FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission file number 0-16005
Unigene Laboratories, Inc.
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(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 No.)
110 Little Falls Road, Fairfield, New Jersey 07004
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 882-0860
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- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $.01 Par Value--38,529,932 shares as of August 1, 1998
<PAGE>
INDEX
UNIGENE LABORATORIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed balance sheets-
June 30, 1998 and December 31, 1997
Condensed statements of operations-
Three months and six months ended June 30, 1998 and 1997
Condensed statements of cash flows-
Six months ended June 30, 1998 and 1997
Notes to condensed financial statements-
June 30, 1998
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Item 4. Submission of Matters to a Vote of
Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
UNIGENE LABORATORIES, INC.
CONDENSED BALANCE SHEETS
June 30 December 31
1998 1997
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ......................... $ 3,547,461 $ 2,126,327
Prepaid expenses and other current assets ......... 652,943 834,245
------------ ------------
Total current assets ......................... 4,200,404 2,960,572
Property, plant and equipment-net
of accumulated depreciation and amortization ...... 8,744,590 9,298,445
Patents and other assets .............................. 1,729,558 1,432,883
------------ ------------
$ 14,674,552 $ 13,691,900
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................. $ 1,459,839 $ 1,041,529
Accrued expenses .................................. 1,059,018 999,212
Notes payable - stockholders ...................... 610,000 610,000
------------ ------------
Total current liabilities ........................... 3,128,857 2,650,741
Note payable - stockholders ........................... 655,000 655,000
5% convertible debentures (Note B) .................... 4,000,000 --
9.5% convertible debentures ........................... 502,694 502,694
10% convertible debentures ............................ 450,000 450,000
Stockholders' equity:
Common stock-par value $.01 per share;
authorized 60,000,000 shares, issued
38,537,222 shares in 1998 and 38,517,722 in 1997 385,372 385,177
Additional paid-in capital ........................ 63,520,307 63,499,439
Accumulated deficit ............................... (57,966,647) (54,450,120)
Less: Treasury stock, at cost, 7,290 shares ....... (1,031) (1,031)
------------ ------------
Total stockholders' equity ................... 5,938,001 9,433,465
------------ ------------
$ 14,674,552 $ 13,691,900
============ ============
</TABLE>
See notes to condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
UNIGENE LABORATORIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------------------ -------------------------------
1998 1997 1998 1997
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Licensing and other revenue ....... $ 142 $ 42 $ 2,011,857 $ 1,484
------------ ------------ ------------ -------------
Operating expenses:
Research and development ...... 2,256,358 2,210,570 4,406,672 4,403,531
Settlement of contractual right -- -- -- 1,669,063
General and administrative .... 568,342 444,581 1,057,528 994,597
------------ ------------ ------------ -------------
2,824,700 2,655,151 5,464,200 7,067,191
------------ ------------ ------------ -------------
Operating loss .................... (2,824,558) (2,655,109) (3,452,343) (7,065,707)
------------ ------------ ------------ -------------
Other income (expense):
Interest/other income .......... 13,754 39,209 44,094 87,407
Interest expense ............... (57,023) (57,699) (108,278) (131,300)
------------ ------------ ------------ -------------
(43,269) (18,490) (64,184) (43,893)
------------ ------------ ------------ -------------
Net loss .......................... $ (2,867,827) $ (2,673,599) $ (3,516,527) $ (7,109,600)
============ ============ ============ =============
Net loss per share, basic ......... $ (.07) $ (.07) $ (.09) $ (.19)
============ ============ ============ =============
Net loss per share, diluted ....... $ (.07) $ (.07) $ (.09) $ (.19)
============ ============ ============ =============
Weighted average number of shares
outstanding 38,528,152 37,148,345 38,519,341 36,586,995
============ ============ ============ =============
</TABLE>
See notes to condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
UNIGENE LABORATORIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30
----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Net cash used for operating activities ..................... $(2,084,404) $(4,328,679)
----------- -----------
Investing activities:
Purchase of equipment and furniture .................... (200,661) (147,809)
Increase in patents and other assets ................... (91,638) (80,962)
Construction of leasehold improvements ................. (2,484) (18,298)
----------- -----------
(294,783) (247,069)
----------- -----------
Financing activities:
Issuance of debt, net of related expenses .............. 3,779,258 --
Exercise of stock options and warrants ................. 21,063 874,425
----------- -----------
3,800,321 874,425
----------- -----------
Net increase (decrease) in cash and cash equivalents ....... 1,421,134 (3,701,323)
Cash and cash equivalents at beginning of year ............. 2,126,327 4,491,386
----------- -----------
Cash and cash equivalents at end of period ................. $ 3,547,461 $ 790,063
=========== ===========
Supplemental cash flow information:
Conversion of convertible debentures and
accrued interest, net of related offering expenses
into common stock ....................................... -- $ 1,181,136
Conversion of notes payable - stockholders into common stock -- $ 200,000
Interest paid .............................................. $ 30,287 $ 46,669
</TABLE>
See notes to condensed financial statements.
<PAGE>
UNIGENE LABORATORIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
NOTE A-BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation have been included. Operating results for the six month
period ended June 30, 1998 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1998. For further information,
please refer to the Company's financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended December
31, 1997.
NOTE B - DEBT FINANCING
In June 1998, the Company completed a private placement of $4 million of 5%
Convertible Debentures (the "5% Debentures"). The Company received net proceeds
of approximately $3.8 million as a result of this placement. The 5% Debentures
mature December 31, 2001. Interest on the 5% Debentures is payable in cash or,
at the option of the Company, in Common Stock. Beginning January 1, 1999, the 5%
Debentures are convertible into (i) Common Stock at a conversion price (the
"Conversion Price") equal to the lower of (a) 110% of the average of the closing
bid prices of the Common Stock on the Nasdaq Stock Market during the fourth
quarter of 1998 (the "Cap Price") and (b) the average of the four lowest closing
bid prices of the Common Stock during the 18 trading days prior to the date of
conversion (the "Market Price") and (ii) warrants, expiring five years from the
date of issuance, to purchase a number of shares of Common Stock equal to 4% of
the number of shares issuable upon conversion at an exercise price equal to 125%
of the Conversion Price. Up to 15% of the original principal amount of the 5%
Debentures may be converted per month on a non-cumulative basis; provided,
however, that if the Market Price is greater than or equal to 120% of the Cap
Price on the last conversion date in any month, then up to 20% of the original
principal amount may be converted in such month. If a Debenture holder submits a
Debenture for conversion and the Market Price is less than or equal to $1.1156,
the Company may redeem the Debenture in consideration of (i) an amount equal to
the principal amount thereof plus a premium of 12% per year from the date of
issuance and (ii) warrants, expiring five years from the date of issuance, to
purchase a number of shares of Common Stock equal to 25% of the number of shares
that would have been issuable upon conversion of the Debenture at an exercise
price equal to 135% of the Conversion Price at the time of redemption. In no
event will the Company issue more than an aggregate of 3,852,500 shares of
Common Stock (the "Share Limit") upon conversion of all of the 5% Debentures,
upon exercise of all warrants issued upon conversion or redemption, and as
payment of interest on the 5% Debentures. If conversion of any 5% Debentures or
exercise of any warrants would require the issuance of shares in excess of the
Share Limit, the Company will, as the case may be, redeem such debentures at a
price equal to 120% of the principal amount thereof or pay in cash the
difference between the market price and exercise price of the number of shares
that would have been issuable upon exercise of such warrants but for the Share
Limit.
<PAGE>
NOTE C - CONVERSION OF NOTES PAYABLE TO STOCKHOLDERS INTO COMMON STOCK
In 1995, executive officers of the Company, Warren Levy, Ronald Levy and Jay
Levy, and another member of the Levy family loaned to the Company an aggregate
of $1,905,000. A total of $440,000 of these loans was repaid in 1996. In May
1997, an aggregate of $200,000 in principal amount of these loans was converted
into 57,200 shares of the common stock of the Company at a conversion price of
$3.4965 per share. On August 6, 1998, an aggregate of $225,000 in principal
amount of these loans was converted into 163,635 shares of common stock at a
conversion price of $1.375 per share. The closing price of the common stock on
August 5, 1998, as reported by the Nasdaq Stock Market, was $1.31 per share.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Revenue for the first half of 1998 consisted primarily of a $2 million milestone
payment from Warner-Lambert Company, under a July 1997 licensing agreement, as
the result of the achievement of a benchmark in the development of an oral
calcitonin product for treating osteoporosis. Revenue for the first half of 1997
represents hormone and enzyme sales.
Research and development, the Company's largest expense, increased 2% from
$2,211,000 to $2,256,000 and less than 1% from $4,404,000 to $4,407,000 for the
three months and six months ended June 30, 1998, respectively, as compared to
the same periods in 1997. The increases were primarily attributable to higher
personnel and regulatory expenses, partially offset by decreased expenditures
for production and laboratory supplies.
In February 1997, the Company issued an aggregate of 490,000 shares of its
Common Stock to the holders of the Company's 9.5% Senior Secured Convertible
Debentures (the "Debentures") in consideration for the cancellation of an
obligation of the Company to pay to the holders a fee equal to 2% of the sum of
the market value as of December 31, 1998 of all of the Company's outstanding
shares of Common Stock plus the principal amount of all outstanding debt of the
Company, less its cash on deposit, up to a maximum fee of $3,000,000. The
expense associated with this transaction was valued at $1,669,063, based on a
closing price of the Common Stock of $3.40625 on February 7, 1997.
General and administrative expenses increased 28% from $445,000 to $568,000 and
6% from $995,000 to $1,058,000 for the three months and six months ended June
30, 1998, respectively, as compared to the same periods in 1997. The increases
were primarily due to higher public relations and travel expenses, partially
offset by reduced legal fees.
Interest and other income decreased $25,000 and $43,000 for the three months and
six months ended June 30, 1998, respectively, as compared to the same periods in
1997, due to reduced funds available for investment in 1998.
Interest expense decreased $1,000 and $23,000 for the three months and six
months ended June 30, 1998, respectively, as compared to the same periods in
1997, due to a reduction in outstanding debt from the prior year as a result of
conversions in 1997 of the Company's convertible debentures into Common Stock.
As a result of increased operating expenses, net loss increased $194,000 or 7%
for the three months ended June 30, 1998, as compared to the corresponding
period in 1997.
As a result of increased revenue, as well as decreased operating expenses, net
loss decreased $3,593,000 or 51% for the six months ended June 30, 1998, as
compared to the corresponding period in 1997.
As of December 31, 1997, the Company had available for income tax reporting
purposes net operating loss carryforwards in the approximate amount of
$53,400,000, expiring from 1998 through 2012, which are available to reduce
future earnings that would otherwise be subject to federal income taxes. For the
six months ending June 30, 1998, the Company accumulated additional losses of
approximately $3,500,000. In addition, the Company has investment tax credits
and research and development credits in the amounts of $50,000 and $1,984,000,
respectively, which are available to reduce the amount of future federal income
taxes. These credits expire from 1998 through 2012.
<PAGE>
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, 1998, under FASB 109, the
Company had deferred tax assets of approximately $23,400,000, subject to a
valuation allowance of $23,400,000. The deferred tax assets were generated
primarily as a result of the Company's net operating losses and available tax
credits. For the six-month period ended June 30, 1998, the Company's deferred
tax assets and valuation allowances each increased by approximately $1,400,000.
The Company adopted the provisions of SFAS No. 128, "Earnings Per Share" on
December 31, 1997. SFAS 128 establishes standards for computing and presenting
earnings per share ("EPS") and supersedes APB Opinion No. 15, "Earnings Per
Share". It also requires presentation of both basic and diluted EPS for net
income on the face of the income statement and a separate reconciliation of both
EPS amounts. Basic EPS is computed using the weighted average number of common
shares outstanding during the period being reported on. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock at the beginning of
the period being reported on. The adoption of SFAS 128 has had no effect on the
Company's reported per share results.
LIQUIDITY AND CAPITAL RESOURCES
The Company has constructed a cGMP peptide production facility in Boonton, New
Jersey in a shell building that is being leased under a ten-year net lease which
began in February 1994. The Company has two ten-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, have
totaled approximately $12 million. The improvements and equipment were primarily
financed from the remainder of the $17 million of proceeds received as a result
of the exercise by the warrant holders of the Company's Class A Warrants in 1991
and the proceeds of $2.2 million from the sale of stock in 1994. There are
currently no material commitments outstanding for capital expenditures relating
to either the Boonton facility or the Company's facility in Fairfield, New
Jersey.
The Company, at June 30, 1998, had cash and cash equivalents of $3,547,000, an
increase of $1,421,000 from December 31, 1997.
The Company's ability to generate cash from operations will depend primarily
upon signing research or licensing agreements, achieving defined benchmarks in
such agreements, receiving regulatory approval for its licensed products, and
the commercial sale of these products.
In 1996, the Company entered into a joint venture agreement with a
pharmaceutical company in China. This joint venture contributed $300,000 to 1996
revenues. It is uncertain whether any additional revenues will be recognized or
received in connection with this joint venture.
In July 1997, the Company entered into an agreement under which it granted to
the Parke-Davis division of Warner-Lambert Company a worldwide license to use
the Company's oral calcitonin technology. Upon execution of the agreement, the
Company received $6 million in payments from Warner-Lambert, consisting of a $3
million licensing fee and a $3 million equity investment by Warner-Lambert
(695,066 shares of Common Stock were purchased at a price of approximately $4.32
per share). In addition, the Company is eligible to receive up to an additional
<PAGE>
$48.5 million in milestone payments during the course of the development program
if specified milestones are achieved. The first of these milestones was achieved
in February 1998, resulting in a payment to the Company of $2 million. Another
$13.5 million would be received prior to the commencement of Phase I clinical
studies in the U.S. Early-stage milestones primarily relate to the product's
performance characteristics, while the latter-stage milestones are primarily
related to regulatory filings and approvals. If the product is successfully
commercialized, the Company also would receive revenue from royalties on product
sales by Warner-Lambert and its affiliates and from the sale of raw material to
Warner-Lambert. The Company has retained the right to license the use of its
technologies for injectable and nasal formulations of calcitonin on a worldwide
basis. Management is actively seeking other licensing and/or supply agreements
with pharmaceutical companies for injectable and nasal forms of calcitonin.
However, there is no assurance that any additional revenue-generating agreements
will be signed.
In June 1998, the Company completed a private placement of $4 million of 5%
Convertible Debentures. The Company received net proceeds of approximately $3.8
million as a result of this placement. These debentures mature December 31,
2001. Interest on the 5% Debentures is payable in cash or, at the option of the
Company, in Common Stock. Beginning January 1, 1999, the 5% Debentures are
convertible into (i) Common Stock at a conversion price (the "Conversion Price")
equal to the lower of (a) 110% of the average of the closing bid prices of the
Common Stock on the Nasdaq Stock Market during the fourth quarter of 1998 (the
"Cap Price") and (b) the average of the four lowest closing bid prices of the
Common Stock during the 18 trading days prior to the date of conversion (the
"Market Price") and (ii) warrants, expiring five years from the date of
issuance, to purchase a number of shares of Common Stock equal to 4% of the
number of shares issuable upon conversion at an exercise price equal to 125% of
the Conversion Price. Up to 15% of the original principal amount of the 5%
Debentures may be converted per month on a non-cumulative basis; provided,
however, that if the Market Price is greater than or equal to 120% of the Cap
Price on the last conversion date in any month, then up to 20% of the original
principal amount may be converted in such month. If a Debenture holder submits a
Debenture for conversion and the Market Price is less than or equal to $1.1156,
the Company may redeem the Debenture in consideration of (i) an amount equal to
the principal amount thereof plus a premium of 12% per year from the date of
issuance and (ii) warrants, expiring five years from the date of issuance, to
purchase a number of shares of Common Stock equal to 25% of the number of shares
that would have been issuable upon conversion of the Debenture at an exercise
price equal to 135% of the Conversion Price at the time of redemption. In no
event will the Company issue more than an aggregate of 3,852,500 shares of
Common Stock (the "Share Limit") upon conversion of all of the 5% Debentures,
upon exercise of all warrants issued upon conversion or remption, and as payment
of interest on the 5% Debentures. If conversion of any 5% Debentures or exercise
of any warrants would require the issuance of shares in excess of the Share
Limit, the Company will, as the case may be, redeem such debentures at a price
equal to 120% of the principal amount thereof or pay in cash the difference
between the market price and exercise price of the number of shares that would
have been issuable upon exercise of such warrants but for the Share Limit.
The Company's operating cash requirements have increased to approximately $10
million per year with the opening of its peptide manufacturing facility. In
addition, the Company has scheduled principal and interest obligations over the
next several years on its outstanding 5% convertible debentures due December
2001, on its 9.5% convertible debentures due November 1998, on its 10%
convertible debentures due March 1999 and on other indebtedness. However,
because of the current below-market conversion prices of the 9.5% and 10%
debentures, a substantial portion of such debentures has been, and the Company
expects that a substantial portion of the remaining debentures of each series
will be, converted into Common Stock, thereby decreasing the amount of cash
required for principal and interest payments thereon. Interest payments on the
5% Debentures may, at the Company's discretion, be made in cash or stock.
<PAGE>
After receipt of net proceeds of $3.8 million from the aforementioned 5%
Debenture financing in June 1998, management believes that the Company currently
has sufficient financial resources to sustain its operations at the current
level into the fourth quarter of 1998. While the Company expects to achieve
additional milestones under the Warner-Lambert agreement, which will result in
further payments, the timing of such payments is uncertain and the Company may
have to rely on outside sources for financing to sustain the Company's
operations over the near term. However, there is no assurance as to the terms on
which such additional funds would be available or that in such circumstances
sufficient funds could be obtained.
Satisfying the Company's long-term liquidity requirements will require the
successful commercialization of the product licensed to Warner-Lambert or one of
its other calcitonin products. In addition, the commercialization of a
calcitonin product will require the Company to incur additional capital
expenditures, including expenditures to expand or upgrade the Company's
manufacturing operations to satisfy its supply obligations under the
Warner-Lambert license agreement. However, neither the cost or timing of such
capital expenditures are determinable at this time.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or activities of the Company, or industry results, to be materially different
from any future results, performance or activities expressed or implied by such
forward-looking statements. Such factors include: general economic and business
conditions, the financial condition of the Company, competition, the Company's
dependence on other companies to commercialize, manufacture and sell products
using the Company's technologies, the uncertainty of results of preclinical and
clinical testing, the risk of product liability and liability for human clinical
trials, the Company's dependence on patents and other proprietary rights,
dependence on key management officials, the availability and cost of capital,
the availability of qualified personnel, changes in, or the failure to comply
with, governmental regulations, the failure to obtain regulatory approvals of
the Company's products and other factors discussed in the Company's various
filings with the Securities and Exchange Commission.
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds
(a) Not applicable.
(b) Not applicable.
(c) Recent Sales of Unregistered Securities.
On June 29, 1998, the Company sold $4 million in aggregate principal
amount of its 5% convertible debentures due December 31, 2001 (the "5%
Debentures") to The Tail Wind Fund, Ltd. The sale of the 5% Debentures was
effected in reliance on an exemption from registration pursuant to Section 4(2)
of the Securities Act of 1933, as amended.
<PAGE>
Interest on the 5% Debentures is payable in cash or, at the option of the
Company, in Common Stock. Beginning January 1, 1999, the 5% Debentures are
convertible into (i) Common Stock at a conversion price (the "Conversion Price")
equal to the lower of (a) 110% of the average of the closing bid prices of the
Common Stock on the Nasdaq Stock Market during the fourth quarter of 1998 (the
"Cap Price") and (b) the average of the four lowest closing bid prices of the
Common Stock during the 18 trading days prior to the date of conversion (the
"Market Price") and (ii) warrants, expiring five years from the date of
issuance, to purchase a number of shares of Common Stock equal to 4% of the
number of shares issuable upon conversion at an exercise price equal to 125% of
the Conversion Price. Up to 15% of the original principal amount of the 5%
Debentures may be converted per month on a non-cumulative basis; provided,
however, that if the Market Price is greater than or equal to 120% of the Cap
Price on the last conversion date in any month, then up to 20% of the original
principal amount may be converted in such month. If a Debenture holder submits a
Debenture for conversion and the Market Price is less than or equal to $1.1156,
the Company may redeem the Debenture in consideration of (i) an amount equal to
the principal amount thereof plus a premium of 12% per year from the date of
issuance and (ii) warrants, expiring five years from the date of issuance, to
purchase a number of shares of Common Stock equal to 25% of the number of shares
that would have been issuable upon conversion of the Debenture at an exercise
price equal to 135% of the Conversion Price at the time of redemption. In no
event will the Company issue more than an aggregate of 3,852,500 shares of
Common Stock (the "Share Limit") upon conversion of all of the 5% Debentures,
upon exercise of all warrants issued upon conversion or redemption, and as
payment of interest on the 5% Debentures. If conversion of any 5% Debentures or
exercise of any warrants would require the issuance of shares in excess of the
Share Limit, the Company will, as the case may be, redeem such debentures at a
price equal to 120% of the principal amount thereof or pay in cash the
difference between the market price and exercise price of the number of shares
that would have been issuable upon exercise of such warrants but for the Share
Limit.
(d) Not applicable.
ITEM 4. Submission of Matters to a Vote of Security-Holders
(a) The matters described under item 4(c) below were submitted
to a vote of security holders at the Annual Meeting of
Stockholders held on June 30, 1998 (the "Annual Meeting") in
connection with which proxies were solicited pursuant to
Regulation 14A under the Securities Exchange Act.
(b) Not applicable
(c) The following describes the matters voted upon at the
Annual Meeting and sets forth the number of votes cast for,
against or withheld and the number of abstentions as to each
such matter (there were no broker non-votes):
(i) Election of directors:
Nominee For Withheld
------- --- --------
Jay Levy 30,205,557 528,849
Ronald S. Levy 30,210,207 524,199
Warren P. Levy 30,210,207 524,199
Robert G. Ruark 30,215,307 519,099
Robert F. Hendrickson 30,202,457 531,949
Allen Bloom 30,213,507 520,899
(ii) Proposal to ratify the appointment of KPMG Peat
Marwick LLP as auditors of the Company for 1998:
For Against Abstain
--- ------- -------
30,418,859 234,200 81,347
(d) Not applicable.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Purchase Agreement, dated June 29, 1998,
between the Company and The Tail Wind Fund,
Ltd.
10.2 Registration Rights Agreement, dated June 29,
1998, between the Company and The Tail Wind
Fund, Ltd.
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the three
months ended June 30, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
-----------------------
(Registrant)
/s/ Warren P. Levy
August 14, 1998 -----------------------
Warren P. Levy, President
(Chief Executive Officer)
/s/ Jay Levy
August 14, 1998 -----------------------
Jay Levy, Treasurer
(Chief Financial Officer and
Chief Accounting Officer)
EXHIBIT 10.1
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made as of the 29th
day of June, 1998 by and between Unigene Laboratories, Inc., a Delaware
corporation (the "Company"), and The Tail Wind Fund, Ltd., a British Virgin
Islands limited liability company (the "Investor").
In consideration of the mutual promises made herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Definitions. The following terms, as used herein, have the
following meanings:
1.1 "Affiliate" means, with respect to any Person, any other
Person which directly or indirectly controls, is controlled by, or is under
common control with, such Person.
1.2 "Transaction Agreements" means this Agreement, the
Registration Rights Agreement, the Debentures and the Warrants.
1.3 "Closing" means the consummation of the transactions
contemplated by this Agreement, which shall occur simultaneously with the
execution hereof.
1.4 "Common Stock" means the common stock, par value $.01 per
share, of the Company.
1.5 "Control" means the possession , directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, by contract or
otherwise.
1.6 "Debentures" mean the Convertible Debentures issued to the
Investor in the aggregate principal amount of $4,000,000, the form of which is
attached hereto as Exhibit A.
1.7 "Material Adverse Effect" means a material adverse effect
on the (i) condition (financial or otherwise), business, assets, results of
operations or prospects of the Company and its subsidiaries, taken as a whole;
(ii) ability of the Company to perform any of its material obligations under the
terms of this Agreement; or (iii) rights and remedies of the Investor under the
terms of this Agreement.
1.8 "Person" means an individual, corporation, partnership,
trust, business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
1.9 "Registration Rights Agreement" means the Registration
Rights Agreement relating to the Common Stock issuable pursuant to the
conversion of the Debentures and the exercise of the Warrants, in the form
attached hereto as Exhibit B, to be entered into as of the date hereof between
the Company and the Investor.
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1.10 "SEC" means the United States Securities and Exchange
Commission.
1.11 "SEC Filings" has the meaning set forth in Section 4.5.
1.12 "Securities" means the Debentures, the Common Stock
issuable upon the conversion of, or payable as accrued interest on, the
Debentures, the Warrants and the Common Stock issuable upon the exercise of
Warrants.
1.13 "1933 Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
1.14 "1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
1.15 "Warrants" mean the Warrants issuable upon the conversion
or redemption of the Debentures, the form of which is attached hereto as Exhibit
C.
2. Purchase and Sale of Debentures. In consideration of the purchase
price and subject to the terms and conditions of this Agreement, and in reliance
on the representations and warranties contained herein, the Investor hereby
purchases and the Company hereby sells and issues to the Investor $4,000,000
principal amount of Debentures in Debenture forms of $200,000 face amount each.
3. Payment of Purchase Price. Simultaneously with its execution hereof,
the Investor shall cause the applicable purchase price to be paid in full by
wire transfer to an account(s) designated to such Investor in writing by the
Company.
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investor that:
4.1 Organization, Good Standing and Qualification. The Company
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business and own its properties as now conducted and
owned. The Company and each of its subsidiaries is duly qualified or licensed to
do business as a foreign corporation and in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of property
makes such qualification or licensing necessary unless the failure to so qualify
or be licensed would not have a Material Adverse Effect.
4.2 Authorization. The Company has full corporate power and
authority and has taken all requisite corporate action on the part of the
Company, its officers, directors and stockholders necessary for (i) the
authorization, execution and delivery of the Transaction Agreements, (ii) the
performance of all obligations of the Company hereunder or thereunder, and (iii)
the authorization, issuance (and reservation for issuance, in the case of Common
Stock issuable upon conversion of, and as payment of interest on, Debentures or
exercise of Warrants in accordance with their terms) and delivery of the
Securities in accordance with the terms hereof. The Transaction Agreements
constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms except as such enforcement
may be limited by (a) applicable bankruptcy, insolvency, reorganization,
voidable preference, fraudulent conveyance and other similar laws affecting the
rights or remedies of creditors generally and (b) the exercise of judicial
discretion in accordance with general principles of equity (whether applied by a
court of law or of equity).
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4.3 Valid Issuance.
(a) The Company has reserved 3,852,500 shares of
Common Stock for issuance upon conversion of, and as payment of interest on, the
Debentures and exercise of the Warrants, and such shares, when issued in
accordance with the respective terms of the Debentures and the Warrants, will be
duly authorized, validly issued, fully paid, non-assessable and free and clear
of all encumbrances and restrictions, except for restrictions on transfer
imposed by applicable securities laws.
(b) The authorized capital stock of the Company
consists solely of 60,000,000 shares of Common Stock, of which 38,537,222 shares
are issued and outstanding, and there are no other outstanding shares of capital
stock of the Company. All of the issued and outstanding shares of the Company's
Common Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights. No Person is entitled to preemptive
or similar statutory or contractual rights with respect to any securities of the
Company. Except as set forth on Schedule 4.3 and other than options granted to
employees, directors and consultants, there are no outstanding warrants,
options, convertible securities or other rights, agreements or arrangements of
any character under which the Company is or may be obligated to issue any equity
securities of any kind, or to transfer any equity securities of any kind, and
the Company and its subsidiaries do not have any present plan or intention to
issue any equity securities of any kind, or to transfer any equity securities of
any kind owned by them other than as contemplated herein. Except as set forth on
Schedule 4.3, the Company does not know (and has not conducted an investigation)
of any voting agreements, buy-sell agreements, option or right of first purchase
agreements or other agreements of any kind among any of the securityholders of
the Company relating to the securities held by them. Except as set forth on
Schedule 4.3, the Company has not granted any Person the right to require the
Company to register any securities of the Company under the 1933 Act, whether on
a demand basis or in connection with the registration of securities of the
Company for its own account or for the account of any other Person.
(c) There are currently 1,913,215 shares of Common
Stock issuable pursuant to outstanding options granted by the Company to
directors, employees and consultants. The number of outstanding shares of Common
Stock, as indicated in Section 4.3(b) above, plus the number of shares of Common
Stock issuable pursuant to outstanding rights and agreements (other than the
Securities) on a fully diluted basis, assuming the complete exercise or
conversion of all rights to acquire capital stock of the Company at the
conversion or exercise price in effect on the date hereof until such rights and
subsequent rights incident to exercise or conversion are fully exercised or
converted for Common Stock, together represent 46,032,308 shares of Common Stock
on the date hereof.
4.4 Consents. Assuming the accuracy of the Investor's
representations contained herein, the execution, delivery and performance by the
Company of the Transaction Agreements and the offer, issue and sale of the
Securities require no consent of, action by or in respect of, or filing with,
any Person, governmental body, agency, or official other than filings made
pursuant to the Registration Rights Agreement, filings that have been made
pursuant to applicable state securities laws and post-sale filings pursuant to
applicable state and federal securities laws and the requirements of Nasdaq,
which the Company undertakes to file within the applicable time periods.
<PAGE>
4.5 Delivery of SEC Filings; Business. The Company has
delivered to the Investor true and correct copies of (i) its most recent Annual
Report on Form 10-K, (ii) its quarterly reports on Form 10-Q for each fiscal
quarter subsequent to that fiscal year end, and (iii) any other documents filed
with the SEC since the filing of its most recent Annual Report on Form 10-K
(collectively, the "SEC Filings"). The Company and its subsidiaries are engaged
only in the business described in the SEC Filings and the SEC Filings contain an
accurate description of the business of the Company and its subsidiaries.
4.6 Use of Proceeds. The proceeds of the sale of the
Securities hereunder shall be used by the Company for working and operating
capital.
4.7 No Material Adverse Change. Since the filing of the
Company's most recent Annual Report on Form 10-K or as otherwise identified and
described in subsequent reports filed by the Company pursuant to the 1934 Act,
there has not been:
(i) any change in the consolidated assets,
liabilities, financial condition or operating results of the Company from that
reflected in the financial statements included in the Company's most recent
Quarterly Report on Form 10-Q, except changes in the ordinary course of business
which have not had, in the aggregate, a Material Adverse Effect;
(ii) any declaration or payment of any dividend, or
any authorization or payment of any distribution, on any of the capital stock of
the Company, or any redemption or repurchase of any securities of the Company;
(iii) any material damage, destruction or loss,
whether or not covered by insurance, to any assets or properties of the Company
or any of its subsidiaries;
(iv) any waiver by the Company or any of its
subsidiaries of a valuable right or of a material debt owed to it;
(v) any satisfaction or discharge of any lien, claim
or encumbrance or payment of any obligation by the Company or any of its
subsidiaries, except in the ordinary course of business and which is not
material to the assets, properties, financial condition, operating results or
business of the Company and its subsidiaries taken as a whole (as such business
is presently conducted and as it is proposed to be conducted);
(vi) any material change or amendment to a material
contract or arrangement by which the Company or any of their subsidiaries or any
of its assets or properties is bound or subject;
(vii) any material change in any compensation
arrangement or agreement with any employee of the Company or any of its
subsidiaries who now earns, or who would earn as a result of such change, in
excess of $100,000 per annum, or any other officer of the Company or any of its
subsidiaries;
(viii) any labor difficulties or labor union
organizing activities with respect to employees of the Company or any of its
subsidiaries;
(ix) any transaction entered into by the Company or
any of its subsidiaries other than in the ordinary course of business or
pursuant to this Agreement; or
<PAGE>
(x) any other event or condition of any character
that might have a Material Adverse Effect.
4.8 SEC Filings; Material Contracts.
(a) As of its filing date, each report filed by the
Company with the SEC pursuant to the 1934 Act, complied as to form in all
material respects with the requirements of the 1934 Act and did not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(b) Each registration statement and any amendment
thereto filed by the Company pursuant to the 1933 Act, as of the date such
statement or amendment became effective, complied as to form in all material
respects with the 1933 Act and did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; and each prospectus
filed pursuant to Rule 424(b) under the 1933 Act, as of its issue date and as of
the closing of any sale of securities pursuant thereto did not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(c) Except those filed as exhibits to the SEC Filings
and as set forth on Schedule 4.3 hereto, there are no agreements or instruments
currently in force and effect that constitute a "material contract" (as such
term is defined in Item 601(b)(10) of Regulation S-K) of the Company or that
constitute a warrant, option, convertible security or other right, agreement or
arrangement of any character under which the Company is or may be obligated to
issue any equity security of any kind, or to transfer any equity security of any
kind, other than options issued to directors, employees and consultants.
4.9 No Breach, Violation or Default. The execution, delivery
and performance of the Transaction Agreements by the Company and the issuance
and sale of the Securities (assuming the accuracy of the representations of the
Investor contained herein) will not result in a breach or violation of any of
the terms and provisions of, or constitute a default under (i) any statute,
rule, regulation or order of any governmental agency or body or any court,
domestic or foreign, having jurisdiction over the Company or any subsidiary of
the Company or any of their properties, or (ii) except to the extent such
breach, violation or default would not have a Material Adverse Effect, any
agreement or instrument to which the Company or any such subsidiary is a party
or by which the Company or any such subsidiary is subject, or the Certificate of
Incorporation or By Laws of the Company or any such subsidiary.
4.10 Tax Returns and Payments. The Company and its
subsidiaries have correctly and timely prepared and filed all tax returns
required to have been filed by it with all appropriate federal, state and local
governmental agencies and timely paid all taxes owed by them. The charges,
accruals and reserves on the books of the Company and its subsidiaries in
respect of taxes for all fiscal periods are adequate in all material respects,
and there are no material unpaid assessments of the Company or any subsidiary
nor, to the knowledge of the Company, any basis for the assessment of any
additional taxes, penalties or interest for any fiscal period or audits by any
federal, state or local taxing authority except such as which are not material.
<PAGE>
All material taxes and other assessments and levies that the Company or any
subsidiary is required to withhold or to collect for payment have been duly
withheld and collected and paid (if due) to the proper governmental entity or
third party. There are no tax liens or claims pending or threatened against the
Company or any subsidiary or any of their respective assets or property. There
are no outstanding tax sharing agreements or other such arrangements between the
Company or any subsidiary and any other corporation or entity.
4.11 Title to Properties. Except as disclosed in the SEC
Filings or Schedule 4.11, the Company and its subsidiaries have good and
marketable title to all real properties and all other properties and assets
owned by them, in each case free from liens, encumbrances and defects that would
materially affect the value thereof or materially interfere with the use made or
currently planned to be made thereof by them; and except as disclosed in the SEC
Filings, the Company and its subsidiaries hold any leased real or personal
property under valid and enforceable leases with no exceptions that would
materially interfere with the use made or currently planned to be made thereof
by them.
4.12 Certificates, Authorities and Permits. The Company and
its subsidiaries possess adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by them and have not received any notice of proceedings relating to
the revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect.
4.13 No Labor Disputes. No labor dispute with the employees of
the Company or any subsidiary exists or, to the knowledge of the Company, is
imminent that might have a Material Adverse Effect.
4.14 Intellectual Property. Except as set forth in Schedule
4.14, the Company and its subsidiaries own or possess adequate trademarks and
trade names and have all other rights to inventions, know-how, patents,
copyrights, confidential information and other intellectual property
(collectively, "Intellectual Property Rights"), free and clear of all liens,
security interests, charges, encumbrances, equities and other adverse claims,
necessary to conduct the business now operated by them, or presently employed by
them, and presently contemplated to be operated by them, and have not received
any notice of infringement of or conflict with asserted rights of others with
respect to any Intellectual Property Rights that, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate have
a Material Adverse Effect. Schedule 4.14 sets forth a description of all U.S.
patents owned or possessed by the Company or any of its subsidiaries. No
proprietary technology of any Person was used in the design or development by
the Company of (or otherwise with respect to) any of the Intellectual Property
Rights, which technology was not properly acquired by the Company from such
Person.
4.15 Environmental Matters. Neither the Company nor any of its
subsidiaries is in violation of any statute, rule, regulation, decision or order
of any governmental agency or body or any court, domestic or foreign, relating
to the use, disposal or release of hazardous or toxic substances or relating to
the protection or restoration of the environment or human exposure to hazardous
or toxic substances (collectively, "Environmental Laws"), owns or operates any
real property contaminated with any substance that is subject to any
Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, or is subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim would
individually or in the aggregate have a Material Adverse Effect; and the Company
is not aware of any pending investigation that might lead to such a claim.
<PAGE>
4.16 Litigation. Except as disclosed in the SEC Filings, there
are no pending actions, suits or proceedings against or affecting the Company,
any of its subsidiaries or any of their respective properties that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect or which are
otherwise material in the context of the sale of the Securities; and to the
Company's knowledge, no such actions, suits or proceedings are threatened or
contemplated.
4.17 Financial Statements. The financial statements included
in each SEC Filing present fairly and accurately the consolidated financial
position of the Company and its subsidiaries as of the dates shown and their
consolidated results of operations and cash flows for the periods shown, and
such financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis.
4.18 Insurance Coverage. The Company and its subsidiaries
maintain in full force and effect insurance coverage that is customary for
comparably situated companies for the business being conducted, and properties
owned or leased, by the Company and its subsidiaries, and the Company reasonably
believes such insurance coverage to be adequate against all liabilities, claims
and risks against which it is customary for comparably situated companies to
insure.
4.19 Compliance with Nasdaq Continued Listing Requirements.
The Company is in compliance with all applicable Nasdaq National Market
continued listing requirements. There are no proceedings pending or threatened
against the Company relating to the continued listing of the Common Stock on the
Nasdaq National Market and the Company has not received any notice of, nor to
the knowledge of the Company is there any basis for, the delisting of the Common
Stock from the Nasdaq National Market.
4.20 Acknowledgment of Dilution. The number of shares of
Common Stock issuable upon conversion of the Debentures may increase
substantially in certain circumstances, including the circumstances wherein the
trading price of the Common Stock declines. The Company's executive officers and
directors have studied and fully understand the nature of the Securities being
sold hereunder and recognize that they have a potential dilutive effect. The
board of directors of the Company has concluded in its good faith business
judgment that such issuance is in the best interests of the Company. The Company
acknowledges that its obligations to issue shares of Common Stock in accordance
with the terms of the Debentures upon conversion of the Debentures or to redeem
Debentures are binding upon it and enforceable regardless of the dilution that
such issuance may have on the ownership interest of the other stockholders of
the Company. In addition, the Company acknowledges that in the event there are
insufficient shares of Common Stock to fund the full conversion of all
Debentures, it will have an obligation to redeem the balance of the Debentures
for cash.
4.21 Brokers and Finders. The Company has taken no action
which would give rise to any claim by any Person for a broker's commission,
finder's fee or similar payment by the Company or any Investor related to this
Agreement or the transactions contemplated hereby, except for amounts which
shall be paid exclusively by the Company pursuant to separate agreement.
4.22 No Directed Selling Efforts or General Solicitation.
Neither the Company nor any Person acting on its behalf has conducted any
general solicitation or general advertising (as those terms are used in
Regulation D under the 1933 Act) in connection with the offer or sale of any of
the Securities.
<PAGE>
4.23 No Integrated Offering. Neither the Company nor any of
its Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
offer and sale of the Securities pursuant to this Agreement under the 1933 Act
or cause the offering of the Securities pursuant to this Agreement to be
integrated with any prior offering(s) by the Company for purposes of the 1933
Act or any applicable shareholder approval provisions, including those under the
rules of Nasdaq.
4.24 Disclosures. No representation or warranty made by the
Company under any Section hereof or in the Transaction Agreements, contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the respective statements contained herein or therein, in light of the
circumstances under which the statements were made, not misleading.
5. Representations and Warranties of the Investor. The Investor hereby
represents and warrants to the Company that:
5.1 Organization and Existence. The Investor is a validly
existing corporation or limited liability company and has all requisite
corporate or limited liability company power and authority to invest in the
Securities pursuant to this Agreement.
5.2 Authorization. The execution, delivery and performance by
the Investor of the Transaction Agreements have been duly authorized and each of
the Transaction Agreements constitutes the valid and legally binding obligation
of the Investor, enforceable against the Investor in accordance with its terms.
5.3 Purchase Entirely for Own Account. The Securities to be
received by such Investor hereunder are being acquired entirely for the
Investor's own account, not as nominee or agent, and not with a view to the
resale or distribution of any part thereof, and the Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same. The Investor is not a registered broker dealer or an entity engaged in
the business of being a broker dealer.
5.4 Investment Experience. The Investor acknowledges that it
can bear the economic risk and complete loss of its investment in the Securities
and has such knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of the investment contemplated
hereby.
5.5 Disclosure of Information. The Investor has had an
opportunity to ask questions and receive answers from authorized officers and
other representatives of the Company regarding the Company, its business and the
terms and conditions of the offering of the Securities and has been furnished
with all information such Investor deemed necessary to make an informed
investment decision with respect to the Securities. Neither such inquiries nor
any other due diligence investigation conducted by the Investor shall modify,
amend or affect the Investor's right to rely on the Company's representations
and warranties contained in this Agreement.
5.6 Restricted Securities. The Investor understands that the
Securities are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.
<PAGE>
5.7 Legends. Subject to subparagraph (c) below, it is
understood that certificates evidencing the Securities may bear one or all of
the following legends:
(a) "The securities represented by this certificate
have not been registered under the Securities Act of 1933 or any state
securities laws. Such securities have been acquired for investment and may not
be pledged, offered, sold or transferred except in compliance with the
registration requirements of the Securities Act of 1933 and applicable state
securities laws or unless an exemption from such registration requirements is
available and upon delivery to the Company, if requested, of an opinion of
counsel reasonably acceptable to the Company, in form and substance reasonably
satisfactory to the Company, that registration is not required."
(b) If required by the authorities of any state in
connection with the issuance of sale of the Securities, the legend required by
such state authority.
(c) Upon registration for resale under the 1933 Act
pursuant to the Registration Rights Agreement, all certificates evidencing the
Common Stock so registered shall be issued free of such restrictive legends.
5.8 Accredited Investor. The Investor is an accredited
investor as defined in Rule 501(a) of Regulation D, as amended, under the 1933
Act.
5.9 No General Solicitation. The Investor did not learn of the
investment in the Securities as a result of any public advertising or general
solicitation.
6. Registration Rights Agreement. The parties acknowledge and agree
that part of the inducement for the Investor to enter into this Agreement is the
Company's execution and delivery of the Registration Rights Agreement. The
parties acknowledge and agree that simultaneously with the execution hereof, the
Registration Rights Agreement is being duly executed and delivered by the
parties thereto.
7. Covenants and Agreements of the Company.
7.1 Capital Raising Limitations. From the date hereof through
the 180-day period following the later of (i) the effective date of the
registration statement contemplated by the Registration Rights Agreement, and
(ii) January 1, 1999, plus that number of days during which any Blackout Period
(as defined in the Registration Rights Agreement) has been in existence, without
the prior written consent of the Investor (which consent may be withheld in such
Investor's sole discretion), the Company shall not issue or sell, or agree to
issue or sell, for cash in a non-public offering (a) any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (i) at a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the Common Stock at any time
after the initial issuance of such debt or equity securities; or (ii) with a
fixed conversion, exercise or exchange price that is subject to being reset at
some future date after the initial issuance of such debt or equity security or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock (but
<PAGE>
excluding standard stock split anti-dilution provisions) or (b) any securities
of the Company pursuant to an "equity line" structure which provides for the
sale, from time to time, of securities of the Company which are registered for
resale pursuant to the 1933 Act (the transactions described in this sentence are
collectively referred to as the "Variable Rate Transactions"). For so long as
the Investor holds a Debenture, Warrant or Common Stock issued upon the
conversion or exercise of Debentures or Warrants, the Company shall give written
notice to the Investor of the Company's intention to engage in a Variable Rate
Transaction at least ten days prior to the date on which the Company intends to
execute an agreement with respect thereto, and for so long as the Investor's
consent is required hereunder, request the Investor's written consent thereto.
7.2 Opinion of Counsel. The Company has delivered to the
Investor, simultaneously with the execution and delivery of this Agreement, the
opinion of Covington & Burling, counsel to the Company, in the form attached
hereto as Exhibit D.
7.3 Reports. So long as the Investor holds Debentures or
Warrants, the Company will deliver to such Investor at the address provided for
in Section 11.4 the following reports by overnight courier (except as otherwise
provided in subparagraph (d) below):
(a) Quarterly Reports. As promptly as practicable and
in any event within five days after the same is issued or filed, the Company's
Form 10-Q or, in the absence of a Form 10-Q, consolidated balance sheets of the
Company and its subsidiaries as at the end of such period and the related
consolidated statements of operations, stockholders' equity and cash flows for
such period and for the portion of the Company's fiscal year ended on the last
day of such quarter, all in reasonable detail and certified by a principal
financial officer of the Company to have been prepared in accordance with
generally accepted accounting principles, subject to year-end and audit
adjustments.
(b) Annual Reports. As promptly as practicable and in
any event within five days after the same is issued or filed, the Company's Form
10-K or, in the absence of a Form 10-K, consolidated balance sheets of the
Company and its subsidiaries as at the end of such year and the related
consolidated statements of earnings, stockholders' equity and cash flows for
such year, all in reasonable detail and accompanied by the report on such
consolidated financial statements of an independent certified public accountant
selected by the Company.
(c) Securities Filings. As promptly as practicable
and in any event within five days after the same are issued or filed, copies of
(i) all notices, proxy statements, financial statements, reports and documents
that the Company or any subsidiary shall send or make available generally to its
stockholders or to financial analysts, and (ii) all periodic and special
reports, documents and registration statements (other than on Form S-8) which
the Company or any subsidiary furnishes or files, or any officer or director of
the Company or any of its subsidiaries (in such person's capacity as such)
furnishes or files with the SEC.
(d) Press Releases. Any press release or other
publicity concerning the Transaction Agreements or the transactions contemplated
thereby shall be submitted by facsimile to the Investor for comment at least
forty-eight (48) hours prior to issuance.
<PAGE>
(e) Other Information. Such other information
relating to the Company or its subsidiaries as from time to time may reasonably
be requested by the Investor, provided the Company produces such information in
its ordinary course of business.
7.4 No Conflicting Agreements. The Company will not, and will
not permit its subsidiaries to, take any action, enter into any agreement or
make any commitment that would conflict or interfere in any material respect
with its obligations to the Investor under the Transaction Agreements.
7.5 Insurance. So long as the Investor holds Debentures or
Warrants, the Company shall, and shall cause each subsidiary to, have in full
force and effect (a) insurance reasonably believed by Company to be adequate on
all assets and activities of a type customarily insured by companies similarly
situated to the Company, covering property damage and loss of income by fire or
other casualty, and (b) insurance reasonably believed by the Company to be
adequate protection against all liabilities, claims and risks against which it
is customary for companies similarly situated to the Company and the
subsidiaries to insure.
7.6 Compliance with Laws. The Company will use reasonable
efforts, and will cause each of its subsidiaries to use reasonable efforts, to
comply in all material respects with all applicable laws, rules, regulations,
orders and decrees of all governmental authorities, except to the extent
non-compliance (in one instance or in the aggregate) would not have a Material
Adverse Effect.
8. Covenants and Agreements of the Investor.
(a) Resales. The Investor agrees that it shall not make any
offers or sales of the Securities other than pursuant to a registration
statement under the 1933 Act or pursuant to an exemption from registration under
the 1933 Act. The Investor agrees that it will comply with applicable prospectus
delivery requirements.
(b) Low Trades. The Investor agrees that it will not directly
or indirectly engage in any activity that is intended to reduce the closing bid
price for the Common Stock on the Nasdaq National Market System on any day that
is within the period of eighteen (18) trading days immediately prior to a
Conversion Date (as defined in the Debenture) for such Investor.
9. Survival. All representations, warranties, covenants and agreements
contained in this Agreement shall be deemed to be representations, warranties,
covenants and agreements as of the date hereof and shall survive the execution
and delivery of this Agreement for a period of five years and six months from
the date of this Agreement; provided, however, that the provisions contained in
Section 7 hereof shall survive in accordance with the terms thereof.
10. Arbitration.
10.1 Scope. Resolution of any and all disputes arising from or
in connection with the Transaction Agreements, whether based on contract, tort,
common law, equity, statute, regulation, order or otherwise ("Disputes"),
including disputes arising in connection with claims by third persons, shall be
exclusively governed by and settled in accordance with the provisions of this
Section 10; provided, that the foregoing shall not preclude equitable or other
judicial relief to enforce the provisions of this Section 10 or to preserve the
status quo pending resolution of Disputes hereunder.
<PAGE>
10.2. Binding Arbitration. The parties hereby agree to submit
all Disputes to arbitration for final and binding resolution. Either party may
initiate such arbitration by delivery of a demand therefor (the "Arbitration
Demand") to the other party. The arbitration shall be conducted in Washington,
D.C. by a sole arbitrator selected by agreement of the parties not later than 10
days after delivery of the Arbitration Demand, or, failing such agreement,
appointed pursuant to the Commercial Arbitration Rules of the American
Arbitration Association, as amended from time to time (the "AAA Rules"). If the
arbitrator becomes unable to serve, his successor(s) shall be similarly selected
or appointed.
10.3. Procedure. The arbitration shall be conducted pursuant
to the Federal Arbitration Act and such procedures as the Parties may agree or,
in the absence of or failing such agreement, pursuant to the AAA Rules.
Notwithstanding the foregoing (a) each party shall provide to the other,
reasonably in advance of any hearing, copies of all documents that a party
intends to present in such hearing; (b) all hearings shall be conducted on an
expedited schedule; and (c) all proceedings shall be confidential, except that
either party may at its expense make a stenographic record thereof.
10.4. Timing. The arbitrator shall complete all hearings not
later than 90 days after his or her selection or appointment, and shall make a
final award not later than 30 days thereafter. The arbitrator shall apportion
all costs and expenses of the arbitration, including the arbitrator's fees and
expenses, and fees and expenses of experts ("Arbitration Costs") between the
prevailing and non-prevailing party as the arbitrator shall deem fair and
reasonable. In circumstances where a Dispute has been asserted or defended
against on grounds that the arbitrator deems manifestly unreasonable, the
arbitrator may assess all Arbitration Costs against the non-prevailing party and
may include in the award the prevailing party's attorney's fees and expenses in
connection with any and all proceedings under this Section 9. Notwithstanding
the foregoing, in no event may the arbitrator award multiple or punitive
damages.
11. Miscellaneous.
11.1 Successors and Assigns. This Agreement may not be
assigned by a party hereto without the prior written consent of the other party
hereto, except that without the prior written consent of the Company, but after
notice duly given, the Investor may assign its rights and delegate its duties
hereunder to an Affiliate, and without the prior written consent of the
Investor, but after notice duly given, the Company may assign its rights and
delegate its duties hereunder to any successor-in-interest corporation in the
event of a merger or consolidation of the Company with or into another
corporation, or any merger or consolidation of another corporation with or into
the Company that results directly or indirectly in an aggregate change in the
ownership or control of more than 50% of the voting rights of the equity
securities of the Company, or the sale of all or substantially all of the
Company's assets. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective permitted successors and assigns
of the parties. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this Agreement.
11.2 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
11.3 Titles and Subtitles. 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.
11.4 Notices. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be deemed
effectively given only upon delivery to each party to be notified by (i)
personal delivery, (ii) telex or telecopier, upon receipt of the correct answer
back, or (iii) internationally recognized overnight air courier, addressed to
the party to be notified at the address as follows, or at such other address as
such party may designate by ten days' advance written notice given hereunder to
the other party:
If to the Company:
Unigene Laboratories, Inc.
110 Little Falls Road
Fairfield, NJ 07004
Attn: Dr. Warren Levy
Telephone: (973) 882-0860
Facsimile: (973) 227-6088
with a copy to:
Covington & Burling
1201 Pennsylvania Avenue, N.W.
Washington, D.C. 20044-7566
Attn: D. Michael Lefever, Esq.
Telephone: (202) 662-5276
Facsimile: (202) 662-6291
If to the Investor:
The Tail Wind Fund, Ltd.
Windermere House
404 East Bay Street
P.O. Box SS-5539
Nassau, Bahamas
Attn: Sherrill Pletscher
Telephone: 242-393-8777
Facsimile: 242-393-9021
with a copy to:
The Tail Wind Fund, Ltd.
c/o European American Securities, Inc.
One Regent Street, 4th Floor
London SW1Y 4NS
England
Attn: David Crook
Telephone: 44-171-468-7660
Facsimile: 44-171-468-7657
and with a copy to:
Bryan Cave LLP
700 Thirteenth Street, N.W.
Washington, D.C. 20005
Attn: LaDawn Naegle
Telephone: 202/508-6046
Facsimile: 202/508-6200
<PAGE>
11.5 Expenses. The Company shall pay at the Closing only the
expenses of Tail Wind Inc. in the amount of $40,000.
11.6 Acknowledgment of Common Stock Issuance Limitation. The
parties hereto acknowledge and agree that the Company shall be required to
reserve for issuance and issue a maximum of 3,852,500 shares of Common Stock
upon the conversion of, and payment of interest on, Debentures and exercise of
the Warrants, and in no event shall the Company be required to issue in excess
of 3,852,500 shares of Common Stock in connection with the transactions
contemplated by the Transaction Agreements. In the event the conversion of, and
payment of interest on, Debentures and exercise of Warrants would require in the
aggregate in excess of 3,852,500 shares of Common Stock, the terms of the
Debenture and Warrants provide, in lieu thereof, for payments by the Company to
the Investor(s) and Warrantholder(s) in cash, which payments include certain
redemption premiums and may include additional interest charges.
11.7 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement 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 Investor.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Securities purchased under this Agreement at the
time outstanding, each future holder of all such securities, and the Company.
11.8 Severability. If one or more provisions of this Agreement
is held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
11.9 Entire Agreement. This Agreement, including the Exhibits
and Schedules hereto, and the Registration Rights Agreement constitute the
entire agreement between the parties hereto with respect to the subject matter
hereof and thereof and supersede all prior agreements and understandings, both
oral and written, between the parties with respect to the subject matter hereof
and thereof.
11.10 Further Assurances. The parties shall execute and
deliver all such further instruments and documents and take all such other
actions as may reasonably be required to carry out the transactions contemplated
hereby and to evidence the fulfillment of the agreements herein contained.
11.11 Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware without regard
to principles of conflicts of laws.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
The Company: UNIGENE LABORATORIES, INC.
By: /S/ WARREN P. LEVY
------------------
Name: Warren P. Levy
Title: President
The Investor: THE TAIL WIND FUND, LTD.
By: /S/ SHERRILL PLETSCHER
----------------------
Name: Sherrill Pletscher
Title: Authorized Signatory
Amount: $4 million
$4,000,000
<PAGE>
CONVERTIBLE DEBENTURE
Exhibit A
$4,000,000.00 June 29, 1998
FOR VALUE RECEIVED, the undersigned, Unigene Laboratories,
Inc., a Delaware corporation (the "Company"), promises to pay to the order of
The Tail Wind Fund, Ltd., or the holder hereof (the "Holder"), on December 31,
2001 ("Due Date"), the principal sum of Four Million Dollars ($4,000,000), or,
if less, the unpaid principal amount outstanding at such time, in either case
together with all accrued and unpaid interest thereon. This Debenture may not be
redeemed or prepaid by the Company, in whole or in part, except as expressly
provided herein.
The Company also promises to pay to the Holder interest
semi-annually from the date hereof on the unpaid principal amount hereof at a
rate of five percent (5%) per annum. Interest on this Debenture shall be
computed on the basis of a 360-day year of twelve 30-day months, provided that
for any period shorter than a month, interest shall be computed on the actual
number of days elapsed. Interest through the last day of the preceding six-month
period shall be payable on or before the fifth day of each January and July,
commencing in July, 1998.
This Debenture is one of the Debentures referred to in and
issued pursuant to the Purchase Agreement dated June 29, 1998, between the
Company and the Investor identified therein (the "Purchase Agreement"), and is
entitled to the benefits of, and subject to, the terms and provisions of the
Purchase Agreement.
1. Payments
All payments by the Company hereunder shall be payable in
lawful money of the United States in immediately available funds by wire
transfer to an account designated in writing by the Holder, or in the case of
conversion of principal and, at the option of the Company unless otherwise
specified herein, payment of interest, in shares of common stock of the Company,
par value $.01 per share (the "Common Stock"), valued at the Conversion Price
(for the conversion of principal) and at the Market Price (for the payment of
interest), not later than 5:00 p.m., Eastern time on the day when due to the
Holder at the address set forth on the Conversion Notice (defined below), or at
such other place as the Holder hereof may from time to time designate in writing
to the Company. Whenever any payment to be made pursuant to this Debenture shall
be stated to be due on a public holiday, Saturday or Sunday, such payment may be
made on the next succeeding business day. Such extension of time shall not in
such case be included in computing interest, if any, in connection with such
payment.
2. Conversion of Debenture
(a) Subject to the limitations set forth in Section 2(l)
below, from time to time, until all unpaid principal of and accrued and unpaid
interest on this Debenture is paid, the Holder of this Debenture shall have the
right to convert at any time from and after January 1, 1999, up to fifteen
percent of the original principal amount of this Debenture per month (on a
non-cumulative basis) (the "Conversion Limit") into (i) an amount of duly
authorized, fully paid and non-assessable shares of Common Stock determined by
dividing such amount to be so converted by the Conversion Price (defined below),
<PAGE>
and (ii) warrants expiring five years after the Conversion Date (defined below)
in the form attached as Exhibit C to the Purchase Agreement to acquire (subject
to the terms of such warrants) a number of shares of Common Stock equal to four
percent (4%) of the number of shares of Common Stock issuable pursuant to clause
(i) above at an exercise price per share of Common Stock of one hundred
twenty-five percent (125%) of the Conversion Price, all upon the terms and
subject to the conditions hereinafter specified in this Section 2. The
Conversion Limit shall cease to apply and the Holder shall not be limited in the
amounts it may convert of this Debenture in the event the Company consummates a
Variable Rate Transaction (as defined in Section 7.1 of the Purchase Agreement).
The Conversion Limit shall be twenty percent of the original principal amount of
this Debenture for any calendar month in which on the last Conversion Date (as
defined below) in such month the Market Price (as defined below) is equal to or
greater than one hundred twenty percent (120%) of the Cap Price (as defined
below).
(b) If the Market Price (defined below) on the business day
immediately preceding the Conversion Date (defined below) is equal to or less
than $1.1156, and a Holder elects to convert all or part of the principal amount
of the Debenture as otherwise permitted hereunder, the Company, at its option,
may redeem the principal amount of the Debenture that is the subject of a Notice
of Conversion (defined below) at a price equal to such principal amount plus
interest on such amount from the date hereof to the Conversion Date at a rate of
twelve percent (12%) per annum payable only in cash (the "Redemption Amount") in
lieu of converting such principal amount, provided that the Company gives
written notice to such holder of the Company's intention to redeem such
principal amount by 8:00 p.m. Eastern time on the next business day following
the date such Notice of Conversion is received; provided further that upon
receipt of such notice from the Company of its intention to redeem such
principal amount, the holder shall have the right within one (1) business day to
rescind such Notice of Conversion. In addition, upon any such redemption, the
Company shall issue to such holder a five year warrant in the form attached as
Exhibit C to the Purchase Agreement to acquire (subject to the terms of such
warrants) a number of shares of Common Stock equal to twenty-five percent (25%)
of the shares of Common Stock that would have been issued upon such conversion
at an exercise price per share equal to one hundred thirty-five percent (135%)
of the Conversion Price on the Conversion Date specified in the Notice of
Conversion. If the Company so elects to redeem such principal amount, upon
surrender of the Debenture as described in Section 2(c) below, the Company shall
pay the Redemption Amount by wire transfer of immediately available funds and
issue the warrant to such Holder within three (3) business days of surrender in
accordance with such Holder's instructions, or it shall forfeit its right to
redeem under this Section 2(b) with respect to all of the then outstanding
principal amount of the Debenture, and the Holder may, at its election by
written notice to the Company, within the next five (5) business days, proceed
to convert the principal amount of the Debenture in accordance with the original
Notice of Conversion or rescind such Notice of Conversion. If no such notice is
received within such five day period after the Company fails to pay the
Redemption Amount, the Holder shall be deemed to have elected to proceed with
conversion in accordance with the original Notice of Conversion. The Holder may
at any time submit to the Company a written request to advise the Holder whether
the Company would, if presented with a Notice of Conversion within seven (7)
business days of such request, elect to redeem under this Section 2(b), and the
Company shall answer such request in writing by the close of business on the
following business day of such request or forfeit its right to so redeem on such
a conversion actually noticed within such seven (7) days of the request.
<PAGE>
(c) In order to convert this Debenture into shares of Common
Stock, the Holder shall: (i) fax a copy of a fully executed notice of conversion
in the form attached hereto ("Notice of Conversion") to the Company at the
office of the Company or its designated transfer agent, if any, for the
Debentures, which notice shall specify the amount of the Debenture to be
converted, the applicable Conversion Price, and a calculation of the number of
shares of Common Stock issuable upon such conversion prior to 6:00 p.m., Eastern
time (the "Conversion Notice Deadline") on the date of conversion specified on
the Notice of Conversion; and (ii) surrender the original Debenture being
converted, along with the original of the Notice of Conversion as soon as
practicable thereafter (and in any case no later than the fifth business day
following the Conversion Date) to the office of the Company or the transfer
agent, if any, for the Debentures; provided that the Company shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon such conversion unless either the Debenture is delivered to the Company or
its transfer agent as provided above, or the Holder notifies the Company or its
transfer agent that such original Debenture has been lost, stolen or destroyed
and provides indemnity or security satisfactory to the Company. In the case of a
dispute as to the calculation of the Conversion Price, the Company shall
promptly issue such number of shares of Common Stock that are not disputed in
accordance with subparagraph (d) below. The Company shall submit the disputed
calculations to its outside accountant via facsimile within two (2) business
days of receipt of the Notice of Conversion. The accountant shall audit the
calculations and notify the Company and the Holder of the results no later than
the fifth business day after the date it receives the disputed calculations. The
accountant's calculation shall be deemed conclusive absent manifest error.
(d) Subject to the limitations set forth in Section 2(l)
below, upon the surrender of the Debenture as described above accompanied by the
Notice of Conversion, the Company shall issue and, within three (3) business
days (the "Delivery Period") after such surrender (or, in the case of a lost,
stolen or destroyed Debenture, after provision of an agreement and
indemnification by the Holder to the Company satisfactory to the Company),
direct its transfer agent to deliver to or upon the order of the Holder (i) that
number of shares of Common Stock for the portion of the Debenture converted as
shall be determined in accordance herewith, (ii) the warrants described in
Section 2(a) above, and (iii) a new Debenture representing the balance of the
principal amount of the Debenture surrendered but not converted, if any. In
addition to any other remedies available to the holder, including actual damages
and/or equitable relief, the Company shall pay to the Holder $250 in cash for
the third day beyond the last day of such Delivery Period that the Company fails
to deliver Common Stock or the warrants issuable upon surrender of the Debenture
with a Notice of Conversion, and $500 per day in cash for each day thereafter,
until such time as the earlier of the date that the Company has delivered all
such Common Stock and warrants, and the fifth day beyond such Delivery Period.
Such cash amount shall be paid to the Holder by the fifth day of the month
following the month in which it has accrued. In the event the Company fails to
deliver such Common Stock and warrants prior to the expiration of the five (5)
business day period after the last day of the Delivery Period for any reason
(whether due to a requirement of law or a stock exchange or otherwise), (i) such
holder shall be entitled to (in addition to any other remedies available to the
holder) Redemption Default Payments in accordance with Section 2(i) hereof
beginning on the expiration of such five (5) business day period, and (ii) the
right to cancel the conversion.
(e) No fractional shares will be issued upon a conversion of
the Debenture. If any conversion of this Debenture would result in a fractional
share of Common Stock or the right to acquire a fractional share of Common
Stock, such fractional share shall be disregarded.
<PAGE>
(f) The "Conversion Date" shall be the date specified in the
Notice of Conversion, provided, that (i) the advance copy of the Notice of
Conversion is faxed to the Company before 6:00 p.m., Eastern time, on the
Conversion Date, and (ii) the original Debenture is surrendered along with the
original of the Notice of Conversion as soon as practicable thereafter (but no
later than the fifth business day after the Conversion Date) to the office of
the Company or the transfer agent for the Debentures. The person or persons
entitled to receive the shares of Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such securities as
of the Conversion Date and all rights with respect to the Debenture fully
surrendered shall forthwith terminate except the right to receive the shares of
Common Stock or other securities or property issuable on such conversion.
(g) The Conversion Price per share ("Conversion Price") at
which shares of Common Stock shall be issuable upon conversion of this Debenture
shall be equal to the lesser of (i) one hundred and ten percent (110%) of the
average of the closing bid prices of the Common Stock as reported by the Nasdaq
Stock Market for each trading day in the fourth calendar quarter of 1998 (the
"Cap Price"), and (ii) 100% of the Market Price on the business day immediately
preceding the Conversion Date. "Market Price" shall mean the average of the four
lowest closing bid prices of the Common Stock as reported by The Nasdaq Stock
Market over the eighteen (18) trading day period ending on the date in question.
(h) In order to prevent dilution of the conversion rights
granted under this Section 2, the Conversion Price shall be subject to
adjustment from time to time as follows:
(i) If at any time the number of outstanding shares
of Common Stock is changed by a stock split, reverse stock split, subdivision,
combination or stock dividend or other distribution payable in additional shares
of Common Stock, then and in each such event the Cap Price shall be equitably
adjusted to reflect such change in number of shares.
(ii) If at any time or from time to time after the
date hereof there is a capital reorganization of the Common Stock in which
Common Stock issuable upon the conversion of the Debentures is changed into the
same or a different number of shares of any other class or classes of stock,
whether by recapitalization, reclassification or otherwise, then and in each
such event and as a part of such reorganization, provision shall be made so that
the Holder of this Debenture shall thereafter be entitled to receive upon
conversion of the Debentures the number of shares of stock or other securities
or property to which a holder of the number of shares of Common Stock
deliverable upon conversion if effected immediately prior to such reorganization
would have been entitled on such capital reorganization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 2(h) with respect to the rights of the Holders of this Debenture
after the reorganization to the end that the provisions of this Section 2(h)
shall be applicable after that event and be as nearly equivalent as may be
practicable, including, by way of illustration and not limitation, by equitably
adjusting the Cap Price.
(iii) If any event occurs of the type contemplated
by the provisions of this Section 2(h) but not expressly provided for by such
provisions (including, without limitation, the granting generally to holders of
Common Stock of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company's board of directors shall make an
appropriate adjustment in the Cap Price so as to protect the rights of the
Holder of this Debenture.
<PAGE>
(iv) Immediately upon any adjustment of the
Conversion Price, the Company shall give written notice thereof to the Holder of
this Debenture, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(i) The Company represents that it has reserved 3,852,500
shares of Common Stock (the "Reserved Shares") solely for the purposes of
effecting the conversion (and paying interest thereon) of all Debentures issued
pursuant to the Purchase Agreement and the exercise of warrants issued upon
conversion or redemption of such Debentures and covenants that it will keep
reserved such number of shares until the same are issued (if necessary) as
described above. The Company covenants that all shares of Common Stock issued
upon conversion of (and in payment of interest on) this Debenture, shall be duly
and validly issued, fully paid and non-assessable. If conversion is not
permitted by reason of Section 2(l) below upon receipt of a Conversion Notice in
accordance with the terms of Section 2(c) of this Debenture (a "Conversion
Prohibition"), the Company shall redeem this Debenture in cash at a redemption
price equal to 120% of the then outstanding principal amount of the Debenture,
plus accrued but unpaid interest on the Debenture within three (3) business days
of receipt of such Conversion Notice. Within three days of the occurrence of a
Conversion Prohibition, the Company shall notify each holder of a Debenture in
writing of such occurrence and shall redeem all outstanding Debentures in
accordance with this Section 2(i) upon receipt by the Company of a Conversion
Notice and the Debenture to which such Conversion Notice relates. If the Company
fails to redeem the outstanding principal balance of and pay the accrued
interest in cash on this Debenture within three (3) business days of the
occurrence of the Conversion Prohibition (a "Redemption Default"), then in
addition to the foregoing, the rate of interest on this Debenture shall, to the
maximum extent allowed by applicable law, be permanently increased by two
percent (2%) per annum (i.e., from 5% to 7%) commencing on the first day of the
thirty (30) day period (or part thereof) following a Redemption Default; an
additional two percent (2%) per annum commencing on the first day of each of the
second and third such thirty (30) day periods (or part thereof); and an
additional one percent (1%) per annum on the first day of each consecutive
thirty (30) day period (or part thereof) thereafter until such securities have
been duly redeemed as herein provided; provided that in no event shall the rate
of interest exceed the lesser of (i) twenty percent (20%) per annum and (ii) the
highest rate permitted by applicable law to be charged on commercial loans. All
such interest shall be payable monthly in cash and any such interest which is
not paid when due shall, to the maximum extent permitted by law, accrue interest
until paid at the rate from time to time applicable to interest on the
Debentures as to which the Redemption Default has occurred. In the event the
Company pays any interest on the Debentures and it is determined that such
interest was paid at a rate in excess of the legal maximum rate, then that
portion of the interest payment representing an amount in excess of the legal
maximum rate shall be deemed a payment of principal and shall be applied against
the principal of the Debenture. Nothing herein shall limit the Holder's right to
pursue the immediate redemption of the Debenture and payment of accrued but
unpaid interest upon a Redemption Default, and in addition to the rights and
remedies provided in this Section 2(i), each holder shall have the right to
pursue all remedies available at law or in equity (including a decree of
specific performance and/or injunctive relief).
<PAGE>
(j) Notwithstanding anything to the contrary herein,
conversion of this Debenture shall not be permitted, the Holder shall not submit
a Notice of Conversion and the Company shall not pay any amounts due to the
Holder of this Debenture in the form of shares of Common Stock, if such
conversion or payments would result in the Holder of this Debenture owning more
than 4.99% of the issued and outstanding shares of Common Stock following
conversion or payment (such percentage to be calculated in accordance with Rule
13d-3 promulgated under the Securities Exchange Act of 1934).
(k) The issuance of certificates for shares of the Common
Stock upon the conversion of this Debenture shall be made without charge to the
Holder hereof for any issuance tax in respect of the issuance of such
certificates or other cost incurred by the Company in connection with such
conversion and the related issuance of shares of Common Stock.
(l) Notwithstanding anything herein to the contrary, the
Company shall have no obligation to issue more than an aggregate of 3,852,500
shares of Common Stock (i) upon the conversion of all Debentures issued pursuant
to the Purchase Agreement, (ii) as payment of interest on such Debentures, and
(iii) upon the exercise of any warrants issued upon conversion or redemption of
such Debentures. In the event such shares are insufficient for such purposes,
the provisions of Section 2(i) shall apply.
3. Covenant. The Company agrees at all times that it will not,
by any amendment of the Company's Articles of Incorporation, or through any
consolidation, merger, reorganization, transfer of assets, dissolution, issue or
sale of securities or any other voluntary action, seek to avoid the observance
or performance hereof, but will at all times take such actions as are necessary
or appropriate in order to protect the rights of the Holder of this Debenture.
4. Events of Default
(a) An "Event of Default" shall exist if any of the following
occurs and is continuing:
(i) Failure to make any payment of principal or
interest on the Debenture when such payment is due (other than a failure to
comply with the provisions of Section 2(i), which is addressed by the default
provisions therein contained) or any provision of the Purchase;
(ii) Failure to comply with or breach of any other
material provision of this Debenture (other than a failure to comply with the
provisions of Section 2(i), which is addressed by the default provisions therein
contained) or any provision of the Purchase Agreement and such failure continues
for more than five (5) business days after the earlier of (i) the Holder hereof
having given written notice of such failure to the Company and (ii) the Company
obtaining knowledge of such failure;
(iii) Any levy, seizure, attachment, execution or
similar process shall be levied on a material portion of the Company's property;
or
(iv) A receiver, custodian, liquidator or trustee of
the Company, or of any of the property of the Company, is appointed by court
order; or the Company is adjudicated bankrupt or insolvent; or any of the
property of the Company is sequestered by court order; or a petition to
reorganize the Company under any bankruptcy, reorganization or insolvency law is
filed against the Company and is not dismissed within sixty (60) days after such
filing; or the Company files a voluntary bankruptcy petition or requesting
<PAGE>
reorganization or arrangement under any provision of any bankruptcy,
reorganization or insolvency law, or consents to the filing of any petition
against it under any such law; or the Company makes a general assignment for the
benefit of its creditors, or admits in writing its inability to pay its debts
generally as they become due, or consents to the appointment of a receiver,
trustee or liquidator of the Company or of all or any part of the property of
the Company.
(b) If an Event of Default occurs, then this Debenture shall
accrue additional interest on all unpaid amounts of principal and interest from
the date of the Event of Default at a rate equal to the lesser of (i) twenty
percent (20%) per annum or (ii) the highest amount allowable by law.
(c) If an Event of Default exists, then the holder of this
Debenture may exercise any right, power or remedy conferred upon it by law, and
shall have the right to declare by written notice the entire principal and all
interest accrued on such Debenture to be, and such Debenture shall thereupon
become, forthwith due and payable without any declaration, presentment, demand,
protest or notice of any kind and the Company shall immediately pay to the
Holder of this Debenture the entire unpaid principal and interest accrued on
such Debenture.
5. Extraordinary Transactions. If at any time (i) there occurs
any consolidation or merger of the Company with or into any other corporation or
other entity or person and the Company is the surviving corporation or there
occurs any other corporate reorganization or transaction or series of related
transactions, and as a result thereof the current shareholders of the Company
after such merger, consolidation, reorganization or other transaction own in the
aggregate less than 50% of the voting power and common equity of the ultimate
parent corporation or other entity surviving or resulting from such merger,
consolidation, reorganization or other transaction, (ii) the Company transfers
all or substantially all of the Company's assets to another corporation or other
entity or person or (iii) the Company shall fix a record date for the
declaration of a special distribution or dividend, whether payable in cash,
securities or assets (other than shares of Common Stock) (an "Extraordinary
Transaction"), then and in each such event thirty (30) days advance written
notice of such Extraordinary Transaction shall be given to the Holder and
provision shall be made so that the Holder of this Debenture, at its option, (a)
may participate in any such Extraordinary Transaction with the holders of the
Common Stock on the same basis as if the outstanding principal amount of this
Debenture had been converted one day prior to the announcement of such
Extraordinary Transaction regardless of any conversion limitations imposed by
Section 2(a) above (provided, however, that the Holder shall not be entitled to
vote on such transaction or have any other approval rights as a Common Stock
holder by reason of the Holder's ownership of this Debenture absent conversion)
and provided that the Company may not exercise its right of redemption under
Section 2(b); or (b) may require that the Company redeem this Debenture at a
redemption price equal to 120% of the then outstanding principal amount of the
Debenture, plus accrued but unpaid interest on the Debenture. Notice of the
Holder's election under this Section 6 shall be given not less than fifteen (15)
days prior to the effective date of such Extraordinary Transaction.
6. Registration. The Holder of this Debenture is entitled to
the benefit of certain registration rights in respect of the shares of Common
Stock into which this Debenture may be converted pursuant to that Registration
Rights Agreement dated effective June 29, 1998. In the event that at any time or
from time to time there is a Blackout Period (as that term is defined in the
<PAGE>
Registration Rights Agreement), the Due Date hereunder shall be extended for a
period equal to 1.5 times the number of days in such Blackout Period.
Furthermore, additional provisions pertaining to the suspension of effectiveness
of such registration statement set forth in the Registration Rights Agreement
shall be applicable in the event of a Blackout Period, and are specifically
incorporated by reference herein.
7. Miscellaneous
(a) In the case of an Event of Default, the Company, to the
extent permitted by law, waives presentment, demand, notice, protest and all
other demands or notices in connection with the enforcement of this Debenture.
(b) No delay or omission by the Holder hereof in exercising
any right or remedy hereunder shall constitute a waiver of any such right or
remedy. A waiver on one occasion shall not operate as a bar to or waiver of any
such right or remedy on any future occasion.
(c) The Company shall pay all reasonable costs and expenses of
collection, including attorney's fees, incurred or paid by the Holder hereof in
enforcing this Debenture and the obligations evidenced hereby.
(d) This Debenture may be amended only by written agreement of
the Company and the Holder hereof.
(e) This Debenture is governed by the laws of the State of
Delaware.
(f) In the event that the Holder notifies the Company that
this Debenture has been mutilated, lost, stolen or destroyed, the Company will
issue a replacement Debenture identical in all respects to the original
Debenture (except for registration number and the then outstanding principal
amount, if different than that shown on the original Debenture) provided that
the Holder surrenders for cancellation its Debenture certificate in the case of
a mutilated certificate or provides evidence of lost, theft or destruction and
security or indemnity satisfactory to the Company in the case of a lost, stolen
or destroyed certificate.
(g) The Holder may, subject to compliance with the Purchase
Agreement and applicable federal and state securities laws, transfer or assign
this Debenture or any interest herein and may mortgage, encumber or transfer any
of its rights or interest in and to this Debenture or any part hereof and,
without limitation, each assignee, transferee and mortgagee (which may include
any affiliate of the Holder) shall have the right to transfer or assign its
interest. The Debenture shall in all cases be binding on the Company and its
successors and inure to the benefit of the Holder and its successors and
assigns.
IN WITNESS WHEREOF, the Company has caused this Debenture to
be executed and delivered by its duly authorized officer as of the day and year
first written above.
UNIGENE LABORATORIES, INC.
By: ____________________
Title: ____________________
[Corporate Seal]
<PAGE>
UNIGENE LABORATORIES, INC.
CONVERTIBLE DEBENTURE
NOTICE OF CONVERSION
UNIGENE LABORATORIES, INC.
110 Little Falls Road
Fairfield, NJ 07004
The undersigned hereby elects to convert $_______________ of the
outstanding principal amount of the Convertible Debenture represented by the
within certificate at a Conversion Price of $___________, for, and to acquire
thereunder _______________ shares of Common Stock ("Conversion Shares") as
provided for therein, and requests that certificates for the Conversion Shares
be issued as follows:
--------------------------------
Name
--------------------------------
Address
--------------------------------
--------------------------------
Federal Tax Identification No.
or Social Security No.
and, if the amount of the principal of the Convertible Debenture being converted
hereby shall not be all of the principal amount of such Convertible Debenture,
that a new Convertible Debenture for the balance of such Convertible Debenture
be issued forthwith to the Holder or the undersigned's Assignee as below
indicated and delivered to the address stated below.
Dated:___________________, ____
Note: The signature must correspond with the name Signature:_________________
of the registered Holder as written on the first
page of the Convertible Debenture in every
particular, without alteration or enlargement or
any change whatever, unless the Convertible
Debenture has been assigned.
___________________________
Name (please print)
___________________________
___________________________
Address
___________________________
Federal Identification or
Social Security No.
Assignee:
___________________________
___________________________
___________________________
___________________________
<PAGE>
Exhibit B
REGISTRATION RIGHTS AGREEMENT
For Registration Rights Agreement see Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998.
<PAGE>
Exhibit C
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT COVERING THIS WARRANT UNDER SAID ACT OR AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT.
VOID AFTER 5:00 P.M. EASTERN TIME ON _______ __, 20__ ("EXPIRATION
DATE").
UNIGENE LABORATORIES, INC.
WARRANT TO PURCHASE ______ SHARES OF
COMMON STOCK, PAR VALUE $.01 PER SHARE ("Common Stock")
This is to certify that, for VALUE RECEIVED, _____________________
("Warrantholder"), is entitled to purchase, subject to the provisions of this
Warrant, from Unigene Laboratories, Inc., a Delaware corporation ("Company"), at
any time not later than 5:00 P.M., Eastern time, on the Expiration Date, at an
exercise price per share equal to $____ (the exercise price in effect being
herein called the "Warrant Price"), ______ shares ("Warrant Shares") of Common
Stock. The number of Warrant Shares purchasable upon exercise of this Warrant
and the Warrant Price shall be subject to adjustment from time to time as
described herein.
Section 1. Registration. The Company shall maintain books for the
transfer and registration of the Warrant. Upon the initial issuance of the
Warrant, the Company shall issue and register the Warrant in the name of the
Warrantholder.
Section 2. Transfers. As provided herein, the Warrant may be
transferred only pursuant to a registration statement filed under the Securities
Act of 1933, as amended ("Securities Act") or an exemption from registration
thereunder. Subject to such restrictions, the Company shall transfer the Warrant
from time to time upon the books to be maintained by the Company for that
purpose, upon surrender thereof for transfer properly endorsed or accompanied by
appropriate instructions for transfer upon any such transfer, and a new Warrant
shall be issued to the transferee and the surrendered Warrant shall be canceled
by the Company.
Section 3. Exercise of Warrant. Subject to the provisions hereof, the
Warrantholder may exercise the Warrant in whole or in part at any time upon
surrender of the Warrant, together with delivery of the duly executed Warrant
exercise form attached hereto (the "Exercise Agreement"), to the Company during
normal business hours on any business day at the Company's principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof). The Warrantholder will not be required to make any
cash payment upon exercise hereunder, but shall only be entitled to effect a
cashless exercise of this Warrant for that number of Warrant Shares indicated in
the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be
issued to the holder hereof or such holder's designee, as the record owner of
such shares, as of the close of business on the date on which this Warrant shall
have been surrendered (or evidence of loss, theft or destruction thereof and
security or indemnity satisfactory to the Company) and the completed Exercise
Agreement shall have been delivered. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the Exercise
Agreement, shall be delivered to the holder hereof within a reasonable time, not
<PAGE>
exceeding three (3) business days, after this Warrant shall have been so
exercised. The certificates so delivered shall be in such denominations as may
be requested by the holder hereof and shall be registered in the name of such
holder or such other name as shall be designated by such holder. If this Warrant
shall have been exercised only in part, then, unless this Warrant has expired,
the Company shall, at its expense, at the time of delivery of such certificates,
deliver to the holder a new Warrant representing the number of shares with
respect to which this Warrant shall not then have been exercised.
To effect the cashless exercise, the Warrantholder shall
include in the Exercise Agreement a calculation of the number of shares of
Common Stock to be issued determined by multiplying the number of Warrant Shares
to which it would otherwise be entitled by a fraction, the numerator of which
shall be the difference between the Market Price per share of the Common Stock
on the date of exercise and the Warrant Price, and the denominator of which
shall be such Market Price per share of the Common Stock. For this purpose, the
"Market Price" of the Common Stock shall be the closing price of the Common
Stock as reported by the Nasdaq National Market on the trading day first
preceding the date in question.
Each exercise hereof shall constitute the representation and
warranty of the Warrantholder to the Company that the representations and
warranties contained in Article 5 of the Purchase Agreement (as defined below)
are true and correct in all material respects as of the time of such exercise.
Section 4. Compliance with the Securities Act of 1933. Neither this
Warrant nor the Common Stock issued upon exercise hereof nor any other security
issued or issuable upon exercise of this Warrant may be offered or sold except
as provided in this agreement and in conformity with the Securities Act, and
then only against receipt of an agreement of such person to whom such offer of
sale is made to comply with the provisions of this Section 4 with respect to any
resale or other disposition of such security. The Company may cause the legend
set forth on the first page of this Warrant to be set forth on each Warrant or
similar legend on any security issued or issuable upon exercise of this Warrant,
unless counsel for the Company is of the opinion as to any such security that
such legend is unnecessary.
Section 5. Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issue or delivery of any certificates for Warrant Shares in a
name other than that of the registered holder of the Warrant in respect of which
such shares are issued, and in such case, the Company shall not be required to
issue or deliver any certificate for Warrant Shares or any Warrant until the
person requesting the same has paid to the Company the amount of such tax or has
established to the Company's satisfaction that such tax has been paid. The
holder shall be responsible for income taxes due under federal or state law, if
any such tax is due.
Section 6. Mutilated or Missing Warrants. In case the Warrant shall be
mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and
substitution of and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and for the purchase of a like number of Warrant Shares, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond, if requested by the Company.
<PAGE>
Section 7. Reservation of Common Stock. The Company hereby represents
and warrants that there have been reserved, and the Company shall at all
applicable times keep reserved until issued (if necessary) as contemplated by
this Section 7, out of the authorized and unissued Common Stock, 3,852,500
shares to provide for the exercise of the rights of purchase represented by the
Warrant, the conversion of $4,000,000 principal amount of Convertible Debentures
(and the payment of interest thereon) issued by the Company pursuant to the
Purchase Agreement, dated June 29, 1998, between the Company and the Investor
named therein (the "Purchase Agreement"), and all other warrants to be issued
upon conversion or redemption of such Debentures. The Company further represents
and warrants that the Registrar and Transfer Company, the transfer agent for the
Common Stock ("Transfer Agent"), and every subsequent transfer agent for the
Common Stock or other shares of the Company's capital stock issuable upon the
exercise of any of the right of purchase or conversion aforesaid, shall be
irrevocably authorized and directed at all times to issue such number of
authorized and unissued shares of Common Stock as shall be issuable upon the
proper exercise hereof. The Company agrees that all Warrant Shares issued upon
exercise of the Warrant shall be, at the time of delivery of the certificates
for such Warrant Shares, duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock of the Company. The Company will keep a
conformed copy of this Warrant on file with the Transfer Agent and with every
subsequent transfer agent for the Common Stock or other shares of the Company's
capital stock issuable upon the exercise of the rights of purchase represented
by the Warrant. The Company will supply from time to time the Transfer Agent
with duly executed stock certificates required to honor the outstanding Warrant.
Notwithstanding anything herein to the contrary, the Company shall have no
obligation to issue more than an aggregate of 3,852,500 shares of Common Stock
(the "Reserved Shares") (i) upon the conversion of all Debentures issued
pursuant to the Purchase Agreement, (ii) as payment of interest on such
Debentures, and (iii) upon the exercise of this Warrant and all other warrants
issued upon conversion or redemption of such Debentures. In the event the
Company does not have a sufficient number of shares of Reserved Shares available
to satisfy an exercise hereunder, upon receipt of the Exercise Agreement on or
prior to the Expiration Date the Company shall immediately notify the
Warrantholder of such fact and shall pay to the Warrantholder in cash the cash
value of the Warrant Shares otherwise issuable pursuant to the cashless exercise
by multiplying that number of Warrant Shares by the Market Price (as defined
above) of the Common Stock.
Section 8. [Intentionally reserved.]
Section 9. Adjustments. Subject and pursuant to the provisions of this
Section 9, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter.
<PAGE>
(a) If the Company shall at any time or from time to time
while the Warrant is outstanding, pay a dividend or make a distribution on its
Common Stock in shares of Common Stock, subdivide its outstanding shares of
Common Stock into a greater number of shares or combine its outstanding shares
into a smaller number of shares or issue by reclassification of its outstanding
shares of Common Stock any shares of its capital stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then the number of Warrant Shares
purchasable upon exercise of the Warrant and the Warrant Price in effect
immediately prior to the date upon which such change shall become effective,
shall be adjusted by the Company so that the Warrantholder thereafter exercising
the Warrant shall be entitled to receive the number of shares of Common Stock or
other capital stock which the Warrantholder would have received if the Warrant
had been exercised immediately prior to such event. Such adjustment shall be
made successively whenever any event listed above shall occur.
(b) If any capital reorganization, reclassification of the
capital stock of the Company, consolidation or merger of the Company with
another corporation in which the Company is not the survivor, or sale, transfer
or other disposition of all or substantially all of the Company's properties to
another corporation shall be effected, then, as a condition of such
reorganization, reclassification, consolidation, merger, sale, transfer or other
disposition, lawful and adequate provision shall be made whereby each
Warrantholder shall thereafter have the right to purchase and receive upon the
basis and upon the terms and conditions herein specified and in lieu of the
Warrant Shares immediately theretofore issuable upon exercise of the Warrant,
such shares of stock, securities or properties as may be issuable or payable
with respect to or in exchange for a number of Warrant Shares equal to the
number of Warrant Shares immediately theretofore issuable upon exercise of the
Warrant, had such reorganization, reclassification, consolidation, merger, sale,
transfer or other disposition not taken place, and in any such case appropriate
provision shall be made with respect to the rights and interests of each
Warrantholder to the end that the provisions hereof (including, without
limitations, provision for adjustment of the Warrant Price) shall thereafter be
applicable, as nearly equivalent as may be practicable in relation to any shares
of stock, securities or properties thereafter deliverable upon the exercise
thereof. The Company shall not effect any such consolidation, merger, sale,
transfer or other disposition unless prior to or simultaneously with the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger, or the corporation purchasing or
otherwise acquiring such assets or other appropriate corporation or entity shall
assume the obligation to deliver to the holder of the Warrant such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to purchase and the other obligations under this
Warrant. The provisions of this paragraph (b) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales,
transfers or other dispositions.
(c) In case the Company shall fix a payment date for the
making of a distribution to all holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness or assets
(other than cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends or distributions referred to in Section
9(a)), or subscription rights or warrants, the Warrant Price to be in effect
after such payment date shall be determined by multiplying the Warrant Price in
effect immediately prior to such payment date by a fraction, the numerator of
<PAGE>
which shall be the total number of shares of Common Stock outstanding multiplied
by the Market Price per share of Common Stock (as determined pursuant to Section
3), less the fair market value (as determined by the Company's Board of
Directors in good faith) of said assets or evidences of indebtedness so
distributed, or of such subscription rights or warrants, and the denominator of
which shall be the total number of shares of Common Stock outstanding multiplied
by such Market Price per share of Common Stock. Such adjustment shall be made
successively whenever such a payment date is fixed.
(d) If the Company shall at any time or from time to time
after the date of issuance hereof issue or sell in a financing transaction
(which, for the avoidance of doubt, shall not include any sales or issuances of
Common Stock after the date hereof pursuant to contractual obligations in effect
on the date hereof) in which the Company receives at least $2 million, (A) any
shares of Common Stock for a consideration per share less than the lesser of (i)
the Market Price (as defined above) on the date of such issuance and (ii) the
Warrant Price, or (B) any securities convertible into shares of Common Stock or
any options, warrants or other rights to purchase Common Stock ("Convertible
Securities") for which the conversion or exercise price (which, for the purposes
of this Section 9(d), shall be the total obtained by dividing (x) the total
amount received by the Company as consideration for the issuance of such
Convertible Securities, plus any amount payable to the Company upon conversion
or exercise thereof, by (y) the number of shares of Common Stock issuable upon
the conversion or exercise thereof) is less than the lesser of (i) the Market
Price (as defined above) on the date of such issuance and (ii) the Warrant
Price, then the Warrant Price shall be reduced to a price equal to such per
share consideration, or conversion or exercise price. Such adjustments shall be
made successively whenever such sales are made.
(e) An adjustment shall become effective immediately after the
payment date in the case of each dividend or distribution and immediately after
the effective date of each other event which requires an adjustment.
(f) In the event that, as a result of an adjustment made
pursuant to Section 9(a), the holder of the Warrant shall become entitled to
receive any shares of capital stock of the Company other than shares of Common
Stock, the number of such other shares so receivable upon exercise of the
Warrant shall be subject thereafter to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions with respect
to the Warrant Shares contained in this Warrant.
(g) Shares of Common Stock owned by or held for the account of
the Company or any majority-owned subsidiary shall not be deemed outstanding for
the purpose of any computation under this Agreement.
Section 10. Fractional Interest. The Company shall not be required to
issue fractions of Warrant Shares upon the exercise of the Warrant. If any
fraction of a Warrant Share would, except for the provisions of this Section, be
issuable upon the exercise of the Warrant (or specified portions thereof), the
fractional share shall be disregarded and the number of shares to be issued upon
exercise shall be the number of whole shares only.
Section 11. Benefits. Nothing in this Warrant shall be construed to
give any person, firm or corporation (other than the Company and the
Warrantholder) any legal or equitable right, remedy or claim, it being agreed
that this Warrant shall be for the sole and exclusive benefit of the Company and
the Warrantholder.
<PAGE>
Section 12. Notices to Warrantholder. Upon the happening of any event
requiring an adjustment of the Warrant Price, the Company shall forthwith give
written notice thereof to the Warrantholder at the address appearing in the
records of the Company, stating the adjusted Warrant Price and the adjusted
number of Warrant Shares resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. The certificate of the Company's independent certified
public accountants shall be conclusive evidence of the correctness of any
computation made, absent manifest error. Failure to give such notice to the
Warrantholder or any defect therein shall not affect the legality or validity of
the subject adjustment.
Section 13. Identity of Transfer Agent. The Transfer Agent for the
Common Stock is Registrar and Transfer Company, 10 Commerce Drive, Crawford, NJ
07016. Forthwith upon the appointment of any subsequent transfer agent for the
Common Stock or other shares of the Company's capital stock issuable upon the
exercise of the rights of purchase represented by the Warrant, the Company will
mail to the Warrantholder a statement setting forth the name and address of such
transfer agent.
Section 14. Notices. Any notice pursuant hereto to be given or made by
the Warrantholder to or on the Company shall be sufficiently given or made if
sent by certified mail, return receipt requested, postage prepaid, addressed as
follows:
Unigene Laboratories, Inc.
110 Little Falls Road
Fairfield, NJ 07004
Attn: Dr. Warren Levy
Telephone: (973) 882-0860
Facsimile: (973) 227-6088
or such other address as the Company may specify in writing by notice to the
Warrantholder complying as to delivery with the terms of this Section 14.
Any notice pursuant hereto to be given or made by the Company to or on
the Warrantholder shall be sufficiently given or made if personally delivered or
if sent by an internationally recognized courier services by overnight or
two-day service, to the address set forth on the books of the Company or, as to
each of the Company and the Warrantholder, at such other address as shall be
designated by such party by written notice to the other party complying as to
delivery with the terms of this Section 14. All such notices, requests, demands,
directions and other communications shall, when sent by courier be effective
three (3) days after delivery to such courier as provided and addressed as
aforesaid.
Section 15. Registration Rights. The initial holder of this Warrant is
entitled to the benefit of certain registration rights in respect of the Warrant
Shares as provided in the Registration Rights Agreement dated as of as of June
29, 1998.
Section 16. Successors. All the covenants and provisions hereof by or
for the benefit of the Warrantholder shall bind and inure to the benefit of its
respective successors and assigns hereunder.
Section 17. Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes shall
be construed in accordance with the laws of said State.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be
duly executed, as of the day and year first above written.
UNIGENE LABORATORIES, INC.
By: _________________________
Name:
Title:
<PAGE>
UNIGENE LABORATORIES, INC.
WARRANT EXERCISE FORM
UNIGENE LABORATORIES, INC.
110 Little Falls Road
Fairfield, NJ 07004
This undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant ("Warrant") for, and to purchase
thereunder by cashless exercise of the within Warrant by surrender of the
Warrant, _______________ shares of Common Stock ("Warrant Shares") provided for
therein, and requests that certificates for the Warrant Shares be issued as
follows:
--------------------------------
Name
--------------------------------
Address
--------------------------------
--------------------------------
Federal Tax Identification No.
or Social Security No.
and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares purchasable upon exercise of the Warrant be registered in the
name of the undersigned Warrantholder or the undersigned's Assignee as below
indicated and delivered to the address stated below. The number of Warrant
Shares to be issued upon this exercise was calculated using a Market Price of
$____________ as follows:
Dated:___________________, ____
Note: The signature must correspond with Signature:____________________
the name of the registered holder as written
on the first page of the Warrant in every ______________________________
particular, without alteration or enlargement Name (please print)
or any change whatever, unless the Warrant
has been assigned. ______________________________
Address ------------------------------
------------------------------
Federal Identification or
Social Security No.
Assignee:
-------------------------------
-------------------------------
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made
and entered as of this 29th day of June, 1998 by and between Unigene
Laboratories, Inc., a Delaware corporation (the "Company"), and The Tail Wind
Fund, Ltd. pursuant to the Purchase Agreement of even date herewith by and
between the Company and the investor identified therein (the "Purchase
Agreement").
The parties hereby agree as follows:
1. Certain Definitions
As used in this Agreement, the following terms shall
have the following meanings:
"Common Stock" shall mean the Common Stock, par value
$.01 per share, of the Company.
"Debentures" mean the Debentures in the aggregate
principal amount of $4,000,000 issued to the Investor pursuant to the Purchase
Agreement.
"Investor" shall mean The Tail Wind Fund, Ltd. and
any subsequent holder of any Debenture, Warrant or Registrable Securities.
"Prospectus" shall mean the prospectus included in
any Registration Statement, as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by such Registration Statement and by all other
amendments and supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such prospectus.
"Register," "registered" and "registration" refer to
a registration made by preparing and filing a registration statement or similar
document in compliance with the 1933 Act (as defined below), and the declaration
or ordering of effectiveness of such registration statement or document.
"Registrable Securities" shall mean (a) 3,852,500
shares of Common Stock which are or may be issuable (i) upon the conversion of
the Debentures as payment of principal or accrued and unpaid interest on the
Debentures, and (ii) upon the exercise of the Warrants, and (b) shares of Common
Stock issuable or issued as a dividend or other distribution with respect to, or
in exchange for or in replacement of, such Common Stock.
"Registration Statement" shall mean any registration
statement filed under the 1933 Act of the Company that covers the resale of any
of the Registrable Securities pursuant to the provisions of this Agreement,
amendments and supplements to such Registration Statement, including
post-effective amendments, all exhibits and all material incorporated by
reference in such Registration Statement.
"SEC" means the U.S. Securities and Exchange
Commission.
"1933 Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
<PAGE>
"1934 Act" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"Warrants" mean the Warrants to purchase shares of
Common Stock issuable to the Investor upon conversion or redemption of the
Debentures.
2. Registration.
(a) Registration Statement. Promptly following the
closing of the transactions contemplated by the Purchase Agreement (the "Closing
Date") (but no later than sixty days after the Closing Date), the Company shall
prepare and file with the SEC one Registration Statement on Form S-3 (or, if
Form S-3 is not then available to the Company, on such form of registration
statement as is then available to effect such a registration of the Registrable
Securities, subject to the Investor's consent) covering the resale of the
Registrable Securities. Such Registration Statement shall cover, to the extent
allowable under the 1933 Act and the Rules promulgated thereunder (including
rule 416), such indeterminate number of additional shares of Common Stock
resulting from stock splits, stock dividends or similar transactions with
respect to the Registrable Securities. No securities shall be included in the
Registration Statement without the consent of the Investor other than (i)
Registrable Securities and (ii) securities issued or issuable pursuant to a
purchase agreement in substantive form identical to the Purchase Agreement and
entered into between the Company and an investor reasonably acceptable to the
Investor within 30 days following the date of this Agreement. The Registration
Statement (and each amendment or supplement thereto, and each request for
acceleration of effectiveness thereof) shall be provided in accordance with
Section 3(c) to (and subject to the approval of) the Investor and its counsel
prior to its filing or other submission, which approval shall not be
unreasonably withheld or delayed.
(b) Expenses. The Company will pay all expenses
associated with the registration, excluding discounts, commissions, fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals and fees of counsel to the Investor relating to the distribution
of the Registrable Securities and the Registration Statement.
(c) Effectiveness.
(i) The Company shall use its best efforts
to have the Registration Statement declared effective as soon as practicable. If
(A) the Registration Statement is not declared effective by the SEC within 120
days following the Closing Date (the "Registration Date"), (B) after the
Registration Statement has been declared effective by the SEC, sales cannot be
made pursuant to the Registration Statement (by reason of a stop order, or the
Company's failure to update the Registration Statement) but except as excused
pursuant to subparagraph (ii) below, or (C) the Common Stock is not listed or
included for quotation on the Nasdaq National Market System, the Nasdaq SmallCap
System, the New York Stock Exchange or the American Stock Exchange, then the
Company will make pro-rata payments to the Investor, as liquidated damages and
not as a penalty, in an amount equal to 2% of the aggregate principal amount of
the Debentures for any month or portion thereof following the Registration Date
during which any of the events described in (A) or (B) or (C) above occurs and
is continuing (the "Blackout Period"). The Blackout Period shall terminate upon
(i) the effectiveness of the Registration Statement in the case of (A) and (B)
above; (ii) listing or inclusion of the Common Stock on the Nasdaq National
<PAGE>
Market System, the Nasdaq SmallCap System, the New York Stock Exchange or the
American Stock Exchange in the case of (C) above; and (iii) in the case of the
events described in (A) or (B) above, the earlier termination of the
Registration Period (as defined in Section 3(a) below). If the Blackout Period
should continue for four months, then, at the option of the Investor, the
Company shall redeem the Debentures on a redemption date designated by such
Investor at a redemption price equal to 120% of the outstanding principal amount
of the Debenture, plus all accrued but unpaid interest and liquidated damages as
of the redemption date (which remedy shall not be exclusive of any other
remedies available at law or in equity). The amounts payable as liquidated
damages and upon redemption of any Debenture (including accrued and unpaid
interest) pursuant to this paragraph shall be payable in lawful money of the
United States and amounts payable as liquidated damages shall be paid monthly on
the last day of each month following the commencement of the Blackout Period
until redemption or the termination of the Blackout Period. Amounts payable as
liquidated damages hereunder shall cease when an Investor no longer holds
Debentures, Warrants or Registrable Securities.
(ii) The Company may terminate or suspend
effectiveness of any registration contemplated by this Section one time for a
period of not more than twenty (20) days if the Company shall deliver to the
Investor a certificate signed by the President of the Company stating that, in
the good faith judgment of the Board of Directors of the Company, it would (A)
be seriously detrimental to the business of the Company for such registration to
be effected or remain effective at such time, (B) interfere with any proposed or
pending material corporate transaction involving the Company or any of its
subsidiaries, or (C) result in any premature disclosure thereof.
(d) Underwritten Offering. If any offering pursuant
to a Registration Statement pursuant to Section 2(a) hereof involves an
underwritten offering, the Investor shall have the right to select an investment
banker and manager to administer the offering, which investment banker or
manager shall be reasonably satisfactory to the Company.
3. Company Obligations. The Company will use its best efforts
to effect the registration of the Registrable Securities in accordance with the
terms hereof, and pursuant thereto the Company will, as expeditiously as
possible:
(a) use its best efforts to cause such Registration
Statement to become effective and to remain continuously effective for a period
that will terminate when all Registrable Securities covered by such Registration
Statement, as amended from time to time, have been sold or until such time as
they become eligible for distribution pursuant to Rule 144(k), or any successor
provision thereof, under the 1933 Act (the "Registration Period");
(b) prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement and the Prospectus as
may be necessary to keep the Registration Statement effective for the period
specified in Section 3(a) and to comply with the provisions of the 1933 Act and
the 1934 Act with respect to the distribution of all Registrable Securities;
provided that, at a time reasonably prior to the filing of a Registration
Statement or Prospectus, or any amendments or supplements thereto, the Company
will furnish to the Investor copies of all documents proposed to be filed, which
documents will be subject to the comments of the Investor;
<PAGE>
(c) permit a single firm of counsel designated by the
Investor to review the Registration Statement and all amendments and supplements
thereto no fewer than five days prior to their filing with the SEC, and not file
any document in a form to which such counsel reasonably objects;
(d) furnish to the Investor and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and Prospectus and each amendment
or supplement thereto, and each letter written by or on behalf of the Company to
the SEC or the staff of the SEC, and each item of correspondence from the SEC or
the staff of the SEC, in each case relating to such Registration Statement
(other than any portion of any thereof which contains information for which the
Company has sought confidential treatment), and (ii) such number of copies of a
Prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
(e) in the event the Investor selects underwriters
for the offering, the Company shall enter into and perform its reasonable
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the underwriters of such offering;
(f) at the request of the Investor, the Company shall
furnish, on the date that Registrable Securities are delivered to an
underwriter, if any, for sale in connection with the Registration Statement (i)
an opinion, dated as of such date, from counsel representing the Company for
purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
underwriter and the Investor and (ii) a letter, dated such date, from the
Company's independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters and the Investor;
(g) make reasonable effort to prevent the issuance of
any stop order or other suspension of effectiveness and, if such order is
issued, obtain the withdrawal of any such order at the earliest possible moment;
(h) furnish to the Investor at least five copies of
the Registration Statement and any post-effective amendment thereto, including
financial statements and schedules;
(i) prior to any public offering of Registrable
Securities, use its reasonable best efforts to register or qualify or cooperate
with the Investor and their counsel in connection with the registration or
qualification of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions as the Investor reasonably
requests in writing and do any and all other reasonable acts or things necessary
or advisable to enable the distribution in such jurisdictions of the Registrable
Securities covered by the Registration Statement;
(j) cause all Registrable Securities covered by the
Registration Statement to be listed on each securities exchange, interdealer
quotation system or other market on which similar securities issued by the
Company are then listed;
<PAGE>
(k) immediately notify the Investor, at any time when
a Prospectus relating to the Registrable Securities is required to be delivered
under the Securities Act, upon discovery that, or upon the happening of any
event as a result of which, the Prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing, and at the request of any such holder, promptly prepare and
furnish to such holder a reasonable number of copies of a supplement to or an
amendment of such Prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such Prospectus
shall not include an untrue statement of a material fact or omit 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; and
(l) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act,
take such other actions as may be reasonably necessary to facilitate the
registration of the Registrable Securities hereunder; and make available to its
security holders, as soon as reasonably practicable, but not later than the
Availability Date (as defined below), an earnings statement covering a period of
at least twelve months, beginning after the effective date of the Registration
Statement, which earnings statement shall satisfy the provisions of subsection
11(a) of the 1933 Act (for the purpose of this subsection 3(m), "Availability
Date" means the 45th day following the end of the fourth fiscal quarter that
includes the effective date of such Registration Statement, except that, if such
fourth fiscal quarter is the last quarter of the Company's fiscal year,
"Availability Date" means the 90th day after the end of such fourth fiscal
quarter).
4. Obligations of the Investor.
(a) It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities that each Investor shall
furnish in writing to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. At
least three (3) business days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify the Investor of the information
the Company requires from the Investor if the Investor elects to have any of the
Registrable Securities included in the Registration Statement.
(b) The Investor, by its acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of its election to exclude all of the Registrable Securities from the
Registration Statement.
(c) In the event the Investor determines to engage
the services of an underwriter, the Investor agrees to enter into and perform
its obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
dispositions of the Registrable Securities.
<PAGE>
(d) The Investor agrees that, upon receipt of any
notice from the Company of the happening of any event rendering the Registration
Statement no longer effective, the Investor will immediately discontinue
disposition of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities until the Investor's receipt of the copies
of the supplemented or amended prospectus filed with the SEC and declared
effective and, if so directed by the Company, the Investor shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in the Investor's possession of the
prospectus covering the Registrable Securities current at the time of receipt of
such notice.
(e) The Investor may not participate in any
underwritten registration hereunder unless it (i) agrees to sell the Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to the terms of this Agreement.
5. Indemnification.
(a) Indemnification by Company. The Company agrees to
indemnify and hold harmless, to the fullest extent permitted by law the
Investor, its officers, directors, partners and employees and each person who
controls the Investor (within the meaning of the 1933 Act) against all losses,
claims, damages, liabilities, costs (including, without limitation, reasonable
attorney's fees) and expenses caused by (i) any untrue or alleged untrue
statement of a material fact contained in any Registration Statement, Prospectus
or any preliminary prospectus or any amendment or supplement thereto or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same are based upon any information furnished in writing
to the Company by the Investor, expressly for use therein, or (ii) any violation
by the Company of any federal, state or common law, rule or regulation
applicable to the Company in connection with any Registration Statement,
Prospectus or any preliminary prospectus, or any amendment or supplement
thereto, and shall reimburse in accordance with subparagraph (c) below, each of
the foregoing persons for any legal and any other expenses reasonably incurred
in connection with investigating or defending any such claims. The foregoing is
subject to the condition that, insofar as the foregoing indemnities relate to
any untrue statement, alleged untrue statement, omission or alleged omission
made in any preliminary prospectus or Prospectus that is eliminated or remedied
in any Prospectus or amendment or supplement thereto, the above indemnity
obligations of the Company shall not inure to the benefit of any indemnified
party if a copy of such corrected Prospectus or amendment or supplement thereto
had been made available to such indemnified party and was not sent or given by
such indemnified party at or prior to the time such action was required of such
indemnified party by the 1933 Act and if delivery of such Prospectus or
amendment or supplement thereto would have eliminated (or been a sufficient
defense to) any liability of such indemnified party with respect to such
statement or omission. Indemnity under this Section 5(a) shall remain in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the permitted transfer of the Registrable
Securities.
<PAGE>
(b) Indemnification by Holder of Registrable
Securities. In connection with any registration pursuant to the terms of this
Agreement, each Investor holding Registrable Securities will furnish to the
Company in writing such information as the Company reasonably requests
concerning such holders or the proposed manner of distribution for use in
connection with any Registration Statement or Prospectus and agrees to indemnify
and hold harmless, to the fullest extent permitted by law, the Company, its
directors, officers, employees, stockholders and each person who controls the
Company (within the meaning of the 1933 Act) against any losses, claims,
damages, liabilities and expense (including reasonable attorney's fees)
resulting from any untrue statement of a material fact or any omission of a
material fact required to be stated in the Registration Statement or Prospectus
or preliminary prospectus or amendment or supplement thereto or necessary to
make the statements therein not misleading, to the extent, but only to the
extent that such untrue statement or omission is contained in any information
furnished in writing by the holder of Registrable Securities to the Company
specifically for inclusion in such Registration Statement or Prospectus or
amendment or supplement thereto and that such information was substantially
relied upon by the Company in preparation of the Registration Statement or
Prospectus or any amendment or supplement thereto. In no event shall the
liability of a holder of Registrable Securities be greater in amount than the
dollar amount of the proceeds (net of all expense paid by such holder and the
amount of any damages such holder has otherwise been required to pay by reason
of such untrue statement or omission) received by such holder upon the sale of
the Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. Any
person entitled to indemnification hereunder shall (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party; provided that any
person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such person unless (a)
the indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a
conflict of interest exists between such person and the indemnifying party with
respect to such claims (in which case, if the person notifies the indemnifying
party in writing that such person elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such person); and
provided, further, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
hereunder, except to the extent that such failure to give notice shall
materially adversely affect the indemnifying party in the defense of any such
claim or litigation. It is understood that the indemnifying party shall not, in
connection with any proceeding in the same jurisdiction, be liable for fees or
expenses of more than one separate firm of attorneys at any time for all such
indemnified parties. No indemnifying party will, except with the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
<PAGE>
(d) Contribution. If for any reason the
indemnification provided for in the preceding clauses (a) and (b) is unavailable
to an indemnified party or insufficient to hold it harmless, other than as
expressly specified therein, then the indemnifying party shall contribute to the
amount paid or payable by the indemnified party as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect the relative
fault of the indemnified party and the indemnifying party, as well as any other
relevant equitable considerations. No person guilty of fraudulent
misrepresentation within the meaning of Section 11(f) of the 1933 Act shall be
entitled to contribution from any person not guilty of such fraudulent
misrepresentation. In no event shall the contribution obligation of a holder of
Registrable Securities be greater in amount than the dollar amount of the
proceeds (net of all expenses paid by such holder and the amount of any damages
such holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission) received by it upon
the sale of the Registrable Securities giving rise to such contribution
obligation.
6. Miscellaneous.
(a) Amendments and Waivers. This Agreement may be
amended only by a writing signed by the parties hereto. The Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the written consent to
such amendment, action or omission to act, of the Investor.
(b) Notices. All notices and other communications
provided for or permitted hereunder shall be made as set forth in Section 11.4
of the Purchase Agreement.
(c) Assignments and Transfers by Investor. This
Agreement and all the rights and obligations of the Investor hereunder may not
be assigned or transferred to any transferee or assignee except as set forth
herein. The Investor may make such assignment or transfer to any transferee or
assignee of any Debenture, Warrant or Registrable Securities, provided, that (i)
such transfer is made expressly subject to this Agreement and the transferee
agrees in writing to be bound by the terms and conditions hereof, and (ii) the
Company is provided with written notice of such assignment.
(d) Assignments and Transfers by the Company. This
Agreement may not be assigned by the Company without the prior written consent
of Investor, except that without the prior written consent of the Investor, but
after notice duly given, the Company shall assign its rights and delegate its
duties hereunder to any successor-in-interest corporation, and such
successor-in-interest shall assume such rights and duties, in the event of a
merger or consolidation of the Company with or into another corporation or the
sale of all or substantially all of the Company's assets.
<PAGE>
(e) Benefits of the Agreement. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
(f) Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(g) Titles and Subtitles. 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.
(h) Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms to the fullest extent permitted by law.
(i) Further Assurances. The Parties shall execute and
deliver all such further instruments and documents and take all such other
actions as may reasonably be required to carry out the transactions contemplated
hereby and to evidence the fulfillment of the agreements herein contained.
(j) Entire Agreement. This Agreement is intended by
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(k) Applicable Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware without
regard to principles of conflicts of law.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
The Company: UNIGENE LABORATORIES, INC.
By: /S/ WARREN P. LEVY
------------------
Name: Warren P. Levy
Title: President
The Investor: THE TAIL WIND FUND, LTD.
By: /S/ SHERRILL PLETSCHER
----------------------
Name: Sherrill Pletscher
Title: Authorized Signatory
<TABLE> <S> <C>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,547,461
<SECURITIES> 0
<RECEIVABLES> 380
<ALLOWANCES> 0
<INVENTORY> 449,665
<CURRENT-ASSETS> 4,200,404
<PP&E> 17,299,189
<DEPRECIATION> 8,554,599
<TOTAL-ASSETS> 14,674,552
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<BONDS> 5,607,694
0
0
<COMMON> 385,372
<OTHER-SE> 5,552,629
<TOTAL-LIABILITY-AND-EQUITY> 14,674,552
<SALES> 1,857
<TOTAL-REVENUES> 2,011,857
<CGS> 0
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<OTHER-EXPENSES> 5,464,200
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<INTEREST-EXPENSE> 108,278
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