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, 1999
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
- -------------------------------------------- ---------
(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 - 41,174,329 shares as of August 1, 1999
<PAGE>
INDEX
UNIGENE LABORATORIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed balance sheets-
June 30, 1999 and December 31, 1998
Condensed statements of operations-
Three months and six months ended June 30, 1999 and 1998
Condensed statements of cash flows-
Six months ended June 30, 1999 and 1998
Notes to condensed financial statements-
June 30, 1999
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
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>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
UNIGENE LABORATORIES, INC.
CONDENSED BALANCE SHEETS
June 30 December 31
1999 1998
------------ ------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ......................... $ 571,249 $ 402,664
Prepaid expenses .................................. 141,242 317,823
Other current assets .............................. 664,102 887,904
------------ ------------
Total current assets ......................... 1,376,593 1,608,391
Property, plant and equipment-net
of accumulated depreciation and amortization ...... 7,396,285 8,085,250
Patents and other intangibles, net .................... 1,231,027 1,206,018
Other assets .......................................... 494,339 664,434
------------ ------------
$ 10,498,244 $ 11,564,093
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................. $ 1,559,068 $ 982,752
Accrued expenses .................................. 1,434,233 1,329,199
Notes payable - stockholders ...................... 2,640,000 1,040,000
Current portion-capital lease obligations ......... 61,464 61,464
------------ ------------
Total current liabilities ........................... 5,694,765 3,413,415
5% convertible debentures ............................. 2,800,000 3,802,807
Capital lease obligations, excluding current portion .. 99,657 127,783
Stockholders' equity:
Common stock-par value $.01 per share;
authorized 60,000,000 shares, issued
41,085,766 shares in 1999 and 39,384,822 in 1998 410,858 393,848
Additional paid-in capital ........................ 66,366,492 65,158,403
Accumulated deficit ............................... (64,872,497) (61,331,132)
Less: Treasury stock, at cost, 7,290 shares ....... (1,031) (1,031)
------------ ------------
Total stockholders' equity ................... 1,903,822 4,220,088
------------ ------------
$ 10,498,244 $ 11,564,093
============ ============
</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
------------------------------ ------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Licensing and other revenue ..... $ 26,670 $ 142 $ 2,526,842 $ 2,011,857
------------ ------------ ------------ ------------
Operating expenses:
Research and development .... 2,236,316 2,256,358 4,609,959 4,406,672
General and administrative .. 615,897 568,342 1,092,133 1,057,528
------------ ------------ ------------ ------------
2,852,213 2,824,700 5,702,092 5,464,200
------------ ------------ ------------ ------------
Operating loss .................. (2,825,543) (2,824,558) (3,175,250) (3,452,343)
------------ ------------ ------------ ------------
Other income (expense):
Interest income .............. 4,589 13,754 15,542 44,094
Interest expense ............. (156,656) (57,023) (381,657) (108,278)
------------ ------------ ------------ ------------
(152,067) (43,269) (366,115) (64,184)
Net loss ........................ $ (2,977,610) $ (2,867,827) $ (3,541,365) $ (3,516,527)
============ ============ ============ ============
Net loss per share, basic ....... $ (.07) $ (.07) $ (.09) $ (.09)
============ ============ ============ ============
Net loss per share, diluted ..... $ (.07) $ (.07) $ (.09) $ (.09)
============ ============ ============ ============
Weighted average number of shares
outstanding .................... 40,109,449 38,528,152 39,835,348 38,519,341
============ ============ ============ ============
</TABLE>
See notes to condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
UNIGENE LABORATORIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net cash used for operating activities ................. $(1,349,104) $(2,084,404)
----------- -----------
Investing activities:
Purchase of equipment and furniture ................ (62,625) (200,661)
(Increase) decrease in patents
and other assets ................................. 12,450 (91,638)
Construction of leasehold and building improvements (4,010) (2,484)
----------- -----------
(54,185) (294,783)
----------- -----------
Financing activities:
Issuance of notes payable-stockholders.............. 1,600,000 --
Issuance of debt, net of related expenses .......... -- 3,779,258
Exercise of stock options and warrants ............. -- 21,063
Repayment of capital lease obligations ............. (28,126) --
----------- -----------
1,571,874 3,800,321
----------- -----------
Net increase in cash and cash equivalents .............. 168,585 1,421,134
Cash and cash equivalents at beginning of year ......... 402,664 2,126,327
----------- -----------
Cash and cash equivalents at end of period ............. $ 571,249 $ 3,547,461
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Non-cash investing and financing activities:
Conversion of convertible debentures and
accrued interest into Common Stock .................. $ 1,301,096 $ --
=========== ===========
Cash paid for interest ................................. $ 9,041 $ 30,287
=========== ===========
</TABLE>
See notes to condensed financial statements
<PAGE>
UNIGENE LABORATORIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1999
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, 1999 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1999. 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, 1998.
NOTE B - CONVERTIBLE DEBENTURES
During January 1999, $200,000 of principal amount of the Company's 5%
Convertible Debentures, due December 31, 2001, were converted into (a) 164,102
shares of Common Stock and (b) warrants, expiring January 29, 2004, to purchase
6,564 shares of Common Stock at an exercise price of $1.52 per share. In
addition, the Company issued 79,384 shares of Common Stock as payment of
interest on the 5% Convertible Debentures in lieu of a semi-annual cash interest
payment in the amount of $101,000.
During the second quarter of 1999, $1,000,000 of principal amount of the
Company's 5% Convertible Debentures, due December 31, 2001, were converted into
(a) 1,457,458 shares of Common Stock and (b) warrants, expiring April - June
2004, to purchase an aggregate of 58,298 shares of Common Stock at exercise
prices ranging from $.78 to $1.15 per share.
NOTE C - NOTES PAYABLE - STOCKHOLDERS
During the second quarter of 1999 (a) Jay Levy, a director and officer of the
Company, loaned the Company $1,500,000 evidenced by demand notes bearing
interest at 6% per year, and (b) Warren Levy and Ronald Levy, directors and
officers of the Company, loaned the Company $100,000 evidenced by demand notes
bearing interest at the Merrill Lynch Margin Loan Rate plus .25% (8.125% at June
30, 1999) (the "Floating Rate"). All of these loans were classified as current
liabilities as of June 30, 1999. In July and August of 1999, (a) Warren Levy and
Ronald Levy loaned the Company an additional $30,000 evidenced by demand notes
bearing interest at the Floating Rate, (b) Jay Levy loaned the Company an
additional $370,000 evidenced by term notes maturing January 2002 and bearing
interest at 6% per year, and (c) the $1,500,000 of demand notes evidencing loans
made by Jay Levy in the second quarter were converted into 6% term notes
maturing January 2002. The Company has granted Jay Levy a security interest in
all of its equipment and a mortgage on its real property to secure payment of
the term notes which are senior to all notes payable to Warren Levy and Ronald
Levy. The Company is required to make installment payments on the term notes
commencing in October 1999 and ending in January 2002 in an aggregate amount of
$72,426 per month.
<PAGE>
NOTE D - LIQUIDITY
The Company has incurred annual operating losses since its inception and, as a
result, at June 30, 1999 had an accumulated deficit of approximately $64,872,000
and a working capital deficiency of approximately $4,318,000. The independent
auditors' report covering the Company's 1998 financial statements includes an
explanatory paragraph that states the above factors raise substantial doubt
about the Company's ability to continue as a going concern. However, the
financial statements have been prepared on a going concern basis and as such do
not include any adjustments that might result from the outcome of this
uncertainty.
In August 1999, the Company and Warner-Lambert successfully concluded their
second pilot human study for their oral calcitonin formulation. This milestone
will result in a payment to the Company of $2.5 million, which is expected to be
received during the third quarter of 1999.
With the receipt of $2 million in stockholder loans during the second and third
quarters of 1999, in addition to the upcoming $2.5 million payment from
Warner-Lambert in the third quarter, management believes that the Company will
have sufficient financial resources to sustain its operations at the current
level into the fourth quarter of 1999. The Company expects to achieve additional
milestones under the Warner-Lambert agreement during 1999, which will result in
further payments. However, there can be no assurance as to when or if the
Company will achieve such milestones. The Company is currently negotiating
licensing agreements for its nasal and injectable calcitonin products. These
agreements could provide short-term funds to the Company in upfront payments as
well as milestone payments. The Company has executed an agreement for the sale
of its state tax benefits under a New Jersey program which allows certain New
Jersey taxpayers to sell their state tax benefits to third-parties. This sale
should provide the Company with a total of approximately $4 million, although
the Company's application for the sale is subject to final approval by the NJ
Economic Development Authority. These tax benefit proceeds should be received in
1999 and 2000. However, there can be no assurance that any of these transactions
will be completed or, if completed, that the terms and timing of such
transactions would provide sufficient funds to sustain operations at the current
level.
While the Company believes that the transactions it currently is pursuing and
the milestone payments under the Warner-Lambert agreement would satisfy the
Company's liquidity requirements in the near term, satisfying the Company's
long-term liquidity requirements will require the successful commercialization
of its nasal or oral calcitonin product. In addition, the commercialization of
its calcitonin products will require the Company to incur additional capital
expenditures, including expenditures to expand or upgrade the Company's
manufacturing operations to satisfy certain of its calcitonin supply
obligations. However, neither the cost nor timing of such capital expenditures
is determinable at this time.
<PAGE>
NOTE E - DIRECTORS STOCK OPTION PLAN
At the Company's June 23, 1999 Annual Meeting, the stockholders approved the
adoption of a new Directors Stock Option Plan (the "New Plan") to replace the
1994 Outside Directors Stock Option Plan (the "1994 Plan"). Under the New Plan,
each person elected to the Board after June 23, 1999,who is not an employee will
receive, on the date of his initial election, an option to purchase 21,000
shares of Common Stock. In addition, on May 1st of each year, commencing May 1,
1999, each non-employee director will receive an option to purchase 10,000
shares of Common Stock if he has served as a non-employee director for at least
six months prior to the May 1st grant. Each option granted under the New Plan
will have a ten-year term and the exercise price of each option will be equal to
the market price of the Common Stock on the date of the grant. A total of
350,000 shares of Common Stock are reserved for issuance under the New Plan.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Revenue for the first half of 1999 increased 26% to $2,527,000 from $2,012,000
in the first half of 1998. Revenue for both periods consisted primarily of
milestone payments from Warner-Lambert Company, as the result of the achievement
of benchmarks in the development of an oral calcitonin product for treating
osteoporosis under a July 1997 licensing agreement. Revenues for the three month
periods ended June 30, 1999 and June 30, 1998 were minimal.
Research and development, the Company's largest expense, decreased 1% from
$2,256,000 to $2,236,000 for the three months ended June 30, 1999, as compared
to the same period in 1998. The decrease was primarily attributable to
regulatory expenses incurred in 1998 related to the Company's injectable
calcitonin product, partially offset by development expenses in 1999 related to
the Company's nasal calcitonin product. Research and development expenses
increased 5% from $4,407,000 to $4,610,000 for the six months ended June 30,
1999, as compared to the same period in 1998. The increase was primarily
attributable to 1999 development expenses related to the Company's nasal
calcitonin product partially offset by a reduction in regulatory expenses
incurred in 1998 related to the Company's injectable calcitonin product.
General and administrative expenses increased 8% from $568,000 to $616,000 and
3% from $1,058,000 to $1,092,000 for the three months and six months ended June
30, 1999, respectively, as compared to the same periods in 1998. The increases
were primarily due to increased professional fees, partially offset by
reductions in public relations and travel expenses.
Interest income decreased $9,000 and $29,000 for the three months and six months
ended June 30, 1999, respectively, as compared to the same periods in 1998, due
to reduced funds available for investment in 1999.
Interest expense increased $100,000 and $273,000 for the three months and six
months ended June 30, 1999, respectively, as compared to the same periods in
1998. The 1999 increases principally were due to the amortization of the value
of the beneficial conversion feature and related warrants of the Company's 5%
Convertible Debentures in the amounts of $46,000 for the second quarter of 1999
and $197,000 for the first half of 1999.
As a result of increased operating expenses and interest expense, partially
offset by an increase in licensing revenue, net loss increased $110,000 or 4%
and $25,000 or 1% for the three months and six months ended June 30, 1999,
respectively, as compared to the corresponding periods in 1998.
As of December 31, 1998, the Company had available for income tax reporting
purposes net operating loss carryforwards in the approximate amount of
$58,400,000, expiring from 1999 through 2018, which are available to reduce
future earnings that would otherwise be subject to federal income taxes. For the
six months ending June 30, 1999, the Company accumulated additional losses of
approximately $3,541,000. In addition, the Company has investment tax credits
and research and development credits in the amounts of $19,000 and $2,178,000,
respectively, which are available to reduce the amount of future federal income
taxes. These credits expire from 1999 through 2018.
<PAGE>
The Company follows Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes". Given the Company's past history of incurring
operating losses, any deferred tax assets that are recognizable under SFAS 109
have been fully reserved. As of January 1, 1999, under SFAS 109, the Company had
deferred tax assets of approximately $25,500,000, subject to a valuation
allowance of $25,500,000. The deferred tax assets are primarily as a result of
the Company's net operating losses and tax credits generated. For the six-month
period ended June 30, 1999, the Company's deferred tax assets and valuation
allowances each increased by approximately $1,416,000.
LIQUIDITY AND CAPITAL RESOURCES
There are currently no material commitments outstanding for capital expenditures
relating to either the Boonton, New Jersey production facility or the Company's
facility in Fairfield, New Jersey.
The Company, at June 30, 1999, had cash and cash equivalents of $571,000, an
increase of $169,000 from December 31, 1998.
The Company has incurred annual operating losses since its inception and, as a
result, at June 30, 1999 had an accumulated deficit of approximately $64,872,000
and a working capital deficiency of approximately $4,318,000. The independent
auditors' report covering the Company's 1998 financial statements includes an
explanatory paragraph that states the above factors raise substantial doubt
about the Company's ability to continue as a going concern. However, the
financial statements have been prepared on a going concern basis and as such do
not include any adjustments that might result from the outcome of this
uncertainty.
The Company's future 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 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. Through June 30, 1999, the Company had
received an aggregate of $13.5 million from Warner-Lambert in the form of an
equity investment, a licensing fee and milestone payments. Under the terms of
the license agreement, the Company is eligible to receive up to an additional
$41 million in milestone payments during the course of the development program,
of which $8 million would be received prior to the commencement of Phase I
clinical studies in the U.S. if specified milestones are achieved. Early-stage
milestones primarily relate to the product's performance characteristics, while
the latter-stage milestones are primarily related to regulatory activities 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. The Company 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.
The Company's cash requirements are approximately $10-11 million per year due to
the operations of its research and peptide manufacturing facilities and with
three calcitonin products in various stages of development. In addition, the
Company faces principal and interest obligations over the next several years
under its outstanding notes payable to stockholders and 5% Convertible
Debentures. However, because of the conversion features of the 5% Convertible
Debentures, a substantial portion of this debt is expected to be converted into
Common Stock, thereby decreasing the amount of cash required for principal
payments. The Company also may elect to pay interest on these debentures in
Common Stock, which would decrease the amount of cash required for interest
payments.
<PAGE>
During the second quarter of 1999 (a) Jay Levy, a director and officer of the
Company, loaned the Company $1,500,000 evidenced by demand notes bearing
interest at 6% per year, and (b) Warren Levy and Ronald Levy, directors and
officers of the Company, loaned the Company $100,000 evidenced by demand notes
bearing interest at the Merrill Lynch Margin Loan Rate plus .25% (8.125% at June
30, 1999) (the "Floating Rate"). All of these loans were classified as current
liabilities as of June 30, 1999. In July and August of 1999, (a) Warren Levy and
Ronald Levy loaned the Company an additional $30,000 evidenced by demand notes
bearing interest at the Floating Rate, (b) Jay Levy loaned the Company an
additional $370,000 evidenced by term notes maturing January 2002 and bearing
interest at 6% per year, and (c) the $1,500,000 of demand notes evidencing loans
made by Jay Levy in the second quarter were converted into 6% term notes
maturing January 2002. The Company has granted Jay Levy a security interest in
all of its equipment and a mortgage on its real property to secure payment of
the term notes which are senior to all notes payable to Warren Levy and Ronald
Levy. The Company is required to make installment payments on the term notes
commencing in October 1999 and ending in January 2002 in an aggregate amount of
$72,426 per month.
In August 1999, the Company and Warner-Lambert successfully concluded their
second pilot human study for their oral calcitonin formulation. This milestone
will result in a payment to the Company of $2.5 million, which is expected to be
received during the third quarter of 1999.
With the receipt of $2 million in stockholder loans during the second and third
quarters of 1999, in addition to the upcoming $2.5 million payment from
Warner-Lambert in the third quarter, management believes that the Company will
have sufficient financial resources to sustain its operations at the current
level into the fourth quarter of 1999.
The Company expects to achieve additional milestones under the Warner-Lambert
agreement during 1999, which will result in further payments. However, there can
be no assurance as to when or if the Company will achieve such milestones. The
Company is currently negotiating licensing agreements for its nasal and
injectable calcitonin products. These agreements could provide short-term funds
to the Company in upfront payments as well as milestone payments. The Company
has executed an agreement for the sale of its state tax benefits under a New
Jersey program which allows certain New Jersey taxpayers to sell their state tax
benefits to third-parties. This sale should provide the Company with a total of
approximately $4 million, although the Company's application for the sale is
subject to final approval by the NJ Economic Development Authority. These tax
benefit proceeds should be received in 1999 and 2000. However, there can be no
assurance that any of these transactions will be completed or, if completed,
that the terms and timing of such transactions would provide sufficient funds to
sustain operations at the current level.
While the Company believes that the transactions it currently is pursuing and
the milestone payments under the Warner-Lambert agreement would satisfy the
Company's liquidity requirements in the near term, satisfying the Company's
long-term liquidity requirements will require the successful commercialization
of its nasal or oral calcitonin product. In addition, the commercialization of
its calcitonin products will require the Company to incur additional capital
expenditures, including expenditures to expand or upgrade the Company's
manufacturing operations to satisfy certain of its calcitonin supply
obligations. However, neither the cost nor timing of such capital expenditures
is determinable at this time.
<PAGE>
YEAR 2000
- ---------
The Company has established a Year 2000 taskforce that is responsible for
identifying and reviewing all of the Company's internal computer systems for
Year 2000 compliance, including workstations, the accounting system, and the
control systems for equipment in the Company's manufacturing and laboratory
facilities. The taskforce is currently taking inventory of all critical and
non-critical systems and has begun to test its systems and workstations for Year
2000 compliance. Of the systems and workstations tested so far, most have been
found to be in compliance. Certain systems, such as the accounting and telephone
systems have been brought into compliance. Of the workstations tested and found
not to be in compliance, most have been updated to be compliant. The review and
all testing should be completed during the third quarter of 1999. After the
review and testing are completed, the taskforce will determine how to address
any remediation necessary. The Company intends to repair or replace any
noncompliant systems in a timely manner so that the business of the Company will
not be adversely affected.
Because most of the principal hardware and software used by the Company
(including most of the equipment control systems) were acquired by the Company
within the last several years, the Company expects that most of its systems will
be Year 2000 compliant. However, until the taskforce completes its review and
testing, the Company will not be able to assess the level of compliance or make
an accurate estimate of the costs of any remediation. To date, the costs of
remediation have not been material. Contingency plans have not yet been
developed.
The Company has no material relationships with third party suppliers, to the
extent that third party noncompliance could seriously disrupt operations. The
Company could be significantly affected by Year 2000 noncompliance on the part
of Warner-Lambert as the Company currently is dependent upon timely milestone
payments from Warner-Lambert. In addition, the loss of the utility supply to the
Company's laboratory, production and administrative facilities would cause a
shut down of those facilities which, depending on the duration of the shut down,
may have a material adverse impact on the Company's business. In addition, the
loss of telecommunications services and banking services would, as is the case
with all businesses, adversely affect the Company.
OTHER
The Company has been notified by the staff of the National Association of
Securities Dealers that it currently does not meet all of the requirements for
the continued listing of the Company's Common Stock on the Nasdaq National
Market. The Company is appealing the staff decision and has developed and
submitted to the Nasdaq Listing Qualifications Panel a plan by which it believes
that it can regain compliance with the listing maintenance requirements.
However, there is no assurance that the Panel will find the plan acceptable.
Should the panel not accept the plan, the Common Stock will be delisted from
trading on the Nasdaq National Market, which could have a material adverse
effect on the price and liquidity of the Common Stock.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting For Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. SFAS No. 133, as amended, will be effective for the
Company's fiscal year beginning January 1, 2001. The adoption of SFAS No. 133 is
not expected to have a material effect on the Company's financial position or
results of operations.
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
MARKET RISK
In the normal course of business, the Company is exposed to fluctuations in
interest rates as the Company seeks debt financing to sustain its operations.
The Company does not use derivative instruments or hedging to manage its
exposures.
The information below summarizes the Company's market risks associated with debt
obligations as of June 30, 1999. Fair values included herein have been estimated
taking into consideration the nature and terms of each instrument and the
prevailing economic and market conditions at June 30, 1999. The table below
presents principal cash flows and related interest rates by year of maturity
based on the terms of the debt. The informatin presented as to the convertible
debentures is without consideration as to conversion features, as the Company is
unable to predict if and when such conversions may occur. Variable interest
rates disclosed represent the rates at June 30, 1999.
<PAGE>
<TABLE>
<CAPTION>
Estimated Year of Maturity
Fair Carrying ----------------------------------------------------
Value Amount 1999 2000 2001 2002 2003
------ ------ ---- ---- ---- ---- ----
<S> <C> <C> <C>
Notes payable - stockholders $1,140,000 1,140,000 1,140,000 -- -- -- --
Variable interest rate 8.125% -- -- -- --
Notes payable - stockholders $1,500,000 1,500,000 1,500,000 -- -- -- --
Fixed interest rate 6%
5% convertible debentures $2,800,000 2,800,000 -- -- 2,800,000 -- --
Fixed interest rate (1) 5% 5% 5% -- --
</TABLE>
(1) At the option of the Company, interest payments may be made using the
Company's Common Stock.
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, including the Company's need
for and success in securing additional financing, 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, including the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.
<PAGE>
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.
During the second quarter of 1999, $1,000,000 of principal amount of the
Company's 5% Convertible Debentures, due Decembe 31, 2001, were converted into
(a) 1,457,458 shares of Common Stock and (b) warrants, expiring April - June
2004, to purchase an aggregate of 58,298 shares of Common Stock at exercise
prices ranging from $.78 to $1.15 per share. All of such shares and warrants
were issued by the Company without registration in reliance on an exemption
under Section 3(a)(9) of the Securities Act.
(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 23, 1999 (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 31,946,540 1,069,691
Ronald S. Levy 31,960,540 1,055,691
Warren P. Levy 32,009,534 1,006,697
Robert F. Hendrickson 32,015,761 1,000,470
Allen Bloom 32,014,789 1,001,442
(ii) Proposal to approve the adoption of the
Company's Directors Stock Option Plan:
For Against Abstain
--- ------- -------
30,722,251 2,098,628 195,352
<PAGE>
(iii) Proposal to ratify the appointment of KPMG LLP
as auditors of the Company for 1999:
For Against Abstain
--- ------- -------
32,554,309 249,093 212,829
(d) Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
Exhibit 10.1 Form of Promissory Note between the Company
and Jay Levy.
Exhibit 10.2 Form of Promissory Note between the Company
and Warren Levy and Ronald Levy.
Exhibit 10.3 Amendment to Loan Agreement and Security
Agreement between the Company and Jay Levy,
Warren Levy and Ronald Levy dated June 25,
1999.
Exhibit 10.4 Directors Stock Option Plan.
Exhibit 27 Financial Data Schedule - period ended
June 30, 1999.
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the three months ended
June 30, 1999.
<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 16, 1999 -----------------------
Warren P. Levy, President
(Chief Executive Officer)
/s/ Jay Levy
August 16, 1999 -----------------------
Jay Levy, Treasurer
(Chief Financial Officer and
Chief Accounting Officer)
EXHIBIT 10.1
PROMISSORY NOTE
Dated: _______, 1999
$-------
FOR VALUE RECEIVED, UNIGENE LABORATORIES, INC., a Delaware corporation
authorized to do business in the State of New Jersey (the "Undersigned")
promises to pay to the order of JAY LEVY, (the "Lender"), at their offices at
110 Little Falls Road, Fairfield, New Jersey, the sum of _____
__________________THOUSAND and 00/100 ($__________) DOLLARS (hereinafter
referred to as the "Principal") in lawful money of the Unites States of America
with interest, calculated on the basis of a 365 day year, for the actual number
of days involved, on the unpaid balance from the date of this Promissory Note
("Note") at the rate set forth hereafter until paid.
The rate of interest on the Note shall be at six (6%) percent per
annum.
Payment of Principal shall be made upon demand. Interest only will be
payable monthly in arrears on the first day of each month.
1. In connection with the execution and delivery of this Promissory
Note, the undersigned (i) has delivered to the Lender an Amendment to Loan
Agreement and a Security Agreement (the Security Agreement, as so amended being
referred to herein as the "Security Agreement") respecting its assets and
equipment located at its business premises at 110 Little Falls Road, Fairfield,
New Jersey and 83 Fulton Street, Boonton, New Jersey (collectively, the "Secured
Assets") and (ii) hereby grants to the Lender a mortgage and security interest
in the tract or parcel of land and premises located in the Township of
Fairfield, County of Essex and State of New Jersey, as more particularly
described in Exhibit A attached hereto and made a part hereof.
2. The Undersigned agrees with the Lender hereof:
(a) to claim no deduction upon the assessed value of such
Secured Assets on account of the monies owing hereon;
(b) to pay all taxes, assessments, or other governmental
charges levied or assessed against the Secured Assets as the same shall
become due and payable unless same are being contested in good faith in
which event, the same shall, if requested, be paid to Lender;
(c) to keep the Secured Assets insured for the benefit of the
Lender hereof against damage or loss by fire and such other hazards as
the Lender hereof shall specify, by insurers and in amounts reasonably
approved by the Lender hereof, and to deliver such policy or policies
of insurance to the Lender hereof; and
(d) to keep the Secured Assets in good repair and in a
condition satisfactory to the Lender hereof. The Undersigned further
agrees that, should default be made with regard to the above
agreements, the Lender, at its option, may pay such amount or amounts
and the amount so paid shall be added to the amount owing hereunder and
shall be due and payable on demand, with interest at the rate set forth
above.
3. This Note, at the option of the Lender hereof, shall become
immediately due and payable in full in the event of any of the following:
<PAGE>
(a) ten (10) days' default in any payment of interest due
on this Note;
(b) default in the payment of principal due on this Note;
(c) the Undersigned shall (i) apply for or consent to the
appointment of a receiver, trustee or liquidator of the Undersigned for
all or a substantial part of its properties or assets, (ii) admit in
writing its inability to pay its debts as they mature, (iii) make a
general assignment for the benefit of creditors, (iv) be adjudicated a
bankrupt or insolvent, or (v) file a voluntary petition in bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or
liquidation law or statute, or an answer admitting the material
allegations of a petition filed against it in any proceeding under any
such law or if corporation action shall be taken by the Undersigned for
the purpose of effecting any of the foregoing; or
(d) an order, judgment or decree shall be entered, without the
application, approval or consent of the Undersigned by any Court of
competent jurisdiction, approving or seeking reorganization of the
Undersigned or of all of a substantial part of the properties or assets
of the Undersigned, or appointing a receiver, trustee or liquidator of
the Undersigned and such order, judgment or decree shall continue
unstayed and in effect for any period of forty-five (45) days or more;
(e) failure of the Undersigned to comply with the terms and
conditions of the Security Agreement or any other loan documents given
by the Undersigned as Borrower to the Lender as Secured Party, or
failure by the Undersigned to comply with the terms and conditions of
the Loan Agreement, as amended, or of any document collateral to this
transaction;
(f) any default by the Undersigned in any payment of principal
or interest due on any other note or obligation of the Undersigned to
Lender; or
(g) a default is made in the repayment of any mortgage
indebtedness with regard to the premises which the undersigned owns and
in which the Secured Assets are located.
4. Any notice provisions contained in the Loan Agreement, as amended,
or the Security Agreement shall also apply hereunder
5. Presentment, dishonor and notice of dishonor are hereby waived.
6. Upon nonpayment of this Note at its stated or accelerated maturity,
the Lender may, in addition to such other and further rights and remedies
provided by law, or by the Security Agreement referred to above:
(a) collect interest from the date of such maturity on the
principal balance owing hereon at the interest rate(s) set forth
herein;
(b) hold as security for the payment hereof any other property
heretofore or hereafter delivered by the Undersigned into the custody,
control or possession of the Lender for any reason or purpose
whatsoever.
<PAGE>
7. If the Lender of the Note has not received the full amount of
payment of interest due by the end of the ten (10) calendar days after the date
it is due and payable, a late charge of five (5%) percent of the overdue payment
shall be immediately due and payable, which charge shall be for the purpose of
defraying expenses incident to handling such delinquent payments. This charge
shall be in addition to, and not in lieu of, any other remedy Lender may have
and is in addition to Lender's right to collect reasonable fees and charges of
any agents or attorneys which Lender employs in connection with any non-payment
or other event of default. Acceptance by the Lender of payment of a late charge
shall in no way be considered to be an election of remedies or waiver by the
Lender of rights at law or under this Note, or the Security Agreement. Such late
charges if not previously paid shall become part of the indebtedness evidenced
hereby, and shall, at the option of the Lender, be added to any succeeding
monthly payment due under this Note. Failure to pay such late charges with such
succeeding monthly payment shall constitute an event of default and such late
charges shall bear interest at the default rate as hereafter provided from the
date due.
8. Upon the occurrence of an event of default (including, without
limitation, the failure of Borrower to pay any sum herein specified when due),
the unpaid principal sum evidenced by this Note together with all accrued and
unpaid interest thereon, and all other sums evidenced and/or secured by the Note
and the Security Agreement, Loan Agreement and other loan documents given in
connection herewith shall bear interest at a rate per annum referred to as the
Default Rate, which shall be equal to a lesser of: (x) the highest rate of
interest permitted to be contracted for under the laws of the State, or (y) the
interest rate first set forth plus five (5%) percent per annum. The Default Rate
shall be in lieu of any other interest rate otherwise applicable and shall
commence, without notice, immediately upon and from the occurrence of any such
event of default effective as of the due date of the payment in default and
shall continue until all defaults are cured and all sums then due and payable
under the Note and other loan documents are paid in full.
9. Borrower shall have the right to prepay this Note in full or in part
at any time.
10. If this Note is referred to an attorney for collection, the
Undersigned agrees that reasonable attorney's fees shall be added to such amount
and shall be payable thereon.
11. This Note is binding on the Undersigned, its successors and
assigns.
12. If there are any inconsistencies between the Note and the Security
Agreement, the terms of the Security Agreement shall prevail.
IN WITNESS WHEREOF, the Undersigned has executed this Note on the date
first above written.
Attest: Unigene Laboratories, Inc.
________________________ By _________________________
Ronald S. Levy, Secretary Warren P. Levy, President
<PAGE>
JAY LEVY DEMAND NOTES:
DATE AMOUNT
05/05/99 $200,000
05/24/99 $200,000
06/07/99 $200,000
06/25/99 $200,000
06/29/99 $350,000
06/30/99 $350,000
EXHIBIT 10.2
PROMISSORY NOTE
Dated:_____, 1999
$ --------
FOR VALUE RECEIVED, UNIGENE LABORATORIES, INC., a Delaware corporation
authorized to do business in the State of New Jersey (the "Undersigned")
promises to pay to the order of ______ LEVY, (the "Lender"), at their offices at
110 Little Falls Road, Fairfield, New Jersey, the sum of _______ THOUSAND and
00/100 ($________ ) DOLLARS (hereinafter referred to as the "Principal") in
lawful money of the Unites States of America with interest, calculated on the
basis of a 365 day year, for the actual number of days involved, on the unpaid
balance from the date of this Promissory Note ("Note") at the rate set forth
hereafter until paid.
The rate of interest on the Note shall be at the Merrill Lynch Margin
Loan Rate as announced from time to time plus one-quarter (1/4%) percent per
annum.
Payment of Principal shall be made upon demand. Interest only will be
payable monthly in arrears on the first day of each month.
1. As security for the payments of monies owing hereon, the undersigned
has delivered to Lender a Security Agreement (the "Security Agreement")
respecting its assets, and equipment located at its business premises at 110
Little Falls Road, Fairfield, New Jersey and 83 Fulton Street, Boonton, New
Jersey (the "Secured Assets").
2. The Undersigned agrees with the Lender hereof:
(a) to claim no deduction upon the assessed value of such
Secured Assets on account of the monies owing hereon;
(b) to pay all taxes, assessments, or other governmental
charges levied or assessed against the Secured Assets as the same shall
become due and payable unless same are being contested in good faith in
which event, the same shall, if requested, be paid to Lender;
(c) to keep the Secured Assets insured for the benefit of the
Lender hereof against damage or loss by fire and such other hazards as
the Lender hereof shall specify, by insurers and in amounts reasonably
approved by the Lender hereof, and to deliver such policy or policies
of insurance to the Lender hereof; and
(d) to keep the Secured Assets in good repair and in a
condition satisfactory to the Lender hereof. The Undersigned further
agrees that, should default be made with regard to the above
agreements, the Lender, at its option, may pay such amount or amounts
and the amount so paid shall be added to the amount owing hereunder and
shall be due and payable on demand, with interest at the rate set forth
above.
3. This Note, at the option of the Lender hereof, shall become
immediately due and payable in full in the event of any of the following:
(a) ten (10) days' default in any payment of interest due on
this Note;
<PAGE>
(b) default in the payment of principal due on this Note;
(c) the Undersigned shall (i) apply for or consent to the
appointment of a receiver, trustee or liquidator of the Undersigned for
all or a substantial part of its properties or assets, (ii) admit in
writing its inability to pay its debts as they mature, (iii) make a
general assignment for the benefit of creditors, (iv) be adjudicated a
bankrupt or insolvent, or (v) file a voluntary petition in bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or
liquidation law or statute, or an answer admitting the material
allegations of a petition filed against it in any proceeding under any
such law or if corporation action shall be taken by the Undersigned for
the purpose of effecting any of the foregoing; or
(d) an order, judgment or decree shall be entered, without the
application, approval or consent of the Undersigned by any Court of
competent jurisdiction, approving or seeking reorganization of the
Undersigned or of all of a substantial part of the properties or assets
of the Undersigned, or appointing a receiver, trustee or liquidator of
the Undersigned and such order, judgment or decree shall continue
unstayed and in effect for any period of forty-five (45) days or more;
(e) failure of the Undersigned to comply with the terms and
conditions of the Security Agreement of even date herewith given by the
Undersigned as Borrower to the Lender as Secured Party, or failure by
the Undersigned to comply with the terms and conditions of the Loan
Agreement or of any document collateral to this transaction;
(f) any default by the Undersigned in any payment of principal
or interest due on any other note or obligation of the Undersigned to
Lender; or
(g) a default is made in the repayment of any mortgage
indebtedness with regard to the premises which the undersigned owns and
in which the Secured Assets are located.
4. Any notice provisions contained in the Loan Agreement or
the Security Agreement shall also apply hereunder.
5. Presentment, dishonor and notice of dishonor are hereby waived.
6. Upon nonpayment of this Note at its stated or accelerated maturity,
the Lender may, in addition to such other and further rights and remedies
provided by law, or by the Security Agreement referred to above:
(a) collect interest from the date of such maturity on the
principal balance owing hereon at the interest rate(s) set forth
herein;
(b) hold as security for the payment hereof any other property
heretofore or hereafter delivered by the Undersigned into the custody,
control or possession of the Lender for any reason or purpose
whatsoever.
<PAGE>
7. If the Lender of the Note has not received the full amount of
payment of interest due by the end of the ten (10) calendar days after the date
it is due and payable, a late charge of five (5%) percent of the overdue payment
shall be immediately due and payable, which charge shall be for the purpose of
defraying expenses incident to handling such delinquent payments. This charge
shall be in addition to, and not in lieu of, any other remedy Lender may have
and is in addition to Lender's right to collect reasonable fees and charges of
any agents or attorneys which Lender employs in connection with any non-payment
or other event of default. Acceptance by the Lender of payment of a late charge
shall in no way be considered to be an election of remedies or waiver by the
Lender of rights at law or under this Note, or the Security Agreement. Such late
charges if not previously paid shall become part of the indebtedness evidenced
hereby, and shall, at the option of the Lender, be added to any succeeding
monthly payment due under this Note. Failure to pay such late charges with such
succeeding monthly payment shall constitute an event of default and such late
charges shall bear interest at the default rate as hereafter provided from the
date due.
8. Upon the occurrence of an event of default (including, without
limitation, the failure of Borrower to pay any sum herein specified when due),
the unpaid principal sum evidenced by this Note together with all accrued and
unpaid interest thereon, and all other sums evidenced and/or secured by the Note
and the Security Agreement, Loan Agreement and other loan documents given in
connection herewith shall bear interest at a rate per annum referred to as the
Default Rate, which shall be equal to a lesser of: (x) the highest rate of
interest permitted to be contracted for under the laws of the State, or (y) the
interest rate first set forth plus five (5%) percent per annum. The Default Rate
shall be in lieu of any other interest rate otherwise applicable and shall
commence, without notice, immediately upon and from the occurrence of any such
event of default effective as of the due date of the payment in default and
shall continue until all defaults are cured and all sums then due and payable
under the Note and other loan documents are paid in full.
9. Borrower shall have the right to prepay this Note in full or in part
at any time.
10. If this Note is referred to an attorney for collection, the
Undersigned agrees that reasonable attorney's fees shall be added to such amount
and shall be payable thereon.
11. This Note is binding on the Undersigned, its successors and
assigns.
12. If there are any inconsistencies between the Note and the Security
Agreement, the terms of the Security Agreement shall prevail.
IN WITNESS WHEREOF, the Undersigned has executed this Note on
the date first above written.
Attest: Unigene Laboratories, Inc.
________________________ By___________________________
Ronald S. Levy, Secretary Warren P. Levy, President
<PAGE>
DEMAND LOANS: RONALD LEVY
DATE AMOUNT
- ---- ------
04/30/99 $15,000
05/19/99 $15,000
06/09/99 $15,000
06/17/99 $ 5,000
DEMAND LOANS: WARREN LEVY
DATE AMOUNT
- ---- ------
04/30/99 $15,000
05/19/99 $15,000
06/09/99 $15,000
06/17/99 $ 5,000
EXHIBIT 10.3
AMENDMENT TO LOAN AGREEMENT AND SECURITY AGREEMENT
This Amendment to Loan Agreement and Security Agreement ("Amendment")
made this 25th day of June, 1999 by and between Unigene Laboratories, Inc., a
Delaware corporation authorized to do business in the State of New Jersey (the
"Borrower") with offices at 110 Little Falls Road, Fairfield, New Jersey and Jay
Levy, Warren P. Levy and Ronald S. Levy, all with offices located at 110 Little
Falls Road, Fairfield, New Jersey, individually (jointly the "Lender").
WHEREAS, the parties have previously entered into a Loan Agreement and
a Security Agreement both dated March 2, 1995 pursuant to which Lender loaned to
Borrower certain sums not to exceed at any time the amount of $500,000 and
Borrower granted to Lender a security interest in certain collateral located in
premises known as 110 Little Falls Road, Fairfield, New Jersey owned by the
Borrower as particularly described therein, which Loan Agreement and Security
Agreement have been amended by the Borrower and the Lender by Amendment to Loan
Agreement and Security Agreement dated March 20, 1995 to grant to Lender a
security interest in certain collateral located in premises known as 83 Fulton
Street, Boonton, NJ (which collateral is referred to collectively, as the
"Collateral") and
WHEREAS, pursuant to an Amendment to Loan Agreement and Security
Agreement, dated June 29, 1995, the Loan Agreement and the Security Agreement
were further amended (i) to provide for additional loans to the Lender from the
Borrower in the aggregate amount of $700,000, to allow for total outstanding
borrowings under the Loan Agreement of up to $1.2 million and (ii) to secure the
obligations of the Borrower under the new loans by granting the Lender a
security interest in the Collateral; and
WHEREAS, under the Loan Agreement, the Lender has made Loans which
have, in part, been repaid by the Borrower, which amounts have been re-lent by
the Lender to the Borrower; and
WHEREAS, the Borrowers and the Lender wish to provide for outstanding
borrowings by the Borrower under the Loan Agreement of up to $1.5 million, which
borrowings shall be entitled to the benefit of the security provided for by the
Security Agreement.
NOW, THEREFORE, in consideration of the mutual convenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties agree as follows.
1. ADVANCES
Is hereby amended to provide for additional loans by the Lender to the
Borrower of up to $300,000 ("New Loan"), with the result that the term "Loan,"
as set forth in the Loan Agreement and Security Agreement shall mean aggregate
outstanding borrowings of up to $1.5 million, which may include amounts re-lent
by the Lender following the repayment of such amounts by the Borrower.
a. The New Loan shall be and is hereby made subject to
the terms and conditions of the Loan Agreement.
b. Advances of the New Loan made to the Borrower shall
be delivered to the Borrower by check payable to the
Borrower or wire transfer of funds for credit to any
general deposit account maintained by the Borrower,
as the Borrower may reasonably direct.
<PAGE>
c. The New Loan shall be evidenced by a Promissory Note,
dated the date hereof, in the principal amount of
$300,00 (the "Promissory Note") to be given pursuant
hereunder.
2. COLLATERAL
To secure payment and performance of the obligations of the Borrower to
the Lender under this Loan Agreement, as amended, and the Promissory Note, the
Borrower hereby amends the Security Agreement and grants to the Lender a
security interest in the Collateral. The Security Agreement shall remain in full
force and effect until all obligations of the Borrower to the Lender are fully
paid and satisfied.
3. DOCUMENTATION
Upon the execution hereof Borrower shall execute and deliver to Lender
the following documents; (i) the Promissory Note; (ii) appropriate financing
statements; and (iii) an Affidavit of Title as to the Collateral. In addition to
the foregoing, upon the execution hereof Borrower shall deliver to the Lender
(iv) a certified copy of the resolution of the Board of Directors of the
Borrower authorizing execution, delivery and performance of this Agreement and
the Promissory Note.
4. ADDITIONAL ADVANCES
Lender's obligation to make additional advances hereunder in respect of
the New Loan shall be conditioned upon and is subject to the satisfaction of the
following conditions precedent:
1. Borrower shall have complied with and shall then be in
compliance with the terms, covenants and conditions of this
Agreement and all of the loan documents pursuant hereto.
2. There shall exist no default or event of default.
3. The representations and warranties contained in any document
given pursuant aid this Agreement, including the Affidavit of
Title, shall be true and with the same effect as if those
representations and warranties had been made at the time of
making of each advance.
5. MISCELLANEOUS
All representations, covenants and warranties contained in the Loan
Agreement, except as otherwise herein provided, are reaffirmed as of the
execution of this Agreement and shall be binding upon the Borrower.
Except as otherwise provided, all terms and conditions of this Loan
Agreement shall remain in full force and effect, shall be binding upon the
Borrower and be applicable to the New Loan.
<PAGE>
IN WITNESS WHEREOF the parties have executed the within Loan Agreement
the day and year first above written.
Attest: Borrower:
Unigene Laboratories, Inc.
_____________________ By_______________________
Ronald S. Levy, Secretary Warren P. Levy, President
(Seal)
Witness: Lender:
- ---------------------- ---------------------
Jay Levy
- ---------------------- ---------------------
Warren P. Levy
- ---------------------- ---------------------
Ronald S. Levy
UNIGENE LABORATORIES, INC.
DIRECTORS STOCK OPTION PLAN
1. Purpose of the Plan.
The purpose of the Directors Stock Option Plan of Unigene Laboratories,
Inc., is to promote the interests of the Company by enhancing the Company's
ability to attract and retain as non-employee directors persons of experience
and ability, and to encourage the highest level of non-employee director
performance by providing such directors with a proprietary interest in the
Company's growth and financial success.
2. Definitions.
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations thereunder.
(c) "Committee" means a committee consisting of members of the Board who
shall be appointed by the Board from time to time, none of whom shall
be eligible to participate in the Plan. Members of the Committee shall
serve at the pleasure of the Board and may resign at any time upon
written notice to the Board.
(d) "Common Stock" means the $.01 par value common stock of the Company.
(e) "Company" means Unigene Laboratories, Inc.
(f) "Date of Grant" means the date of grant of an Option.
(g) "Election Date" means the day of the initial election or appointment
to the Board (whether by the stockholders of the Company or the Board)
of a Non-employee Director.
(h) "Non-employee Director" means a member of the Board who is not an
Employee at the time that a grant of an Option is made to such person
under the terms of the Plan.
(i) "Employee" means any full-time employee of the Company, or any present
or future parent or subsidiary of the Company.
(j) "Fair Market Value" means the last sale price of Common Stock
immediately prior to the close of business on the date Fair Market
Value is to be determined as reported by the Nasdaq Stock Market, or,
if the Common Stock is not subject to last sale reporting, the average
of the bid and asked quotations as reported by the Nasdaq Stock Market
at the close of business on such date. If no such last sale report or
quotations are available on such date, such determination shall be
made as of the next preceding date on which a last sale report or
quotations were available.
(k) "1994 Plan" means the 1994 Outside Directors Stock Option Plan of the
Company.
(l) "Option" means a right granted to purchase Common Stock under the
Plan.
(m) "Participant" means a Non-employee Director who holds an Option.
(n) "Plan" means the Directors Stock Option Plan of the Company as set
forth herein and as it may be amended from time to time.
<PAGE>
3. Shares of Common Stock Eligible for Issuance Under the Plan.
(a) Subject to the provisions of Section 7, the aggregate number of shares
of Common Stock that may be issued or transferred pursuant to exercise
of Options under the Plan shall not exceed 350,000 shares. Such shares
may be either authorized but unissued shares or treasury shares.
(b) In the event that an Option previously granted shall for any reason
expire or be terminated without being exercised in whole or in part,
the unpurchased shares of Common Stock subject to the Option shall be
restored to the total number of shares of Common Stock with respect to
which Options may be granted under the Plan.
4. Administration of the Plan.
(a) The Plan shall be administered by the Committee, which shall have the
sole and complete authority to interpret the Plan and amend and
rescind rules and to make all other determinations necessary for the
Plan's administration.
(b) All action taken by the Committee in the administration and
interpretation of the Plan shall be final and binding on all
concerned.
(c) The Committee may designate officers or employees of the Company to
assist the Committee in the administration of the Plan and to execute
documents on behalf of the Committee, and the Committee may delegate
to such officers and employees such other ministerial and limited
discretion duties as it sees fit.
<PAGE>
5. Eligibility and Awards.
(a) Only directors of the Company who are Non-employee Directors shall be
eligible to participate in the Plan.
(b) Options shall be granted under the Plan as follows:
(i) on the Election Date of a Non-employee Director that occurs on or
after the effective date of the Plan, such Non-employee Director
shall be granted an Option to purchase 21,000 shares of Common
Stock (an "Initial Option");
(ii) commencing on May 1, 1999, and on each succeeding May 1st
thereafter, each Non-employee Director shall be granted an Option
to purchase 10,000 shares of Common Stock if such Non-employee
Director has served as a Non-employee Director for at least six
months prior to each May 1st (an "Additional Option").
(c) Each Option shall be evidenced by a written instrument that includes
such terms and conditions, consistent with the Plan, as the Committee
may determine (a "Stock Option Agreement").
6. Terms and Conditions of Options.
(a) The purchase price of Common Stock under each Option shall be equal to
the Fair Market Value of the Common Stock on the Date of Grant.
(b) Each Option shall expire on the tenth anniversary of its Date of
Grant, unless it expires sooner pursuant to the provisions of the Plan
or the Stock Option Agreement.
(c) Each Initial Option shall become exercisable with respect to 7,000
shares on each of the first, second and third anniversaries of its
Date of Grant. Each Additional Option shall become exercisable with
respect to all 10,000 shares of Common Stock on the first anniversary
of its Date of Grant. In no event, however, shall any Option become
exercisable with respect to any shares of Common Stock after the
Participant ceases to be a director of the Company for any reason.
(d) Any Option that has not theretofore expired shall terminate 90 days
following the termination of the Participant's service as a director
of the Company for any reason, and no shares of Common Stock may
thereafter be purchased pursuant to such Option, except that:
(i) Upon the resignation of a Participant as a director due to
disability, the Participant may, within a 180-day period after
the date of such termination, purchase all or any part of the
shares of Common Stock that such Participant was entitled to
purchase under such Option on the date of such termination.
(ii) Upon the death of a Participant while serving as a director or
within the 90-day period referred to above, the Participant's
estate or the person to whom such Participant's rights under the
Option are transferred by will or the laws of descent and
distribution may, within a 180-day period after the date of such
Participant's death, purchase all or any part of the shares of
Common Stock that such Participant was entitled to purchase under
such Option on the date of death.
(e) Upon the exercise of an Option, the purchase price shall be payable in
full in cash; provided, however, that the Committee may determine
acceptable methods for tendering shares of Common Stock in payment of
the exercise price, and may impose such other limitations and
prohibitions on the tendering of such shares as it deems appropriate.
Any shares so tendered to the Company in payment or partial payment of
the purchase price shall be valued at their Fair Market Value on the
exercise date.
(f) No Option shall be exercisable in whole or in part and no certificates
representing shares of Common Stock subject to the Option shall be
delivered,
(i) If any requisite approval or consent of any governmental
authority having jurisdiction over the exercise of Options shall
not have been secured or if the issuance of shares of Common
Stock subject to the Option would violate any federal, state or
local law, regulation or order;
(ii) At any time that the Common Stock of the Company is listed on a
stock exchange or the Nasdaq Stock Market, if the shares of
Common Stock subject to the Option shall not have been
effectively listed on such exchange or the Nasdaq Stock Market,
unless the Company is advised by its counsel that such listing is
not required; or
(iii)At any time that the Company shall determine that any applicable
withholding tax or other withholding obligations have not been
satisfied.
<PAGE>
7. Adjustment Provisions.
If any subdivision or combination of shares of Common Stock or any stock
dividend, capital reorganization or recapitalization occurs after the effective
date of the Plan, the Committee shall make such proportionate adjustments as are
appropriate in the number of shares of Common Stock that may be issued under
Section 3 and in the purchase price of, and the number of shares underlying,
outstanding Options in order to prevent the dilution or enlargement of the
rights of each Participant.
8. Effect of Merger or Other Reorganization.
If the Company dissolves, sells substantially all of its assets, is
acquired in a stock-for-stock or securities exchange, or is a party to a merger,
consolidation or other reorganization in which it is not the surviving
corporation, then each Option shall be exercisable in full for a period
commencing upon the date the action of the stockholders (or of the Board, if
stockholder action is not required) is taken to approve the transaction and
ending on the date of consummation of such transaction, and upon the expiration
of that period all Options and all rights with respect thereto shall
automatically terminate; except that, if following such approval no such
transaction is consummated, all outstanding Options not exercised during the
period will be restored to their original vesting schedule.
9. General Provisions.
(a) Nothing in the Plan or in any instrument executed pursuant to the Plan
shall confer upon any Participant any right to continue to serve as a
director of the Company.
(b) No shares of Common Stock shall be issued pursuant to the exercise of
an Option unless and until all requirements imposed by federal and
state securities and other laws, rules and regulations and by any
regulatory agencies having jurisdiction, and by any stock exchanges or
the Nasdaq Stock Market upon which the Common Stock may be listed,
have been fully satisfied. As a condition precedent to the issuance of
shares pursuant to the exercise of an Option, the Company may require
the Participant to take any reasonable action to meet such
requirements.
(c) No Participant shall be entitled to the rights and privileges of stock
ownership relating to any shares of Common Stock underlying an Option
granted hereunder until such Option is exercised and the shares are
issued.
(d) Each Option is personal to the grantee, is not transferable by the
Participant other than by will or by the laws of descent and
distribution or a "qualified domestic relations order" as defined by
the Code, and is exercisable, during the Participant's lifetime, only
by the Participant or his legal representative.
10. Amendment and Termination.
The Board shall have the power, in its sole discretion, to amend, suspend
or terminate the Plan at any time; provided that no such amendment, suspension
or termination of the Plan shall, without the consent of the Participant, alter,
terminate, impair or adversely affect any right or obligation under any Option
previously granted under the Plan.
11. Effective Date and Duration of Plan.
This Plan shall become effective on the date that it is approved by
stockholders of the Company at the Company's 1999 Annual Meeting. No Option
shall be granted under the Plan after the tenth anniversary of such effective
date or, if earlier, the termination of the Plan pursuant to Section 10.
12. Termination of 1994 Plan.
On the effective date of the Plan, the 1994 Plan shall terminate, except
for currently issued and outstanding options that shall remain outstanding and
subject to the terms of the 1994 Plan.
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