasers may, at
their option, require that the Debentures be paid off, within 45 days
of the closing of the Sale Transaction, as follows: (i) if the
consideration to be paid to the holders of Common Stock under the terms
of the Sale Transaction is either cash or readily marketable stock
(i.e., stock that is traded on the NASDAQ or on a national securities
exchange issued by an issuer with a market capitalization in excess of
$100 million and with an average daily trading volume in excess of the
number of shares issued in the Sale Transaction), then the Purchasers
shall receive such cash or readily marketable stock on the same basis
as all other holders of the Common Stock; however, (ii) if, and to the
extent that, the consideration to be paid to the holders of Unigene
Common Stock under the terms of the Sale Transaction is anything other
than as stated in (i), the Purchasers may require that the Debentures
not be converted but rather be paid off in cash at $1.25 for every
$1.00 then owing on the Debentures (in respect of both principal and
accrued interest), such payment to be made within 10 days of the
consummation of such Sale Transaction.
(f) Dividends and Other Distributions with Respect to
Outstanding Securities. In the event that Unigene shall, except as set
forth in Section 2.2.4(g) and with Purchasers' consent as required by
Section 6.5, at any time prior to the conversion of all of the
Debentures declare a dividend (other than a dividend consisting solely
of shares of Common Stock or rights to purchase Common Stock) or
otherwise distribute without market value consideration paid, to its
shareholders any monies, assets, property, rights, evidences of
indebtedness, securities (other than shares of Common Stock or rights
to purchase Common Stock), whether issued by Unigene or by another
Person, or any other thing of value, the Purchasers shall thereafter be
entitled, in addition to the shares of Common Stock or other securities
receivable upon the conversion thereof, to receive, upon conversion,
the same monies, property, assets, rights, evidences of indebtedness,
securities or any other thing of value that they would have been
entitled to receive at the time of such dividend or distribution. At
the time of any such dividend or distribution, Unigene shall make
appropriate reserves to ensure the timely performance of the provisions
of this Section 2.2.4(f).
(g) Subscription Rights for Shares of Common Stock or
Other Securities. In the case Unigene or an Affiliate of Unigene shall
at any time, without market value consideration paid, distribute to its
shareholders any rights to subscribe for shares of Common Stock or any
other securities of Unigene or of such Affiliate, the Purchasers shall
be entitled, in addition to the shares of Common Stock or other
securities receivable upon conversion, to receive such rights at the
time such rights are distributed to the other shareholders of Unigene,
on the same basis as the Purchasers would have received such rights had
the Debentures been converted immediately prior to the record date for
such distribution.
(h) Consideration; Expenses, etc. For the purposes
hereof, the consideration received by Unigene in any transaction shall
be deemed to be the gross amount received therefor before deducting
underwriters' discounts, legal fees, finders fees and other costs and
expenses incurred in connection with such issuance or sale determined
as of the date not later than 45 days after the date of the close of
the offering with respect to such issuance or sale.
(i) Exceptions to Adjustments. Notwithstanding
anything to the contrary herein set forth, no adjustment shall be
required to be made:
(i) upon the issue or exercise of any conversion or
exercise option associated with the Debentures or the
Purchased Warrants; or
(ii) upon the exercise of any option heretofore or
hereafter granted to employees, outside directors or
consultants to Unigene pursuant to any benefit plan
of Unigene; or
(iii) upon the issuance or sale of Common Stock or
other securities upon the exercise or exchange of any
Convertible Securities to subscribe for or purchase
Common Stock which were outstanding on the date
hereof.
2.2.5 Preemptive Rights. The Purchasers shall
have preemptive rights to acquire, on the same terms as any other purchaser in
any public or private financing transaction by Unigene of Common Stock or
securities (other than upon the exercise, conversion or exchange of outstanding
securities) exercisable to purchase or convertible into Unigene Common Stock (or
any security with the economic terms of the Common Stock or such securities,
whether a "synthetic equity," a "swap" or whatever), up to such amount of such
Common Stock or securities as would result in the Purchasers holding the same
percentage of the outstanding Common Stock, on a fully diluted basis, as such
Purchasers held prior to such issuance, disregarding securities whose exercise
or conversion price is $3.75 or more in excess of the average closing bid price
for the Common Stock for the thirty trading days prior to such issuance of
additional securities by Unigene. Such preemptive rights shall not apply to (i)
the contemplated offering by Unigene of its convertible debentures through
Swartz Investments, LLC and (ii) other offerings of securities prior to December
31, 1996 which offerings are individually for 50,000 shares of Common Stock or
less, and which in the aggregate total 250,000 shares of Common Stock or less.
2.2.6 Registration Rights. Unigene shall file and
use commercially reasonable efforts to keep a shelf registration statement
effective covering resales of the Common Stock issuable upon conversion of the
Debentures for a period (the "Registration Period") commencing no later than
June 30, 1996 and ending no later than the earlier of (i) February 28, 1999, and
(ii) the date upon which the Purchasers are able to resell all of the Common
Stock into which the Debentures are convertible without registration.
2.2.7 Redemption.
(a) The Debentures are subject to redemption at the
election of Unigene as of the 15th day of each month beginning December
15, 1996, upon not less than thirty (30) days' notice, in a maximum
principal amount of up to $495,000 per month, provided that the average
closing bid price of the Common Stock on the NASDAQ or a national
securities exchange exceeds 200% (the "Redemption Target Percentage")
of the Conversion Price for 20 of the 30 trading days preceding the
date of notice. Such required Redemption Target Percentage shall be
adjusted downward each month by 2.083% such that the required
Redemption Target Percentage will be 175% of the Conversion Price after
December 15, 1997, as contemplated by the following paragraph. The
redemption price shall be equal to 100% of the principal amount
redeemed, plus any accrued but unpaid interest to the redemption date.
Notwithstanding the foregoing sentence, interest installments whose
stated maturity is on or prior to any such redemption date will be
payable to the holders of such Debentures as of such redemption date.
(b) The Debentures are subject to redemption at the
election of Unigene as of the 15th day of each month beginning December
15, 1997 upon not less than thirty (30) days' notice, in a maximum
principal amount of up to $1,100,000, provided that the average closing
bid price for the Common Stock on the NASDAQ or a national securities
exchange exceeds 175% of the Conversion Price for 20 of the 30 trading
days preceding the date of notice. The redemption price shall be equal
to 100% of the principal amount redeemed plus any accrued but unpaid
interest to the redemption date. Notwithstanding the foregoing
sentence, interest installments whose stated maturity is on or prior to
such redemption date will be payable to the holders of such Debentures
as of such redemption date.
(c) In the event that either (i) the Common Stock is
not listed on NASDAQ or any national securities exchange or (ii) the
Common Stock issuable upon conversion of the Debentures is not the
subject of an effective registration statement permitting the immediate
resale of such Common Stock, Unigene cannot exercise its redemption
option. In the event that Unigene is eligible to and does elect to
redeem any portion of the Debentures, the Debenture holders shall have
the right to convert all or part of the Debentures to Common Stock at
any time through the close of business on the redemption date of the
Debentures. Upon any conversion of the Debentures, the Debenture
holders shall be entitled to receive any interest accrued on such
Debentures through the close of business on the conversion date.
(d) In the event of redemption of the Debentures in
part only, a new Debenture or Debentures for the unredeemed portion
will be issued in the name of the holder of the Debenture upon
cancellation of the redeemed Debenture.
2.2.8 Security. The amounts due under the
Debentures, including all accrued but unpaid interest, shall be secured by
certain Collateral as provided in the Security Agreement.
2.2.9 Transfer.
(a) Unigene shall cause to be kept at its corporate
offices a register (the register maintained in such office and in any
other office or agency of Unigene being herein sometimes referred to as
the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, Unigene shall provide for the
registration of the Debentures and of the registration of transfers of
the Debentures. Unigene shall act as Security Registrar for the purpose
of registering Debentures and transfers of Debentures as herein
provided.
(b) Upon surrender for registration of transfer of
any Debenture at the office of Unigene, Unigene shall execute and make
available for delivery, in the name of the designated transferee or
transferees, one or more new Debentures of the same series, of any
authorized denominations and of a like aggregate principal amount and
maturity or expiration date. All Debentures issued upon any
registration of transfer or exchange of Debentures shall be the valid
obligations of Unigene, evidencing the same obligation, and entitled to
the same benefits under this Agreement, as the Debentures surrendered
upon such registration of transfer or exchange.
(c) Every Debenture presented or surrendered for
registration of transfer or for exchange shall (if so required by
Unigene) be duly endorsed or be accompanied by a written instrument of
transfer in a form satisfactory to the Security Registrar duly
executed, by the holder thereof or his attorney duly authorized in
writing.
(d) Unless otherwise provided in the Debentures to be
transferred or exchanged, no service charge shall be made for any
registration of transfer or exchange of Debentures.
(e) Unigene shall not be required to register the
transfer of or exchange any Debenture selected for redemption in whole
or in part, except the unredeemed portion of any Debenture being
redeemed in part.
2.2.10 Legend. Each Debenture and each certificate
for shares of Common Stock issued upon the conversion of the Debentures shall
bear a restrictive legend as contemplated by Section 4.3 of this Agreement.
2.2.11 Authentication. The Debentures shall be
executed on behalf of Unigene by its Chairman of the Board, its President or one
of its Vice Presidents, under its corporate seal reproduced thereon attested by
its Secretary or one of its Assistant Secretaries.
The Debentures together with any other document executed pursuant to this
Agreement are hereinafter referred to collectively as the "Documents."
2.2.12 Limit on Purchasers' Equity Ownership and
Number of Shares Issuable upon Conversion of the Debentures. Purchasers may not
acquire, pursuant to anti-dilution adjustments or otherwise, in excess of a
19.5% "fully-diluted" equity interest in Unigene's Common Stock, calculated on
the basis prescribed by Securities Exchange Act Rel. No. 8325, i.e., including
all shares of Common Stock into which the Debentures and the Purchased Warrants
are convertible or exercisable (regardless of conversion or exercise price), as
the case may be, as outstanding but excluding all shares of Common Stock subject
to acquisition upon conversion or exercise of any derivative securities held by
any other investors (again, regardless of conversion or exercise price).
Consequently, at each time that the number of shares of Common Stock
beneficially owned by the Purchasers (i.e., into which the Debentures and the
Purchased Warrants are convertible or exercisable) is adjusted upward through
the reset of the Conversion Price or the Purchased Warrants' exercise price or
otherwise, a sufficient principal amount of the Debentures shall be
automatically converted into such principal amount of Non-Convertible Senior
Secured Debentures, in each case due on November 15, 1998 (and otherwise upon
events of default as specified in the Debentures) and bearing interest at 17%
per annum, so that Purchasers' "fully-diluted" equity interest, calculated as
set forth above, does not exceed 19.5%. The Non-Convertible Senior Secured
Debentures shall be secured pari passu with the Debentures.
In addition to the foregoing limitation on
Purchasers' aggregate equity interest in Unigene, and, notwithstanding any term
or provision of this Agreement or the Debentures to the contrary, in no event
may the total number of shares issuable upon conversion of the Debentures,
irrespective of which party or parties holds the Debentures at the time of
conversion, exceed 19.5% of Unigene's outstanding Common Stock as of the date
hereof.
3. Representations and Warranties of Unigene. Unigene hereby
represents and warrants to the Purchasers that:
3.1 Standing and Qualification. Unigene is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Unigene is not, nor is it required to be, qualified or
licensed to transact business as a foreign corporation under the laws of any
State other than the State of its incorporation and New Jersey in order to
enable it to conduct its business as it is presently being conducted, except
where the failure to be so qualified or licensed is not reasonably expected to
have a material adverse effect on its financial condition, assets, business or
results or operation or its ability to perform its obligations hereunder.
Unigene is duly qualified as a foreign corporation and is in good standing under
the laws of the State of New Jersey. Unigene has full corporate power and
authority to own or lease its properties and other assets and to conduct its
business as it is now being conducted.
3.2 Subsidiaries. Except as set forth in Schedule
3.2, Unigene does not own any capital stock or other voting securities of any
corporation, partnership or other organization. Unigene is not a party to any
joint venture or partnership. Unigene is the sole vehicle through which Unigene
and its Affiliates conducts its and their business.
3.3 Capitalization. The authorized capital stock of
Unigene consists of 48,000,000 shares of Common Stock, of which, as of December
31, 1995, 23,813,171 shares are issued and outstanding. There are no dividends,
whether current or accumulated, due or payable on any of the capital stock of
Unigene.
3.4 Interests in Unigene Securities. Except as
disclosed in Unigene's Form 10-Q for the quarter-end September 30, 1995 (the
"1995 Form 10-Q") or Schedule 3.4, there are no outstanding options, convertible
securities, warrants or other rights to subscribe for or purchase from Unigene,
nor any plans, contracts or commitments providing for the issuance by Unigene
of, or for the granting by Unigene of rights to acquire: (i) any capital stock
in Unigene; or (ii) any securities convertible into or exchangeable for any
capital stock or other ownership interest in Unigene.
3.5 Authority. Unigene (i) has the full corporate
right, power and authority to execute and deliver this Agreement and to perform
its obligations hereunder and to execute, deliver and perform its obligations
under the Documents (as defined in Section 2.2.11), and (ii) has taken all
necessary corporate actions to approve and adopt this Agreement and such
Documents and to authorize the performance of this Agreement and such Documents.
Upon execution and delivery, this Agreement and each of the Documents to which
Unigene is a party is the duly authorized, valid and binding obligation of
Unigene, enforceable against it, in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization, or similar laws from time to time in effect which affect the
enforcement of creditors' rights generally and by legal and equitable
limitations on the availability of specific performance and other equitable
remedies against it, public policy, and with respect to the priority of
Purchasers, security interest, subject to applicable filing requirements.
3.6 Absence of Conflicts and Consents. Neither the
execution and delivery of this Agreement and the Documents nor the consummation
of the transactions contemplated hereby or thereby will (i) breach or violate
any of the terms and conditions of the Articles of Incorporation or Bylaws of
Unigene, or (ii) breach or violate any judgment, order, injunction, decree or
ruling of any court, arbitrator or any governmental authority, domestic or
foreign, or any material contract, material agreement or other material
instrument to which Unigene is a party or any of its respective properties,
rights or assets is subject or which it is bound or with any statute, law,
ordinance, rule or regulation of any federal, state, local or foreign
governmental authority or regulatory body, the breach or violation of which (A)
would have a material adverse effect on Unigene's properties, assets, business,
operations, prospects or financial condition or (B) would impair the ability of
Unigene to execute, deliver or perform its obligations under this Agreement or
any Document, (C) would terminate or result in the cancellation of any payments
under any such agreement, contract or instrument or (D) would result in any
material damages or result in or, except as contemplated by this Agreement or
the Documents, require the creation or imposition of any Encumbrance of any
nature upon or with respect to any of its properties or assets.
3.7 Title to; Condition of Assets; Real Property.
Except as set forth in Schedule 3.7, all of Unigene's assets, including the
Premises (as defined in the Mortgage) and Collateral (as defined in the Security
Agreement), are owned free and clear of all material Encumbrances. All such
personal property is in good operating condition and in a state of reasonable
maintenance and repair, fit for the purpose for which it is intended. Unigene is
the lessee of property located at 83 Fulton Street, Boonton, NJ pursuant to a
lease dated May 20, 1993, as amended by First Amendment to Lease on that same
day. Such lease is in full force and effect and has not been further modified or
amended, and no event has occurred that, with the passage of time or notice,
would constitute a default thereunder. All other leases that, individually or in
the aggregate, are material are valid and subsisting and are in full force and
effect in all material respects.
3.8 Conduct of Business.
(a) Since September 30, 1995, except as set forth in
Schedule 3.8 or in its 1995 Form 10-Q, Unigene has preserved
substantially intact its business organization.
(b) Except as set forth in Schedule 3.8 or in its
September 30, 1995 Form 10-Q, Unigene has conducted its business only
in the ordinary and usual course of business consistent with past
practice and there has not been:
(i) any increase in its indebtedness for borrowed
money incurred by or on behalf of Unigene or any
incurrence of any other material obligation or
liability (fixed or contingent) by or on behalf of
Unigene, except for the additional indebtedness
incurred by Unigene through borrowings from the
Purchasers, and except for obligations incurred in
the ordinary course of business consistent with past
practice;
(ii) except for increased indebtedness and decrease
in stockholders equity, any material adverse change
in its assets, liabilities, properties, business,
financial condition or results of operations or any
development of which its management has knowledge
which is reasonably likely to result in any such
change other than any such change resulting from
changes in general economic conditions;
(iii) any damage, destruction, loss or claim to or
against any of its property or other assets, whether
or not covered by insurance, which materially
adversely affects its assets, properties, business,
profits or financial condition;
(iv) any sale, lease, transfer or other disposition
or mortgage or pledge of any of its properties or
other assets, or an imposition of any Encumbrance on
any of its properties or other assets, other than
transactions in the ordinary course of business
consistent with past practice;
(v) any cancellation of any debts owed to or claims
held by or on behalf of Unigene, or any waiver or
release of any of its rights of material value;
(vi) any dividend or other distribution or payment in
respect of, any subdivision, consolidation or other
recapitalization of its capital stock or any
declaration or authorization of any of the foregoing;
(vii) any issuance of additional warrants or rights
to acquire any equity security or any security
convertible into any equity security of Unigene,
except as contemplated by this Agreement; or
(viii) other than as contemplated by the Commitment,
Unigene has not agreed or consented to cause or
permit in the future (upon the happening of a
contingency or otherwise) any of its properties or
assets whether now owned or hereafter acquired, or
any income or profits therefrom, to be or become
subject to a lien.
3.9 Financial Statements; SEC Filings. The Financial
Statements (i) were prepared in accordance with the books of account and records
of Unigene, which accurately reflects all assets and transactions of Unigene,
and (ii) present fairly Unigene's financial condition as of the dates thereof
and its results of operations for the periods then ended in accordance with
GAAP, subject, in the case of the interim Financial Statements, to routine,
recurring year-end adjustments. As of the date hereof, except as set forth in
the Financial Statements, Unigene has no material contingent liabilities,
liabilities for taxes, unusual commitments or unrealized or unanticipated losses
which are required to be reflected on a balance sheet prepared in accordance
with GAAP. Unigene has delivered to the Purchasers its Forms 10-K for the fiscal
years ended December 31, 1993 and 1994 and its Forms 10-Q for the first three
fiscal quarters of 1995 as filed with the Securities Exchange Commission. Such
reports do not contain any untrue statement or omission of any material fact.
3.10 Tax and Other Returns and Reports. (i) All
federal, foreign, state, provincial and local tax returns and tax reports (or
extensions relating thereto) required to be filed by or on behalf of Unigene or
any affiliated, combined or unitary group of which Unigene is or was a member
have been filed on a timely basis with the appropriate governmental agencies in
all jurisdictions in which such returns and reports are required to be filed and
all such returns and reports were true and correct in all material respects when
filed; and (ii) all federal, foreign, state, provincial and local income,
profits, franchise, sales, use, occupancy, property, severance, excise,
withholding, value added and other taxes as shown on such returns (including
interest and penalties) due from Unigene either directly, as part of the
consolidated tax return of another taxpayer, or otherwise, have been fully and
timely paid, or where payment is not required to have been made, Unigene has set
up an adequate reserve or accrual for such payment. Unigene knows of no basis
for any other tax, assessment or governmental charge that, individually or in
the aggregate, could reasonably be expected to have a material adverse effect on
Unigene, its operations or prospects.
3.11 Intellectual Property.
(a) Schedule 3.11(a) accurately lists all registered
United States and Foreign Patents and Trademarks, and all pending
United States Patent and Trademark applications that are owned or
controlled by Unigene.
(b) Schedule 3.11(b) accurately lists all
Intellectual Property owned or controlled by others besides Unigene,
the use of which is licensed to Unigene. Unigene is not aware of any
other Intellectual Property owned or controlled by others besides
Unigene that is material to the ability of Unigene to operate its
business as it is currently conducted or as currently contemplated.
(c) Schedule 3.11(c) accurately lists all
Intellectual Property rights licensed or granted by Unigene to third
parties.
Unigene is the sole and exclusive owner of the entire
right, title and interest in and to the Intellectual Property
identified on Schedule 3.11(a) and except for such licenses and rights
identified on Schedule 3.11(c), Unigene has not granted nor does there
exist by implication or operation of law, any license or other right in
respect thereof which does or which will, subsequent to the date
hereof, permit or enable any Person other than Unigene to use the
Intellectual Property and, moreover, except as set forth in Schedule
3.11(c), none of said Intellectual Property is subject to any
Encumbrance. As of the date hereof, there is no pending or, to the best
knowledge of Unigene, threatened claim against Unigene asserting (A)
that Unigene's use of any of said Intellectual Property infringes or
violates any rights of third parties, (B) that the past or present
conduct of Unigene's business infringes or violates the rights of third
parties, (C) that any third parties have any rights to use any of said
Intellectual Property or (D) except as set forth in Schedule 3.15, that
any third parties have or will have any right which could adversely
affect Unigene's ability to use any of the Intellectual Property after
the date hereof; and to the best knowledge of Unigene, there is no
basis for any claim of the foregoing types. Neither the Intellectual
Property nor Unigene's past or present conduct of its business
infringes or violates the rights of third parties. During the past five
(5) years, Unigene has not given any notice to any third parties
asserting infringement by such third parties of any of said
Intellectual Property. To the best knowledge of Unigene, there is no
material violation by any person of any right of Unigene with respect
to the Intellectual Property. Unigene is not aware of any bars or other
restrictions with respect to its rights to utilize any of said
Intellectual Property, and no bars or other restrictions on Unigene's
rights to utilize any of said Intellectual Property will be created by,
or will, by reason of any action or inaction by Unigene, before the
date hereof, exist after the consummation of the transactions
contemplated hereby.
Nothing has come to the attention of Unigene which
has led Unigene to form the opinion that any of said Intellectual
Property is invalid or that its rights in any of said Intellectual
Property are unenforceable in any way, with the proviso that pending
patent applications are merely requests for patents, and there can be
no guarantee that those requests will be granted and that any patents
will necessarily be issued based upon said pending applications, and
with the further proviso that applications for trademark registrations
are merely requests for registration which may or may not ultimately
result in registration with the U.S. Patent and Trademark office. The
execution and delivery of this Agreement will not affect or impair
Unigene's right to continue to use all of said Intellectual Property
without the impairment or alteration thereof and without the payment of
any license or other fees (other than that the license fees payable
under the License Agreements identified in Schedule 3.11(b)).
All of the License Agreements identified on Schedule
3.11(b) are valid agreements, enforceable in accordance with their
terms, except that such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization, bulk sales or
similar laws from time-to-time in effect which affect the enforcement
of creditors' rights generally and by legal and equitable limitations
on the availability of specific performance and other equitable
remedies. There is no pending or, to the best knowledge of Unigene,
threatened claim against either Unigene or, to the best knowledge of
Unigene, the licensor of any Licensed Intellectual Property asserting
that any of the Licensed Intellectual Property infringes or conflicts
with the rights of third parties, or that the present or past conduct
of Unigene's business infringes or violates the rights of third
parties, and to the best knowledge of Unigene, no basis for any such
claim exists.
3.12 ERISA. Unigene has complied in all material
respects with the requirements of ERISA; no Reportable Event (as defined in
ERISA) has occurred and is continuing with respect to any Plan (as defined in
ERISA); and it has no unfunded vested liability under any Plan.
3.13 Permits and Licenses.
(a) List of Governmental Permits. Set forth on
Schedule 3.13(a) is a list and description of all Permits which are
issued to, held or used by Unigene, or for which Unigene has applied,
and which are material to the operation and development of its
business. There are no other Permits which are material to the
operation of Unigene's business as now conducted. Except as otherwise
indicated, all Permits listed in Schedule 3.13(a) are in good standing,
valid and effective in accordance with their respective terms. Unigene
owns the Permits, free and clear of all Encumbrances and subject to no
Claims.
(b) Compliance with Permits. Except as set forth on
Schedule 3.13(b), Unigene is in material compliance with all Permits
listed on Schedule 3.13(a) and no governmental proceedings or
investigations are pending or, to the best knowledge of Unigene,
threatened against it relating to noncompliance with such Permits.
3.14 Governmental Authorizations. No consent,
approval or authorization of, or registration, filing or declaration with, any
governmental authority is required in connection with the execution, delivery or
performance by Unigene of this Agreement or any of the Documents other than
those required with respect to the registration contemplated in Section 2.2.6
and the security interest filings contemplated in this Agreement and the
Documents.
3.15 Litigation and Proceedings. Except as set forth
on Schedule 3.15, there are no causes of action or other litigations or
arbitrations or regulatory, administrative, zoning or other governmental
proceedings or investigations presently pending or, to the best knowledge of
Unigene, threatened, before any court, arbitrator, governmental agency or other
forum either against Unigene or any of its properties or assets which relate in
any way to Unigene or any of its properties or assets.
3.16 FDA Status. The Unigene manufacturing process is
undergoing formal validation in order to obtain GMP (Good Manufacturing
Practice) status. Unigene has completed testing of the manufacturing equipment
and is now performing the various manufacturing process operations. The
validation process is essentially complete when three consecutive "conformance
batches" (batches in which all of the in-process and final product test
specifications have been met and which are performed in compliance with all cGMP
requirements) of product have been prepared. Unigene has received no notice, and
is not aware of any state of facts that would lead it to believe, that its
Boonton, New Jersey facility will not receive FDA validation to allow Unigene to
produce its Calcitonin for human use in the United States. Finally, Unigene has
been advised verbally by the FDA that only brief clinical programs designed to
test safety and bioequivalence should be required for the approval of Unigene's
injectable Calcitonin product. Following validation, Unigene intends to file an
IND (investigational new drug application) and initiate clinical programs to
support such product approval in 1996.
3.17 Environmental Laws. Unigene has received no
notice, and is not aware of any state of fact that would lead it to believe that
there exists, or has existed at any real property occupied by it, any hazardous
material in violation of any environmental law, rule or regulation.
3.18 Judgments, Orders and Consent Decrees. Unigene
is not subject to any judgment, order or decree of, or agreement with, any
court, arbitrator or regulatory authority limiting, restricting or adversely
affecting its conduct, financial condition or operating result, and no such
judgment, order, decree or agreement is pending.
3.19 No Omissions. No representation, warranty,
covenant or agreement of Unigene in this Agreement, any schedule or exhibit
attached hereto, or any Document contains nor shall contain any untrue statement
of material fact nor omits nor shall omit to state any material fact necessary
to make the statements contained herein and therein not misleading.
4. Representations and Warranties of the Purchasers.
4.1 Standing and Capacity.
(a) Olympus represents and warrants to Unigene that
it has all requisite legal and corporate power to execute and deliver
this Agreement and the other Documents to which it is a party, to
purchase the Debentures, and to perform its obligations under this
Agreement and the other Documents to which it is a party. Olympus has
the capacity to enter into the transactions contemplated by the
Documents; neither the execution, delivery nor performance of this
Agreement or the Documents violates any law, rule or regulation, of any
jurisdiction, court or administrative judgment, order or decree or any
agreement applicable to or binding upon Olympus.
(b) Nelson represents and warrants to Unigene that it
has all requisite legal and partnership power to execute and deliver
this Agreement and the other Documents to which it is a party, to
purchase the Debentures, and to perform its obligations under this
Agreement and the other Documents to which it is a party. Nelson has
the capacity to enter into the transactions contemplated by the
Documents; neither the execution, delivery nor performance of this
Agreement or the Documents violates any law, rule or regulation, of any
jurisdiction, court or administrative judgment, order or decree or any
agreement applicable to or binding upon Nelson.
4.2 Authority. Each Purchaser represents and warrants
to Unigene that all action necessary for the purchase of the Debentures and the
performance of its obligations under this Agreement and the other Documents to
which it is a party has been duly taken. The Agreement is valid and binding upon
it and enforceable in accordance with its terms except as such enforceability
may be limited by applicable bankruptcy, insolvency, moratorium, reorganization,
bulk sales, or similar laws from time to time in effect which affect the
enforcement of creditors' rights generally and by legal and equitable
limitations on the availability of specific performance and other equitable
remedies against it, public policy.
4.3 Investment Representation. Each Purchaser
represents and warrants to Unigene that (i) it is acquiring the Debentures for
investment, for its own account as principal and not with the current view to
distribution or trade thereof, (ii) it is an "accredited investor" as defined in
Rule 501(a) and (iii) the questionnaire executed and delivered by it to Unigene
in connection with the transactions contemplated hereby is true and accurate in
all material respects and does not omit any material information required to be
stated therein or necessary to make the Statements made therein not misleading.
The Debentures and shares issued upon conversion of the Debentures shall bear
restrictive legends that are customary for securities that are issued without
registration under the Securities Act in reliance on a "private placement
exemption."
5. Affirmative Covenants of Unigene. Unigene covenants that,
until the principal of, and interest on, the Debentures and all other monetary
obligations to the Purchasers under the Debentures have been paid in full, it
will:
5.1 Corporate Existence. Do all things necessary to
preserve and keep in full force and effect its existence (corporate or other)
and existing name, rights and franchises, and qualify and remain qualified to do
business in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business, operating results, assets or condition
(financial or otherwise) or prospects.
5.2 Insurance. Schedule 5.2 lists insurance coverage
currently maintained by Unigene. No change in such insurance coverage will be
made without the Purchasers' consent, which will not be unreasonably withheld or
delayed.
5.3 Keeping of Records and Books of Account. Keep
adequate records and books of account, in which complete entries will be made
reflecting all of Unigene's financial transactions.
5.4 Inspection Rights. At any reasonable time, and
from time to time, permit representatives of the Purchasers, upon reasonable
notice to Unigene, to examine and make copies of and abstracts from its records
and books of account of, and visit its properties during normal business hours
and to discuss its affairs, finances and accounts with any of its officers and
its independent certified public accountants. The Purchasers agree to keep in
confidence and not to utilize or disclose any confidential information provided
to them, including, without limitation, financial statements or information,
business plans, proposed financing or acquisition plans, information concerning
Unigene's products, patents, patent applications, trade secrets, secret
processes or other proprietary information unless and until such confidential
information is publicly disseminated by Unigene. This confidentiality provision
shall survive the execution and delivery of this Agreement, but if Unigene
defaults on its obligations and the Purchasers take possession of the
Collateral, such confidentiality obligation shall terminate to the extent
reasonably necessary to enable the Purchasers to sell any of the Collateral. In
such event, the Purchasers may disclose or use any confidential information in a
manner as it deems necessary (in its sole judgment) to obtain payment of all
Obligations.
5.5 Compliance with Laws. Comply with the applicable
requirements of all laws and all rules, regulations and orders of any
governmental authority, the violation of which might be reasonably expected to
have a material adverse effect on its business, operating results, assets or
condition (financial or other).
5.6 Reporting Requirements. Furnish to the Purchasers
(a) (i) Commencing with the month of March, 1996, as
soon as practicable and in any event within 40 days
after the close of each monthly accounting period,
unaudited financial statements, consisting of a
balance sheet as at the end of such monthly period
and statements of operations, and cash flows of
Unigene for such monthly period and for the period
from the beginning of the fiscal year to the end of
such monthly period;
(ii) Commencing with the quarterly period ending
March 31, 1996, as soon as possible and in any event
within 50 days after the close of each of the first
three quarterly accounting periods of each fiscal
year, unaudited financial statements, consisting of a
balance sheet as at the end of such quarterly period
and statements of operations, cash flows,
shareholders' equity for such quarterly period and
for the period from the beginning of the fiscal year
to the end of such quarterly period; and
(iii) Annually, as soon as available but in any event
within 95 days after the close of each fiscal year of
Unigene, a balance sheet of Unigene as at the end of
such year and statements of income and retained
earnings and of cash flow of Unigene reflecting the
results of its operations during such year, which
financial statements shall be used by Unigene's
independent public accountants in the preparation of
Unigene's audited financial statements for such year
end, certified by the President and Treasurer of the
Unigene to fairly present its financial condition at
such year end and the results of its operations for
such period in accordance with GAAP.
The financial statements required to be delivered
under this Subsection (a) shall contain reasonable
detail and shall be certified by the Chief Executive
Officer of Unigene and, in the case of the financial
statements required to be delivered under clause (ii)
above, as (x) having been prepared in accordance with
GAAP, subject to normal year-end audit adjustments
(except that footnotes shall not be required on
monthly and quarterly financial statements), (y)
being complete and correct, and (z) presenting fairly
the financial condition, results of operations,
shareholders' equity and cash flows which they
purport to present.
(b) Together with the quarterly financial statements
furnished pursuant to Section 5.6(a), there shall be delivered to the
Purchasers a certificate signed by the Chief Executive Officer of
Unigene stating that they have caused a review of the affairs of
Unigene to be made and that based thereon nothing has come to their
attention which would lead them to believe that any event of default
("Event of Default") under the terms of the Debenture or any event
which, with the lapse of time or the giving of notice or both could
become an Event of Default has occurred or exists hereunder or, if such
is not the case, specifying the nature thereof and what action has been
taken or is being taken or is proposed to be taken with respect
thereto.
(c) Promptly after Unigene discovers the occurrence
of any Event of Default or any event which, with the lapse of time or
the giving of notice or both, could become an Event of Default, a
statement of Unigene's President or Chief Financial Officer setting
forth details of such Event of Default or other event and the action
taken, or proposed to be taken, with respect thereto.
(d) Promptly after Unigene has knowledge thereof,
notice of any action, suit or proceeding known to it before any court
or governmental authority, domestic or foreign, which might reasonably
be expected to have a material adverse effect on its business,
earnings, assets or condition (financial or other).
(e) Promptly after the sending or filing thereof,
copies of all proxy statements, financial statements and reports which
Unigene sends to its shareholders, and copies of all reports, and all
registration statements it files with the U.S. Securities and Exchange
Commission (the "SEC") or the National Association of Securities
Dealers, Inc.
(f) Such other information respecting the business,
operating results, assets or condition (financial or other) of Unigene
as the Purchasers may reasonably request from time to time.
(g) Promptly, but in any event not later than three
business days after the receipt of a reasonable written demand from the
Purchasers, a certificate of its Chief Executive Officer or the Chief
Financial Officer, in form satisfactory to the Purchasers, stating and
acknowledging (a) the then outstanding principal balance of the
Debentures, (b), the fact that there are no defenses, offsets or
counterclaims thereto (or stating such defenses, offsets or
counterclaims, if any); (c) that no Event of Default and no event
which, with the giving of notice or the lapse of time or both, would
constitute such an Event of Default exists, or if such is not the fact,
the facts and circumstances relating to such Event of Default or other
event; and (d) that no litigation or administrative proceeding has been
instituted by or against Unigene if determined adverse to Unigene would
have a material adverse effect on its business, operating results,
assets or condition (financial or other) or, if such is not the fact,
the facts and circumstances relating to such litigation or proceeding.
5.7 Further Assurances. Unigene shall, without
further consideration, take all such other action and shall procure or execute,
acknowledge, and deliver all such further certificates, conveyance instruments,
consents, and other documents the Purchasers or their counsel may reasonably
request to perfect and protect Purchasers' rights as contemplated by this
Agreement, including, without limitation, their security interest in and to the
Collateral.
6. Negative Covenants. Unigene covenants that until all
amounts due under the Debentures have been fully paid, unless otherwise
expressly consented to in writing by the Purchasers, it will not:
6.1 Investments. Make or permit to exist any
investment in securities or other financial instruments (including loans and
advances), except:
(a) Accounts receivables arising in the ordinary
course of business;
(b) Notes or other securities in connection with any
bona fide settlement of account receivables owing in the ordinary
course of business;
(c) Direct obligations of the United States of
America or any agency thereof, solely for investment purposes, provided
the same shall mature within twelve months;
(d) Certificates of deposit, time deposits, bankers'
acceptances, commercial paper and similar short term bank deposits or
instruments having a maturity of not more than twelve months of a
commercial bank; and
(e) Money market funds with a AAA rating.
6.2 Impair Value. Take any action which would result
in a material impairment of the overall value of any property on which the
Purchasers shall have a lien.
6.3 Change of Business. Conduct any business, the
nature of which would differ in any material respect from that presently
conducted by it or contemplated as set forth in its 1994 Annual Report and
September 30, 1995 Form 10-Q or which does not complement such business.
6.4 No New Entities. Except as set forth in Schedule
3.2, form or acquire any corporation, partnership, joint venture or other kind
of entity for the purpose of transferring to such person or entity any of its
assets or business of the type presently conducted by it, unless the assets so
transferred remain subject to the Purchasers' lien and Unigene's interest in
such entity is pledged to the Purchasers.
6.5 Merger; Sale of Assets; Reclassification. (a)
Enter into any merger or consolidation in which it is not the surviving entity,
(b) liquidate, wind up its affairs or dissolve, (c) sell, lease, transfer,
convey or otherwise dispose of all or substantially all of its assets or capital
stock or (d) reclassify or change the outstanding shares of Common Stock (other
than a change from par value to no par value or from no par value to par value
or as a result of a subdivision or combination).
6.6 Dividends; Distributions. Directly or indirectly,
declare or pay dividends or otherwise make any distribution or assets or
anything of value in respect of its Common Stock or capital shares, or redeem or
repurchase any shares of the Common Stock or capital shares.
6.7 Increase in Compensation. Until such time as
Unigene's Boonton facility achieves cGMP status and Unigene has entered into a
definitive agreement with one or more Strategic Partners, directly or
indirectly, increase compensation paid to any person who is or was an officer,
director or Affiliate of Unigene. At such point as the conditions in the
foregoing sentence have been met, then Unigene's directors may increase the
compensation of each officer, director or Affiliate by 10%, and thereafter may
provide additional reasonable and customary increases in compensation to such
persons, as the directors may, in their discretion, determine.
6.8 No Amendment. Make any material amendment,
modification or change to any agreement or instrument respecting indebtedness
for money borrowed, or waive any of its rights or privileges thereunder, without
the Purchasers' prior written consent which will not be unreasonably withheld or
delayed.
6.9 Transactions with Affiliates and/or Associates.
(a) Enter into any transactions with an Affiliate or
Associate of Unigene, except as contemplated in this Agreement or
except in the ordinary course and pursuant to the reasonable
requirements of its business, and in good faith and upon commercial
reasonable terms or conditions that are no less favorable to such
person or entity than would be obtainable at the time in a comparable
arm's length transaction with a person or entity other than an
Affiliate and/or an Associate.
(b) Except as expressly permitted by any other
provision of this Section 6, make any loan of money or property to any
Affiliate, or become contingently liable (through guarantee or
otherwise) to any person with respect to any indebtedness of an
Affiliate and/or Associate.
6.10 Disposition of Collateral. Sell, assign,
exchange or otherwise dispose of any Collateral except in the ordinary course of
business.
6.11 Loans. Make any loans or advances to any Person,
including without limitation Unigene's directors, officers and employees, except
(i) advances to officers or employees with respect to expenses incurred by them
in the ordinary course of their duties which are properly reimbursable by
Unigene; and (ii) loans to employees not exceeding $20,000 in the aggregate
during any fiscal year of Unigene; and (iii) advances to collaborators,
suppliers, material men and with respect to research and development projects
made in the ordinary course of Unigene's business, but not to exceed $100,000 to
any one Person.
6.12 Negative Pledge. Create or suffer to exist any
mortgage, pledge, liens, permits, interest, assignment or transfer upon any of
the Collateral which purports to be senior to or pari passu with any of the
security for the Debentures, other than Permitted Liens.
6.13 Guarantees. Assume, guaranty, endorse or
otherwise become directly or contingently liable in respect to (including
without limitation by way of agreement, contingent or otherwise, to purchase,
provide funds to or otherwise invest in a debtor or otherwise to assure a
creditor against loss), any Indebtedness of any other Person (except guarantees
by endorsement of instruments for deposit or collection in the ordinary course
of business.
6.14 Removal of Hazardous Substances. Should Unigene
cause or permit any intentional or unintentional act or omission resulting in
the discharging of hazardous substances or wastes into the atmosphere or waters,
or onto lands, resulting in damage to the natural resources without having
obtained a permit issued by the appropriate governmental authorities, Unigene
shall promptly clean up same in accordance with all applicable federal, state
and local orders, statutes, laws, ordinances, rules and regulations.
6.15 Intent and Purpose. It is the intent of the
parties that, subject to this Article 6, until an Event of Default and the
principal sum under the Debentures has become due and payable by acceleration or
otherwise, Unigene may conduct its business in the ordinary course, may use its
cash, cash equivalents, royalties, licensing fees, milestone payments, research
sponsorship payments, interest, dividend income, proceeds of loans and sales of
securities, sales of inventory and joint venture distributions for general
corporate purposes.
6.16 Levy Family Repayment. The outstanding Levy
family loans may be repaid in the following (or any less) amounts and pursuant
to the following schedule:
Precondition Repayment Tranche Maximum Repayment Rate
- ------------ ----------------- ----------------------
1. cGMP status achieved $250,000 50% per month
2. filing of injectable calcitonin IND $250,000 50% per month
3. filing of oral calcitonin IND $250,000 50% per month
4. contract with a Strategic Partner $500,000 50% per month
The repayment of each of the foregoing "repayment
tranches" may not overlap. Should one such tranche become eligible for repayment
during a month while another tranche is being repaid, or has been repaid,
payment of the former shall be delayed until the month immediately following
repayment in full of the latter tranche.
Repayment shall become permissible as of the
beginning of the calendar month immediately following the month in which the
specified precondition is satisfied.
7. Events of Default.
7.1 Event of Default. Each of the following shall
constitute an Event of Default under this Agreement, the Debentures and
Security Agreement:
(a) Unigene shall default in the payment of principal
of, or any interest on, the Debentures, when and as the same shall
become due and payable; or
(b) Unigene shall incur an event of default in the
performance of its payment obligations for borrowed money under any
note or other obligation for borrowed money in excess of $500,000 which
has become due and payable by acceleration or otherwise; or
(c) any representation or warranty made by Unigene in
this Agreement, the Debentures, or the Security Agreement or in any
other Document shall prove to be false or inaccurate in any material
respect; or
(d) Unigene shall default in the performance or
compliance with any covenant, condition or agreement to be performed or
complied with by it under this Agreement or any Documents delivered in
connection herewith, and such default shall continue unremedied for a
period of 14 consecutive days after Unigene receives notice from the
Purchasers or becomes aware, or with the exercise of reasonable
diligence should have been aware, of the event of default, provided,
however, if Unigene shall have commenced to remedy such default during
such 14 day period and is diligently seeking to remedy such default at
the expiration of such period, then if the Purchasers are satisfied
that, with the exercise of due diligence in the circumstances, Unigene
could not have remedied such default in such 14 day period and that,
with the exercise of due diligence, such default is capable of being
remedied by Unigene within a further period of 10 consecutive days, no
Event of Default shall be deemed to have occurred under this Section
7.1(d), unless such default is not remedied to the reasonable
satisfaction of the Purchasers by the expiration of such second 10 day
period; or
(e) A final judgment for the payment of money which,
together with all other such undischarged judgments, against Unigene
exceeds an aggregate of $200,000 (after taking into account any
proceeds from third party indemnifications and insurance proceeds which
are paid to Unigene with respect to such liability) shall have been
entered against Unigene if, within 14 days after the entry thereof,
such judgment shall not have been discharged or execution thereon
stayed pending appeal, or if, within 14 days after the expiration of
any such stay, such judgment shall not have been discharged; or
(f) A proceeding shall have been instituted or order
for relief shall have been made in respect of Unigene in an involuntary
case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or for the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of Unigene or for any substantial part of its property, or
for the winding-up or liquidation of its affairs, and such proceeding
shall remain undismissed or unstayed and in effect for a period of 60
consecutive days or such court shall enter a decree of order granting
the relief sought in such proceeding; or
(g) Unigene shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official)
of Unigene or for any substantial part of its property, or shall make a
general assignment for the benefit of creditors, or shall take any
action in furtherance of any of the foregoing; or
(h) Any material provision of any Document shall,
after execution and delivery of such Document, for any reason cease to
be valid and binding on Unigene, or Unigene shall so state in writing
or shall contest the validity or enforceability thereof, or any
Document shall otherwise cease to be in full force and effect, and, in
such case, the Purchasers shall be adversely affected as a result
thereof; or
(i) If Warren Levy and Ronald Levy cease to be
officers of Unigene.
7.2 Consequences of an Event of Default.
(a) If an Event of Default specified in Section
7.1(a), (g), or (h) shall occur, the outstanding principal of, and interest
accrued on, the Debentures and all other obligations of Unigene to the
Purchasers hereunder or under the Documents shall be immediately due and
payable, upon written notice from the Purchasers.
(b) If an Event of Default, other than under Section
7.1(a), (g) or (h) shall occur and continue, the Purchasers, at their option, on
14 days prior written notice to Unigene, may declare the outstanding principal
of, and interest accrued on, the Debentures and all other obligations of Unigene
to the Purchasers hereunder and under the Documents to be forthwith due and
payable, and the same shall thereupon become and be immediately due and payable,
without further notice of any kind.
(c) Upon an Event of Default and at the time the
principal sum of the Debentures is due and payable, the Purchasers may exercise
any one of its rights provided to a secured party under the Uniform Commercial
Code or other applicable law or under this Agreement, the Security Agreement or
any one or more of the Documents delivered in connection with or pursuant to
this Agreement.
8. Success Fee. During the period commencing on March 6, 1996
and ending on December 31, 1996, Unigene intends to raise additional funds
through "Funding Events" -- including, without limitation, the sale of Unigene's
convertible debentures pursuant to the Regulation S offering managed by Swartz
Investments LLC -- in an amount not less than $9,000,000 (the "Minimum Financing
Target").
As of December 31, 1998, Unigene shall become obligated to
pay, such payment to be made as provided in the last paragraph of this Section
8, to the Purchasers an amount equal to the sum of (i) 2% of the Enterprise
Value of Unigene as of such date plus (ii) (a) the fraction the numerator of
which is the shortfall between the Net Proceeds from Funding Events and the
Minimum Financing Target and the denominator of which is the Minimum Financing
Target multiplied by (b) 18% multiplied by (c) the Enterprise Value of Unigene
as of such date. Notwithstanding the foregoing, the amounts payable by Unigene
under clause (i) of this Section 8 shall not exceed $3,000,000; this limitation
does not apply to clause (ii) of this Section 8.
"Enterprise Value" for purposes of the preceding paragraph
shall equal the sum of (i) the aggregate Market Value of all outstanding shares
of Common Stock, plus (ii) the principal amount of all outstanding long-term and
short-term debt, less (iii) the cash held on deposit by Unigene and not subject
to pledge, lien or encumbrance.
Unigene covenants that it will exercise good faith in not
attempting to manipulate the December 31, 1998 Enterprise Value of Unigene to
the detriment of the Purchasers.
The Success Fee shall be due as of December 31, 1998, but
shall not be paid until completion and filing of Unigene's 1998 Final 10-K
Annual Report with the SEC. Final computation of the amount of the Success Fee
shall be based on the audited financial statements included in such Final 10-K.
9. Miscellaneous.
9.1 Notices. All notices and other communications
given to or made upon any party hereto in connection with this Agreement shall,
except as otherwise expressly herein provided, be in writing (including
telecopied communications) and personally delivered, mailed, telecopied or sent
by express courier to the respective parties as follows:
if to Unigene, to:
Unigene Laboratories, Inc.
110 Little Falls Road
Fairfield, NJ 07004
Attn: Warren Levy
if to the Purchasers, to:
Olympus Securities, Ltd.
c/o Leeds Management Ltd.
129 Front Street
Hamilton HM 12 Bermuda
Attention: Nitin Aggarwal
Telecopier No.: 441-292-2239
and
Nelson Partners
c/o Citadel Investment Management, L.P.
Citadel Investment Management, Inc.
Leeds Management Ltd.
129 Front Street
Hamilton HM 12 Bermuda
Attention: Nitin Aggarwal
Telecopier No.: 441-292-2239
or in accordance with any subsequent written direction from the recipient party
to the sending party. All such notices and other communications shall, except as
otherwise expressly herein provided, be effective upon delivery, if delivered by
hand; two days after deposit in the mail, if sent by registered mail, return
receipt requested, postage prepaid; in the case of telecopy, when the answer
back is received; or if sent by express courier providing guaranteed next day
delivery, on the next succeeding Business Day.
9.2 Costs. Unigene will pay (i) the reasonable fees
and expenses of counsel for the Purchasers in connection with the preparation of
the Documents and any waiver, consent or release by the Purchasers under any of
the Documents, any amendment thereof, or any Event of Default, and (ii) if the
Purchasers shall incur costs and/or expenses to collect, enforce or protect
their rights under this Agreement or any of the Documents, Unigene shall pay all
of the reasonable costs and expenses of such collection, enforcement and
protection, including reasonable attorneys' fees, of the Purchasers. Whenever
counsel fees are provided for in this Agreement or any of the Documents, it is
understood and agreed that the interests of the Purchasers (and/or holders) are
substantially similar and that there shall be no allowance of counsel fees for
separate counsel of each of the Purchasers (and/or holders).
9.3 Representations to Survive. All representations
and warranties contained herein or in any other Document made or delivered
pursuant hereto or thereto or to be executed and delivered hereunder or
thereunder, shall be deemed to survive (a) the execution and delivery of this
Agreement and the Documents and (b) any investigation made by or on behalf of
the Purchasers at any time while any amounts under the Debentures are
outstanding.
9.4 Purchased Warrants to Survive. The terms of the
Purchased Warrants shall remain in full force and effect irrespective of the
transactions contemplated hereby (except as provided in Sections 2.2.6 and
2.2.12).
9.5 Successors and Assigns. All representations,
warranties and covenants in this Agreement by or on behalf of, or for the
benefit of any of the parties hereto, shall be binding on and inure to the
benefit of such party, its successors and assigns. The foregoing
notwithstanding, this Agreement, the Debentures, and the other agreements,
documents and instruments entered in or delivered in connection herewith or
therewith may not be assigned, in whole or in part and in fact or by operation
of law, by Unigene without the prior written approval of the Purchasers.
9.6 Stamp or Other Tax. Should any stamp, recording
tax or fee or other similar tax become payable with respect to this Agreement,
the Debentures, the Security Agreement, the Warrants or any other document,
Unigene promptly following demand therefor will pay the same. This section shall
not apply to any income or withholding taxes or transfers by Purchasers or
holders.
9.7 Cumulative Remedies. No failure on the part of
any Purchaser to exercise, and no delay in exercising, any remedy, right, power
or privilege hereunder, or under any other agreement, security or instrument
delivered pursuant hereto, shall operate as a waiver thereof; nor shall any
single or partial exercise of any such remedy, right, power or privilege
preclude any other or further exercise of any other such remedy, right, power or
privilege, and no waiver whatsoever shall be valid unless in writing signed by
the Purchasers and then only to the extent specifically set forth in such
writing. All remedies, rights, powers and privileges afforded the Purchasers
under this Agreement, the Debentures and any other agreements, documents or
instruments delivered in connection herewith or therewith shall be cumulative
and not be exclusive of any remedies, rights, powers and privileges available by
law and shall be available until the Debentures and all interest thereon and all
other indebtedness of Unigene to the Purchasers have been paid in full. The
Purchasers may exercise any such remedies, rights, powers and privileges in any
order or priority.
9.8 Severability. In case any one or more of the
provisions of this Agreement or the Documents shall be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions hereof and thereof shall not be affected or impaired
thereby.
9.9 Governing Law. This Agreement and the rights and
obligations of the parties hereto shall be governed by and construed in
accordance with the laws of the State of New York, except that the Security
Agreement and Mortgage shall be governed by the laws of the state of New Jersey.
9.10 Sole Agreement; Amendments. It is the intention
of the parties that this Agreement and the Documents shall supersede any prior
negotiations, discussions, commitments, representations or agreements, written
or oral, other than as specified herein, including but not limited to any
correspondence, conversations, discussions, representations or other means of
communication not specified or set forth herein. No amendment, modification or
waiver of any provision of this Agreement, nor consent to any departure by any
party herefrom, shall in any event be effective unless the same shall be in
writing and signed by the party to be charged and then such amendment, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
9.11 Captions. The headings of the Sections of this
Agreement have been inserted solely for convenience of reference and shall not
modify, define or limit the express provisions of this Agreement.
9.12 Waiver. The waiver by a party of a breach of any
provision of this Agreement or any Document shall not operate or be construed as
a waiver of any subsequent breach by any party.
9.13 Right of the Purchasers to Perform Covenants. If
Unigene fails or refuses to perform or comply with any covenant, condition or
agreement to be performed or complied by it under any provision of this
Agreement or any other Document to which it is a party, Purchasers may, but
shall not be obligated to, perform or comply with such provision for the account
of and at the expense of such Person, and Unigene will, jointly and severally,
on demand, reimburse Purchasers for all costs and expenses paid or incurred by
them in performing or complying with such provision, together with accrued
interest thereon at the rate of 11.5% per annum from the time such cost or
expense was paid or incurred and payment demanded until the same is reimbursed
in full to Purchasers.
9.14 No Brokerage or Finder's Fees. Each party
represents and warrants that it has dealt with no broker or finder in connection
with the transactions contemplated hereby. Each party shall indemnify and save
the other harmless from any and all claims for broker's or finder's fees or
commissions which arise out of any agreement made by such indemnifying party
with respect to the subject matter of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
UNIGENE LABORATORIES, INC.
By:________________________________
Name:
Title:
OLYMPUS SECURITIES, LTD.
By:________________________________
Name:
Title:
NELSON PARTNERS
By: CITADEL INVESTMENT
MANAGEMENT, L.P.,
General Partner
By: CITADEL INVESTMENT MANAGEMENT,
INC., General Partner
By:________________________________
Name:
Title:
Schedule 10.20
--------------
Exhibit 10.20 is the form of Regulation S Securities Subscription Agreement
entered into by the Company and each of 22 subscribers for the sale and purchase
of an aggregate principal amount of $9.08 million of the Company's 10%
Convertible Debentures due March 4, 1999. All such executed agreements are
identical except for the identity of the subscriber and the principal amount of
debentures purchased.
<PAGE>
EXHIBIT 10.20
<PAGE>
UNIGENE LABORATORIES, INC.
REGULATION S SECURITIES SUBSCRIPTION AGREEMENT
THE DEBENTURES BEING SUBSCRIBED FOR HEREIN AND THE COMMON STOCK
ISSUABLE UPON CONVERSION OF THE DEBENTURES HAVE NOT BEEN REGISTERED WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION ("THE COMMISSION") UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT") OR THE SECURITIES
COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES LAW. THEY ARE BEING OFFERED
PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION S ("REGULATION S")
PROMULGATED UNDER THE ACT . THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE UNITED STATES OR TO A U.S. PERSON (AS SUCH TERM IS DEFINED IN
REGULATION S) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO
AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. INVESTMENT IN SUCH SECURITIES INVOLVES A HIGH DEGREE OF RISK. IN
MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND THE RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED, APPROVED OR DISAPPROVED BY
ANY U.S. FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.
FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT REVIEWED, PASSED UPON, CONFIRMED
OR DETERMINED THE ACCURACY OR ADEQUACY OF THIS DOCUMENT OR ANY INFORMATION
PROVIDED BY THE COMPANY TO POTENTIAL INVESTORS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Securities Subscription Agreement (the "Agreement") is executed by
the undersigned (the "Subscriber") in connection with the offering (the
"Offering") and subscription by the undersigned for 10% Convertible Debentures
(the "Debentures") of Unigene Laboratories, Inc. (the "Company"), due on March
4, 1999, and offered in denominations of at least $50,000 and integral multiples
of $10,000 in excess thereof up to a maximum aggregate principal amount of
$9,080,000. The terms of the Debentures, including the terms on which the
Debentures may be converted into common stock, $.01 par value, of the Company
(the "Common Stock"), are set forth in the Debenture, in the form attached
hereto as Exhibit A. The solicitation of this subscription and, if accepted by
the Company, sale of Debentures, are being made in reliance upon the provisions
of Regulation S. The Company may be subject to NASD regulatory restrictions
regarding the number of shares that may be issued upon conversion of the
Debentures (see Section 6.13 below and the Risk Factors referred to in Section
2.3). The Debentures, and the shares of Common Stock issuable upon conversion
thereof (the "Shares"), are sometimes referred to herein collectively as the
"Securities." The Subscriber wishes to subscribe for Debentures in the amount
set forth in Section 19 in accordance with the terms and conditions of the form
of Debenture and this Agreement. It is agreed as follows:
1. Offer to Subscribe; Purchase Price; Closing; Placement Fees; and
Conditions to
Subscriber's Obligations.
1.1 Offer to Subscriber; Purchase Price. Subject to satisfaction of the
conditions to closing set forth below, the Subscriber hereby subscribes
for and agrees to purchase the aggregate principal amount of Debentures
for a purchase price set out in Section 19 of this Agreement.
1.2 Closing. The closing of the sale and purchase of the Debentures
("Closing") will occur upon (i) the satisfaction of all conditions
described in this Agreement, (ii) sale in this Offering of at least
$6,000,000 of aggregate principal amount of Debentures (the "Minimum
Amount"), and no more than $9,080,000 of aggregate principal amount of
Debentures (the "Maximum Amount"), and (iii) the satisfaction of all
conditions required by the Escrow Agreement ("Escrow Agreement",
defined as the agreement between the Company, Swartz Investments, LLC
("Placement Agent ") and First Union National Bank ("Escrow Agent")
regarding this Offering). As soon as the subscriptions for at least the
Minimum Amount have been accepted by the Company, according to the
terms of this Agreement, the Company shall close on the Minimum Amount.
Thereafter, the Company may conduct one or more additional Closings
until the Maximum Amount has been reached.
1.3 Placement Fees. The parties hereto acknowledge that the Placement
Agent for this Offering will be compensated by the Company in cash and
warrants to purchase Common Stock of the Company. The Placement Agent
has acted solely as placement agent in connection with the Offering by
the Company of the Debentures pursuant to this Agreement. The
information and data contained in the Disclosure Documents (as defined
in Section 2.2 below) and Risk Factors (as defined in Section 2.3
below) have not been subjected to independent verification by Placement
Agent, and no representation or warranty is made by Placement Agent as
to the accuracy or completeness of the information contained in the
Disclosure Documents and Risk Factors.
1.4 Conditions to Subscriber's Obligations. The Subscriber's
obligations hereunder are further conditioned upon the following:
(i) the Common Stock is listed on the National Association of
Securities Dealers, Inc.'s NASDAQ National Market System or
Small Cap Market ("Nasdaq");
(ii) the representations and warranties of the Company are
true and correct in all material respects on the Closing Date
as if made on such date, and the Company shall deliver a
certificate, signed by an officer of a Company, to such effect
to the Escrow Agent;
(iii) there have been no material adverse changes in the
Company's business prospects or financial condition since the
date of the Company's balance sheet dated September 30, 1995;
and
(iv) the following documents shall have been deposited with
the Escrow Agent: the Registration Rights Agreement, the
Opinion of Counsel and the Debenture;
2. Representations and Covenants; Access to Information; Independent
Information; Independent Investigation
2.1 Offshore Transaction.
The Subscriber represents and warrants to the Company that (i)
the Subscriber is not a U.S. person ("U.S. person") as that
term is defined in Rule 902(o) of Regulation S (a copy of
which definition is attached as Exhibit B) and which
definition includes, without limitation, a corporation or
partnership that is organized under the laws of a jurisdiction
other than the United States if it is formed by a U.S. person
principally for the purpose of investing in securities not
registered under the Act, unless it was organized or
incorporated, and is owned, by accredited investors (as
defined in Rule 501(a) of Regulation D under the Act) who are
not natural persons, estates or trusts; (ii) the Securities
were not offered to the Subscriber in the United States and at
the time of execution of this Subscription Agreement and the
time of any offer to the Subscriber to purchase the Securities
hereunder, the Subscriber was physically outside the United
States; (iii) the Subscriber is purchasing the Securities for
its own account and not on behalf of or for the benefit of any
U.S. person and the sale and resale of the Securities have not
been prearranged with any U.S. person or buyer in the United
States; (iv) the Subscriber agrees, and to the knowledge of
the Subscriber, without any independent investigation, each
distributor, if any, participating in the offering of the
Securities, has agreed, that all offers and sales of the
Securities prior to the expiration of a period commencing on
the date of the last Closing of a sale and purchase of
Debentures pursuant to the Offering (the "Last Closing") and
ending forty days thereafter (the "Restricted Period") shall
not be made to U.S. persons or for the account or benefit of
U.S. persons and shall otherwise be made in compliance with
the provisions of Regulation S; and (v) Subscriber is not an
underwriter, dealer, distributor or other person who is
participating, pursuant to a contractual arrangement, in the
distribution of the Securities offered or sold in reliance on
Regulation S.
2.2 Subscriber's Independent Investigation. The Subscriber, in
offering to subscribe for the Securities hereunder, has relied
solely upon (i) an independent investigation made by it and
its representatives, if any, and (ii) the representation,
warranties and disclosures of the Company set forth herein and
in the Disclosure Documents (as defined below). Subscriber
has, prior to the date hereof, been given the opportunity to
examine all material contracts and documents of the Company
which have been filed as exhibits to the Company's filings
made under the Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). In making its investment
decision to purchase the Debentures, the Subscriber is not
relying on any oral or written representations or assurances
from the Company or any other person other than as set forth
in this Agreement, or on any information other than that
contained or incorporated by reference in this Agreement and
in written information, if any, prepared by the Company and
supplied to the Subscriber by the Company in connection
herewith or in the Company's (i) Annual Report on Form 10-KSB
for the year ended December 31, 1994 and (ii) Quarterly Report
on Form 10-QSB for the quarter ended September 30, 1995
(collectively, the "Disclosure Documents"). The Subscriber has
such experience in business and financial matters that it is
capable of evaluating the risk of its investment and
determining the suitability of its investment. The Subscriber
is an accredited investor as defined in Rule 501 of Regulation
D, a copy of which definition is attached hereto as Exhibit C.
2.3 Subscriber's Economic Risk. The Subscriber understands and
acknowledges that an investment in the Securities involves a
high degree of risk. Subscriber acknowledges that there are
limitations on the liquidity of the Securities. The Subscriber
represents that the Subscriber is able to bear the economic
risk of an investment in the Securities, including a possible
total loss of investment. In making this statement the
Subscriber hereby represents and warrants to the Company that
the Subscriber has adequate means of providing for the
Subscriber's current needs and contingencies; that Subscriber
is able to afford to hold the Securities for an indefinite
period; and that Subscriber has such knowledge and experience
in financial and business matters that the Subscriber is
capable of evaluating the merits and risks of the investment
in the Securities. Further, the Subscriber represents, as of
the date of signing this Agreement, that the Subscriber has no
present need for liquidity in the Securities and the
Subscriber is willing to accept such investment risks.
Subscriber has reviewed the Disclosure Documents, including
without limitation the Risk Factors set forth at Exhibit D,
prior to subscribing for any Debentures.
2.4 No Government Recommendation or Approval. The Subscriber
understands that no United States federal or state agency, or
similar agency of any other country, has reviewed, approved,
passed upon or made any recommendation or endorsement of the
Company, the Offering or the subscription for the Securities.
2.5 No Directed Selling Efforts in Regard to this Transaction. To
the knowledge of the Subscriber, without any independent
investigation, neither the Company, Placement Agent nor any
other distributor (if any) participating in the Offering, nor
any person acting for the Company, Placement Agent or any such
distributor, has conducted any "directed selling efforts" in
the United States as the term "directed selling efforts" is
defined in Rule 902(b) of Regulation S, which in general,
means any activity undertaken for the purpose of, or that
could reasonably be expected to have the effect of,
conditioning the market in the United States for any of the
Securities being offered in reliance on Regulation S. Such
activity includes, without limitation, the mailing of printed
material to investors residing in the United States, the
holding of promotional seminars in the United States, and the
placement of advertisements with radio or television stations
broadcasting in the United States or in publications with a
general circulation in the United States, that refers to the
offering of the Securities in reliance on Regulation S.
2.6 Company's Reliance on Representations of Subscribers. This
Agreement is made by the Company with each Subscriber in
reliance upon such Subscriber's representations and covenants
made in this Section 2, which reliance by his, her or its
execution of this Agreement the Subscriber hereby confirms.
2.7 Securities Not Registered Under the Act or Any State Act.
Subscriber understands that the Debentures and the Common
Stock issuable upon conversion of the Debentures have not been
registered under the Act or any state securities laws ("State
Acts") and are being offered and sold pursuant to Regulation S
based in part upon the representations of Subscriber contained
herein. The Common Stock does, however, carry certain
registration rights as set forth in the Registration Rights
Agreement, in the form of Exhibit Q (see Section 7.4 below)
executed by the parties hereto.
2.8 No Public Solicitation. Subscriber knows of no public
solicitation or advertisement of an offer in connection with
the proposed issuance and sale of the Securities.
2.9 Investment Intent. Subscriber is acquiring the Debentures to
be issued and sold hereunder (and the Shares issuable upon
conversion of the Debentures) for his, her or its own account
(or a trust account if such Subscriber is a trustee) for
investment and not as a nominee and not with a view to the
distribution thereof. Subscriber understands that Subscriber
must bear the economic risk of this investment indefinitely
unless such Debentures or such Shares are registered pursuant
to the Act and any applicable State Acts, or an exemption from
such registration is available, and that the Company has no
present intention of registering any such sale of the
Debentures or Shares other than as contemplated by the
Registration Rights Agreement. Subscriber represents and
warrants to the Company, as of the date of this Agreement,
that Subscriber has no present plan or intention to sell the
Debentures or the Shares in the United States at any
predetermined time, and has made no predetermined arrangements
to sell the Debentures or the Shares. Subscriber covenants
that neither Subscriber nor its affiliates nor any person
acting on its or their behalf has entered into, has the
intention of entering into, or will enter into any put option,
short position or other similar instrument, contract,
arrangement or position with respect to the Debentures or
Common Stock of the Company anytime after the earlier of (i)
the time Subscriber first received the term sheet (the "Term
Sheet") concerning this Offering and (ii) the time that
Subscriber was first notified by Placement Agent of the
existence of the Offering (the earlier of which is referred to
as the "Time of Notification of the Offering") until the end
of the Restricted Period, or at any time for the intended
purpose of lowering the price at which the Debentures are
convertible into Shares; and neither Subscriber nor any of its
affiliates nor any person acting on its or their behalf will
at any time use Shares acquired upon conversion of the
Debentures to settle/cover any put option, short position or
other similar instrument, contract, arrangement or position
entered into prior to the end of the Restricted Period.
2.10 Subscriber Not to Sell or Transfer Securities in Violation of
the Securities Laws. Subscriber covenants that he, she or it
will not knowingly make any sale, transfer or other
disposition of the Debentures or the Shares in violation of
the Act (including Regulation S), the Exchange Act, any
applicable State Acts or the rules and regulations of the
Commission or of any state securities commissions or similar
state authorities promulgated under any of the foregoing.
2.11 Subscriber's Power and Authority. Subscriber has the full
power and authority to execute, deliver and perform this
Agreement. This Agreement, when executed and delivered by
Subscriber, will constitute a valid and legally binding
obligation of Subscriber, enforceable in accordance with its
terms.
2.12 Signatory's Representation. The signatory to this Agreement
hereby represents and warrants that he, she or it is either:
(a) not a U.S. person (as defined in Regulation S), and is not
located in the U.S. at the time of signing this Agreement, or
(b) a professional fiduciary of Subscriber (as described in
Section (o)(2) through
(o)(4) of Rule 902 of Regulation S), acting solely in his
capacity as holder of such account, as a fiduciary, executor,
administrator, or trustee, and has completed and signed the
accompanying Certificate (Exhibit E) and forwarded it to
Placement Agent.
2.13 No Tax Advice From Company or Its Agents. Subscriber has had
an opportunity to review with his, her or its own tax advisors
the foreign, U.S. federal, state and local tax consequences of
this investment, and the transactions contemplated by this
Agreement. Subscriber is relying solely on such advisors and
not on any statements or representations of the Company or any
of its agents and understands that Subscriber (and not the
Company) shall be responsible for the Subscriber's own tax
liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.
2.14 No Legal Advice from Company or Its Agents. Subscriber
acknowledges that he, she, or it has had the opportunity to
review this Agreement and the transactions contemplated by
this Agreement with his, or her or its own legal counsel.
Subscriber is relying solely on such counsel and not on any
statements or representations of the Company or any of its
agents for legal advice with respect to this investment or the
transactions contemplated by this Agreement, except for the
representations, warranties and covenants set forth herein and
on the opinion provided for in paragraph 7.3 herein.
2.15 Offering Material Statements. Subscriber acknowledges that all
offering materials and documents received by it in connection
with the offers and sales of the Securities included
statements to the effect of those contained in the first
legend set forth on the first page of this Agreement
2.16 No Scheme to Evade Registration. Subscriber's acquisition of
the Debentures is not a transaction (or any element of a
series of transactions) that is part of a plan or scheme to
evade the registration provisions of the Act.
3. Resales of Securities by Subscriber
Subscriber acknowledges, covenants and agrees that the
Securities may and will only be resold by it (a) in compliance with Regulation S
and applicable State Acts, if any; or (b) pursuant to an exemption from
registration under the Act and applicable State Acts after the Restricted
Period; or (c) pursuant to an effective and current Registration Statement under
the Act. In addition, in connection with any resale of the Debentures in
accordance with clause (a) or (b), above, the Subscriber will deliver to the
Company and will cause the purchaser to deliver to the Company the documents
described in Section 3.1 and 3.2 below, respectively:
3.1. Documents to be Delivered for Offshore Regulation S Resales.
If any Debenture is being resold to an offshore purchaser in
compliance with Regulation S:
1. Sales Agreement, executed by Subscriber and the
purchaser (in the form of Exhibit F);
2. Seller Representation Letter (in the form of
Exhibit G);
3. Assignment Separate from Certificate (in the form
of Exhibit H)(or endorsed Certificates);
4. Seller's Instruction Letter (in the form of
Exhibit I); and
5. Purchaser Representation Letter (in the form of
Exhibit J).
3.2 Documents to be Delivered for Resales into the United States.
If any Debenture is being resold to a purchaser in the U.S.
after the Restricted Period:
1. Sales Agreement, executed by both Subscriber and
the purchaser (in the form of Exhibit F);
2. Seller Representation Letter (in the form of
Exhibit K);
3. Assignment Separate from Certificate (in the form
of Exhibit H)(or endorsed Certificates);
5. Seller's Instruction Letter (in the form of
Exhibit I); and
6. Purchaser Representation Letter (in the form of
Exhibit J).
Upon receipt of the executed documents listed above, the Company will
effect the transfer of the Debentures on the Company's books and will issue and
deliver new Debentures in the purchaser's name (and, in the case of a resale
pursuant to Section 3.2 after the Restricted Period, free of any restrictive
legend restricting transfer under the Act) within three (3) business days of
such receipt. The provisions of this Section 3 shall not apply to subsequent
resales of Debentures that have previously been sold by Subscriber in compliance
with this Section 3.
4. Legends; Subsequent Sale of Securities
4.1 Debenture Legend. The Debenture shall bear a legend
substantially in the form of the first legend set forth on the
first page of this Agreement (the "Regulation S Restrictive
Legend") and any other legend or legends as reasonably
required to comply with U.S. federal, state or foreign law.
4.2 The Shares Obtained Upon Conversion Shall Not Bear a
Restrictive Legend. Assuming that there are no changes in the
material facts set forth in Section 2 of this Agreement or
applicable law from the date hereof until the Date of
Conversion (as that term is defined in the Debentures) of the
Debentures by Subscriber, the Shares obtained upon a
conversion after the Restricted Period shall not bear any
restrictive legend restricting transfer under the Act, nor
shall any stop order be placed on the books of the Transfer
Agent, provided that the Subscriber delivers to the Company a
Certificate in the form of Exhibit L.
4.3 Removal of Debenture Legend for Pledge With a Margin Account.
Upon the submission, at any time after the expiration of the
Restricted Period, by Subscriber of a written request for
removal of the Regulation S Restrictive Legend for the purpose
of a bona fide pledge or deposit of Debentures with a margin
account, together with the Debentures for which legend removal
is being requested and a Certificate in the form of Exhibit M,
the Company shall immediately re-issue the Debentures without
any restrictive legend restricting transfer under the Act, or
the Company shall irrevocably instruct its designated transfer
agent ("Transfer Agent") to do so, assuming that there are no
changes in the material facts set forth in Section 2 of this
Agreement or applicable law from the date hereof until the
date of such submission. Except for the requirements otherwise
set forth in this Agreement, and assuming there are no changes
after the date hereof in the material facts set forth in
Section 2 of the Agreement or applicable law, no action other
than as set forth in this Section 4.3 shall be required of the
Subscriber to remove the Regulation S Restrictive Legend
(unless such pledge or deposit would constitute a violation of
securities law).
4.4 The Company's Instructions to Transfer Agent. The Company will
issue to its Transfer Agent an irrevocable instruction letter
(the "Irrevocable Instructions to Transfer Agent") to convert
the Subscriber's Debentures to Common Stock (in accordance
with the Debenture and, so long as Section 4.2 is complied
with, free of any restrictive legend restricting transfer
under the Act) upon receipt of a valid Notice of Conversion
from a Subscriber and the original Debentures, and such other
documents as are required by this Agreement or the Debenture.
5. Issuance of Securities in the Near Future; Notice Requirements
The Company shall not issue any debt or equity securities for cash in
private capital raising transactions ("Future Offerings") for a period
of seventy five (75) days after the Last Closing without obtaining the
prior written approval of Subscribers holding a majority of the
principal amount of Debentures then outstanding, provided that the
preceding shall not limit the Company's right to conduct a public
secondary offering. The Company will not conduct any Future Offerings
for a period of two hundred and forty (240) days after the Last Closing
without delivering to the Subscriber prior written notice of its intent
to conduct a Future Offering (a "Future Offering Notice") setting forth
the material terms of the proposed Future Offering. For a period of ten
(10) days, commencing on the date of receipt of such Future Offering
Notice (the "Offer Period"), the Subscriber shall have the right
irrevocably to commit to purchase the Subscriber's Portion (as that
term is defined below) of the securities being offered in the Future
Offering on the terms contained in the Future Offering Notice. If,
during the Offer Period, the Subscriber fails irrevocably to commit to
purchase the Subscriber's Portion of the securities that are the
subject of the Future Offering Notice, the Company shall be permitted
to offer and sell any such securities, on terms generally no less
favorable to the Company than are set forth in the Future Offering
Notice, to any third party during a period of ninety (90) days
following the termination of the Offer Period after which 90 day period
the terms of this Section 5 shall again apply (the limitations referred
to in the preceding sentences of this Section 5 are collectively
referred to as the "Capital Raising Limitation"). The Capital Raising
Limitation shall not apply to any transaction involving the Company's
commercial banking arrangements or issuances of securities in
connection with a merger, consolidation or sale of assets, or in
connection with or as part of the same transaction as a joint venture
or other acquisition or disposition of a business, a product or a
license by the Company, or exercise of options by employees,
consultants or directors or any transaction with a strategic corporate
partner or to loan securitization or sales of loans to master trusts.
The Capital Raising Limitation also shall not apply to the issuance of
securities upon exercise or conversion of the Company's options,
warrants or other convertible securities outstanding as of March 5,
1996, or to the grant of additional options or warrants, or the
issuance of additional securities, under any Company stock option or
restricted stock plan. The amount of securities which a Subscriber is
entitled to purchase in such a Future Offering (the "Subscriber's
Portion") shall be a number obtained by multiplying the aggregate
amount of securities being offered in the Future Offering by a
fraction, the numerator of which is the aggregate principal amount of
Debentures purchased by the Subscriber pursuant to this Agreement and
the denominator of which is the aggregate principal amount of
Debentures placed in the Offering. If the Company fails to obtain from
purchasers of Debentures in the Offering irrevocable commitments to
purchase 90% of the proposed Future Offering, the Company shall be
released from any obligation under this Section 5 to the Subscribers
with respect to such Future Offering.
6. Representations and Warranties of Company
Company represents and warrants to Subscriber as follows:
6.1 Organization, Good Standing, and Qualification. The Company is
a corporation duly organized, validly existing and in good
standing under the laws of state of Delaware and has all
requisite corporate power and authority to carry on its
business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so
qualify would have a material adverse effect on the business
or properties of the Company and its subsidiaries taken as a
whole. The Company, is not the subject of any pending or, to
its knowledge, threatened investigation or administrative or
legal proceeding by the Internal Revenue Service, the taxing
authorities of any state or local jurisdiction, or the
Securities and Exchange Commission which could have a material
adverse effect and which have not been disclosed in the
reports referred to in Section 2.2 above.
6.2 Corporate Condition. The Company's condition was, in all
material respects, as described in the Disclosure Documents at
the respective dates thereof. There has been no material
adverse change in the Company's business financial condition
or prospects since September 30, 1995. The Disclosure
Documents are true and correct, in all material respects, and
the financial statements contained in the Disclosure Documents
have been prepared in accordance with generally accepted
accounting principles, consistently applied, and fairly
present the financial position and results of operation and
cash flows of the Company on a consolidated basis, for the
periods then ended. Without limiting the foregoing, there are
no material liabilities, contingent or actual, that are not
disclosed in the Disclosure Documents. The Company has paid
all material taxes which are due, except for taxes which it
reasonably disputes. There is no material claim, litigation,
or administrative proceeding pending, or to the best of the
Company's knowledge, threatened against the Company, except as
disclosed in the Disclosure Documents. This Agreement and the
Disclosure Documents do not contain any untrue statement of a
material fact and do not omit to state any material fact
required to be stated therein or herein or necessary to make
statements contained therein or herein not misleading in the
light of the circumstances under which they were made.
6.3 Authorization. All corporate action on the part of the Company
by its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the
performance of all obligations of the Company hereunder and
the authorization, issuance and delivery of the Debentures
being sold hereunder and issuance (and reservation for
issuance) of the Common Stock obtainable on conversion of the
Debentures have been taken, and this Agreement and the
Registration Rights Agreement constitute valid and legally
binding obligations of the Company, enforceable in accordance
with their terms. The Company has obtained all consents and
approvals required for it to execute, deliver, and perform
this Agreement. The Company is not in violation or default of
any provisions of its Articles of Incorporation or By-laws, as
amended and in effect on and as of the date of this Agreement,
or of any material provision of any instrument or contract to
which it is a party or by which it is bound or of any material
provision of any federal or state judgment, writ, decree,
order, statute, rule or governmental regulation applicable to
the Company except where such violation, default or conflict
would have no material adverse affect on the Company's
business prospects or financial condition, or on the
transaction contemplated herein. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in any such
violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a
default under any such provision, instrument or contract or an
event which results in the creation of any lien, charge or
encumbrance upon any assets of the Company.
6.4 Valid Issuance of Securities. The Debentures, when issued,
sold and delivered in accordance with the terms hereof for the
consideration expressed herein, will be validly issued and
binding obligations of the Company, enforceable in accordance
with their terms, and, based in part upon the representations
of the Subscriber in this Agreement, will be issued in
compliance with all applicable U.S. federal and state
securities laws. The Common Stock issuable upon conversion of
the Debentures, when issued in accordance with the terms of
the Debentures, shall be duly and validly issued and
outstanding, fully paid and nonassessable, and based in part
on the representations and warranties of Subscriber of the
Debentures, will be issued in compliance with all applicable
U.S. federal securities laws and State Acts. The Shares will
be issued free of any preemptive right. The Company currently
has at least 4.8 million shares reserved for issuance upon
conversion of the Debentures.
6.5 Current Public Information. The Company represents and
warrants to the Subscriber that the Company is a "reporting
issuer" as defined in Rule 902(1) of Regulation S and it has a
class of securities registered under Section 12(b) or 12(g) of
the Exchange Act or is required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act, and has filed all the
materials required to be filed as reports pursuant to the
Exchange Act for a period of at least twelve months preceding
the date hereof (or for such shorter period as the Company was
required by law to file such material), and all such filings
have been made on a timely basis. The Company undertakes to
furnish the Subscriber with copies of such information as may
be reasonably requested by the Subscriber prior to
consummation of this Offering.
6.6 No Securities Offered in U.S. or to any U.S. Person. The
Company represents that it has not offered the Debentures to
the Subscriber in the U.S. or to any person in the United
States or any U.S. person (as defined in Regulation S) unless
such U.S. person is a professional fiduciary of a non-U.S.
person (as defined in Section (o) (2) through (o) (4) of Rule
902 of Regulation S).
6.7 No Directed Selling Efforts in Regard to this Transaction.
Neither the Company, nor to the knowledge of the Company, the
Placement Agent, any other distributor participating in the
Offering (if any), or any person acting for the Company, the
Placement Agent or any such distributor, has conducted any
"directed selling efforts" in the United States, as the term
"directed selling efforts" is defined in Rule 902(b) of
Regulation S with respect to the Offering, which in general,
means any activity undertaken for the purpose of, or that
could reasonably be expected to have the effect of,
conditioning the market in the United States for any of the
Securities being offered in reliance upon Regulation S. Such
activity includes, without limitation, the mailing of printed
material to investors residing in the United States, the
holding of promotional seminars in the United States, and the
placement of advertisements with radio or television stations
broadcasting in the United States or in publications with a
general circulation in the United States, that refers to the
offering of the Securities.
6.8 Capitalization Structure of the Company. The capitalization of
Company, as of the date of the Closing, after giving effect to
the issuances of the Securities in this Offering, is as set
forth in Exhibit N.
6.9 Termination Date of Offering. In no event shall the Last
Closing of a sale of a Debenture in connection with the
Offering, occur later than March 15, 1996, which date can be
extended by up to 10 days upon written approval by the Company
and the Placement Agent.
6.10 Use of Proceeds. As of the date hereof, the Company expects to
use the proceeds from this Offering (less fees and expenses)
for the purposes and in the approximate amounts set forth in
Exhibit O hereto. These purposes and amounts are estimates and
are subject to change.
6.11 Intellectual Property. The Company has a valid unrestricted,
enforceable and exclusive license for the use of all patents,
trademarks, trademark registrations, trade names, copyrights,
trade secrets, know-how, technology and other intellectual
property necessary to the conduct of its business, except to
the extent such rights have been licensed, assigned or
otherwise transferred to others, as indicated on Schedule
IP-1. To the best of the Company's knowledge, the Company is
not infringing on the intellectual property rights of any
third party, nor is any third party infringing on the
Company's intellectual property rights. There are no
restrictions in any agreements, licenses, franchises, or other
instruments that are necessary for the conduct of the
Company's business as presently conducted or as planned to be
conducted in the future that materially interfere with the
conduct of such business.. The Company has granted valid and
enforceable licenses to others as listed on Schedule IP-1.
6.12 Levy Family Loan Repayment. The outstanding Levy family loans
may be repaid out of the proceeds of the Offering according to
the following schedule of repayment preconditions and in the
following limited monthly amounts:
Repayment Maximum
Repayment Precondition Tranche Monthly Repayment
1. GMP Status Achieved $250,000 $125,000
2. Filing of Injectable Calcitonin IND $250,000 $125,000
3. Filing of Oral Calcitonin IND $250,000 $125,000
4. Contract with a "Strategic Marketing
Partner" (as defined below) $500,000 $250,000
Repayments shall become permissible as of the beginning of the
calendar month immediately following the month in which the
specified precondition is satisfied. During any one month,
repayment may only be made towards one eligible "Repayment
Tranche". If an additional Repayment Tranche becomes eligible
during a month an initial Repayment Tranche is already being
repaid, repayment under the additional Repayment Tranche shall
be delayed until the calendar month immediately following
repayment in full of the initial Repayment Tranche.
Strategic Marketing Partner: Strategic Marketing Partner shall
mean any person or entity which has entered into an agreement
with the Company which provides (a) that such person or entity
will arrange for the marketing, manufacturing and/or
distribution services for the Company's amidated peptide
products developed and/or manufactured utilizing the Company's
proprietary technology and (b) that such person or entity
will, at the Company's discretion, (1) make an aggregate
payment of at least $2,000,000 to the Company in up-front fees
and/or scheduled already known fixed payments over the term of
the agreement or (2) if the marketing territory covered by the
agreement includes one or more of the United States, Japan, or
any European country, pay the Company at least a 5% royalty
over the term of the agreement.
6.13 Shareholder Approval. The Company covenants to submit to its
shareholders at its next annual shareholder meeting a proposal
for ratification of the issuance of the Debentures and the
Common Stock issuable upon conversion thereof. The Company
further covenants to use it best efforts to have such proposal
approved by the necessary shareholder vote, if and as required
by the rules of the National Association of Securities
Dealers, Inc. (the "NASD") applicable to the transaction.
Neither the failure to obtain stockholder approval nor the
Company's lack of financial ability to redeem Debentures will
release the Company from its contractual obligations to issue
unrestricted and unlegended shares of Common Stock, in
accordance with the terms of the Debentures and this
Agreement, upon the conversion of the Debentures.
7. Covenants of Company
7.1 Independent Auditors. The Company shall, until at least
February 28, 1999, maintain as its independent auditors an
accounting firm authorized to practice before the Commission.
7.2 Corporate Existence and Taxes. The Company shall, until at
least the earlier of March 5, 1999, and the conversion or
redemption of all the Debentures purchased pursuant to this
Agreement maintain its corporate existence in good standing
(provided, however, that the foregoing covenant shall not
prevent the Company from entering into any merger or corporate
reorganization as long as the surviving entity in such
transaction, if not the Company, assumes the Company's
obligations with respect to the Debentures) and shall pay all
its material taxes when due except for taxes which the Company
reasonably disputes.
7.3 Opinion of Counsel. Subscriber shall, upon purchase of the
Debentures, receive an opinion letter from outside counsel to
the Company, in the form attached hereto as Exhibit P, to the
effect that (i) the Company is duly incorporated and validly
existing under the laws the state of Delaware; (ii) this
Agreement, the Registration Rights Agreement, the Irrevocable
Instructions to Transfer Agent, the issuance of the
Debentures, and the issuance of the Common Stock upon
conversion of the Debentures have been duly authorized by all
required corporate action, and that all such Shares of Common
Stock, upon delivery, shall be validly issued, fully paid and
nonassessable; (iii) this Agreement, the Registration Rights
Agreement, and the Irrevocable Instructions to Transfer Agent
constitute valid and binding obligations of the Company,
enforceable in accordance with their terms, except as
enforceability of any indemnification provisions may be
limited by principles of public policy, and subject to laws of
general application relating to bankruptcy, insolvency and the
relief of debtors and rules of laws governing specific
performance and other equitable remedies; (iv) based upon the
representations and warranties of the Subscribers contained in
the Regulation S Subscription Agreements entered into in
connection with the Offering and the representations and
warranties of the Placement Agent set forth in the Manner of
Offering Certificate of the Placement Agent, and assuming that
no Subscriber is engaged in a plan or scheme to evade the
registration requirements of the Act, the issuance of the
Debentures has been effected in compliance with Regulation S,
and the issuance of the Shares upon conversion of the
Debentures in accordance with their terms by the Subscriber
(assuming that no commission or other remuneration is paid or
given, directly or indirectly, for soliciting such conversion)
will not be subject to the registration provisions of the Act;
and (v) the execution, delivery and performance of this
Agreement and the other agreements entered into in connection
herewith, does not conflict with or result in a breach of the
Company's Articles of Incorporation, By-laws, or any
agreement, relating to the issuance of securities, the
incurrence of funded indebtedness or registration rights, to
which the Company is a party or by which its property is bound
or any judgment, or decree to which it is subject, that is
identified to such counsel by the Company.
7.4 Registration Rights. The Company will grant Subscriber the
registration rights covering the Common Stock issuable on
conversion of the Debentures on the terms of the Registration
Rights Agreement attached hereto as Exhibit Q.
7.5 Notification of Final Closing Date & Restricted Period by
Company. Within five (5) business days after the Last Closing,
the Company shall notify the Subscriber in writing that the
Last Closing has occurred, the date of the Last Closing, the
date upon which the Restricted Period will terminate with
respect to the Securities, the dates that the Subscribers are
entitled to convert the respective portions of their
Debentures and the Fixed Conversion Price, as that term is
defined in the Debenture.
7.6 Payments for Late Conversion or Failure to Reserve Authorized
but Unissued Common.
(a) Payments for Late Conversion. As set forth in the
Debentures, the Transfer Agent or the Company (as applicable)
shall, no later than 6:00 P.M. (New York City time) on the
third business day (the "Deadline") after receipt by the
Company or its Transfer Agent of a notice of conversion and
all necessary documentation duly executed and in proper form
required for conversion, including receipt by the Transfer
Agent of the original Debentures to be converted, all in
accordance with the terms of the Debentures and this
Agreement, issue a certificate for the number of shares of
Common Stock to which the holder ("Holder") of the Debentures
shall be entitled as aforesaid and surrender such original
Common Stock certificates to a common courier for either
overnight or (if delivery is outside the United States) 2-day
delivery to the Holder at the address of the Holder on the
books of the Company. The Company understands that a delay in
the issuance and delivery of the Shares of Common Stock beyond
the Deadline could result in economic loss to the Holder. As
compensation to the Holder for such loss, the Company agrees
to pay late payments to the Holder for late issuance of Shares
upon conversion in accordance with the following schedule
(where "No. Business Days Late" is defined as the number of
business days beyond the Deadline):
Late Payment For Each
$10,000 Of Debenture Principal
No. Business Days Late Amount Being Converted
---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
greater than 10 $1,000 + $200 for each
Business Day Late
beyond 10 days
In the event that the number of shares of Common Stock that
the Company reasonably calculates to be due a particular
Subscriber upon conversion is different from the number of
shares claimed by the Subscriber, by virtue of the calculation
of the conversion rate or other information set forth in its
Notice of Conversion, the Company shall direct the Transfer
Agent to issue, in accordance with the procedures set forth
above and in the Debentures, to the Subscriber certificates
for a number of shares equal to the lesser of the two numbers
and, as to the issuability of the remaining disputed number of
shares of Common Stock, shall submit the dispute within three
business days after the receipt of such Holder's Notice of
Conversion to the Company's usual outside accounting firm
("Accountant") for determination of the number of shares of
Common Stock to be issued. In the event of such a dispute, the
Company agrees to instruct its Accountant, at the Company's
expense, to resolve any such dispute and notify the parties of
the result within three business days after the Accountant's
receipt of notice of such dispute. Within two business days of
its receipt of the Accountant's results, the Company shall
direct the Transfer Agent to issue to the Subscriber
certificates for any additional shares (the "Disputed Shares")
to which the Subscriber is entitled. The Disputed Shares shall
not be subject to the late payment provisions of this Section
7.6(a).
To the extent that the failure of the Company to issue the
Common Stock pursuant to this Section 7.6 is due to the
unavailability of authorized but unissued shares of Common
Stock, the provisions of this Section 7.6(a) shall not apply
but instead the provisions of Section 7.6(b) shall apply.
The Company shall pay any payments incurred under this Section
7.6(a) in immediately available funds within three (3)
business days from the date of issuance of the applicable
Common Stock. Nothing herein shall limit a Holder's right to
pursue actual damages for the Company's failure to issue and
deliver Common Stock to the Holder pursuant to the terms of
the Debenture.
(b) Payments for Failure to Reserve Authorized but Unissued
Common . If, at any time a Holder of Debentures submits a
Notice of Conversion (as defined in the Debenture), the
Company does not have sufficient authorized but unissued
shares of Common Stock available to effect, in full, a
conversion of the Debentures under Section 4 of the Debenture,
subject to the Company's right to redeem such Debentures in
accordance with the terms thereof (a "Conversion Default", the
date of such default being referred to herein as the
"Conversion Default Date"), the Company shall issue to the
Holder all of the shares of Common Stock which are available,
and the Notice of Conversion as to any Debentures requested to
be converted but not converted (the "Unconverted Debentures")
shall become null and void. The Company shall provide notice
of such Conversion Default ("Notice of Conversion Default") to
each Holder of outstanding Debentures, by facsimile, within
three (3) business days of such default (with the original
delivered by overnight or two (2) day courier). Holders may
not submit a Notice of Conversion after receipt of a Notice of
Conversion Default until the date additional shares of Common
Stock are authorized by the Company.
The Company agrees to pay to all Holders of
outstanding Debentures payments for a Conversion Default
("Conversion Default Payments") in the amount of (N/365) x
(.24) x the initial issuance price of the outstanding
Debentures held by each Holder where N = the number of days
from the Conversion Default Date to the date (the
"Authorization Date") that the Company authorizes a sufficient
number of shares of Common Stock to effect conversion of all
remaining Debentures. The Company shall send notice
("Authorization Notice") to each Holder of outstanding
Debentures, by facsimile, within three (3) business days after
the Authorization Date (with the original delivered by
overnight or two (2) day courier) that additional shares of
Common Stock have been authorized, the Authorization Date and
the amount of Holder's accrued Conversion Default Payments.
The accrued Conversion Default shall be paid in cash or shall
be convertible into Common Stock at the Conversion Rate (as
that term is defined in the Debenture), at the Company's
option, and shall be payable to each Holder of outstanding
Debentures by the fifth day of the following calendar month.
Nothing herein shall limit the Subscriber's right to pursue
actual damages for the Company's failure to maintain a
sufficient number of authorized shares of Common Stock.
7.7 Listing. The Company shall effect, as soon as
practicable following the Closing, subject to Company's right
to redeem such Debentures, the listing of the shares of Common
Stock issuable upon the conversion of the Debentures on Nasdaq
or another national securities exchange or quotation system.
8. Events of Defaults. If any of the following events of default (each
an "Event of Default") shall occur:
8.1 Conversion. The Company fails to issue shares of
Common Stock to the Holder upon exercise by the Holder of the
conversion rights of the Holder in accordance with the terms
of the Debenture and this Agreement fails to transfer any
certificate for shares of Common Stock issued to the Holder
upon conversion of the Debenture and when required by the
Debenture or fails to remove any restrictive legend on any
certificate or any shares of Common Stock issued to the Holder
upon conversion of the Debenture as and when required by the
Debenture or this Agreement and any such failure shall
continue uncured for 10 trading days;
8.2 Breach of Covenant. The Company breaches any
material covenant or other material term or condition of the
Debenture (other than as specifically provided in Section 8.1
hereof), or this Agreement and the breach of which would have
a material adverse effect on the Company or the prospects of
the Company or a material adverse effect on the Holder or the
rights of the Holder with respect to the Debentures or the
shares of Common Stock issuable upon conversion of the
Debentures and such breach continues for a period of ten (10)
business days after written notice thereof to the Company from
the Holder;
8.3 Breach of Representations and Warranties. Any
representation or warranty of the Company made herein or in
any agreement, statement or certificate given in writing
pursuant hereto or in connection herewith shall be false or
misleading in any material respect when made and the breach of
which would have a material adverse effect on the Company or
the prospects of the Company or a material adverse effect on
the Holder or the rights of the Holder with respect to the
Debentures or the shares of Common Stock issuable upon
conversion of the Debentures;
8.4 Receiver or Trustee. The Company or any
subsidiary of the Company shall make an assignment for the
benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a
substantial part of its property or business; or such a
receiver or trustee shall otherwise be appointed;
8.5 Judgments. Any money judgment, writ or similar
process shall be entered or filed against the Company or any
subsidiary of the Company or any of its property or other
assets for more than $500,000, and shall remain unvacated,
unbonded or unstayed for a period of thirty (30) days unless
otherwise consented to by the Holder, which consent will not
be unreasonably withheld; or
8.6 Bankruptcy. Bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceeding
for relief under any bankruptcy law or any law for the relief
of debtors shall be instituted by or against the Company or any
subsidiary of the Company and any such proceeding instituted
against the Company or any subsidiary is not dismissed within
thirty (30) days.
Then upon the occurrences and during the continuation of any
Event of Default specified in Section 8.1, 8.2, 8.3, 8.4, 8.5 or 8.6 upon the
written notice of the Holders of 75% of the outstanding principal amount of the
Debentures, the Company shall, and upon the occurrences of any event of default
specified in Section 8.4 or 8.6, the Company shall pay to the Holder an amount
equal to (a) the sum of (1) the unpaid principal amount of the Debentures owned
by such Holder plus (2) accrued and unpaid interest on the unpaid principal
amount of the Debentures owned by such Holder to the date of payment; multiplied
by (b) the percentage (the "Default Percentage") set forth below with respect to
the date on which such Event of Default occurs:
Date of Event of Default Default Percentage
- ------------------------ ------------------
Date of Last Closing to 18 months 130%
following Last Closing
18 months and 1 day to 24 months 125%
following Last Closing
24 months and 1 day to 30 months 120%
following Last Closing
After 30 months following Last Closing 115%
In addition, all other amounts payable hereunder shall
immediately become due and payable, all without demand, presentment, or notice,
all of which hereby are expressly waived, together with all costs, including,
without limitation, legal fees and expenses, of collection to which the Holder
is lawfully entitled, and the Holder shall be entitled to exercise all other
rights and remedies available at law or in equity.
If the Company fails to pay any amounts due pursuant to this
Article 8 within 5 business days of such amounts being due and payable, then the
Holder shall have the right at any time, so long as the Company remains in
default, to require the Company, upon written notice, to immediately issue, in
lieu of such amounts, the number of shares of Common Stock of the Company equal
to the amounts owed by the Company to the Holder, divided by the Conversion
Price then in effect.
9. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the state of Delaware, U.S.A. applicable to agreements made in and
wholly to be performed in that jurisdiction, except for matters arising under
the Act or the Exchange Act which matters shall be construed and interpreted in
accordance with such laws. Any action brought to enforce, or otherwise arising
out of, this Agreement shall be heard and determined only in either a federal or
state court sitting in the County of New Castle in the State of Delaware, U.S.A.
10. Entire Agreement; Written Amendments Required
This Agreement, the Debentures, the Registration Rights Agreement, the
Irrevocable Instructions to Transfer Agent (except as set forth therein), the
Escrow Agreement and the other documents delivered pursuant hereto or thereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof, and no party shall be liable or
bound to any other party in any manner by any warranties, representations or
covenants except as specifically set forth herein or therein. Neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought.
11. Written Notices, Etc.
Any notice, demand or request required or permitted to be given by
either the Company or the Subscriber pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally, or by
facsimile (with a hard copy to follow by either overnight or two (2) day
courier), addressed to the Subscriber at the address and/or facsimile telephone
number set forth at the end of this Agreement and to Unigene Laboratories, Inc.
at 110 Little Falls Road, Fairfield, New Jersey 07004 (or such other address as
a party may request by notifying the other in writing).
12. Execution in Counterparts Permitted
This Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
13. Representations and Warranties Survive the Closing;
Agreement is Severable
The Subscriber's and the Company's representations and warranties shall
survive the closing of the transaction notwithstanding any due diligence
investigation made by or on behalf of the party seeking to rely thereon. In the
event that any provision of this Agreement becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall to the extent permitted by law continue in full force and effect without
said provision; provided that no such severability shall be effective if it
materially changes the economic benefit of this Agreement to any party.
14. Titles and Subtitles; Gender
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or
interpreting this Agreement. The use in this Agreement of a masculine,
feminine or neuter pronoun shall be deemed to include a reference to
the others.
15. Exact Registered Name of Security Holder; Offshore Delivery
Instructions
(a) Subscriber agrees to provide Company with the exact name
in which he, she or it wishes the Securities to be registered by providing that
information on the accompanying signature page of this Agreement. Additionally,
Subscriber also agrees to provide Company with detailed delivery instructions to
an offshore addressee and will also provide that information on the accompanying
signature page of this Agreement.
(b) Subscriber agrees to courier to Company his, her or its
original inked signed Subscription Agreement within 2 days of faxing said signed
Agreement to the Placement Agent.
16. Limitations on Assignment of this Agreement.
Neither party to this Agreement may assign this Agreement without the
prior written consent of the other (which may be withheld for any reason). This
provision does not limit the Subscriber's right to transfer the Securities
pursuant to the terms of the Debenture and this Agreement.
17. Subscription and Wiring Instructions; Irrevocability
(a) Subscriber shall send a copy of its signed Subscription Agreement
by facsimile to Placement Agent at (770) 640-7150, and shall send its
subscription funds by wire transfer, to the Escrow Agent as follows:
First Union National Bank of Georgia
Attn: Rick Schaal
Corporate Trust Administration
999 Peachtree Street, N.E., Suite 1100
Atlanta, Georgia 30309
Fax: 404-827-7305
ABA Number: 053000219
Account Number: 465946
Attn: Claire Moore
Ref: UNIGENE LABORATORIES, INC./Swartz Investments, LLC
Ref: Subscriber's Name
A/C 3072232630
Contact Nicole Stefanini
(b) The Subscriber hereby acknowledges and agrees, subject to the
provisions of any applicable laws providing for the refund of subscription
amounts submitted by the Subscriber, that this Agreement is irrevocable and that
the Subscriber is not entitled to cancel, terminate or revoke this Agreement;
provided, however, that if the conditions to Closing are not satisfied or if the
Disclosure Documents are discovered prior to Closing to contain statements which
are materially inaccurate, or omit statements of material fact, the Subscriber
may revoke or cancel this Agreement.
(c) This Agreement shall be accepted by the Company when the Agreement
is countersigned by the Company and delivered to the Escrow Agent. The
Subscriber hereby confirms that the Company has full right in its sole
discretion to accept or reject the subscription of the Subscriber, in whole or
in part, provided that, if the Company decides to reject such subscription, the
Company must do so promptly and in writing. In the case of rejection, the
Company will promptly return any rejected payments (together with any interest
earned on such rejected funds in the escrow account) and (if rejected in whole)
copies of all executed subscription documents (including without limitation this
Agreement) to Subscriber. The Company may terminate this Agreement prior to the
Closing if this Agreement is discovered to contain statements that are
materially inaccurate or to or omit statements of material fact.
18. Indemnification.
The Company shall indemnify and hold harmless the Subscriber, Placement
Agent and each of their officers, directors, employees, partners, control
persons and agents (a "Subscriber Indemnified Party") who is or may be a party
to any threatened, pending, or completed action, suit or proceeding of any kind,
against any losses, damages, liabilities and expenses (including reasonable
attorneys fees) suffered or incurred by a Subscriber Indemnified Party and not
otherwise reimbursed, arising from or due to any material breach of a
representation warranty or covenant of the Company contained in this Agreement.
The Subscriber shall indemnify and hold harmless the Company and each of its
officers, directors, employees, partners, control persons and agents (a "Company
Indemnified Party") who is or may be a party to any threatened, pending, or
completed action, suit or proceeding of any kind, against any losses, damages,
liabilities and expenses (including reasonable attorneys fees) suffered or
incurred by a Company Indemnified Party and not otherwise reimbursed, arising
from or due to any material breach of a representation, warranty or covenant of
the Subscriber contained in this Agreement.
<PAGE>
19. Amount
The undersigned hereby subscribes for _________________________
principal amount of Debentures, and pays herewith funds in the amount of
____________________________ U.S. Dollars ($______________U.S.) on the terms and
conditions of this Agreement.
The undersigned acknowledges that this Agreement and the subscription
represented hereby shall not be effective unless accepted by the Company as
indicated below and delivered to the Subscriber.
Dated this _____ day of ___________, 1996.
- ------------------------------------ ---------------------------------
Your Signature EXACT NAME IN WHICH YOU WANT
THE SECURITIES TO BE REGISTERED
(Please Print Exact Registered Name)
OFFSHORE DELIVERY INSTRUCTIONS:
- ------------------------------------- -----------------------------------
Name: Please Print
Please type or print address where
your security is to be delivered.
ATTN:
----------------------
- ------------------------------------ --------------------------------
Title/Representative Capacity (if applicable) Street Address
- ------------------------------------ --------------------------------
Name of Company You Represent (if applicable) Street Address
- ------------------------------------ --------------------------------
Place of Execution of this Agreement City, State or Province, Country
-----------------------------
Offshore Postal Code
-----------------------------
Phone Number (For Federal Express)
-----------------------------
Facsimile Number (re: Notice)
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE ____ DAY OF __________ 1996.
UNIGENE LABORATORIES, INC.
By:________________________________
(Signature)
Print Name: _________________________
Title: ______________________________
<PAGE>
EXHIBIT E
- UNIGENE LABORATORIES, INC. -
FIDUCIARY, ADMINISTRATOR, EXECUTOR OR TRUSTEE CERTIFICATE
The signatory to this Agreement hereby represents and warrants
that he, she or it is a professional fiduciary of Subscriber
(as described in Section (o)(2) through (o)(4) of Rule 902 of
Regulation S), acting solely in his, her or its capacity as
such, and that:
(i) the Subscriber is not a U.S. person (as defined in
Regulation S); and
(ii) either (sign either A, B or C, as applicable):
A. The account for which the Debentures are being
purchased by Subscriber is a discretionary account or
similar account (other than an estate or trust) which
the undersigned manages and holds for the benefit or
account of Subscriber and the Subscriber is not
located in the U.S. at the time of signing this
Agreement;
----------------- (signature)
OR
B. The account for which the Debentures are being
purchased by Subscriber is the account of an estate
of which the undersigned acts as executor or
administrator, an executor or administrator of the
estate who is not a U.S. person (as defined in
Regulation S) has sole or shared investment
discretion with respect to the assets of the estate,
the estate is governed by foreign law and the
Subscriber is not located in the U.S. at the time of
signing this Agreement;
----------------- (signature)
OR
C. The account for which the Debentures are being
purchased by Subscriber is the account of a trust of
which the undersigned acts as trustee, a trustee, who
is not a U.S. person (as defined in Regulation S) has
sole or shared investment discretion with respect to
the trust assets, no beneficiary of the trust (and no
settlor, if the trust is revocable) is a U.S. person
(as defined in Regulation S) and the Subscriber is
not located in the U.S. at the time of signing this
Agreement.
----------------- (signature)
--------------------- -----------------------------------------
Print Your Name Person or Entity for Whom You are Signing
EXHIBIT 10.20.1
<PAGE>
EXHIBIT Q
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as of
March 12, 1996, by and among UNIGENE LABORATORIES, INC., a Delaware corporation,
("Company"), Swartz Investments, LLC., a Georgia limited liability corporation
("Swartz Investments") and the subscribers ("Subscribers") to the Company's
offering ("Offering") of up to $9,080,000 of Debentures pursuant to Regulation S
Subscription Agreements between the Company and the Subscribers of even date
herewith ("Subscription Agreement").
1. Definitions. For purposes of this Agreement:
(a) The terms "register", "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act of 1933, as
amended (the "Act"), and the declaration or ordering of effectiveness of such
registration statement or document;
(b) The term "Registrable Securities" means the shares of
Common Stock issuable or issued upon (i) conversion of the Debentures issued to
Subscribers in the Offering and (ii) exercise of the Warrant; provided, however,
that (x) after the expiration of the Restricted Period, shares of Common Stock
obtainable on conversion of the Debentures (in whole or in part), and (y) after
two years from the date of this Agreement, shares of Common Stock obtainable on
exercise of the Warrant (the "Warrant Shares"), shall not constitute Registrable
Securities, if those shares of Common Stock may be resold in a public
transaction without registration under the Act, including without limitation
pursuant to Rule 144 under the Act. Upon request of any Holders of Common Stock
issued or issuable upon conversion of the Debentures or exercise of the Warrant,
the Company shall cause legal counsel, reasonably acceptable to such Holder, to
issue an opinion addressed to the holders, stating that such Common Stock may be
sold without registration and without restriction on resale under the Act as
described in the provisions of the immediately preceding sentence, in form and
substance reasonably satisfactory to such Holder.
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock which
have been issued or are issuable upon conversion of the Debentures and exercise
of the Warrant at the time of such determination;
(d) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any permitted assignee thereof; and
(e) The term "Warrant" means the warrant granted to Swartz
Investments in connection with the Offering.
(f) "Restricted Period" has the meaning ascribed to that term
in the Subscription Agreement.
2. Demand Registration.
(a) At any time beginning after the end of the Restricted
Period, the Holders of Registrable Securities obtained or obtainable upon
conversion of at least 25% in principal amount of the Debentures then
outstanding ("Initiating Holders") may notify the Company in writing that they
demand that the Company file a registration statement under the Act covering the
registration of all of the Registrable Securities then outstanding (other than
Registrable Securities held by any Holder who does not want to be included
therein). Upon receipt of such notice, the Company shall, within ten (10) days,
give written notice of such request to all Holders and shall, subject to the
limitations of subsection 2(b), file within 60 days of receipt of such request a
registration statement to effect the registration under the Act of all
Registrable Securities which the Holders request, by notice given to the Company
within (10) days of receipt of the Company's notice, and use its best efforts to
cause such registration statement to become effective as soon as possible (a
"Demand Registration"). The Company may include in such registration statement
any other securities of the Company which the holders thereof are entitled to
have so included pursuant to any agreement entered into by the Company prior to
the date hereof (the "Additional Shares").
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2 and the Company shall include such information in the written
notice referred to in subsection 2(a). In such event, the right of any Holder to
include his Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities covered by the registration statement in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder). All Holders proposing to distribute their
securities through such underwriting shall (together with the Company as
provided in subsection 6(f)) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by a
majority in interest of the Initiating Holders, and reasonably acceptable to the
Company.
(c) The Company is obligated to effect only one Demand
Registration pursuant to Section 2 of this Agreement. The Company agrees to
include all Registrable Securities held by all Holders in such registration
statement; provided that, in the event that (i) the Registrable Securities
covered by such registration statement are to be distributed pursuant to an
underwriting and (ii) the managing underwriter determines, and advises the
Company in writing, that marketing factors require a limitation on the number of
shares (including Additional Shares) to be underwritten, the managing
underwriter may require the exclusion from the underwriting of the excess
shares, with the shares to be excluded allocated among the Registrable
Securities and all Additional Shares in respect of which the exclusion of such
Additional Shares on any other basis would violate the contractual rights of the
holders of such Additional Shares, in the proportion that the number of such
Registrable Securities or Additional Shares which each holder thereof seeks to
register bears to the total number of Registrable Securities and Additional
Shares sought to be included by all holders of Registrable Securities and
Additional Shares. In the event the Company breaches its obligation of the
preceding sentence, or Registrable Securities are excluded from the registration
statement by reason of the proviso thereof, any Holders of the Registrable
Securities which were not included in such registration statement shall be
entitled to a Demand Registration for such excluded securities on the same terms
as the Demand Registration described in this Agreement.
(d) The Company is not obligated to effect a Demand
Registration under this Section 2 if, in the written opinion of counsel to the
Company reasonably acceptable to the person or persons from whom written request
for registration has been received (and satisfactory to the Company's transfer
agent to permit the transfer), registration under the Act is not required for
the immediate public transfer of the Registrable Securities, with no
restrictions on resale, pursuant to Rule 144 or any other applicable exemption
from registration.
(e) The Company represents that it is eligible to effect the
registration contemplated hereby on Form S-3 and will use commercially
reasonable efforts to maintain such eligibility.
3. Piggyback Registration. If (but without any obligation to
do so) the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the Holders)
any of its Common Stock under the Act in connection with the public offering of
such securities (other than a registration relating solely to the sale of
securities to participants in a Company employee benefit plan or a registration
on Form S-4 promulgated under the Act or any successor or similar form
registering stock issuable upon a reclassification, upon a business combination
involving an exchange of securities or upon an exchange offer for securities of
the issuer or another entity), the Company shall, at such time, promptly give
each Holder written notice of such registration. Upon the written request of
each Holder given within ten (10) days after mailing of such notice by the
Company, which request shall state the intended method of disposition of such
shares by such Holder, the Company shall cause to be registered under the Act
all of the Registrable Securities that each such Holder has requested to be
registered (a "Piggyback Registration"). The Company may elect not to proceed
with, or suspend the effectiveness of, a Piggyback Registration at any time in
its sole discretion and without prior consultation with any Holder.
4. Limitation on Obligations to Register.
(a) In the case of a Piggyback Registration on an underwritten
public offering by the Company, if the managing underwriter determines and
advises in writing that the inclusion in the registration statement of all
Registrable Securities proposed to be included would interfere with the
successful marketing of the securities proposed to be offered and sold by the
Company, then the number of such Registrable Securities, if any, to be included
in the registration statement as determined by the managing underwriter shall be
allocated among all Holders who had requested Piggyback Registration, in the
proportion that the number of Registrable Securities which each such Holder,
including Swartz Investments, seeks to register bears to the total number of
Registrable Securities sought to be included by all Holders, including Swartz
Investments.
(b) Notwithstanding anything to the contrary herein, the
Company shall have the right (i) to defer the filing of a registration statement
(or any amendment thereto) or any request for acceleration of effectiveness of
any Demand Registration and (ii) after effectiveness, to suspend effectiveness
of any such registration statement, if, in the good faith judgment of the board
of directors of the Company and upon the advice of counsel to the Company, such
delay in filing or requesting acceleration of effectiveness or such suspension
of effectiveness is necessary in light of the existence of material non-public
information (financial or otherwise) concerning the Company, the disclosure of
which at the time is not, (A) otherwise required and (B) in the best interests
of the Company; provided however that the Company will use its best efforts to
terminate such delay or suspension as soon as practicable and, in any event,
will not delay effectiveness of such Demand Registration for more than three
months from the date of the demand or suspend effectiveness for more than 60
days, unless it is then engaged in an acquisition that would make such
registration impracticable, in which case it will use its best efforts to
eliminate such impracticability as soon as possible.
5. Obligations to Increase Available Shares. If after a
registration statement is filed pursuant to Section 2 the shares of Common Stock
issuable upon the conversion of the Debentures is change by reason of the
adjustment of the Conversion Rate, the number of Registrable Securities covered
by the registration statement shall be proportionally adjusted. If required, the
Company shall amend that registration statement, or file a new registration
statement, or both, so as to cover such additional Registrable Securities. The
Company shall use commercially reasonable efforts to effect such new
registration within ninety days.
6. Obligations of the Company. Whenever required under this
Agreement to effect the registration of any Registrable Securities, but subject
to the limitations on the obligations of the Company set forth herein, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use commercially reasonable
efforts to cause such registration statement to become effective.
(b Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of the Registrable
Securities covered by such registration statement.
(c) With respect to any Demand Registration, use commercially
reasonable efforts to keep such registration statement effective for a period of
at least 180 days or, if earlier until the Holders of Registrable Securities
covered by such registration statement have completed the distribution described
in the registration statement.
(d) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, as they may reasonably request
in order to facilitate the disposition of Registrable Securities covered by the
registration statement.
(e) Use commercially reasonable efforts to register and
qualify the Registrable Securities covered by such registration statement under
such other securities or Blue Sky laws of such of the United States as shall be
reasonably requested by the Holders of the Registrable Securities covered by
such registration statement, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states.
(f) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement that is in
usual and customary form with the managing underwriter of such offering. Each
Holder participating in such underwriting shall also enter into and perform its
obligations under such underwriting agreement.
(g) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
(h) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Agreement, on the date
that Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Agreement, if such Registrable
Securities are being sold through underwriters, or, if such Registrable
Securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (i) an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders of such Registrable Securities and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders of such Registrable Securities.
(i) Use commercially reasonable efforts to maintain the
listing of the Common Stock on NASDAQ Small Cap Market, NASDAQ National Market
System or a national securities exchange for as long as any of the Registrable
Securities are still outstanding.
7. Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Agreement
that the selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities or to determine that registration is not
required by reason of the availability of Rule 144 or other applicable provision
of the Act.
8. Future Grants.
(a) The Company represents and warrants to the Holders that
the number of securities constituting Additional Shares are the 100,000 shares
of Common Stock initially issuable upon the exercise of certain warrants issued
by the Company prior to the date hereof (warrants for 50,000 shares were issued
on March 15, 1995 and warrants for 50,000 shares were issued on April 15, 1995,
collectively the "Existing Warrants") and such additional number of shares of
Common Stock as may be issued, pursuant to certain anti-dilution provisions set
forth in the Existing Warrants, upon exercise thereof.
(b) During the period commencing on the date hereof and ending
on the date of termination of this Agreement, the Company shall not grant to any
person registration rights with respect to Common Stock that are senior to the
registration rights granted herein.
9. Expenses of Demand Registration. All expenses, other than
underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to Section 2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and
including the reasonable fees and disbursements incurred of only one counsel for
the selling Holders, shall be borne by the Company; provided, however, if the
registration request is subsequently withdrawn at the request of the Holders of
a majority of the Registrable Securities to be registered, the Company shall not
be required to pay for any expenses of any registration proceeding begun
pursuant to Section 2 (in which case all Holders who had requested such
registration shall by jointly and severally liable for such expenses and the
Holders of Registrable Securities shall have no further rights to a Demand
Registration); provided further, however, that if at the time of such
withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company from that which was publicly
known at the time of their request, then the Holders shall not be required to
pay any of such expenses and shall retain their rights pursuant to Section 2.
10. Expenses of Company Registration. The Company shall bear
and pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 3 for each Holder, including (without limitation) all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto (and including the reasonable fees and
disbursements incurred by only one counsel for the selling Holders selected by
them), but excluding underwriting discounts and commissions relating to the sale
of Registrable Securities.
11. Indemnification. In the event any Registrable Securities
are included in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each "Holder Indemnified Person" (defined for purposes of this
Section 11 as each Holder of registrable securities included in the registration
statement, the officers and directors of each such Holder acting in their
capacity as such, any underwriter (as defined in the Act) for such Holder and
each person, if any, who controls such Holder or underwriter within the meaning
of the Act or the Securities Exchange Act of 1934, as amended (the "1934 Act")),
against any losses, claims, damages, expenses, or liabilities (joint or several)
("Losses") to which they may become subject under the Act, the 1934 Act or other
federal or state law, insofar as such Losses (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement, or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission, or alleged omission,
to state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation by the
Company of the Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the Act, the 1934 Act or any state securities law;
and the Company will reimburse each such Holder Indemnified Person for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such Loss or action; provided, however, that the indemnity
agreement contained in this subsection 11(a) shall not apply to amounts paid in
settlement of any such Loss or action if such settlement is effected without the
prior written consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such Loss or
action to the extent that it arises out of or is based upon a Violation which
occurs in either (i) in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by any such
Holder Indemnified Person or any of its directors, officers, agents or
affiliates or (ii) based upon a prospectus which included a Violation, after the
Company has advised the Holder not to sell pursuant to such prospectus, and has
made available an amended or supplemental prospectus that corrects such
Violation.
(b) To the extent permitted by law, each selling Holder of
Registrable Securities included in the registration statement will indemnify and
hold harmless the "Company Indemnified Persons" (defined for the purpose of this
Section 11 as the Company, each of its officers and directors in their capacity
as such, each person, if any, who controls the Company within the meaning of the
Act or the 1934 Act, any underwriter and any person who controls such
underwriter within the meaning of the Act or the 1934 Act and any other Holder
Indemnified Person selling securities in such registration statement), against
any Loss (joint or several) to which the Company or any such director, officer,
controlling person, or underwriter or controlling person, or other such Holder
Indemnified Person may become subject, under the Act, the 1934 Act or other
federal or state law, insofar as such Loss (or actions in respect thereto) arise
out of or are based upon any Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder or any of its directors, officers,
employees, agents or affiliates expressly for use in connection with such
registration; and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company and any such Company Indemnified Person in
connection with investigating or defending any such Loss or action; provided,
however, that the indemnity agreement contained in this subsection 11(b) shall
not apply to amounts paid in settlement of any such Loss or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this subsection 11(b) exceed the gross proceeds from the offering received
by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 11 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 11, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonably incurred fees and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 11.
(d) The obligations of the Company and Holders under this
Section 11 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Agreement, and otherwise.
12. Reports Under Securities Exchange Act of 1934. With a view
to making available to the Holders the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the Securities and Exchange
Commission ("SEC") that may at any time permit a Holder to sell shares of Common
Stock of the Company to the public without registration, the Company agrees to
use commercially reasonable efforts to:
(a) whether or not the Company is required to file reports
required by Section 13(a) of the 1934 Act, make and keep public information
available, as those terms are understood and defined in SEC Rule 144, at all
times;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company, if true, that it has complied with the reporting requirements of
Section 13(a) or 15(d) of the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company under Section 13(a) or 15(d) of the 1934 Act, and (iii) such other
information as may be reasonably requested in availing any Holder of any rule or
regulation of the SEC which permits the selling of any Registrable Securities
without registration.
13. Amendment of Registration Rights. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
Holder, each future Holder, and the Company; provided that no amendment or
waiver that materially and adversely affects the rights of any Holder shall be
effective against such Holder unless such Holder agrees thereto.
14. Notices. All notices required or permitted under this
Agreement shall be made in writing signed by the party making the same, shall
specify the section under this Agreement pursuant to which it is given, and
shall be addressed if to (i) the Company at: President, Unigene Laboratories,
Inc., 110 Little Falls Road, Fairfield, New Jersey 07004, Telephone No. (201)
882-0860, Telecopy No. (201) 227-6088 and (ii) the Holders at their respective
addresses on the books of the Company. Any notice, except as otherwise provided
in this Agreement, shall be made by fax and shall be deemed given at the time of
transmission of the fax.
15. Termination. This Agreement shall terminate on the later
to occur of (a) the date that is two years from the date of this Agreement and
(b) the date any distribution of Registrable Securities described in a
registration statement filed pursuant to this Agreement is completed; but
without prejudice to (i) the parties' rights and obligations arising from
breaches of this Agreement occurring prior to such termination or (ii) the
indemnification obligations under Section 11 of this Agreement.
16. Assignment. No assignment, transfer or delegation, whether
by operation of law or otherwise, of any rights or obligations under this
Agreement by the Company or any Holder, respectively, shall be made without the
prior written consent of the majority in interest of the Holders or the Company,
respectively; provided that the rights of a Holder may be transferred to a
subsequent holder of the Holder's Registrable Securities (provided such
transferee shall provide to the Company, together with or prior to such
transferee's request to have such Registrable Securities included in a Demand
Registration or Piggyback Registration, a writing executed by such transferee
agreeing to be bound as a Holder by the terms of this Agreement); and provided
further that the Company may transfer its rights and obligations under this
Agreement to a purchaser of all or a substantial portion of its business if the
obligations of the Company under this Agreement are assumed in connection with
such transfer, either by merger or other operation of law (which may include
without limitation a transaction whereby the Registrable Securities are
converted into securities of the successor in interest) or by specific
assumption executed by the transferee.
17. Governing Law. This Registration Rights Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
applicable to agreements made in and wholly to be performed in that
jurisdiction, except for matters arising under the Act or the 1934 Act, which
matters shall be construed and interpreted in accordance with such laws. Any
action brought to enforce, or otherwise arising out of, this Agreement shall be
heard and determined only in a federal court sitting in the county of New Castle
in the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Registration
Rights Agreement as of the date first above written.
UNIGENE LABORATORIES, INC.
By: ________________________________
_________________________, President
Address: 110 Little Falls Road
Fairfield, New Jersey 07004
SUBSCRIBER(S)
____________________________________
Subscriber's Name
By:_________________________________
(Signature)
Address: ____________________________________
____________________________________
SWARTZ INVESTMENTS, LLC
By:_________________________________
(Signature)
Title:______________________________
EXHIBIT 10.21
<PAGE>
AMENDMENT TO LOAN AGREEMENT AND SECURITY AGREEMENT
This Amendment to Loan Agreement and Security Agreement ("Amendment")
made this 29th day of June, 1995 by and between Unigene Laboratories, Inc., a
Delaware corporation authorized to do business in the State of New Jersey (the
"Borrower") with offices at 110 Little Falls Road, Fairfield, New Jersey and Jay
Levy, Warren P. Levy and Ronald S. Levy, all with offices located at 110 Little
Falls Road, Fairfield, New Jersey, individually (jointly the "Lender").
WHEREAS, the parties have previously entered into a Loan Agreement and
a Security Agreement both dated March 2, 1995 pursuant to which Lender loaned to
Borrower certain sums not to exceed at any time the amount of $500,000.00 and
Borrower granted to Lender a security interest in certain collateral located in
premises known as 83 Fulton Street, Boonton, New Jersey leased by the Borrower
as particularly described therein (the "Collateral"), which Loan Agreement and
Security Agreement have been amended by the Borrower and the Lender by Amendment
to Loan Agreement and Security Agreement dated March 20, 1995 (the "Loan
Agreement" and the "Security Agreement"; and
WHEREAS, Lender has previously loaned to Borrower the amount of
$255,000.00 in addition to amounts loaned pursuant to the Loan Agreement and is
unwilling to lend to Borrower any additional sums unless and until Borrower
grants to Lender a security interest in the Collateral to secure the repayment
of all such additional loans including the prior loan of $255,000.00; and
WHEREAS, Borrower desires to arrange for additional borrowings from
Lender in the amount not to exceed $445,000.00; and
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties agree as follows.
1. ADVANCES
The term "Loan" as that term is set forth in the Loan Agreement and
Security Agreement shall be revised to reflect the $500,000.00 borrowing ("Prior
Loan") and the additional borrowing of $255,000.00 and subsequent loans in an
amount not to exceed at any time $445,000.00 (the total of (X) $255,000.00 and
(Y) $445,000.00 being herein referred to as the "New Loan".)
a. The New Loan shall be and is hereby made subject to the terms and
conditions of the Loan Agreement, and, provided no event or condition
constituting a default or an event of default has occurred, Lender shall lend
and re-lend to Borrower from time to time until the termination date, amounts
which shall not exceed at any one time in the aggregate the New Loan in the
principal amount of Seven Hundred Thousand ($700,000.00) Dollars.
b. Advances of the New Loan shall be made to the Borrower under this
Agreement and delivered to the Borrower by check payable to the Borrower or wire
transfer of funds for credit to any general deposit account maintained by the
Borrower, as the Borrower may reasonably direct.
c. The Borrower acknowledges receipt pursuant to this Agreement prior
to the date hereof of sums totalling Two Hundred Fifty Five Thousand and 00/100
($255,000.00) dollars, which advances have been made pursuant to the terms of
this Agreement and shall be evidenced by the Promissory Note to be given
pursuant hereunder.
2. COLLATERAL
In consideration of the Lender's granting to the Borrower the New Loan
in accordance with the terms and conditions of this Agreement, and to secure
payment and performance of the obligations of the Borrower to the Lender
hereunder and the Promissory Note to be delivered pursuant to this Agreement,
the Borrower hereby amends the Security Agreement and grants to the Lender to
secure the promissory note to be given to evidence the New Loan a security
interest in the Collateral. The Security Agreement shall remain in full force
and effect until all obligations of the Borrower to the Lender are fully paid
and satisfied.
3. DOCUMENTATION
Upon the execution hereof Borrower shall execute and deliver to Lender
the following documents: (i) Promissory Note; (ii) Financing Statements (2) to
be filed in the Morris County Clerk's Office and in the New Jersey Secretary of
State's Office; and (iii) an Affidavit of Title as to the Collateral. In
addition to the foregoing, upon the execution hereof Borrower shall deliver to
the Lender (vi) a certified copy of the resolution of the Board of Directors of
the Borrower authorizing execution, delivery and performance of this Agreement
and the Promissory Note.
4. ADDITIONAL ADVANCES
Lender's obligation to make
additional advances hereunder shall be conditioned upon and is subject to the
satisfaction of the following conditions precedent: 1. Borrower shall have
complied with and shall then be in compliance with the terms, covenants and
conditions of this Agreement and all of the loan documents pursuant hereto. 2.
There shall exist no default or even of default. 3. The representations and
warranties contained in any document given pursuant aid this Agreement,
including the Affidavit of Title, shall be true and with the same effect as if
those representations and warranties had been made at the time of making of each
advance.
5. MISCELLANEOUS
All representations, covenants and warranties contained in the Loan
Agreement, except as otherwise herein provided, are reaffirmed as of the
execution of this Agreement and shall be binding upon the Borrower. Except as
otherwise provided, all terms and conditions of this Loan Agreement shall remain
in full force and effect, shall be binding upon the Borrower and the applicable
to the New Loan.
<PAGE>
IN WITNESS WHEREOF the parties have executed the within Loan Agreement
the day and year first above written.
Attest: Borrower:
Unigene Laboratories, Inc.
By
- --------------------------------------- ----------------------------------
Ronald S. Levy, Secretary Warren P. Levy, President
(Seal)
Witness: Lender:
- ---------------------------------- ----------------------------------
Jay Levy
- ---------------------------------- ----------------------------------
Warren P. Levy
- ---------------------------------- ----------------------------------
Ronald S. Levy
EXHIBIT 10.22
<PAGE>
EXHIBIT 10.22
PROMISSORY NOTE
$700,000.00 Dated: June 29, 1995
FOR VALUE RECEIVED, UNIGENE LABORATORIES, INC., a Delaware
corporation authorized to do business in the State of New Jersey (the
"Undersigned") promises to pay the order of JAY LEVY, WARREN P. LEVY and RONALD
S. LEVY jointly (the "Lender"), at their offices at 110 Little Falls Road,
Fairfield, New Jersey, the sum of SEVEN HUNDRED THOUSAND and 00/100
($700,000.00) DOLLARS or so much thereof as may be advanced hereunder from time
to time but not in excess of Seven Hundred Thousand and 00/100 ($700,000.00)
Dollars in the aggregate at any point in time (hereinafter referred to as the
"Principal") in lawful money of the United States of America with interest,
calculated on the basis of a 360 day year, for the actual number of days
involved, on the unpaid balance from the date of this Promissory Note ("Note")
at the rate set forth hereafter until paid.
The rate of interest on the SEVEN HUNDRED THOUSAND and 00/100
($700,000.00) DOLLARS shall be at the Merrill Lynch Margin Loan Rate as
announced from time to time.
annum.
Payment of Principal shall be made upon demand but in any event not
later than February 10, 1997. Interest only will be payable monthly in arrears
on the first day of each month commencing October 1, 1995.
1. As security for the payments of monies owing hereon, the undersigned
has delivered to Lender a Security Agreement (the "Security Agreement")
respecting its assets and equipment located at its leased business premises at
83 Fulton Street, Boonton, New Jersey (the "Secured Assets").
2. The Undersigned agrees with the Lender hereof:
(a) to claim no deduction upon the assessed value of such
Secured Assets on account of the monies owing hereon;
(b) to pay all taxes, assessments, or other governmental
charges levied or assessed against the Secured Assets as the same shall become
due and payable unless same are being contested in good faith in which event,
the same shall, if requested, be paid to Lender;
(c) to keep the Secured Assets insured for the benefit of the
Lender hereof against damage or loss by fire and such other hazards as the
Lender hereof shall specify, by insurers and in amounts reasonable approved by
the Lender hereof, and to deliver such policy or policies of insurance to the
Lender hereof; and
(d) to keep the Secured Assets in good repair and in a
condition satisfactory to the Lender hereof.
The Undersigned further agrees that, should default be made
with regard to the above agreements, the Lender, at its option, may pay such
amount or amounts and the amount so paid shall be added to the amount owing
hereunder and shall be due and payable on demand, with interest at the rate set
forth above.
3. This Note, at the option of the Lender hereof, shall become
immediately due and payable in full in the event of any of the following:
(a) ten (10) days' default in any payment of interest due on
this Note;
(b) default in the payment of principal due on this Note;
(c) the Undersigned shall (i) apply for or consent to the
appointment of a receiver, trustee or liquidator of the Undersigned for all or a
substantial part of its properties or assets, (ii) admit in writing its
inability to pay its debts as they mature, (iii) make a general assignment for
the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent, or (v)
file a voluntary petition in bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation law or statute, or an answer
admitting the material allegations of a petition filed against it in any
proceeding under any such law or if corporation action shall be taken by the
Undersigned for the purpose of effecting any of the foregoing; or
(d) an order, judgment or decree shall be entered, without the
application, approval or consent of the Undersigned by any Court of competent
jurisdiction, approving or seeking reorganization of the Undersigned or of all
of a substantial part of the properties or assets of the Undersigned, or
appointing a receiver, trustee or liquidator of the Undersigned and such order,
judgment or decree shall continue unstayed and in effect for any period of
forty-five (45) days or more;
(e) failure of the Undersigned to comply with the terms and
conditions of the Security Agreement of even date herewith given by the
Undersigned as Borrower to the Lender as Secured Party, or failure by the
Undersigned to comply with the terms and conditions of the Loan Agreement or of
any document collateral to this transaction;
(f) any default by the Undersigned in any payment of principal
or interest due on any other note or obligation of the Undersigned to Lender; or
(g) a default is made in the repayment of any mortgage
indebtedness with regard to the premises which the undersigned owns and in which
the Secured Assets are located.
4. Any notice provisions contained in the Loan Agreement or the
Security Agreement shall also apply hereunder.
5. Presentment, dishonor and notice of dishonor are hereby waived.
6. Upon nonpayment of this Note at its stated or accelerated maturity,
the Lender may, in addition to such other and further rights and remedies
provided by law, or by the Security Agreement referred to above:
(a) collect interest from the date of such maturity on the
principal balance owing hereon at the interest rate(s) set forth herein;
(b) hold as security for the payment hereof any other property
heretofore or hereafter delivered by the Undersigned into the custody, control
or possession of the Lender for any reason or purpose whatsoever.
7. If the Lender of the Note has not received the full amount of
payment of interest due by the end of the ten (10) calendar days after the date
it is due and payable, a late charge of five (5%) percent of the overdue payment
shall be immediately due and payable, which charge shall be for the purpose of
defraying expenses incident to handling such delinquent payments. This charge
shall be in addition to, and not in lieu of, any other remedy Lender may have
and is in addition to Lender's right to collect reasonable fees and charges of
any agents or attorneys which Lender employs in connection with any non-payment
or other event of default. Acceptance by the Lender of payment of a late charge
shall in no way be considered to be an election of remedies or waiver by the
Lender of rights at law or under this Note, or the Security Agreement. Such late
charges if not previously paid shall become part of the indebtedness evidenced
hereby, and shall, at the option of the Lender, be added t o any succeeding
monthly payment due under this Note. Failure to pay such late charges with such
succeeding monthly payment shall constitute an event of default and such late
charges shall bear interest at the default rate as hereafter provided from the
date due.
8. Upon the occurrence of an event of default (including, without
limitation, the failure of Borrower to pay any sum herein specified when due),
the unpaid principal sum evidenced by this Note together with all accrued and
unpaid interest thereon, and all other sums evidenced and/or secured by the Note
and the Security Agreement, Loan Agreement and other loan documents given in
connection herewith shall bear interest at a rate per annum referred to as the
Default Rate, which shall be equal to a lesser of: (x) the highest rate of
interest permitted to be contracted for under the laws of the State, or (y) the
interest rate first set forth plus five (5%) percent per annum. The Default Rate
shall be in lieu of any other interest rate otherwise applicable and shall
commence, without notice, immediately upon and from the occurrence of any such
event of default effective as of the due date of the payment in default and
shall continue until all defaults are cured and all sums then due and payable
under the Note and other loan documents are paid in full.
9. Borrower shall have the right to prepay this Note in full or in part
at any time.
10. If this Note is referred to an attorney for collection, the
Undersigned agrees that reasonable attorney's fees shall be added to such amount
and shall be payable thereon.
11. This Note is binding on the Undersigned, its successors and
assigns.
12. If there are any inconsistencies between the Note and the Security
Agreement, the terms of the Security Agreement shall prevail.
IN WITNESS WHEREOF, the Undersigned has executed this Note on the date
first above written.
Attest: Unigene Laboratories, Inc.
________________________________ By ________________________
Ronald S. Levy, Secretary Warren P. Levy, President
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Unigene Laboratories, Inc.:
We consent to incorporation by reference in the Registration Statements (No.
33-18890 and the Registration Statement filed March 22, 1996) on Form S-8 of
Unigene Laboratories, Inc. of our report dated March 22, 1996, relating to the
balance sheets of Unigene Laboratories, Inc. as of December 31, 1995 and 1994,
and the related statements of operations, stockholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1995, which
report appears in the December 31, 1995 annual report on Form 10-K of Unigene
Laboratories, Inc.
Our report dated March 22, 1996 contains an explanatory paragraph that states
that the Company has suffered recurring losses from operations and has a net
working capital deficiency, which raise substantial doubt about its ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
KPMG Peat Marwick LLP
New York, New York
March 28, 1996
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