Document:

Asset Purchase Agreement

  
 EXHIBIT 10.1 
  
 ASSET PURCHASE AGREEMENT 
  
 ASSET PURCHASE
AGREEMENT (this “Agreement”) dated as of December 31, 2002, by and among SHURflo Pump Manufacturing Co., a California corporation (“Buyer”), and The Coast Distribution System, Inc., a Delaware corporation (“Company”).

  
 RECITALS 
  
 A.    Company is the owner of certain assets (the “Polar Aire Assets”) which are used in the manufacture and marketing of a line of ventilation products, more fully described on Exhibit A
hereto (the “Polar Aire Products”). 
  
 B.    Buyer desires to purchase from Company
and Company desires to sell to Buyer the Polar Aire Assets which are described with particularity in Section 1.1 below. 
  
 NOW THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, Agreements and conditions hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as
follows. 
  

	1.
	 
	PURCHASE AND SALE OF ASSETS 
 

  

	 	1.1
	 
	Assets to be Transferred. 
 

  
 Subject to the terms and conditions of this Agreement, on the Closing Date (as hereinafter defined) Company shall sell, transfer, convey, assign, and deliver to Buyer, and Buyer shall purchase from the
Company and accept all of the Company’s right, title and interest in and to the Polar Aire Assets, which are comprised of the following specifically described assets, properties and rights of the Company: 
  
 1.1(a)    Personal Property.  The machinery, equipment, tools, jigs, patterns, tooling, dyes,
supplies and spare parts owned by Company and used in the manufacture of Polar Aire Products, a list of which is set forth on Exhibit B hereto (the “Fixed Assets”). 
  
 1.1(b)    Inventory.  The inventories of Polar Aire finished goods and components listed on Exhibit C hereto, together with any related
packaging materials (collectively the “Polar Aire Inventory”). 
  
 1.1(c)    Trade
Rights.  All the Company’s interest in: (i) the trademark rights in the name “Polar Aire” and (ii) all Company registrations of any of the foregoing, all applications therefor, and all goodwill associated with any of the
foregoing (the “Trade Rights”), but excluding any and all claims for infringement or breach thereof by others that occurred or may occur at any time prior to the Closing Date. 
  
 1.1(d)    [Intentionally Omitted] 
  
 1.1(e)    Literature.  All sales literature, promotional literature, catalogs and similar materials of Company relating exclusively to the Polar Aire Products. 
  
 1.1(f)    Records and Files.  All vendor lists, blueprints, specifications, designs and drawings and
other records or files belonging to the Company that are needed by Buyer for the manufacture or sale, after the Closing, of the Polar Aire Products, including a list of the Company’s OEM customers for the Polar Aire Products, but excluding the
identities of other customers that purchase such 

  
 Products from Company. For purposes of this Agreement the terms “OEMs” and “OEM
customers” means manufacturers of RVs that purchase Polar Aire Products for installation in RVs at the time of their manufacture. 
  
 1.1(g)    Polar Aire Brand Name.  All right, title and interest of Company in and to use the term “Polar Aire” in the manufacture, marketing, advertising and sale of the Polar
Aire Products. 
  

	 	1.2
	 
	Excluded Assets. 
 

  
 The provisions of Section 1.1 notwithstanding, Company shall not sell, transfer, assign, convey or deliver to Buyer, but Company shall retain ownership of, and Buyer will not purchase or accept, any real property or accounts
or other receivables, or any assets of the Company not specifically identified in Section 1.1 above (collectively the “Excluded Assets”). 
  

	2.
	 
	NON-ASSUMPTION OF LIABILITIES 
 

  
 2.1    Non-Assumption of Company Liabilities.  Except as otherwise provided in Sections 2.2, 3.3 and 6.4 below, Buyer shall not assume and is not agreeing to
perform or discharge, any debts, obligations or liabilities of any kind or nature whatsoever, whether fixed or contingent, secured or unsecured, known or unknown, or suspected or unsuspected of the Company (collectively “Liabilities”),
including those arising out of the manufacture for the Company or the sale by the Company of any of the Polar Aire Products prior to the Closing Date or the use of any of the Polar Aire Assets by the Company prior to the Closing Date. Without
limiting the generality of the foregoing, Buyer shall have no liability for and Company shall perform or discharge without cost or liability to Buyer the following Liabilities: 
  
 2.1(a)    [Intentionally Omitted] 
  
 2.1(b)    Income and Franchise Taxes.  Any Liability of Company for Federal income taxes and any state or local income, profit or franchise taxes (and any penalties or interest due on
account thereof). 
  
 2.1(c)    Product Liability or Product Warranty.  Product
warranty obligations relating to, and any and all liabilities arising out of any injury to person or property, from any Polar Aire Products sold by the Company prior to the Closing, whether based on tort, breach of warranty or other causes of action
or principles of law; provided, however, that the parties acknowledge and agree that the Company may sell Polar Aire Products that it purchases from Buyer and that any and all Liabilities of the type described in this Section 2.1(c)
arising out of the sale or use of those Polar Aire Products that are manufactured after the Closing shall be a Liability and the responsibility of Buyer and not the Company. 
  
 2.1(d)    Litigation Matters.  Any liabilities, judgments, settlements, assessments or penalties and any and all costs, including
attorneys fees, incurred by the Company in or as a result of any action, suit, proceeding, arbitration, investigation or inquiry, whether civil, criminal or administrative (“Company Litigation”), including those arising out of the
manufacture for the Company or the sale by the Company of Polar Aire Products prior to the Closing, whether or not disclosed in Schedule 4.8 hereto. 
  
 2.1(e)    Infringements.  Any liability incurred to a third party for infringement of such third party’s Trade Rights by the Company, including those arising
out of the manufacture, marketing or sale of any of the Polar Aire Products by the Company prior to the Closing. 
  
 2.1(f)    [Intentionally Omitted] 

 
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 2.1(g)    Violation of Laws or
Orders.  Liabilities of Company for any violation by it of or failure by it to comply with any statute, law, ordinance, rule or regulation (collectively, “Laws”) or any order, writ, injunction, judgment, plan or decree
(collectively, “Orders”) of any court, arbitrator, department, commission, board, bureau, agency, authority, instrumentality or other body, whether federal, state, municipal, foreign or other (collectively, “Government
Entities”), including those relating in any way to the Company’s manufacture, marketing or sale of Polar Aire Products prior to the Closing. 
  
 2.2    Post Closing Liabilities.  Buyer, and not the Company, shall be responsible for and shall pay, perform and discharge without liability or cost to Company:
(i) any sales, use or other transfer taxes applicable to, imposed upon or arising out of the sale or transfer of the Polar Air Assets to Buyer and the other transactions contemplated by this Agreement, at a rate not to exceed seven and three
quarters percent (7.75%) applied to the fair market value of the Polar Aire Assets being sold to Buyer for which no sales tax exemption is applicable, and (ii) any and all Liabilities, including Liabilities of the type described in Section 2.1
above, that arise out of the manufacture or sale of Polar Aire Products or the use of the Polar Aire Assets after the Closing (“Buyer Post-Closing Liabilities”). Buyer Post-Closing Liabilities shall include claims or litigation that may be
or are asserted or brought against or that may be or are incurred by the Company with respect to Polar Aire Products manufactured after the Closing, but Buyer Post-Closing Liabilities shall not include any liability, including product warranty and
product manufacturing liabilities arising out of the manufacture of the portion of the Polar Aire Inventory consisting of finished goods sold by Company to Buyer pursuant to this Agreement, which is identified on Exhibit C as the “Retail
Inventory”. 
  

	3.
	 
	PURCHASE PRICE – PAYMENT 
 

  

	 	3.1
	 
	Purchase Price. 
 

  
 The purchase price (the “Purchase Price”) that Buyer shall Pay to Company for the Purchased Assets shall be One Million Two Hundred Sixty Thousand ($1,260,000). 
  

	 	3.2
	 
	Payment of Purchase Price. 
 

  
 The Purchase Price shall be paid by Buyer to Company by wire transfer of immediately available funds to an account designated by Company. 
  

	 	3.3
	 
	Prorations. 
 

  
 The following prorations relating to the Purchased Assets will be made as of the Closing Date, with Company liable to the extent such items relate to any time period up to and including the Closing Date and Buyer liable to the extent
such items relate to periods subsequent to the Closing Date. Except as otherwise specifically provided herein, the net amount of all such prorations will be settled and paid on the Closing Date: 
  

3.3(a)    Personal property taxes, if any, on or with respect to the Polar Aire Assets. 
  
 If the actual expense of any of the above items is not known on the Closing Date, the proration shall be made based on the prior year’s expense. Company agrees to
furnish Buyer with such documents and other records as shall be reasonably requested in order to confirm all proration calculations. 

 
 3 

  

	 	3.4
	 
	Allocation of Purchase Price. 
 

  
 The aggregate Purchase Price shall be allocated among the Purchased Assets for tax purposes in accordance with Schedule 3.4. Company and Buyer will follow and use such allocation in all tax
returns, filings or other related reports made by them to any governmental agencies. Additionally, the parties will comply with, and furnish the information required by Section 1060 of the Internal Revenue Code of 1986, as amended (the
“Code”), and any regulations thereunder. 
  

	4.
	 
	REPRESENTATIONS AND WARRANTIES OF COMPANY 
 

  
 Company makes the following representations and warranties to Buyer, as the same may have been modified by the Exhibits or Schedules delivered on the date hereof by Company to Buyer pursuant hereto.
Each of such representations and warranties is true and correct on the date hereof, shall remain true and correct to and including the Closing Date, shall be unaffected by any investigation heretofore or hereafter made by Buyer, or any knowledge of
Buyer other than as specifically disclosed in the Schedules delivered to Buyer at the time of the execution of this Agreement, and shall survive the Closing of the transactions provided for herein for the respective applicable Survival Periods
specified in Section 7.5 below. 
  

	 	4.1
	 
	Corporate. 
 

  
 4.1(a)    Organization.  Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. 
  
 4.1(b)    Corporate Power.  Company has all requisite corporate power and authority to enter into
this Agreement and the other documents and instruments to be executed and delivered by Company pursuant hereto and to carry out the transactions contemplated hereby and thereby. 
  

	 	4.2
	 
	Authority. 
 

  
 The Company’s execution and delivery of this Agreement and the other documents and instruments to be executed and delivered by Company pursuant hereto and its consummation of the transactions contemplated hereby and thereby have
been duly authorized by the board of directors of Company. No other or further corporate act or proceeding on the part of Company is necessary to authorize the Company’s execution and delivery of this Agreement, or any other documents and
instruments to be executed and delivered by Company pursuant hereto, or the Company’s consummation of the transactions contemplated hereby and thereby. This Agreement constitutes, and when executed and delivered, any other documents and
instruments to be executed and delivered by Company pursuant hereto will constitute, valid and binding Agreements of Company, enforceable in accordance with their respective terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, moratorium or other similar laws affecting creditors’ rights, and (b) general principles of equity relating to the availability of equitable remedies (regardless of whether such Agreements are sought to be enforced in a proceeding
at law or in equity). 
  

	 	4.3
	 
	No Violation. 
 

  
 Neither the Company’s execution and delivery of this Agreement or the other documents and instruments to be executed and delivered by Company pursuant hereto, nor the consummation by Company of the transactions contemplated
hereby and thereby (a) will violate any applicable law or order applicable to the Company, (b) will require any authorization, consent, approval, exemption or other action by or notice to any government entity having jurisdiction over the Company
(including, without 

 
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 limitation, under any “plant-Closing” or similar law), or (c) will violate or conflict with,
or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or will result in the termination of, or accelerate the performance required by, or result in the creation of any Lien (as defined
in Section 4.10(a)) upon any of the Polar Aire Assets under, any term or provision of the Certificate of Incorporation or By-Laws of Company or of any contract, commitment, understanding, arrangement, agreement or restriction of any kind or
character to which Company is a party or by which Company or any of its assets or properties may be bound or affected. 
  

	 	4.4
	 
	[Intentionally omitted] 
 

  

	 	4.5
	 
	Inventory. 
 

  
 The Polar Aire Inventory consists of a quality and quantity usable or saleable in the ordinary course of manufacturing, selling and servicing Polar Aire Products. Except as set forth in Schedule 4.5, all of the Polar Aire Inventory
is located on premises owned or leased by Company as reflected in this Agreement. The Polar Aire Inventory is all of the inventory of Polar Aire parts and finished goods (wherever located), except for (i) a supply of finished goods to meet the
Company’s requirements for after-market sales of Polar Aire Products for a period of approximately 30 days, the book value of which is approximately $19,675, and (ii) a supply of Polar Aire parts and finished goods needed by Coast to perform
warranty repairs and provide warranty replacements in respect of Polar Aire Products manufactured by the Company prior to the Closing Date, the book value of which is approximately $12,840. 
  

	 	4.6
	 
	Absence of Certain Changes. 
 

  
 Except as and to the extent set forth in Schedule 4.6, since September 1, 2002, there has not been: 
  
 4.6(a)    No Material Decline in Orders or Sales.  A decline in purchase orders for or sales of Polar Aire Products of more than 5% as compared to the prior four
months (other than seasonal changes consistent with past experience); 
  
 4.6(b)    No
Damage.  Any loss, damage or destruction, whether covered by insurance or not, to any of the Polar Aire Assets; 
  
 4.6(c)    No Liens.  Except as set forth in Schedule 4.10(a), any Lien made on any of the Polar Aire Assets; 
  
 4.6(d)    No Changes in Credit Terms.  Any grant of credit to any OEM customer in connection with its purchase of Polar Aire Products from the Company on terms or
in amounts materially more favorable than those which have been extended to such customer in the past, any other material change in the terms of any credit heretofore extended to any such customer, or any other material change of Company’s
policies or practices with respect to the granting of credit in connection with sales of Polar Aire Products by the Company to OEM customers; 
  
 4.6(e)    No Unusual Events.  Any other event or condition not in the ordinary course of business of Company materially affecting the manufacture of Polar Aire
Products for, or sales of Polar Aire Products by, the Company, the amount of which exceeded $50,000. 

 
 5 

  

	 	4.7
	 
	Absence of Undisclosed Liabilities. 
 

  
 Except as and to the extent specifically disclosed on Schedule 4.7 and except for commercial liabilities and obligations incurred in the ordinary course of business and consistent with past practice,
(i) Company does not have any liabilities which have had or which are reasonably expected to have a material adverse effect on the Polar Aire Assets or the transactions contemplated hereby and (ii) Company has no knowledge of any basis for the
assertion against Company of any liabilities in connection with the manufacture for the Company or its sale, prior to the Closing, of Polar Aire Products that would have such an effect. 
  

	 	4.8
	 
	No Litigation. 
 

  
 Except as set forth in Schedule 4.8 there is no Litigation pending, or to the Company’s knowledge threatened, against Company in connection with the manufacture or sale of the Polar Aire Products or in connection with the Polar
Aire Assets, nor does Company know of any basis for any such Litigation. Company is not subject to any Order in connection with the Polar Aire Assets or its manufacture or sales of Polar Aire Products. 
  

	 	4.9
	 
	Compliance With Laws and Orders. 
 

  
 Except as set forth in Schedule 4.9, Company is in compliance with all Laws and Orders in connection with the Polar Aire Assets or its manufacture or sales of Polar Aire Products, including, without
limitation, trade practices, competition and pricing, product warranties, product advertising and environmental laws, except for any instances of non-compliance which do not and will not have an adverse effect on the ability of Company or Buyer to
manufacture or market or sell the Polar Aire Products. Except as set forth in Schedule 4.9, Company has not received notice of any violation or alleged violation of, any Laws or Orders in connection with the manufacture or sale of Polar Aire
Products. 
  

	 	4.10
	 
	Title to and Condition of Properties. 
 

  
 4.10(a)    Marketable Title.  Company has good and marketable title to all the Polar Aire Assets, free and clear of all liens (statutory or otherwise), security
interests, claims, pledges, licenses, equities, options, conditional sales contracts, (collectively, “Liens”) except those described in Schedule 4.10(a). At Closing, Buyer will receive from Company good and marketable title to all the
Polar Aire Assets, free and clear of all Liens of any nature whatsoever except for liens for personal property taxes not yet due and payable. 
  
 4.10(b)    Condition.  Except as otherwise disclosed on Exhibit B hereto, all of the Fixed Assets are in good operating condition and repair. 

 

	 	4.11
	 
	Insurance. 
 

  
 Set forth in Schedule 4.11 is a complete and accurate list of all policies of product liability insurance presently in effect covering the Polar Aire Products sold by the Company. All such policies are valid, outstanding and
enforceable policies. No notice of cancellation or termination of such policies as they relate to the Polar Aire Products has been received, and Company has no knowledge of any act or omission of Company which is reasonably expected to result in
cancellation of any such policy prior to its scheduled expiration date. Company has not been refused any insurance with respect to product liability coverage of the Polar Aire Products nor has such coverage been limited by any insurance carrier to
which it has applied for insurance or with which it has carried insurance during the last three years. Company 

 
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 has duly and timely made all claims it has in connection with any Polar Aire products under each policy
of insurance. Since June 1, 1998 all such products liability policies have been “occurrence” policies and not “claims made” policies. There is no claim in connection with any Polar Aire Products by the Company pending under any
such policies as to which coverage has been questioned, denied or disputed by the underwriters of such policies, and Company does not know of any basis for denial of any claim in connection with the Polar Aire Products under any such policy.

  

	 	4.12
	 
	No Default. 
 

  
 Company is not in default under any contract, nor has any event or omission occurred which through the passage of time or the giving of notice, or both, would constitute a default thereunder and thereby result in the creation of any
Lien on any of the Polar Aire Assets. 
  

	 	4.13
	 
	Trade Rights. 
 

  
 Schedule 4.13 lists the Trade Rights used by the Company in connection with marketing or sale of the Polar Aire Products, specifying whether such Trade Rights are owned, controlled, used or held (under license or otherwise) by
Company, and also indicating which of such Trade Rights are registered. Those of such Trade Rights shown as registered in Schedule 4.13 have been properly registered and any annuity, maintenance, renewal and other fees relating to such registrations
are current. The Company’s use of the Trade Rights listed on Schedule 4.13 is not infringing and has not infringed any Trade Rights of another, nor to the Company’s knowledge is any other person infringing such Trade Rights. Company has
not granted any license or made any assignment of any of such Trade Rights listed on Schedule 4.13, and no other person has any right to use any such Trade Rights. Company does not pay any royalties or other consideration in connection with or for
the right to use any such Trade Rights. Except as otherwise set forth in Schedule 4.8, there is no litigation pending, or to the Company’s knowledge that is threatened, challenging the Company’s right, title and interest with respect to
its continued use and right to preclude others from using the Trade Rights listed on Schedule 4.13. 
  

	 	4.14
	 
	Major Customers and Suppliers. 
 

  
 4.14(a)    Major Customers.  Schedule 4.14(a) contains a list of the 10 largest of the Company’s OEM customers for the Polar Aire Products for each of the two
(2) most recent fiscal years (determined on the basis of the total dollar amount of net sales) showing the total dollar amount of net sales to each such customer during each such year. Company has no has no knowledge that any of the OEM customers
listed on Schedule 4.14(a) intend to discontinue, or materially reduce the dollar amount of, their purchases of Polar Aire Products from the Company and has not been notified by any such customers that they will not do business with Buyer.

  
 4.14(b)    Major Suppliers.  Schedule 4.14(b) contains a list of the 10
largest suppliers to Company of Polar Aire Products for each of the two (2) most recent fiscal years (determined on the basis of the total dollar amount of purchases) showing the total dollar amount of purchases from each such supplier during each
such year. Company has no knowledge that any of the suppliers listed on Schedule 4.14(b) do not intend to continue supplying the Company with substantially the same quantity and quality of goods at competitive prices and none of those suppliers has
notified the Company that it will not do business with Buyer. 
  

	 	4.15
	 
	Product Warranty and Product Liability. 
 

  
 Schedule 4.15 contains a true, correct and complete copy of Company’s standard warranty or warranties for sales of the Polar Aire Products and, except as stated therein, the Company has

 
 7 

  
 no warranties, commitments or obligations with respect to the return, repair or replacement of Polar
Aire Products. Schedule 4.15 sets forth the estimated aggregate annual cost to Company of performing warranty obligations for customers of the Polar Aire Products for the period from March 2002 to December 2002. Schedule 4.15 contains a description
of all product liability claims and similar litigation in connection with the Polar Aire Products, which are presently pending or which to Company’s knowledge are threatened, or which have been asserted or commenced against Company since it
commenced the sale of such Products. There are no defects in the design of the Polar Aire Products which would adversely affect performance or create an unusual risk of injury to persons or property. None of the Polar Aire Products has been the
subject of any general or wide-spread replacement, field fix campaign or any retrofit or recall campaign and, to Company’s knowledge, no facts or conditions exist which could reasonably be expected to result in such a recall campaign. The Polar
Aire Products have been designed and are manufactured so as to meet and comply with all governmental standards and specifications currently in effect that are applicable to such Products, and have received all U.S. and Canadian governmental
standards and specifications currently in effect that are applicable to those Products, and have received all U.S. and Canadian governmental approvals necessary to allow their sale and use in the United States and Canada. 
  

	 	4.16
	 
	No Brokers or Finders. 
 

  
 Neither Company nor any of its directors, officers, employees or agents have retained, employed or used any broker or finder in connection with the transactions provided for herein or the negotiation of this Agreement.

  

	 	4.17
	 
	Disclosure. 
 

  
 No representation or warranty by Company in this Agreement, as modified by the Exhibits or Schedules hereto, contains any untrue statement of material fact or omits to state a material fact necessary to make the statements contained
herein not misleading. 
  

	5.
	 
	REPRESENTATIONS AND WARRANTIES OF BUYER 
 

  
 Buyer makes the following representations and warranties to Company, each of which is true and correct on the date hereof, shall remain true and correct to and including the Closing date, shall be
unaffected by any investigation heretofore or hereafter made by Company or any notice to Company, and shall survive the Closing of the transactions provided for herein for the respective applicable Survival Periods specified in Section 7.5 hereof.

  

	 	5.1
	 
	Corporate. 
 

  
 5.1(a)    Organization.  Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of California. 
  
 5.1(b)    Corporate Power.  Buyer has all requisite corporate power to enter into this Agreement and
the other documents and instruments to be executed and delivered by Buyer and to carry out the transactions contemplated hereby and thereby. 
  

	 	5.2
	 
	Authority. 
 

  
 The Buyer’s execution and delivery of this Agreement and the other documents and instruments to be executed and delivered by Buyer pursuant hereto and the consummation by Buyer of the transactions contemplated hereby and thereby
have been duly authorized by the board of directors of 

 
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 Buyer. No other or further corporate act or proceeding on the part of Buyer is necessary to authorize
this Agreement or the other documents and instruments to be executed and delivered by Buyer pursuant hereto or the consummation of the transactions contemplated hereby and thereby. This Agreement constitutes, and when executed and delivered, the
other documents and instruments to be executed and delivered by Buyer pursuant hereto will constitute, valid and binding Agreements of Buyer, enforceable in accordance with their respective terms, except as such may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors’ rights generally, and by general equitable principles. 
  

	 	5.3
	 
	No Violation. 
 

  
 Neither Buyer’s execution and delivery of this Agreement or the other documents and instruments to be executed and delivered by Buyer pursuant hereto, nor its consummation of the transactions contemplated hereby and thereby (a)
will violate any applicable Law or Order known by Buyer to be applicable to it, (b) will require any authorization, consent, approval, exemption or other action by or notice to any Government Entity having jurisdiction over Buyer, or (c) will
violate or conflict with, or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or will result in the termination of, or accelerate the performance required by, or result in the
creation of any Lien (as defined in Section 4.10(a)) upon any of the material assets of Buyer under, any term or provision of the Articles of Incorporation or By-laws of Buyer or of any contract, commitment, understanding, arrangement, agreement or
restriction of any kind or character to which Buyer is a party or by which Buyer or any of its assets or properties may be bound or affected, except for any such violations, defaults or accelerations or other consequences that would not have a
material adverse effect on the Buyer (considered on a consolidated basis with all of its subsidiaries). 
  

	 	5.4
	 
	Litigation. 
 

  
 There is no action, suit, arbitration proceeding, charge, complaint, allegation, investigation, inquiry or other process or claim, before any court or governmental or administrative body or agency or other entity, which either is
pending against Buyer or which, to the knowledge of Buyer, is threatened against it, that could reasonably be expected to interfere, in any material respect, with or delay the consummation by Buyer of the transactions contemplated hereby.

  

	 	5.5
	 
	No Brokers or Finders. 
 

  
 Neither Buyer nor any of its directors, officers, employees or agents have retained, employed or used any broker or finder in connection with the transactions provided for herein or the negotiation of this Agreement.

  

	 	5.6
	 
	Disclosure. 
 

  
 No representation or warranty by Buyer in this Agreement contains any untrue statement of material fact or omits a material fact necessary to make the statements contained therein not misleading. 
  

	6.
	 
	OTHER MATTERS 
 

  

	 	6.1
	 
	Noncompetition. 
 

  
 6.1(a)    Subject to the Closing and as an inducement to Buyer to execute this Agreement and complete the transactions contemplated hereby, and in order to preserve the goodwill associated with the
designing and manufacturing of Polar Aire Products, Company hereby covenants and agrees that, 

 
 9 

  
 except as otherwise set forth in Paragraph 6.1(b) below, for a period of fifteen (15) years from the
Closing date, it will not, directly or indirectly: 
  
 (i)    engage in, continue
in or carry on any business which designs, manufactures or otherwise produces any products that are Competing Products (as defined in Section 6.1(b) below) that are installed on RVs, boats or other vehicles or devices used for recreation or travel,
including owning or controlling any financial interest in any corporation, partnership, firm or other form of business organization which engages in the design, manufacture or production of any such Competing Products; 
  
 (ii)    consult with, advise or assist in any way, whether or not for consideration, any corporation,
partnership, firm or other business organization which is now or becomes a competitor of Buyer in any aspect with respect to the design or manufacture of Polar Aire Products, including, but not limited to, loaning money or rendering any other form
of financial assistance to or engaging in any form of business transaction on other than an arm’s length basis with any such competitor; 
  
 (iii)    engage in any practice the purpose of which is to evade the provisions of this covenant not to compete. 
  
 The parties agree that the geographic scope of this covenant not to compete shall extend throughout the United States. 
  

6.1(b)    Notwithstanding the foregoing or any other provision of this Agreement to the contrary, Buyer acknowledges and agrees as follows: (i)
Company’s primary business is the sale for resale of parts, supplies and accessories for RVs, boats and other vehicles or devices used for recreation or travel and the Company currently markets and sells Competing Products (as hereinafter
defined), for resale, to customers; (ii) Company shall be entitled to market and sell Polar Aire Products and Competing Products, other than for installation on RVs at the time of their manufacture (“OEM Sales”), and in connection
therewith Company shall be entitled to advertise or otherwise endorse Competing Products and solicit customers to purchase Competing Products and assist any manufacturer or supplier of any such Competing Products in connection with sales or
marketing campaigns and strategies (other than in connection with OEM Sales); and (iii) the Company may own, directly or indirectly, securities of corporations which are listed on a national securities exchange or traded in the national
over-the-counter market in an amount which shall not exceed 5% of the outstanding shares of any such corporation; and (iv) none of the activities described in this Paragraph 6.1(b) by or on the part of the Company, whether now or at any time in the
future, shall constitute a breach or violation of this Section 6.1. For purposes of this Section 6.1 the term “Competing Products” shall mean powered ventilation fans and powered ventilation fan systems that are installed on RVs, boats or
other vehicles or devices used for recreation or travel, including units that are turned on manually, units with thermostats and units with rain sensors, and components for powered ventilation fans and powered ventilation fan systems that are
manufactured by Buyer, provided, however, that “Competing Products” shall not include air conditioning and refrigeration and coolant based systems that provide a source of ventilation whether or not such systems include a powered fan.

  
 6.1(c)    The parties agree that Buyer may sell, assign or otherwise transfer this covenant
not to compete, in whole or in part, to any person, corporation, firm or entity that purchases all or substantially all of the Polar Aire Assets or the business of designing or manufacturing Polar Aire Products being acquired by Buyer hereunder,
subject to the exceptions set forth in Paragraph 6.1(b) above. 

 
 10 

  
 6.1(d)    In the event a court of competent jurisdiction
determines that the provisions of this covenant not to compete are excessively broad as to duration, geographical scope or activity, it is expressly agreed that this covenant not to compete shall be construed so that the remaining provisions shall
not be affected, but shall remain in full force and effect, and any such over broad provisions shall be deemed, without further action on the part of any person, to be modified, amended and/or limited, but only to the extent necessary to render the
same valid and enforceable in such jurisdiction. 
  

	 	6.2
	 
	Confidential Polar Aire Information. 
 

  
 6.2(a)    Subject to the exceptions set forth hereinafter in this Paragraph 6.2(a) and those set forth in Paragraph 6.2(b), Company shall not at any time subsequent to the Closing,
except as explicitly requested by Buyer, use for any purpose, disclose to any person, or keep or make copies of documents, tapes, discs, programs or other information storage media containing, any confidential information that relates solely to the
Polar Aire Assets (the “Confidential Polar Aire Information”), all such Confidential Polar Aire Information being deemed to be transferred to the Buyer hereunder. For purposes hereof, the term “Confidential Polar Aire
Information” shall mean and include, without limitation, all confidential Trade Rights of the Company with respect to the design or manufacture of the Polar Aire Products, and all OEM customer lists and all lists relating to the suppliers of
Polar Aire Products to the Company and information related thereto; provided, however, that the Confidential Polar Aire Information shall not include any of the following (i) lists or identities of non-OEM customers of the Company,
(ii) information that, on the date hereof, is of public knowledge, (iii) information that hereafter becomes of public knowledge through no fault, action or inaction of the Company, (iv) any information relating to the marketing or sale of Polar Aire
Products by the Company to customers other than OEMs, and (v) any information which is not included in the description of Polar Aire Assets contained in Section 1.1 above. If at any time after Closing Company should discover that it is in possession
of any records containing any Confidential Polar Aire Information of Buyer, then the Company shall, at its option, either turn such Information over to Buyer or certify in writing to Buyer that it has destroyed such records or the portion thereof
containing any such Confidential Polar Air Information. Company agrees that it will not assert a waiver or loss of confidential or privileged status of the information based upon such possession or discovery. 
  
 6.2(b)    Notwithstanding the foregoing provisions of this Section 6.2 or any other provisions of this Agreement to
the contrary, if the Company is requested or required (by oral questions, interrogatories, requests for information or documents in legal proceedings, subpoena, civil investigative demand or other similar process), to disclose any Polar Aire
Information (as hereinabove defined), the Company shall provide Buyer with prompt notice of any such request or requirement and shall provide, at Buyer’s expense, such reasonable cooperation as Buyer may request so that it may seek a protective
order or other appropriate remedy with respect to the Information being so requested or required to be disclosed. If, notwithstanding any such efforts by Buyer, the Company is nonetheless required to disclose the Information so requested or required
to be disclosed, the Company may, without breaching this Agreement and without liability hereunder, disclose the Information so requested or required to be disclosed. 
  

	 	6.3
	 
	Use of Polar Aire Name. 
 

  
 Following the Closing, Company shall not, without the prior written consent of Buyer, make any use of the name “Polar Aire” name or any other name confusingly similar thereto, except in connection with the
marketing and with sales (other than OEM Sales) of Polar Aire Products in the ordinary course of Company’s business. 

 
 11 

  

	 	6.4
	 
	Sales Tax Matters. 
 

  
 Buyer shall, without liability or cost to the Company, as and when they come due, pay any and all sales, use or other transfer taxes applicable to, imposed upon or arising out of the sale or transfer of the Polar Air Assets
to Buyer and the other transactions contemplated by this Agreement at a rate of not to exceed seven and three quarters percent applied to the fair market value of the Polar Aire Assets being sold to Buyer for which no sales tax exemption is
applicable. At the Closing Buyer shall also provide to Company its resale certificate number and other information required to evidence an exemption from sales taxes applicable to the sale of the Polar Aire Inventory hereunder. 

 

	7.
	 
	INDEMNIFICATION 
 

  

	 	7.1
	 
	By Company. 
 

  
 Subject to the terms, conditions and limitations contained below in this Article 7, Company hereby agrees to indemnify, defend and hold harmless Buyer, and its directors, officers, employees and controlled and controlling persons
(hereinafter “Buyer’s Affiliates”), from and against all Claims (as hereinafter defined) and all Indemnifiable Damages (as hereinafter defined), asserted against, resulting to, imposed upon or incurred by Buyer, Buyer’s
Affiliates or the Polar Aire Assets sold and transferred to Buyer pursuant to this Agreement, by reason of, arising out of or resulting from: 
  
 7.1(a)    the inaccuracy or breach of any representation or warranty of Company contained in this Agreement (regardless of whether such breach is deemed “material”);

  
 7.1(b)    the breach of any covenant of Company contained in this Agreement (regardless of
whether such breach is deemed “material”); 
  
 7.1(c)    the retention, employment or
use by Company or any of its directors, officers, employees or agents of any broker or finder in connection with the transactions provided for herein or the negotiation thereof, whether or not disclosed herein; or 
  
 7.1(d)    the failure of the Company to satisfy or discharge any Liability of the Company not specifically assumed or
agreed to be paid by Buyer pursuant to this Agreement. 
  
 As used in this Article 7, the term (a) “Claim”
shall include all demands, claims, suits, actions, causes of action, proceedings and assessments, whether or not ultimately determined to be valid; and (b) the term “Indemnifiable Damages” shall include (i) all liabilities; (ii)
out-of-pocket losses, damages (excluding consequential damages), (iii) judgments, awards, penalties and settlements of Claims and (iv) all costs and expenses (including, without limitation, interest (including prejudgment interest in any litigated
or arbitrated matter), court costs and the reasonable fees and expenses of attorneys and expert witnesses) of investigating, defending against any Claims or of enforcing this Agreement to which a party is entitled to be indemnified pursuant to this
Article 7. 
  

	 	7.2
	 
	By Buyer. 
 

  
 Subject to the terms, conditions and limitations contained below in this Article 7, Buyer hereby agrees to indemnify, defend and hold harmless Company, its directors, officers, employees and controlled and controlling persons
(“Company Affiliates”) from and against all Claims and all Indemnifiable Damages asserted against, resulting to, imposed upon or incurred by the Company or any Company Affiliates by reason of or resulting from: 

 
 12 

  
 7.2(a)    the inaccuracy or breach of any representation or
warranty of Buyer contained in this Agreement (regardless of whether such breach is deemed “material”); 
  
 7.2(b)    the breach of any covenant of Buyer contained in this Agreement (regardless of whether such breach is deemed “material”); 
  
 7.2(c)    the retention, employment or use by Buyer or any of its directors, officers, employees or agents of any broker or finder in connection with
the transactions provided for herein or the negotiation thereof, whether or not disclosed herein; or 
  
 7.2(d)    any liabilities or obligations arising out of or in connection with the use after the Closing of any of the Polar Aire Assets or the manufacture or sale by Buyer after the Closing of any Polar Aire
Products (“Post Closing Liabilities”), which shall include, without limitation, product warranty and repair and product liability claims arising out of the sale or use of any Polar Aire Products manufactured after the Closing.

  

	 	7.3
	 
	Indemnification of Third-Party Claims. 
 

  
 The following provisions shall apply to any claim subject to indemnification which is (i) a suit, action or arbitration proceeding filed or instituted by any third party, or (ii) any other form of
proceeding or assessment instituted by any Government Entity against a party for or against which a party hereto or any of its Affiliates is entitled to be indemnified pursuant to this Agreement: 
  

7.3(a)    Notice and Defense.  The party or parties to be indemnified (whether one or more, the “Indemnified Party”)
will give the party from whom indemnification is sought (the “Indemnifying Party”) prompt written notice of any such Claim, and the Indemnifying Party will undertake the defense thereof by representatives chosen by it. The failure of an
Indemnified Party to give such notice to the Indemnifying Party shall not affect the Indemnifying Party’s duty or obligations under this Article 7, except to the extent the Indemnifying Party is prejudiced thereby. So long as the Indemnifying
Party is defending any such Claim actively and in good faith, the Indemnified Party shall not settle such Claim and the Indemnifying Party shall not be obligated to indemnify the Indemnified Party for or otherwise pay any costs or expenses that the
Indemnified Party may incur in the defense of such third party action or proceeding, including, without limitation, the fees or disbursement of the Indemnified Party’s attorneys. The Indemnified Party shall make available to the Indemnifying
Party or its representatives all records and other materials required by them and in the possession or under the control of the Indemnified Party or its representatives, for the use of the Indemnifying Party and its representatives in defending any
such Claim, and shall in other respects give reasonable cooperation in such defense. 
  
 7.3(b)    Failure to Defend.  If the Indemnifying Party, within a reasonable time after notice of any such Claim, fails to defend such Claim actively and in good faith, the Indemnified Party will
(upon further notice) have the right to undertake the defense, compromise or settle such Claim as it relates to the liability of the Indemnified Party, and the Indemnifying Party shall thereafter have no right to challenge the Indemnified
Party’s defense, compromise or settlement thereof. 
  
 7.3(c)    Indemnified Party’s
Rights.  Anything in this Article 7 to the contrary notwithstanding, (i) if there is a reasonable probability that a Claim may materially and adversely affect the Indemnified Party other than as a result of money damages or other money
payments, the Indemnified Party shall have the right to defend, compromise or settle such Claim (but only after first notifying the Indemnifying Party in writing of its intention to do so), and (ii) the Indemnifying Party shall not, without the
written consent of the Indemnified Party, settle or compromise any Claim or consent to the entry of 

 
 13 

  
 any judgment which does not include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnified Party of a release from all Liability in respect of such Claim. 
  

	 	7.4
	 
	Indemnification for Product Warranty Claims. 
 

  
 7.4(a)    Indemnification for Warranty Claims Relating to Products Sold Prior to Closing.  Company shall indemnify Buyer from any Claim relating to product warranty
or product liability for any Polar Aire Products manufactured prior to the Closing. 
  
 7.4(b)    Indemnification for Warranty Claims Relating to Products Sold After Closing.  Buyer shall indemnify Company from any Claim relating to product warranty or product liability for any Polar
Aire Products manufactured after the Closing. 
  

	 	7.5
	 
	Limitations on Indemnification. 
 

  
 7.5(a)    Time Limitation.  Except as otherwise specifically provided elsewhere in this Article 7, no claim for indemnification under this Article 7 (an
“Indemnification Claim”) may be brought or asserted after, and all rights to be indemnified under this Article 7 for any Claim or Indemnifiable Damages shall terminate two (2) years after the Closing Date. Such two (2) year period shall be
referred to herein as a “Survival Period” and the second anniversary of the Closing Date shall, in the case of that two (2) year Survival Period, be the “Survival Termination Date”. Notwithstanding the foregoing, however, or any
other provision of this Agreement to the contrary: 
  
 (i)    Any Indemnification
Claim arising out of a breach of any of the representations or warranties of the Company contained in Sections 4.2 or 4.10(a), or a breach of the representations or warranties of Buyer contained in Sections 5.2, may be brought or asserted at any
time prior to, but not after, the lapse of ten (10) years following the Closing, which ten (10) year time period shall be the Survival Period applicable to such Indemnification Claims. 
  
 (ii)    No time limit shall apply to the assertion by Buyer of any Indemnification Claims against or the right of Buyer to recover
Indemnifiable Damages from the Company under any of Sections .7.1(b), 7.1(c) or 7.1(d) or Section 7.4(a) or to the assertion by Company of any Indemnification Claims against or the right to recover Indemnifiable Damages from Buyer under Section
7.2(b), (c) or 7.2(d) or Section 7.4(b) and the Survival Periods with respect thereto shall not expire. 
  
 (iii)    If an Indemnification Claim is made by a party or any of its Affiliates prior to the termination of the Survival Period applicable to such Indemnification Claim as specified hereinabove in this Section
7.5, a demand for arbitration thereof in accordance with Article 9 hereof shall be preserved despite the fact that the arbitration is not commenced or concluded prior to the expiration of such Survival Period. 
  
 (iv)    If any act, omission, disclosure or failure to disclose shall form the basis for more than one
Indemnification Claim under this Article 7, and such Claims have different Survival Periods hereunder, the termination of the Survival Period of one such Claim shall not affect a party’s right to make an Indemnification Claim with respect to
which the applicable Survival Period has not yet expired. 

 
 14 

  
 7.5(b)    Amount Limitation. 
  
 (i)    Limitation on Amount of Company Liability.  Notwithstanding anything to the
contrary that may be contained elsewhere in this Agreement, other than as set forth in the proviso to this Subparagraph 7.5(b)(i) below, the Company shall not have any obligation to indemnify Buyer or its Affiliates unless and until the aggregate
dollar amount of the Indemnifiable Damages incurred by Buyer or its Affiliates, or which Buyer or its Affiliates may sustain as a result of a Claim or Claims for which Buyer and/or its Affiliates are entitled to be indemnified hereunder, totals
$50,000 (the “Company Deductible”), after which the Company shall be liable for any and all Indemnifiable Damages incurred by Buyer and/or its Affiliates (calculated without duplication) in excess of the Company Deductible up to a maximum
aggregate dollar amount equal to but not to exceed fifty percent (50%) of the Purchase Price (the “Company Indemnification Ceiling”); provided, however, that (A) the Company Indemnification Ceiling shall be an amount equal to
one hundred percent (100%) of the Purchase Price, less the total of all amounts theretofore recovered from Company under this Article 7, for Indemnifiable Claims made within the applicable Survival Period with respect to breaches of the
representations and warranties of the Company relating to the Company’s compliance with environmental laws (contained in Section 4.9 above), breaches of the Company’s representations and warranties of the Company contained in Section 4.15
above and (B) that there shall be no Company Deductible and no Company Indemnification Ceiling applicable to Indemnification Claims made by a failure by Buyer against the Company under any of Sections 2.1, 6.1, 6.2, 6.3, 7.1(b), 7.1(c), 7.1(d) or
7.4(a) above. 
  
 (ii)    Limitation of Amount of Buyer
Liability.  Notwithstanding anything to the contrary that may be contained elsewhere in this Agreement, other than as set forth in the proviso to this Subparagraph 7.5(b)(ii) below, Buyer shall not have any obligation to indemnify
Company or its Affiliates unless and until the aggregate dollar amount of the Indemnifiable Damages incurred by Company or its Affiliates, or which Company or its Affiliates sustain as a result of a Claim or Claims for which the Company and/or its
Affiliates are entitled to be indemnified hereunder, totals $50,000 (the “Buyer Deductible”), after which the Buyer shall be liable for any and all Indemnifiable Damages incurred by the Company and/or its Affiliates (calculated without
duplication) in excess of the Buyer Deductible up to a maximum aggregate dollar amount equal to but not to exceed fifty percent (50%) of the Purchase Price (the “Buyer Indemnification Ceiling”); provided, however, that there
shall be no Buyer Deductible and no Buyer Indemnification Ceiling applicable to a failure by Buyer to pay any Post-Closing Liabilities (as defined in Section 2.2 above) or any Indemnification Claims of the Company against Buyer under any of Sections
6.4, 7.2( b), 7.2(c), 7.2(d) or 7.4(b). 
  

	 	7.6
	 
	Exclusive Remedy. 
 

  
 Except with respect to intentional and knowing misrepresentations, the respective rights and remedies of each party and their respective Affiliates, contained in this Article 7 shall constitute their sole and exclusive
rights and remedies with respect to the recovery of Indemnifiable Damages from the other party hereto with respect to the matters set forth in Sections 7.1 and Section 7.2 hereof. 
  

	8.
	 
	CLOSING 
 

  
 The Closing of this transaction (“the Closing”) shall occur at 10:00 a.m. on December 31, 2002, or on such earlier date as the parties may agree. Such date is referred to in this Agreement as the “Closing Date”.

 
 15 

  

	 	8.1
	 
	Documents to be Delivered by Company. 
 

  
 At the Closing, Company shall deliver to Buyer the following documents, in each case duly executed or otherwise in proper form: 
  
 8.1(a)    Bill of Sale.  A bill of sale and such other instruments of assignment, transfer, conveyance and endorsement as will be
sufficient in the reasonable opinion of Buyer and its counsel to transfer, assign and convey ownership of the Polar Aire Assets to Buyer as contemplated hereby. 
  
 8.1(b)    Certified Resolutions.  A certified copy of the resolutions of the Board of Directors of Company authorizing and approving this Agreement and the
consummation of the transactions contemplated by this Agreement by the Company. 
  
 8.1(c)    Good Standing Certificates.  Certificates of good standing for the Company issued by the Delaware Secretary of State and the California Secretary of State as of a date within 5 business
days of the Closing Date. 
  
 8.1(d)    [Intentionally omitted]. 
  
 8.1(e)    Incumbency Certificate.  An incumbency certificate relating to each person executing any
document executed and delivered on behalf of Company to Buyer pursuant to the terms hereof. 
  
 8.1(f)    Other Documents.  All other documents, instruments or writings required to be delivered to Buyer at or prior to the Closing pursuant to this Agreement and such other certificates of
authority and documents as Buyer may reasonably request. 
  

	 	8.2
	 
	Documents to be Delivered by Buyer. 
 

  
 At the Closing, Buyer shall deliver to Company the following documents, in each case duly executed or otherwise in proper form: 
  
 8.2(a)    Purchase Price.  To Company, the Purchase Price by wire transfer of same day funds to the account designated by Company.

  
 8.2(b)    Certified Resolutions.  A certified copy of the resolutions of the
Board of Directors of Buyer authorizing and approving this Agreement and the consummation of the transactions contemplated by this Agreement by Buyer. 
  
 8.2(c)    Incumbency Certificate.  An incumbency certificate relating to each person executing any document executed and delivered to Company by Buyer pursuant to
the terms hereof. 
  
 8.2(d)    Good Standing Certificate.  A certificate of
good standing for the Buyer issued by the California Secretary of State as of a date within 5 business days of the Closing Date. 
  
 8.2(e)    Other Documents.  All other documents, instruments or writings required to be delivered to Company at or prior to the Closing pursuant to this Agreement and such other certificates of
authority and documents as Company may reasonably request. 
  
 8.3    Inventory
Delivery.  The Polar Aire Inventory, other than the retail inventory (as listed on Exhibit C hereto) shall be ready for pick up by Buyer at Company’s warehouse in Wilsonville, Oregon on 

 
 16 

  
 January 6, 2003 and the retail inventory will be shipped to Buyer at its Santa Ana, California facility,
at the sole cost and expense of Buyer (inclusive of freight and insurance costs), during the week of January 6, 2003 or at such other time as the parties may agree hereafter. 
  

	9.
	 
	RESOLUTION OF DISPUTES 
 

  

	 	9.1
	 
	Arbitration. 
 

  
 After the Closing, any dispute, controversy or claim arising out of or relating to this Agreement or the negotiation hereof or entry hereunto or any contract or Agreement entered into pursuant hereto or the performance by the parties
of its or their terms shall be settled by binding arbitration held in San Francisco, California, in accordance with the commercial arbitration rules of the American Arbitration Association then in effect, except as specifically otherwise provided in
this Article 9. This Article 9 shall be construed and enforced in accordance with the Federal Arbitration Act, notwithstanding any other choice of law provision in this Agreement. Notwithstanding the foregoing: 
  
 9.1(a)    Either party may, in its discretion, apply to a court of competent jurisdiction for equitable relief as
provided in Section 10.5 below. Such an application shall not be deemed a waiver of the right to compel arbitration pursuant to this Article 9. 
  
 9.1(b)    No party shall be required to submit to arbitration hereunder unless all persons who are not parties to this Agreement, but who are necessary parties to a complete
resolution of the controversy, submit to the arbitration process on the same terms as the parties hereto. Without limiting the generality of the foregoing, no claim under Article 7 for the indemnification of a third-party claim shall be subject to
arbitration under this Article 9 unless the third party bringing such claim against the indemnitee shall agree in writing to the application of this Article 9 of the resolution of such claim. 
  

	 	9.2
	 
	Arbitrators. 
 

  
 The panel to be appointed shall consist of three neutral arbitrators; otherwise, one neutral arbitrator. 
  

	 	9.3
	 
	Procedures; No Appeal. 
 

  
 The arbitrator(s) shall allow such discovery as the arbitrator(s) determine appropriate under the circumstances and shall resolve the dispute as expeditiously as practicable, and if reasonably practicable, within 120 days
after the selection of the arbitrator(s). The arbitrator(s) shall give the parties written notice of the decision, with the reasons therefor set out, and shall have 30 days thereafter to reconsider and modify such decision if any party so requests
within 10 days after the decision. Thereafter, the decision of the arbitrator(s) shall be final, binding, and nonappealable with respect to all persons, including (without limitation) persons who have failed or refused to participate in the
arbitration process. 
  

	 	9.4
	 
	Authority. 
 

  
 The arbitrator(s) shall have authority to award relief under legal or equitable principles, including interim or preliminary relief, and to allocate responsibility for the costs of the arbitration and to award recovery of attorneys
fees and expenses in such manner as is determined to be appropriate by the arbitrator(s). 

 
 17 

  

	 	9.5
	 
	Entry of Judgment. 
 

  
 Judgment upon the award rendered by the arbitrator(s) may be entered in any court having in personam and subject matter jurisdiction. Company and Buyer hereby submit to the in personam jurisdiction of the federal and state
courts in California, for the purpose of confirming any such award and entering judgment thereon. 
  

	 	9.6
	 
	Confidentiality. 
 

  
 All proceedings under this Article 9, and all evidence given or discovered pursuant hereto, shall be maintained in confidence by all parties and by the arbitrators, subject to the same exceptions as are set forth in Section
6.2(b) above. 
  

	 	9.7
	 
	Continued Performance. 
 

  
 The fact that the dispute resolution procedures specified in this Article 9 shall have been or may be invoked shall not excuse any party from performing its obligations under this Agreement and during the pendency of any
such procedure all parties shall continue to perform their respective obligations in good faith, subject to any rights to terminate this Agreement that may be available to any party. 
  

	10.
	 
	MISCELLANEOUS 
 

  

	 	10.1
	 
	Further Assurance. 
 

  
 From time to time, at a party’s request and without further consideration, the other party will execute and deliver to the requesting party such documents, instruments and consents and take such other action as the
requesting party may reasonably request in order to consummate more effectively the transactions contemplated hereby and to discharge the covenants of the other party, including to vest in Buyer good, valid and marketable title to the Polar Aire
Assets being transferred hereunder, but in no event shall any party, in response to any such request, be required to execute or deliver any documents, instruments or consents or take any action that would increase its obligations or diminish its
rights under this Agreement or any other instrument or agreement entered into pursuant to the terms hereof. 
  

	 	10.2
	 
	[Intentionally omitted] 
 

  

	 	10.3
	 
	Disclosures and Announcements. 
 

  
 Both the timing and the content of all disclosures to third parties and public announcements concerning the transactions provided for in this Agreement by either Company or Buyer shall be subject to
the approval of the other in all essential respects; provided, however, that a party may proceed with any such disclosure notwithstanding the failure of the other party to give its approval thereto, if the party proposing to make such
disclosure believes in good faith that it is required to make such disclosure pursuant to any laws or regulations applicable to it. 
  

	 	10.4
	 
	Assignment; Parties in Interest. 
 

  
 10.4(a)    Assignment.  The rights and obligations of a party hereunder may not be assigned, transferred or encumbered without the prior written consent of the
other parties. 

 
 18 

  
 10.4(b)    Parties in Interest.  Subject to
Section 10.4(a), this Agreement shall be binding upon, inure to the benefit of, and be enforceable by the respective successors and permitted assigns of the parties hereto. Nothing contained herein shall be deemed to confer upon any other person any
right or remedy under or by reason of this Agreement. 
  

	 	10.5
	 
	Equitable Relief. 
 

  
 Each party shall be entitled to seek equitable relief to obtain a halt to a breach or to prevent a threatened breach by the other party of any material obligations of such other party under this Agreement or to obtain
specific performance of any such obligations. Without limiting the generality of the foregoing, each of the parties agrees that any breach by the Company of any noncompetition obligation imposed by Section 6.1 hereof, or any breach by Company of its
obligations imposed by Section 6.2 hereof, will result in irreparable injury to Buyer for which a remedy at law would be inadequate; and that, in addition to any relief at law which may be available to Buyer for such breach and regardless of any
other provision contained in this Agreement, Buyer shall be entitled to injunctive and other equitable relief as a court may grant. This Section 10.5 shall not be construed to limit either party’s right to obtain equitable relief for other
breaches of this Agreement under general equitable standards. 
  

	 	10.6
	 
	Law Governing Agreement. 
 

  
 10.6(a)    This Agreement shall be construed and interpreted according to the internal laws of the state of Delaware, excluding any choice of law rules that may direct the
application of the laws of another jurisdiction. Subject to the provisions of Article 9.1, the parties hereby stipulate that any action or other legal proceeding arising under or in connection with this Agreement shall be commenced and prosecuted in
its entirety in the federal or state courts having jurisdiction over parties residing and doing business in Santa Clara County, California, each party hereby submitting to the personal jurisdiction thereof, and the parties agree not to raise the
objection that such courts are not a convenient forum. Process and pleadings mailed by registered or certified U.S. mail, return receipt requested and postage prepaid, to a party at the address provided in Section 10.8 shall be deemed properly
served and accepted for all purposes. 
  
 10.6(b)    Waiver of Jury Trial.  TO
THE MAXIMUM EXTENT PERMITTED BY LAW EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES SUCH PARTY’S RIGHTS TO A TRIAL BY JURY IN ANY LEGAL OR ARBITRATION PROCEEDING THAT MAY BE BROUGHT AS A RESULT OF ANY CLAIM, CONTROVERSY OR DISPUTE BETWEEN
THE PARTIES RELATING TO OR ARISING OUT OF THIS AGREEMENT AND EACH PARTY EXPRESSLY AND IRREVOCABLY AGREES THAT THE TRIER OF FACT IN ANY SUCH PROCEEDING SHALL BE THE JUDGE OR THE ARBITRATOR(S) IN THE CASE OF A PROCEEDING INITIATED PURSUANT TO ARTICLE
9 ABOVE. 
  

	 	10.7
	 
	Amendment and Modification. 
 

  
 Buyer and Company may amend, modify and supplement this Agreement in such manner as may be agreed upon by them in writing. 
  

	 	10.8
	 
	Notice. 
 

  
 All notices, requests, demands and other communications hereunder shall be given in writing and shall be: (a) personally delivered; (b) sent by telecopier, facsimile transmission or other electronic means of transmitting written
documents; or (c) sent to the parties at their respective addresses indicated herein by registered or certified U.S. Mail, return receipt requested and postage prepaid, or by 

 
 19 

  
 private overnight mail courier service. The respective addresses to be used for all such notices,
demands or requests are as follows: 
  

	 	(a)
	 
	If to Buyer, to: 
 

  
 SHURflo Pump Manufacturing Co. 
 5900 Katella Avenue 
 Cypress, CA 90630 
 Attention: Norm Alexander

  
 (with a copy to) 
  
 Foley & Lardner 
 777 East Wisconsin
Avenue 
 Milwaukee, WI 53202-5306 
 Attention: Joseph Tyson 
 Facsimile: (414) 297-4900 
  
 or to such other person or address as Buyer shall furnish to Company in writing. 
  

	 	(b)
	 
	If to Company, to: 
 

  
 The Coast Distribution System 
 350 Woodview Avenue 
 Morgan Hill, CA 95037 
 Attention: Sandra
Knell 
 Facsimile: (408) 782-8601 
  

	 	(with
	 
	a copy to) 
 

  
 Stradling Yocca Carlson & Rauth 
 660 Newport Center Drive, Suite 1600 
 Newport Beach, CA 92660 
 Attention: Ben A.
Frydman 
 Facsimile: (949) 725-4100 
  
 or to such other person or address as Company shall furnish to Buyer in writing. 
  
 If personally delivered, any such
notice, request, demand or other communication shall be deemed delivered upon actual receipt; or, if electronically transmitted pursuant to this paragraph, such communication shall be deemed delivered the next business day after transmission (and
sender shall bear the burden of proof of delivery); or, if sent by overnight courier pursuant to this paragraph, such communication shall be deemed delivered upon receipt; or, if sent by U.S. mail pursuant to this paragraph, such communication shall
be deemed delivered as of the date of delivery indicated on the receipt issued by the relevant postal service or, if the addressee fails or refuses to accept delivery, as of the date of such failure or refusal. Any party to this Agreement may change
its address for the purposes of this Agreement by giving notice thereof in accordance with this Section. 
  

	 	10.9
	 
	Expenses. 
 

  
 Regardless of whether or not the transactions contemplated hereby are consummated: 
  
 10.9(a)    Expenses to be Paid by Buyer.  Buyer shall pay, and shall indemnify, defend and hold Company harmless from and against (i) any sales, use, transfer or other similar tax imposed with

 
 20 

  
 respect to the transactions provided for in this Agreement, as and to the extent provided in Section 6.4
above, and (ii) any interest or penalties related thereto. 
  
 10.9(b)    Other.  Except as otherwise provided herein, each of the parties shall bear its own expenses and the expenses of its counsel and other agents in connection with the transactions
contemplated hereby. 
  
 10.9(c)    Costs of Litigation or Arbitration.  The
parties agree that (subject to the discretion, in an arbitration proceeding, of the arbitrator as set forth in Section 9.4) the prevailing party in any action or proceeding brought with respect to or to enforce any right or remedy under this
Agreement shall be entitled to recover from the other party or parties all reasonable costs and expenses of any nature whatsoever incurred by the prevailing party in connection with such action, including without limitation reasonable
attorneys’ fees and prejudgment interest. 
  

	 	10.10
	 
	Entire Agreement. 
 

  
 This instrument embodies the entire Agreement between the parties hereto with respect to, and supersedes any other agreements, written or oral, between the parties relating to, the transactions contemplated herein, and there
have been and are no agreements, representations or warranties with respect to such transactions between the parties other than those set forth or provided for herein. 
  

	 	10.11
	 
	Counterparts. 
 

  
 This Agreement may be executed in one or more counterparts, each of which executed counterparts, and any facsimile copies or photocopies thereof, shall be deemed an original, but all of which together shall constitute one and the
same instrument. 
  

	 	10.12
	 
	Headings and Interpretation. 
 

  
 This Agreement is the result of arms’-length negotiations between the parties hereto and no provision hereof, because of any ambiguity found to be contained herein or otherwise, shall be construed
against a party by reason of the fact that such party or its legal counsel was the draftsman of that provision. The section, subsection and any paragraph headings contained herein are for the purpose of convenience only and are not intended to
define or limit or affect, and shall not be considered in connection with, the interpretation of any of the terms or provisions of this Agreement. Unless otherwise indicated elsewhere in this Agreement, (i) the term “or” shall not be
exclusive, (ii) the term “including” shall mean “including, but not limited to” and (iii) the terms “herein,” “hereof,” “hereto,” “hereunder” and other terms similar thereto shall refer to
this Agreement as a whole and not merely to the specific section, subsection, paragraph or clause where such terms may appear. Where any group or category of items or matters is defined collectively in the plural number, any item or matter within
such definition may be referred to using such defined term in the singular number. 
  
 (Signatures of parties follow on
next page) 

 
 21 

  
 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written. 
  
 
	 SHURflo Pump Manufacturing Co.
  
 
	 
	 By:
 	 	         /s/    GREGORY M. KIRSTE        
 

 
  
  
  
 
	 The Coast Distribution System, Inc.
  
 
	 
	 By:
 	 	         /s/    DENNIS CASTAGNOLA         
 

	  	 	  

 

 
 22<PAGE>

                                                                    Exhibit 10.1

Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as **. A complete version of this exhibit has been
filed separately with the Securities and Exchange Commission.

                        LICENSE AND DEVELOPMENT AGREEMENT

         THIS LICENSE AND DEVELOPMENT AGREEMENT (this "Agreement") is made and
entered into as of November 26, 2002 (the "Effective Date") by and between
Upsher-Smith Laboratories, Inc., a corporation existing under the laws of the
State of Minnesota and which has offices at 14905 23/rd/ Avenue North,
Minneapolis, Minnesota 55447 ("USL"), and Unigene Laboratories, Inc., a
corporation existing under the laws of the State of Delaware and which has
offices at 110 Little Falls Road, Fairfield, New Jersey 07004 ("Unigene").

                                 R E C I T A L S

         WHEREAS, Unigene has developed certain proprietary technology for the
manufacture and formulation of salmon calcitonin suitable for nasal
administration;

         WHEREAS, Unigene has undertaken testing, animal studies and human
clinical trials for its formulation of salmon calcitonin;

         WHEREAS, USL wishes to obtain an exclusive license from Unigene under
Unigene's intellectual property rights to market Unigene's formulation of salmon
calcitonin in the United States;

         WHEREAS, the parties intend that Unigene produce the salmon calcitonin
for USL and supply USL with Unigene's formulation of salmon calcitonin in filled
vials, labeled and packaged in bulk;

         NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, terms and conditions hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties do hereby agree to be legally bound as follows:

ARTICLE 1. DEFINITIONS

         As used herein, the following terms shall have the following meanings:

         "Act" means the U.S. Food, Drug and Cosmetic Act, as amended, and
regulations promulgated thereunder.

         "Affiliate", with respect to any party, shall mean any other Person
that, directly or indirectly, through one or more intermediaries, Controls, is
Controlled By or is Under Common Control With such Person.

         "Agreement" shall have the meaning given in the opening paragraph of
this document.

         "Agreement Term" shall have the meaning set forth in Section 16.1
below.

<PAGE>

         "Active Pharmaceutical Ingredient" or "API" shall mean bulk active
salmon calcitonin in lyophilized form ready for appropriate formulation and
filling into Vials.

         "Amended Financing Statement" shall have the meaning set forth in
Section 13.1(c)(x) below.

         "Annual Volume Cap" shall have the meaning set forth in Section 7.1(b)
below.

         "Business Day" shall mean a day, Monday through Friday, on which banks
are open for business in New York, New York.

         "Business Plan" shall have the meaning set forth in Section 11.4 below.

         "cGMP" shall mean the current Good Manufacturing Practices as set forth
in 21 CFR (S)211, as amended from time to time.

         "Confidential Information" shall mean all proprietary and confidential
business information, Technical Information, or data owned by a party and
disclosed by that party to the other party pursuant to this Agreement including,
without limitation, manufacturing, marketing, financial, personnel, scientific
and other business information and plans, and the material terms of this
Agreement, whether in oral, written, graphic or electronic form.

         "Control" and, with correlative meanings, the terms "Controlled By" and
"Under Common Control With" shall mean the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract, resolution, regulation or
otherwise.

         "Cost of Goods Sold" shall mean manufacturing costs and expenses
incurred by USL (including labor and materials) in connection with assembling
and finishing Finished Product upon receipt of Vials supplied by Unigene
hereunder ** calculated in accordance with GAAP (as defined in the definition of
"Net Sales" below) **.

         "Credit" and "Credits" shall have the meanings set forth in Section 4.3
below.

         "Earned Royalty" has the meaning given in Section 4.1 below.

         "Effective Date" shall mean the date set forth in the opening paragraph
of this Agreement.

         "FDA" shall mean the U.S. Food and Drug Administration.

         "Field" shall mean the nasal administration of salmon calcitonin to
human subjects for all indications now or hereafter approved by the FDA.

         "Finished Product" shall mean Vials packaged (with the pump and
associated packaging) and labeled for sale to the ultimate consumer.

<PAGE>

         "First Amendment" shall have the meaning set forth in Section
13.1(c)(x).

         "First Commercial Sale" shall mean the first sale of Finished Product
by USL to a Third Party.

         "Forecast" shall have the meaning set forth in 7.2(a) below.

         "Force Majeure" shall have the meaning set forth in Section 17.14
below.

         "Free Samples" shall have the meaning set forth in Section 7.4(c)
below.

         "Indemnitor" shall have the meaning set forth in Section 12.1(a) or
12.1(b) below, as applicable.

         "Indemnitee" shall have the meaning set forth in Section 12.1(a) or
12.1(b) below, as applicable.

         "Infringement Action" shall have the meaning set forth in Section 10.3
below.

         "Innovator" shall mean the innovator listed in the Orange Book with
respect to the ** which there is a patent listing in the Orange Book.

         "**" shall have the meaning set forth in Section 13.1(c)(x).

          "Label", "Labeled", or "Labeling" means all labels and other written,
printed, or graphic matter upon: (i) API, Vials or Finished Product (as the case
may be) or any container or wrapper utilized with API, Vials or Finished Product
(as the case may be) or (ii) any written material accompanying API, Vials or
Finished Product (as the case may be).

         "**" shall have the meaning set forth in Section 13.1(c)(x).

         "**" shall have the meaning set forth in Section 13.1(c)(x).

         "Licensed Patents" shall, subject to Section 2.5.4, mean any United
States patent (including any extension, reissue, reexamination, or the like
relating thereto) or patent application (including any provisional, divisional,
continuation or continuation-in-part and renewal applications) now or hereafter
owned by or licensed to Unigene that claims Product or any use of Product in the
Field, including, without limitation (i) Unigene's United States Patent No. **
issued on **; provided however, that any rights in Licensed Patents covering API
shall be limited to the right to use API in the Product, Vials and Finished
Product.

         "Licensed Trademark" shall mean the trademark owned or controlled by
Unigene and designated by Unigene for use with Finished Product pursuant to
Section 11.2.

         "Listed Patent" shall mean the patent(s) listed in the Orange Book in
connection with NDA No. ** for a nasal product whose active ingredient is salmon
calcitonin.

<PAGE>

         "Loss" and "Losses" shall have the meaning set forth in Section 12.1(a)
below.

         "Market Year" means each twelve (12) month period following the first
day of the month following the First Commercial Sale, and in each successive
anniversary of that date.

         "Milestone" shall have the meaning set forth in Section 3.2 below.

         "Milestone Payment" shall have the meaning set forth in Section 3.2
below.

         "Monthly Volume Cap" shall have the meaning set forth in Section 7.1(b)
below.

         "NDA" shall mean the New Drug Application for the commercial sale of
Finished Product in the United States pursuant to 21 U.S.C. (S)355(b)(2).

         "NDA Approval" shall mean final approval by the FDA of the NDA
permitting the commercial sale of Finished Product in the United States, and
such NDA being made effective pursuant to 21 U.S.C. (S)355(c)(3).

         "Net Royalties" shall mean the sum of Earned Royalties for a given
Reporting Quarter minus the Transfer Price, minus the Cost of Goods Sold.

          "Net Sales" shall mean the gross revenues earned or accrued
(determined in accordance with United States generally accepted accounting
principles consistently applied ("GAAP")) from sales of Finished Product, after
NDA Approval by USL or its Affiliates, to a Third Party; less all of the
following deductions (as applicable):

         (a)   transportation charges, including insurance, for transporting
               Finished Product;

         (b)   sales and excise taxes and duties and any other governmental
               charges imposed upon the production, importation, use or sale of
               such Finished Product;

         (c)   trade, quantity and cash discounts **;

         (d)   allowances, refunds or credits to customers on account of
               rejection or return of Finished Product (including returned,
               spoiled, damaged, outdated or defective goods) or on account of
               retroactive price reductions affecting Finished Product **;

         (e)   rebates and charge backs attributable to Finished Product,
               including those granted to managed-care entities and government
               agencies **;

         (f)   interest, service, finance, and sales carrying charges paid by
               customers for extension of credit on sales **; and

         (g)   bad debt actually incurred.

<PAGE>

Sales among USL and its Affiliates shall be excluded from the computation of Net
Sales unless Finished Product is administered or used by such Affiliate. Free
Samples shall not be included in the calculation of Net Sales and no Royalty
shall be payable with respect to Free Samples.

         "Net Sales Shortfall" shall mean the amount by which Targeted Net Sales
exceed actual Net Sales in any Market Year for which Exhibit A provides for a
Targeted Net Sales objective.

         "Notice of Second Amendment" shall have the meaning set forth in
Section 13.1(c)(x).

         "OOS" shall have the meaning set forth in Paragraph 7 of Exhibit B.

         "Orange Book" shall mean a publication of the FDA titled "Approved Drug
Products With Therapeutic Equivalence Evaluations".

         "Packaging" means all primary containers, cartons, shipping cases,
inserts or any other like material used in packaging, or accompanying API, Vials
or Finished Product (as the case may be).

         "Paragraph 4 Certification" shall mean a certification pursuant to 21
U.S.C. (S)355(b)(2)(A)(iv) that Product does not infringe the Listed Patent(s)
or that the Listed Patent(s) is/are invalid or unenforceable

         "**" shall have the meaning set forth in Section 10.3 below.

         "Person" shall mean an individual, sole proprietorship, partnership,
limited partnership, limited liability partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture or other similar entity or organization, including,
without limitation, a government or political subdivision, department or agency
of a government.

         "Product" shall mean Unigene's proprietary formulation of salmon
calcitonin for nasal administration for all indications now or hereafter
approved by the FDA.

         "Projections" shall have the meaning set forth in Section 5.1 below.

         "PTO" shall have the meaning set forth in Section 3.1

         "** Event" shall have the meaning set forth in Section 5.2(a) below.

         "Rejected Vials" shall have the meaning set forth in Paragraph 5.1 of
Exhibit B.

         "Reporting Date" shall have the meaning set forth in Section 6.2 below.

         "Reporting Quarter" shall have the meaning set forth in Section 6.2
below.

          "Restricted Business" shall have the meaning set forth in Section
14.1(a) below.

<PAGE>

         "Restricted Period" shall have the meaning set forth in Section 14.1(a)
below.

         "Royalty" means, collectively and individually, both the Earned
Royalty and the Shortfall Royalty.

         "SEC" shall mean the U.S. Securities and Exchange Commission.

         "Second Amendment" shall have the meaning set forth in Section
13.1(c)(x).

         "Section 9.2 Credit" shall have the meaning set forth in Section 9.2
below.

         "Shortfall Royalty" shall have the meaning set forth in Section 5.2
below.

         "SOP" and "SOPs" shall mean Unigene's Standard Operating Procedures.

         "Specifications" shall mean the specifications which describe testing
methods and acceptance criteria for Vials as specified in the NDA, as such
specifications may be amended from time to time by mutual written agreement of
the parties or as requested or required by the FDA, including without limitation
such amendments to the NDA. The Specifications shall include, without
limitation: (a) the specifications for materials, packaging, components,
labeling, finished product and manufacturing controls for the Vials or API (as
applicable) covered under Unigene's Standard Operating Procedures (the "SOPs"),
Validation Documentation, policies or covered under any other materials
identified and committed to in any applicable regulatory application, and (b)(i)
material and component specifications (including approved suppliers and
distributors; physical, chemical and microbiological specifications, as
appropriate); (ii) Labeling specifications (including approved suppliers and
distributors, physical attributes, art proofs); (iii) sampling requirements (for
physical, chemical, microbiological testing); (iv) manufacturing requirements,
including processing and equipment requirements; (v) in-process control
specifications; (vi) Packaging requirements, including processing and equipment
requirements; (vii) Finished Product release requirements (including testing
methodology, equipment requirements, and release specifications); and (viii)
stability specifications (including testing methodology, equipment requirements
and testing specifications). All Specifications must comply with cGMP
requirements and be consistent with U.S. Pharmacopeia standards, National
Formulary standards and International Committee for Harmonization standards, as
applicable.

         "Suspension Event" shall have the meaning set forth in Section 5.2(a)
below.

         "Targeted Net Sales" shall mean the Net Sales objective for each Market
Year as provided for each such Market Year on Exhibit A.

         "Technical Information" shall mean Unigene's proprietary formulation,
clinical, preclinical, animal and manufacturing information and data, regulatory
filings, unpublished patent applications and other proprietary information, all
of which shall, and does, constitute Unigene's Confidential Information.

<PAGE>

         "Territory" shall mean the United States of America, its territories
and its possessions.

         "Third Party" shall mean any Person other than USL, Unigene or their
respective Affiliates.

         "Third Party Infringement" shall have the meaning set forth in Section
10.2 below.

         "Transfer Price" shall have the meaning set forth in Section 7.4(a)
below.

         "Unit" shall mean one (1) unit of Finished Product.

         "Vial" shall mean a labeled container of Product containing ** of
salmon calcitonin.

ARTICLE 2. LICENSE

         2.1.  License to USL under Licensed Patents.

               (a)   Subject to the terms and conditions herein, Unigene grants
USL an exclusive license in the Territory under the Licensed Patents to make,
have made, use, sell or offer for sale Finished Product (i) made from Vials
manufactured by, and purchased from, Unigene or its designees or (ii) produced
by USL to the extent provided in Sections 7.3(b) or 2.5 below.

               (b)   Subject to the terms and conditions herein and to the
extent required for USL to manufacture Product and Vials pursuant to Section 7.3
below, Unigene grants USL a nonexclusive license in the Territory under the
Licensed Patents to make, and use Product and Vials for use in the production of
Finished Product for sale in the Territory.

         2.2.  License to USL under Technical Information.

               (a)   Subject to the terms and conditions herein, Unigene grants
USL an exclusive license in the Territory under the Technical Information to
make, have made, use, sell or offer for sale Finished Product (i) made from
Vials manufactured by, and purchased from, Unigene or its designees or (ii)
produced by USL to the extent provided in Sections 7.3(b) or 2.5 below

               (b)   Subject to the terms and conditions herein and to the
extent required for USL to manufacture Product and Vials pursuant to Section 7.3
below, Unigene grants USL a nonexclusive license in the Territory under the
Technical Information to make, and use Product and Vials for use in the
production of Finished Product for sale in the Territory.

         2.3.  License to USL under Licensed Trademark. Subject to the terms and
conditions herein, Unigene grants USL an exclusive license in the Territory to
sell Finished Product marked with the Licensed Trademark.

<PAGE>

         2.4.  Private Label Distributors. USL has the right to sell Finished
Product to Third Parties on a private label basis for distribution by the Third
Party of Finished Product under its own private label, subject to the approval
of Unigene which approval will not be unreasonably withheld.

         2.5.  License for Manufacture of API and Product If Unigene Does Not
Deliver. In order to provide USL the right to make, have made and use Product
and API in the event Unigene does not supply Vials or API as contemplated in
this Agreement, the parties now agree that, subject to and in accordance with
the terms of this Section 2.5, Unigene shall (and by this Section 2.5 does)
grant to USL a limited use right and license to make, have made, import and use
API and the Product for use in the production of Vials and Finished Product for
sale in the Territory, as described below in this Section 2.5.

               2.5.1.   License to USL under Licensed Patents. Subject to the
terms and conditions of this Section 2.5, Unigene grants USL a nonexclusive
license in the Territory under the Licensed Patents to make, have made and use
Product and/or API for use only in the production of Vials and Finished Product
for sale in the Territory in accordance with, and as contemplated by, this
Agreement.

               2.5.2.   License to USL under Technical Information. Subject to
the terms and conditions of this Section 2.5, Unigene grants USL a nonexclusive
license in the Territory under the Technical Information to make, have made,
import and use Product and/or API for use only in the production of Vials and
Finished Product for sale in the Territory in accordance with, and as
contemplated by, this Agreement. Unigene shall furnish Technical Information and
technical assistance to enable USL to exercise its rights under this Section
2.5.2.

               2.5.3.   Limitation on Exercise of License.

               (a)   USL agrees (i) not to exercise the rights and licenses
granted as of the date of this Agreement, under Sections 2.5.1 and 2.5.2 above
until such time as Unigene does not supply to USL Vials in accordance with the
terms of Section 7.3(a) and in such event to exercise its rights and licenses to
make or have made Product and Vials using API supplied by Unigene provided
Unigene supplies USL's requirements for API (and USL will furnish forecasts and
purchase orders for API in the same manner as contemplated in Section 7.2 for
Vials), and (ii) not to exercise its rights under 2.5.1 and 2.5.2 to make or
have made API until such time as Unigene does not supply to USL its requirements
for API. The exercise of the rights and licenses granted under Sections 2.5.1
and 2.5.2 shall be in addition to any other rights or remedies available under
this Agreement or under law.

               (b)   If USL has, in accordance with Section 2.5.3(a), commenced
exercise of the rights and licenses granted as of the date of this Agreement
under Sections 2.5.1 and 2.5.2 above, and thereafter Unigene again begins to
supply to USL Product or API (as the case may be) in accordance with the terms
of this Agreement, USL shall then in an orderly manner discontinue exercise of
such rights and licenses and obtain its supply from Unigene, provided

<PAGE>

that Unigene shall first do the following (it being understood that the
following may be performed by Unigene or a permitted successor or assignee of
Unigene under this Agreement):

                      (1)   Unigene shall reimburse USL for all reasonable
expenses incurred in preparing to commence and commencing the manufacture,
testing and supply of Product or API (as the case may be) by USL or a Third
Party on behalf of USL under this Section 2.5, including any expenses related to
obtaining regulatory approval for the manufacture and supply of API and Product
under the NDA, and other expenses as required to comply with applicable law and
regulation in connection with such manufacture and supply;

                      (2)   If USL has entered into a contract with a Third
Party in connection with the manufacture (for example a contract manufacturer),
testing, quality assurance or otherwise in connection with the exercise of USL's
rights under Sections 2.5.1 and 2.5.2 above, Unigene shall have assumed any such
contract and obtained the release of USL from any and all obligations thereunder
arising from events occurring from and after the date of Unigene's assumption of
that contract (it being understood that Unigene shall not be liable for
obligations or liabilities under that contract arising from events occurring
before the date of Unigene's assumption of that contract); and

                      (3)   Unigene shall reimburse USL for any and all ** that
USL shall have incurred as a result of Unigene having not supplied Product or
API (as the case may be) in accordance with the terms of this Agreement,
including payment of amounts incurred or paid by USL to obtain a supply (by
exercise of the rights and licenses under this Section 2.5) of Product or API
(including as applicable, USL's cost of manufacture) to the extent it exceeds
the Transfer Price that USL would have paid Unigene for such Product or API
under this Agreement.

               2.5.4. Definition of "Licensed Patents" as Used in Section 2.5.
Notwithstanding anything contained in this Agreement to the contrary, as used in
Section 2.5, "Licensed Patents" shall mean any United States patent (including
any extension, reissue, reexamination, or the like relating thereto) or patent
application (including any provisional, divisional, continuation or
continuation-in-part and renewal applications) now or hereafter owned by or
licensed to Unigene that claims Product or a component thereof, any portion of
the production of Product or component thereof, or any use of Product in the
Field, including, without limitation (i) Unigene's United States Patent No. **
issued on **, (ii) Unigene's United States Patent No. ** issued on **, and (iii)
Unigene's United States Patent No. ** issued on **.

ARTICLE 3. SIGNING FEE AND MILESTONE PAYMENTS

         3.1.  Signing Fee. As consideration and reimbursement to the Licensor
for certain of its costs and expenses associated with in-process research,
development, and testing for the Product and Vials, USL will (a) upon the
execution of this Agreement, pay Unigene a non-refundable fee of THREE MILLION
DOLLARS (U.S. $3,000,000), and pay Unigene certain Milestone Payments subject to
and in accordance with Section 3.2 below. The signing fee shall be paid by USL
to Unigene upon written confirmation to USL (including written confirmation by
fax) of **.

<PAGE>

         3.2.  Milestones. Subject to the Section 9.2 Credit described in
Sections 3.4 and 9.2 below, Upon achievement of certain events (each a
"Milestone"), USL shall pay Unigene the corresponding Milestone amount as set
forth below (each a "Milestone Payment"):

                     Milestone Description                  Milestone Payment
                     ---------------------                  -----------------
               1.    **                                     **
               2.    **                                     **

         3.3.  Milestone Notices. Unigene shall notify USL in writing of the
achievement of each of the foregoing Milestones within ** (**) Business Days
after such achievement.

         3.4.  Milestone Credits. USL shall be entitled to credit against the
second Milestone Payment equal to the Section 9.2 Credit (as provided in Section
9.2 hereof).

         3.5.  Milestone Payments. Milestone Payments shall be due and payable
on or before the ** (**) day after delivery to USL of Unigene's notice of the
achievement of the corresponding Milestone.

ARTICLE 4. ROYALTIES

         4.1.  Royalty. Subject to the credits provided in Section 4.3, USL
shall pay to Unigene, or its designee, on a quarterly basis, an earned royalty
(the "Earned Royalty") equal to (a) ** of Net Sales for so long as (1) the
Finished Product is covered by at least ** of a Licensed Patent that has issued
and is in full force, and (2) **, or (b) ** of Net Sales of Finished Product in
the event that at the time of the sale the circumstances are as described in
either (i) or (ii) as follows: (i) both (A) ** and (B) ** or (ii) both (A) **
and (B) **.

         4.2.  Royalty Term.

               (a)   USL's obligation to pay Earned Royalties shall commence
upon the First Commercial Sale and shall continue through **. After the later of
(i) or (ii) above in this Section 4.2(a), (A) USL shall have a fully paid up,
royalty-free right and license under the licenses and rights granted under this
Agreement and (B) Unigene's sole compensation under this Agreement will be **
for Vials or API (as the case may be) supplied by Unigene to USL described in
**, provided that, except as provided in Section 17.1, such licenses and rights
shall terminate at such time as USL (or its permitted assignee) **.

               (b)   USL shall have an obligation to pay a Shortfall Royalty in
accordance with and subject to Section 5.2 for any Market Year in which USL has
an obligation to pay Earned Royalties ** pursuant to Section 4.1 above. Also as
described in Section 5.2, ** of Net Sales. For any Market Year in which USL has
an obligation to pay Earned Royalties ** during only a portion of the Market
Year, USL's obligation to pay a Shortfall Royalty shall be determined in
accordance with Section 5.2.

<PAGE>

         4.3.  Credits. USL shall be entitled to credit against each payment of
Earned Royalties otherwise due the amount of the following to the extent not yet
taken as a credit under this Section 4.3: ** (each a "Credit" and, collectively,
the "Credits"); provided, however, that in no event shall the aggregate dollar
value of such ** Credit for any Reporting Quarter exceed ** of the Net Royalties
due to Unigene for such Reporting Quarter. Any unapplied ** Credits shall be
applicable to subsequent payments (other than for Transfer Price) due under this
Agreement. In addition, USL shall be entitled to credit against any payment of
Shortfall Royalty the amount of any **, provided, however, that in no event
shall the aggregate dollar value of such ** for any Shortfall Royalty due for a
given Market Year exceed ** of the Shortfall Royalty due to Unigene for such
Market Year.

ARTICLE 5. TARGETED NET SALES

         5.1.  Projections. USL has provided to Unigene projections by Market
Year for the projected Net Sales of Finished Product, which projections are
attached as Exhibit A (the "Projections"). In the event that **, Unigene and USL
will negotiate in good faith **; provided, however, that if USL and Unigene
cannot reach agreement with respect thereto within ** (**) days of the first
meeting between the parties with respect to such matter, (a) the respective
officers of Unigene and USL with decision making authority with respect to such
matter shall meet face-to-face within ** (**) days after the expiration of the
aforementioned ** (**) day period, and (b) if the respective officers of Unigene
and USL cannot resolve the matter within ** (**) days after their first meeting,
the matter shall be submitted to arbitration pursuant to Section 17.2.

         5.2.  Targeted Net Sales.

               (a)   During each Market Year in which USL has an obligation to
pay Earned Royalties **, USL will use commercially reasonable efforts to achieve
Targeted Net Sales, as set forth on Exhibit A, provided that for any Market Year
in which USL has an obligation to pay Earned Royalties ** under Section 4.1(a)
during a portion, but not all, of the Market Year, the Targeted Net Sales shall
be prorated to equal the product of the Targeted Net Sales for that Market Year
multiplied by a fraction, the numerator of which is the number of days during
the applicable Market Year that USL has an obligation to pay Earned Royalties
**, and the denominator of which is the total number of days in that Market
Year. Also, ** to reflect the number of days during the applicable Market Year
that a "Suspension Event" is occurring. The term "Suspension Event" means the
occurrence of any of the following events: (A) Unigene materially ** in
accordance with the terms of this Agreement, (B) the occurrence of an event of
Force Majeure; **. Specifically, the Targeted Net Sales for the applicable
Market Year shall be reduced by an amount equal to ** during which USL has an
obligation to pay Earned Royalties equal to ** of Net Sales.

               (b)   In addition to Section 5.2(a) above, if a Suspension Event
continues for a period ** or more consecutive days, then in addition to the
proration of the Targeted Net Sales for the applicable Market Year as described
above, ** as, and to the extent, determined pursuant

<PAGE>

to the same process described below in Section 5.2(c) utilized when a "Reduction
Event" has occurred.

               (c)   Upon the occurrence of a "Reduction Event," Unigene and USL
will negotiate in good faith to reduce, if appropriate, the Targeted Net Sales
to reflect such Reduction Event. The term "Reduction Event" means the occurrence
of any of the following events: **. If USL and Unigene cannot reach agreement
with respect thereto within ** (**) days following written notice by one party
to the other of the occurrence of a Reduction Event, (i) the respective officers
of Unigene and USL with decision making authority with respect to such matter
shall meet face-to-face within ** (**) days after the expiration of the
aforementioned ** (**) day period, and (ii) if the respective officers of
Unigene and USL cannot resolve the matter within ** (**) days after their first
meeting, the matter shall be submitted to arbitration pursuant to Section 17.2.

               (d)   The terms of Section 5.2(a) through (c) shall be in
addition to any other rights or remedies available under this Agreement or
applicable law.

               (e)   In the event that a Net Sales Shortfall occurs in a given
Market Year, within sixty (60) days after the end of such Market Year, USL shall
pay to Unigene a "Shortfall Royalty" equal to **. The payment of the Shortfall
Royalty shall be accompanied (or preceded) by a written statement setting forth
the itemized calculations used to compute the amount of the Shortfall Royalty.

         5.3.  Effect of Net Sales Shortfall.

               (a)   In the event that a Net Sales Shortfall occurs under
Section 5.2 in any ** period commencing after **, Unigene, at its sole option,
may terminate this Agreement for cause pursuant to Section 16.3, provided
Unigene gives notice of termination specifically referencing this Section 5.5
and stating the basis for such termination within ** (**) days following
Unigene's receipt from USL of the report described in Section 5.2(b) following
the end of the ** period. Such termination shall be effective ** (**) days
following USL's receipt of such notice of termination.

               (b)   In the event of a ** in any Market Year, USL may give
written notice at any time of its ** in good faith the **. Upon such notice from
USL, Unigene and USL shall (within thirty (30) days) enter into good faith
negotiations for a period of ** (**) days, commencing on the date of Unigene's
written notice, regarding **, or give written notice that it does not wish to do
so. If, in response to any such notice from USL **, Unigene gives written notice
that it does not wish to enter into negotiations as described above, or if the
parties enter into such negotiations but are unable to reach agreement as to any
**, USL may ** upon written notice to Unigene, and such ** shall be effective **
(**) days following Unigene's receipt of such notice of **. Absent the written
agreement of the parties to the contrary, nothing in this Section 5.3(a) shall
limit, or affect Unigene's rights under Section 5.3(a).

<PAGE>

ARTICLE 6.    STATEMENTS AND REMITTANCES

         6.1. Records. USL will maintain all books and records reasonably
necessary to completely and accurately determine the amount of Royalties due to
Unigene under this Agreement. USL will maintain such books and records for at
least ** (**) months after the end of the Market Year to which those records
relate.

         6.2. Contents of Net Sales Reports; Payment of Royalties. Within
forty-five (45) days after the last day of USL's manufacturing month (determined
in the ordinary course or USL's business practice) for each February, May,
August, and November during the period when USL has an obligation to pay Earned
Royalties under this Agreement (the "Reporting Date"), USL shall deliver to
Unigene a detailed written report describing, for the three (3) month period
ending respectively on the last such day of USL's manufacturing month for such
February, May, August , or November (the "Reporting Quarter"): (a) the number
and full description of the Units manufactured and sold by USL and its
Affiliates; (b) the gross sales and Net Sales for each such Unit and sufficient
information to show the deductions from gross sales used to calculate Net Sales;
(c) any Credits, itemized by type, applied against Earned Royalties; (d) the
number of Free Samples (as defined below) distributed; and (e) the total Earned
Royalties due to Unigene. Each such report shall be accompanied by full payment
to Unigene of the Royalties (net of any applicable Credits) or other payments
then due and payable under this Agreement.

         6.3. Payments.

              (a)    All payments required to be paid to Unigene under this
Agreement shall be made in U.S. DOLLARS by means of ACH wire transfer provided
that Unigene maintains authorization permitting such wire transfer by USL into
Unigene's account. If Unigene does not maintain such authorization, after
Unigene gives USL notice thereof, USL will pay by check.

              (b)    Whenever any payment hereunder shall be stated to be due on
a day which is not a Business Day, such payment shall be made on the immediately
succeeding Business Day.

              (c)    Payments hereunder shall be considered to be made as of the
date on which such payment is received by Unigene.

              (d)    In the event that USL is late by more than ** (**) days in
paying any amount owed to Unigene under this Agreement, such late payment shall
bear interest at the bank reference rate of TCF Bank Minnesota from the date the
payment should have been made to Unigene.

         6.4. Unigene's Right to Audit. Upon thirty (30) days prior written
notice to USL, USL shall permit an independent certified public accounting firm
of nationally recognized standing selected by Unigene and reasonably acceptable
to USL, at Unigene's expense, to have access during normal business hours to
examine books and records of USL described in Section 6.1 hereof as may be
reasonably necessary to verify the accuracy of the reports described in

<PAGE>

Section 6.2 hereof. The examination shall be limited to USL's books and records
for any year ending not more than ** (**) months prior to the date of such
request, unless any such audit establishes that the Royalties actually paid for
any Market Year subject to the audit were actually less than ** percent (**%) of
the Royalties due for such Market Year, in which event the audit may extend to
include records ending not more than ** (**) months prior to the date of such
initial request. An examination under this Section 6.4 shall not occur more than
once in any Market Year, and any period shall be subject to audit under this
Section 6.4 only once during the term of this Agreement. USL may designate
competitively sensitive information, which such accountant may not disclose to
Unigene, provided, however, that such designation shall not impair the
accountant's ability to examine the relevant books and records or to report the
accountant's conclusions to Unigene. The accounting firm shall disclose to
Unigene only whether the reports described in Section 6.2 hereof are correct or
incorrect and the specific details concerning any discrepancies. Any such
accounting firm shall sign a confidentiality agreement, in a form and substance
reasonably acceptable to USL, as to any of USL's confidential information which
they are provided or to which they have access while conducting any audit
pursuant to this Section 6.4. Unigene shall pay all costs of conducting audits
pursuant to this Section 6.4; provided, however, that USL shall reimburse
Unigene in full for such reasonable costs whenever the accounting reveals that,
with respect to any audited period (but in no event a period of less than a
Market Year), the aggregate Royalties actually paid to Unigene were less than **
percent (**%) of the total of Royalties due to Unigene hereunder. Should such an
audit identify an underpayment of aggregate Royalties, USL shall immediately
remit such underpayment amount to Unigene plus interest at the bank reference
rate of TCF Bank Minnesota from the date the payment should have been made.
Should such an audit identify any overpayment of aggregate Royalties, Unigene
shall immediately remit such overpayment amount to USL, **.

ARTICLE 7.    PRODUCTION, TESTING, FORECASTING

         7.1. Production.

              (a)    Except as provided in Sections 7.3 and 2.5, Unigene shall
produce API for Product, formulate Product, fill, label and bulk package the
Vials with Product for supply to USL, and USL shall obtain Product in Vials from
Unigene. Unigene shall collect such data on production, maintain such records,
retain such retention and reserve samples of all raw materials and in-process
production steps, and take such other steps as required to comply with cGMP.
Subject to the confidentiality provisions set forth in ARTICLE 15 hereof,
Unigene and USL shall both share such data, information or samples with one
another as required to maintain the NDA. Unigene will have, during the period it
is to supply Vials or API to USL under this Agreement, the requisite experience,
knowledge and expertise, suitable facility and qualified personnel, as well as
the legal right, to perform its obligations under this Agreement in a sound,
safe, lawful and workmanlike manner. In addition, Unigene will perform in
accordance with the terms of Exhibit B attached hereto. USL has the requisite
experience, knowledge and expertise, suitable facility and qualified personnel,
as well as the legal right to perform its obligations under this Agreement in a
sound, safe, lawful and workmanlike manner.

<PAGE>

              (b)    Unigene shall supply all of USL's requirements for Vials as
stated in USL's purchase orders as described below, provided, however, that
Unigene shall not be obligated to accept purchase orders for more than ** Vials
per Market Year (the "Annual Volume Cap") or purchase orders for the delivery of
more than ** Vials in any calendar month (the "Monthly Volume Cap").

              (c)    USL shall purchase the pumps to be included in Finished
Product from a Third Party, and provide appropriate samples to Unigene at no
cost. Unigene shall, thereafter, test and release the pumps from such sample.

         7.2. Forecasting; Purchase Orders.

              (a)    USL will deliver to Unigene, within seven (7) days after
the beginning of each USL manufacturing quarter, its forecast for Vials for the
succeeding twelve (12) manufacturing month period (the "Forecast"), provided
that the first Forecast will be provided approximately six (6) months prior to
the anticipated date of commercial launch of the Finished Product. The Forecast
will be updated each manufacturing quarter on a rolling twelve (12) month basis.
Unigene will use the Forecast for planning purposes only. For any given quarter,
Unigene may purchase raw materials and components (for Vials or API, as
applicable) on the basis of USL's most recent Forecast for Vials or API (as
applicable) for the second manufacturing quarter covered by that Forecast given
in accordance with this Section 7.2(a). If USL does not submit purchase orders
for that manufacturing quarter in a volume equaling or exceeding such Forecast
for that quarter, USL will reimburse Unigene for the cost of those raw materials
and components that Unigene cannot use thereafter for the manufacture of Product
or Vials or otherwise for equivalent value.

              (b)    Vials will be ordered by USL by the issuance of separate,
pre-numbered binding purchase orders. Unigene will supply USL with its estimated
batch yield of Vials to assist USL in ordering batch lot quantities. USL's
purchase orders will designate the desired quantities of the Vials, delivery
dates and destinations and will be submitted at least ** (**) days prior to the
shipment date specified. Subject to the terms of Section 7.1(b) above, Unigene
will fill and ship all orders of Vials in accordance with USL's purchase orders
provided that if such orders exceed the Forecast for such period by more than **
percent (**%), Unigene shall not be required to fill and ship such excess
amount, but shall use commercially reasonable efforts to do so. If any USL
purchase order is not submitted at least ** (**) days prior to the requested
delivery dates, Unigene will still use commercially reasonable efforts to meet
USL's requested delivery dates. Unigene shall not produce Vials more than **
(**) days prior to the shipment date of such Vials; provided, however, in the
event that the FDA approves the Product for ** (**) month expiration dating,
Unigene shall not produce Vials more than ** (**) days, rather than the
aforementioned ** days, prior to the shipment date of such Vials.

              (c)    All sales of Vials by Unigene to USL will be subject to the
provisions of this Agreement and will not be subject to the terms and conditions
contained in any purchase order of USL or confirmation of Unigene, except
insofar as any such purchase order or confirmation establishes (i) the quantity
of Vials to be sold; (ii) the shipment dates for those

<PAGE>

Vials; and (iii) the destinations to which those Vials are to be shipped. In the
event of any conflict between the terms of this Agreement and the terms of any
purchase order, invoice or similar document, the terms of this Agreement shall
prevail.

         7.3. Alternative Source for Vials.

              (a)    Unigene must be able to supply Vials sufficient to meet the
Monthly Volume Cap and the Annual Volume Cap. In order to do so, Unigene shall
have the right to designate and (at Unigene's expense) qualify a Third Party to
supply Vials; **.

              (b)    In addition, if USL anticipates that it will require a
quantity of Vials in excess of the Monthly Volume Cap and/or the Annual Volume
Cap, USL shall give Unigene reasonable notice thereof. USL and Unigene shall
thereafter promptly meet and work together in good faith to identify a
reasonable means of increasing capacity for supply in a mutually beneficial,
commercially reasonable manner, with the objective of having excess capacity
available in the time period reasonably requested by USL. Alternatives for doing
so may include Unigene increasing its capacity, qualifying a Third Party to
supply Vials, qualifying USL to supply Vials (in which case USL may manufacture
Product and Vials under the license and right granted in Sections 2.1(b) and
2.2(b) above and Unigene shall supply all of USL's requirements for API for use
in the manufacture of such Product and Vials (and USL will furnish forecasts and
purchase orders for API in the same manner as contemplated in Section 7.2 for
Vials)), or some combination thereof, with the objective of achieving such extra
capacity in the reasonable time frame on commercially reasonable terms. USL and
Unigene shall agree in good faith upon a commercially reasonable manner to
proceed with a view of time frame, cost and other commercially reasonable
considerations. All costs and expenses incurred in connection with Unigene
increasing its capacity, qualifying a Third Party to supply Vials, qualifying
USL to supply Vials, or some combination thereof, pursuant to this Section
7.3(b), shall be borne ** by USL and ** by Unigene. Notwithstanding anything in
this Section 7.3(b) to the contrary, upon USL giving notice that it will require
a quantity of Vials in excess of the Monthly Volume Cap and/or the Annual Volume
Cap, Unigene and USL will within ** (**) days of such notice meet to commence
good faith discussions and negotiations to decide among the three alternatives
taking into account commercially reasonable considerations as discussed in this
Section 7.3(b); provided, however, that if USL and Unigene cannot reach
agreement with respect thereto within ** (**) days following USL's written
notice, (i) the respective officers of Unigene and USL with decision making
authority with respect to such matter shall meet face-to-face within ** (**)
days after the expiration of the aforementioned ** (**) day period, and (ii) if
the respective officers of Unigene and USL cannot resolve the matter within **
(**) days after their first meeting, the matter shall be submitted to
arbitration pursuant to Section 17.2.

         7.4. Transfer Price.

              (a)    The "Transfer Price" shall initially be ** per Vial (plus
transportation charges, including insurance). If it becomes clear that by reason
of costs outside Unigene's control that Unigene's ** percent (**%) shall exceed
the ** (plus transportation charges, including insurance) by ** percent (**%) or
more, Unigene shall deliver USL written notice of

<PAGE>

the same (including an explanation of the cause of the increase to Unigene's **)
at least thirty (30) days before the end of the relevant Reporting Quarter,
along with a revised Transfer Price calculated to achieve a price equal to
Unigene's ** percent (**%) based on prices available at the time of the notice,
provided that in no event shall the Transfer Price change more than once
annually. Notwithstanding the foregoing, at such time as USL's obligation for
the payment of Earned Royalties expires under Section 4.2(a), the applicable
Transfer Price shall be increased to an amount equal to Unigene's ** percent
(**%). In the event USL commences manufacture of Product and Vials pursuant to
Section 7.3 or Section 2.5, the Transfer Price for API supplied by Unigene to
USL hereunder shall equal Unigene's ** percent (**%) until such time as USL's
obligation for the payment of Earned Royalties expires under Section 4.2(a), and
thereafter the applicable Transfer Price for API shall be increased to an amount
equal to Unigene's ** percent (**%), subject to the terms of Section 14.1(b)
below.

              (b)    After the Transfer Price increases to Unigene's **, Unigene
shall, upon written request from USL from time to time, but not more than once
in any Market Year, promptly furnish to USL written documentation maintained by
Unigene in the ordinary course evidencing the cost of **. Upon thirty (30) days
prior written notice to Unigene, Unigene shall permit an independent certified
public accounting firm of nationally recognized standing selected by USL and
reasonably acceptable to Unigene, at USL's expense, to have access during normal
business hours to examine books and records of Unigene hereof as may be
reasonably necessary to verify the accuracy of the Transfer Price for any period
after USL's obligation for the payment of Earned Royalties expires under Section
4.2(a), and written documentation evidencing the cost of manufacture described
in this Section7.4(b). The examination shall be limited to Unigene's books and
records for any year ending not more than ** (**) months prior to the date of
such request, unless any such audit establishes that the Transfer Price actually
paid for any Market Year subject to the audit were actually more than ** percent
(**%) of the Royalties due for such Market Year after USL's obligation for the
payment of Earned Royalties expires under Section 4.2(a), in which event the
audit may extend to include records ending not more than ** (**) months prior to
the date of such initial request. An examination under this Section 7.4(b) shall
not occur more than **, and any period shall be subject to audit under this
Section 7.4(b) only once during the term of this Agreement. Unigene may
designate competitively sensitive information, which such accountant may not
disclose to USL, provided, however, that such designation shall not impair the
accountant's ability to examine the relevant books and records or to report the
accountant's conclusions to USL. The accounting firm shall disclose to USL only
whether the Transfer Price paid for the period subject to the audit are correct
or incorrect and the specific details concerning any discrepancies. Any such
accounting firm shall sign a confidentiality agreement, in a form and substance
reasonably acceptable to Unigene, as to any of Unigene's confidential
information which they are provided or to which they have access while
conducting any audit pursuant to this Section 7.4(b). USL shall pay all costs of
conducting audits pursuant to this Section 7.4(b); provided, however, that
Unigene shall reimburse USL in full for such reasonable costs whenever the
accounting reveals that, with respect to any audited period (but in no event a
period of less than a Market Year), the aggregate Transfer Price actually paid
by USL was more than ** (**%) of the total Transfer Price due to Unigene for the
applicable period hereunder. Should such an audit identify an overpayment of
Transfer Price for

<PAGE>

any period after USL's obligation for the payment of Earned Royalties expires
under Section 4.2(a), Unigene shall immediately remit such overpayment amount to
USL plus interest at the bank reference rate of TCF Bank Minnesota from the date
the overpayment was made. Should such an audit identify any underpayment of
Transfer Price for any period after USL's obligation for the payment of Earned
Royalties expires under Section 4.2(a), USL shall immediately remit such
underpayment amount to Unigene, plus interest at the bank reference rate of TCF
Bank Minnesota from the date the payment should have been made.

              (c)    For each Vial or API (as the case may be) shipped to USL,
USL shall pay to Unigene the Transfer Price, which shall be due and payable
within thirty (30) days after the last to occur of (i) delivery to USL's
facility of the applicable shipment of Vials or API (as the case may be); and
(ii) the delivery to USL of the invoice relating to the applicable shipment of
Vials or API (as the case may be).

              (d)    For each Reporting Quarter, the aggregate amount of any
accumulated Transfer Price paid to Unigene, except for such amounts paid on
Vials or API (as the case may be) used in samples distributed for no cost or a
nominal cost ("Free Samples"), shall be creditable against Earned Royalties
pursuant to Section 4.3.

         7.5. Shipment and Risk of Loss. Unigene will ship all Vials or API (as
the case may be) to USL, F.O.B. point of delivery (USL's loading dock). The risk
of loss of or damage to any Vials or API (as the case may be) ordered by USL and
shipped by Unigene will pass to USL upon Unigene's delivery to USL, F.O.B. point
of delivery (USL's loading dock). Unigene will pay the cost of all freight and
insurance for each shipment.

ARTICLE 8.    REGULATORY APPROVAL

         8.1. NDA Approval and **. Unigene shall file and pursue the application
for NDA Approval. When NDA Approval is granted, **. Following NDA Approval,
Unigene shall cooperate in, and take all commercially reasonable actions
necessary for, **, including without limitation all actions set forth in the
regulations of the FDA relating to such ** (currently codified at **). USL shall
reimburse Unigene for Unigene's payment to the FDA of **; provided that if, the
facility covered by ** to be reimbursed by USL, is being used by Unigene to
produce product or materials other than those used for the production and supply
of Vials to USL hereunder, USL's obligation to reimburse Unigene for the ** will
be prorated on the basis of the number of products produced at the facility for
commercial sale. **, subject to the limitations set forth in this ARTICLE 8, **.

         8.2. ** upon Termination. Upon termination of this Agreement for any
reason, USL shall promptly **. Upon the occurrence of an event requiring USL **
shall cooperate in, and take all actions necessary for, **, including without
limitation all actions set forth in the regulations of the FDA relating to such
** (currently codified at **). ** shall bear the cost and expense of such **,
provided that ** shall bear the cost and expense of such ** in the event of any
termination under Section 5.3, or termination by Unigene under Section 16.3.

<PAGE>

        8.3.  Prohibition on Technical Information **. Except in connection with
a permitted assignment of this Agreement by USL as provided in Section 17.1
below, USL shall not assign, transfer or allow any Third Party to reference the
Technical Information ** for any purpose, it being understood and agreed that
this prohibition shall not apply in the case of an assignment of this Agreement
by USL permitted in Section 17.1. USL shall not employ or reference the
Technical Information ** for any purpose other than for the sale of Finished
Product in the Territory.

        8.4.  Permitted Uses of the Technical Information **. Unigene shall be
free to reference and use (a) ** the Technical Information for any purpose
outside the Territory, (b) Technical Information for any purpose outside the
Field within the Territory, and (c) **.

        8.5.  Adverse Drug Reaction. Each party shall promptly inform the other
party of any adverse reaction related to API, Product, Vials or Finished
Product.

ARTICLE 9.    **

        9.1.  **

        9.2.  **

ARTICLE 10.   INTELLECTUAL PROPERTY RIGHTS

        10.1. Patent Prosecution and Maintenance. Unigene shall be responsible
in its sole discretion for taking all necessary actions to file, prosecute, and
maintain Licensed Patents, including the following:

              (a)   Filing applications for patents, reexaminations and
reissues;

              (b)   Prosecuting all patent applications and applications for
reexaminations and reissue, and responding to opposition or any other form of
action for invalidity or revocation (other than litigation described in Section
10.2 or 10.3, for which the responsibility shall be borne as described in those
sections); and

              (c)   Maintaining in force any patents by duly filing all
necessary papers and paying any fees required by the patent legislation of the
particular country in which such patents were granted.

Unigene shall consult with USL regarding, and shall consider in good faith USL's
proposals and recommendations with respect to, patent applications and
applications for reexaminations and reissue under the Licensed Patents. Unigene
shall keep USL advised of the status of patent applications and applications for
reexaminations and reissue and the patents in the Licensed Patents by making
available to USL copies of all patent applications and applications for
reexaminations and reissue, office actions, amendments, copies of issued patents
and copies of notices from the patent office.

<PAGE>

        10.2. Patent Enforcement. If either Unigene or USL learns of an
infringement or threatened infringement of a Licensed Patent or of a
misappropriation of Technical Information by a Third Party in the Field (any of
the foregoing, a "Third Party Infringement"), such party shall promptly, and in
any event within ** days, notify the other party of such Third Party
Infringement. Unigene shall have the right to bring an action to remedy such
Third Party Infringement in the Field **. In the event that USL does not join in
an action brought by Unigene in connection with a Third Party Infringement,
Unigene shall bear the entire cost of such action **. In the event that Unigene
elects not to pursue a Third Party Infringement, USL ** may bring an action to
remedy such Third Party Infringement **. Notwithstanding anything set forth in
this Section 10.2 to the contrary, if necessary, each party agrees to be
included as a named party in any Third Party Infringement action.

        10.3. Infringement of Third Party Rights. Other than as provided in
Section 9.1, if the manufacture, sale or use of Product, Vials or Finished
Product pursuant to this Agreement results in any claim, suit or proceeding
alleging patent infringement against Unigene or USL (any of the foregoing, an
"Infringement Action"), such party shall promptly notify the other party hereto
of such Infringement Action. ** will assume the defense ** through counsel of
its own choice, and in such event **. If USL is named as a party ** through
counsel of its own choice **. Notwithstanding anything set forth in this
Agreement to the contrary, ** shall not, under any circumstances (without the
prior written consent of **, which consent shall not be unreasonably withheld),
enter into any agreement which (a) extends or purports to exercise **; or (b)
makes any admission regarding (i) wrongdoing on the part of **; or (ii) the
invalidity, unenforceability or absence of infringement **. The parties shall
cooperate with each other in connection with any such Infringement Action and
shall keep each other reasonably informed of all material developments in
connection with any such Infringement Action. ** shall bear all cost and expense
in defending any Infringement Action ** (including, without limitation, any
money damages award (including without limitation any award or settlement
providing for continuing royalties payable to a third party) and reasonable
attorney's fees and expenses) incurred by ** in connection with such
Infringement Action **; provided, further, however, that the ** shall not
include any cost or expense (including, without limitation, any money damages
award (including without limitation any award or settlement providing for
continuing royalties payable to a third party) and reasonable attorney's fees
and expenses) of USL to the extent attributable to USL's modification or
innovation of Product **.

ARTICLE 11.    MARKETING

        11.1. Grant of Marketing and Promotion Rights. Subject to the terms and
conditions of this Agreement, Unigene hereby grants to USL the right to market
Finished Product within the Territory.

        11.2. Trademarks.

              (a)   Finished Product shall be marketed and distributed under the
Fortical(R) or Forcaltonin(R) trademarks, which are owned by, and registered
and maintained by Unigene. Unigene shall determine which such trademark shall be
used and such trademark shall become

<PAGE>

the "Licensed Trademark". Unigene hereby grants to USL an exclusive,
non-transferable license to use the Licensed Trademark in the Territory solely
in connection with the marketing and distribution of Finished Product under this
Agreement. All rights not expressly granted in the Licensed Trademark are
reserved by Unigene, and USL acknowledges that nothing in this Agreement shall
give it any right, title or interest in or to any Unigene trademarks other than
the license to the Licensed Trademark granted herein.

               (b)   Notwithstanding Section 11.2(a) above, if the FDA rejects
the Fortical(R) and Forcaltonin(R) trademarks for use with Finished Product,
USL, at its cost and expense, shall develop, own, register and maintain a
different trademark for use with the Finished Product.

               (c)   In the event that, pursuant to Section 11.2(b) above, USL
is the owner of the trademark used in connection with the sale of Finished
Product, upon termination of this Agreement for any reason other than
termination due to the insolvency or other event described in Section 16.3(a) on
the part of Unigene, or due to Unigene's breach under Section 16.3(b), USL shall
assign such trademark to Unigene and Unigene ** for any product sold by Unigene
or any licensee bearing such trademark. Unigene shall be obligated to make such
** in the same manner as set forth in Article ** (without reference to any "**"
since there are no ** applicable to Unigene's ** obligation under this Section
11.2), and similarly Unigene shall maintain records and USL shall be entitled to
** in the same manner as set forth in Article **.

         11.3. Marketing Obligations.

               (a)   Subject to Section 11.3(a) and subject to availability of
Vials to be supplied by Unigene, including quantities for commercial launch,
following NDA Approval, USL shall, at its own expense, use its commercially
reasonable efforts to market and sell the Finished Product within the Territory
commensurate with those efforts used by USL to commercialize its own branded
products of similar nature, value and status. Upon reasonable request from
Unigene, USL will furnish to Unigene, on a confidential basis, subject to the
terms of Section 15 of this Agreement, information regarding those efforts used
by USL to commercialize its own branded products of similar nature, value and
status.

               (b)   USL shall prepare copy for Finished Product packaging and
Finished Product inserts in the appropriate languages and provide to Unigene
such copy for submission by Unigene to FDA. USL will, prior to NDA Approval,
submit its launch promotional materials to Unigene for submission by Unigene to
the FDA on a timely basis in accordance with applicable law and regulation. **,
USL will be responsible for ** on a timely basis in accordance with applicable
law and regulation.

               (c)   Notwithstanding anything contained in this Agreement to the
contrary, the parties understand and agree that USL shall not commence shipment
of commercial launch quantities of the Finished Product for sale in the United
States **, unless Unigene and USL otherwise first agree in writing that USL
shall commence such shipment of commercial launch quantities of the Finished
Product prior to such **.

<PAGE>

         11.4. Marketing Plans. USL shall furnish to Unigene, on a confidential
basis, a draft launch plan (which includes launch promotional materials
referenced in Section 11.3(b) above) for Finished Product as soon as is
commercially reasonable, taking into account any **, and the impact of those
events on planning and activities in anticipation of commercial launch of the
Finished Product. The parties shall meet annually, on or about the anniversary
of the First Commercial Sale, to discuss, on a confidential basis, USL's annual
marketing and sales plan for Finished Product. Unigene shall provide to USL
consultation in connection with USL's marketing and sales efforts, including
feedback regarding USL's marketing and sales plans, for Finished Product as
reasonably requested from time to time by USL.

ARTICLE 12.    INDEMNITY

         12.1. General Indemnification.

               (a)   Unigene (for purposes of this Section 12.1(a),
"Indemnitor") shall, at its own expense, defend, indemnify, and forever hold
harmless USL and its respective officers, directors, agents and employees (for
purposes of this Section 12.1(a), each an "Indemnitee"), from and against any
and all losses, liabilities, claims, costs, damages and expenses (including,
without limitation, fines, forfeitures, reasonable attorneys' fees,
disbursements and administrative or court costs) (individually "Loss," and
collectively "Losses") that arise from any claim of a Third Party arising out of
a breach of any representation, warranty or agreement of Unigene in this
Agreement, Unigene's willful misconduct or negligence, or an Infringement Action
that alleges that the API or its production violates the Third Party's
intellectual property rights. Notwithstanding the foregoing provisions of this
Section 12.1(a), in no event will an Indemnitee be entitled to indemnification
under this Section 12.1(a) with respect to any and all Losses to the extent that
they arise from an Indemnitee's (including any Affiliates of an Indemnitee)
negligence or willful misconduct. The indemnification provisions of this Section
12.1(a) shall not apply to any matters covered by the indemnification and
reimbursement provisions set forth in Sections 9.1, 9.2 or 10.3 hereof, except
to the extent that a Loss is due to a breach by Unigene of any representations
and warranties set forth in Section 13.1(c)(v) or (vii) in which event USL shall
be entitled to indemnification to the full extent provided in this Section
12.1(a).

               (b)   USL (for purposes of this Section 12.1(b), "Indemnitor")
shall, at its own expense, defend, indemnify, and forever hold harmless Unigene
and its respective officers, directors, agents and employees (for purposes of
this Section 12.1(b), each an "Indemnitee"), from and against any and all Losses
that arise from any claim of a Third Party arising out of a breach of any
representation, warranty or agreement of USL in this Agreement or USL's willful
misconduct or negligence. Notwithstanding the foregoing provisions of this
Section 12.1(b), in no event will an Indemnitee be entitled to indemnification
under this Section 12.1(b) with respect to any and all Losses to the extent that
they arise from an Indemnitee's (including any Affiliates of an Indemnitee)
negligence or willful misconduct.

         12.2. Supplemental Indemnification.

<PAGE>

               (a)   Unigene agrees to indemnify and hold USL harmless against
any and all Losses due to Third Party actions, claims, damages, injuries,
losses, costs and expenses (including reasonable attorney's fees and
disbursements) arising from or claimed to arise from the **, or from manufacture
of Product or Vials by Unigene to the extent that such Product (including
without limitation the API, included in such Product) or Vials did not meet
Specifications. Notwithstanding the foregoing provisions of this Section
12.2(a), in no event will an Indemnitee be entitled to indemnification under
this Section 12.2(a) with respect to any and all Losses to the extent that they
arise from an Indemnitee's (including any Affiliates of an Indemnitee)
negligence or willful misconduct. The indemnification provisions of this Section
12.2(a) shall not apply to any matters covered by the indemnification and
reimbursement provisions set forth in Sections 9.1, 9.2 or 10.3 hereof, except
to the extent that a Loss is due to a breach by Unigene of any representations
and warranties set forth in Section 13.1(c)(v) or (vii) in which event USL shall
be entitled to indemnification to the full extent provided in this Section
12.1(a). In the event USL commences production of some or all of its
requirements for Vials, pursuant to Section 7.3 or Section 2.5, references in
this 12.2(a) to Product or Vials supplied by Unigene hereunder shall, as
applicable, be deemed changed to reference instead API supplied by Unigene
hereunder.

               (b)   USL agrees to indemnify and hold Unigene harmless against
any and all Losses due to Third Party actions, claims, damages, injuries,
losses, costs and expenses (including reasonable attorney's fees and
disbursements) arising from or claimed to arise from the manufacture of Vials
(but only in the event and to the extent that USL manufactures Vials), assembly,
outer packaging, labeling, transportation of Finished Product from USL's
facility, sale, performance or use of Finished Product by USL. Notwithstanding
the foregoing provisions of this Section 12.2(b), in no event will an Indemnitee
be entitled to indemnification under this Section 12.2(b) with respect to any
and all losses, liabilities, claims, costs, damages and expenses (including,
without limitation, fines, forfeitures, reasonable attorneys' fees,
disbursements and administrative or court costs) to the extent that they arise
from an Indemnitee's (including any Affiliates of an Indemnitee) negligence or
willful misconduct.

        12.3.  Procedure. A Party (the "Indemnitee") that intends to claim
indemnification under this Article 9 shall promptly notify the other Party (the
"Indemnitor") in writing of any loss, claim, damage, liability or action in
respect of which the Indemnitee or any of its Affiliates, sublicensees or their
directors, officers, employees, agents or counsel intend to claim such
indemnification, and the Indemnitor shall have the right to participate in, and,
to the extent the Indemnitor so desires, to assume the defense thereof with
counsel mutually satisfactory to the Parties. The indemnity agreement in this
Article 9 shall not apply to amounts paid in settlement of any loss, claim,
damage, liability or action if such settlement is made without the consent of
the Indemnitor, which consent shall not be withheld unreasonably. The failure to
deliver written notice to the Indemnitor within a reasonable time after the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such Indemnitor of any liability to the Indemnitee under
this Article 9. At the Indemnitor's request, the Indemnitee under this Article
9, and its employees and agents, shall cooperate fully with the Indemnitor and
its legal

<PAGE>

representatives in the investigation and defense of any action, claim or
liability covered by this indemnification and provide full information with
respect thereto.

         12.4. Insurance. From and after NDA Approval, each party will at all
times thereafter during the term of this Agreement, maintain in full force and
effect, for the benefit of itself and each other, comprehensive general
liability insurance which (i) is sufficient to protect against the risks
associated with its ongoing business, including the risks which might possibly
arise in connection with the transactions contemplated by this Agreement and in
any event, will maintain product liability insurance in an amount not less than
** for each occurrence and in the aggregate; and (ii) that cannot be terminated
or canceled without giving the other party thirty (30) days prior written
notice. Each party's product liability insurance policy will name the other
party as an additional insured. Upon request of the other party, each party
shall furnish the other with a certificate of insurance evidencing that such
insurance coverage is in force.

         12.5. Finished Product Recalls. In the event (i) the FDA issues a
request, directive or order that any Finished Product be recalled; or (ii) a
court of competent jurisdiction orders such a recall; or (iii) Unigene
reasonably determines, after consultation with USL, that any Finished Product
should be recalled because API, Product or Vials do not conform to
Specifications; or (iv) USL, after consultation with Unigene, reasonably
determines that any Finished Product should be recalled for any reason, the
parties will take all appropriate corrective actions reasonably requested by the
other party or by the FDA. To the extent that any such recall results because
API, Product or Vials (in each case made by or on behalf of Unigene) do not
conform to Specifications, Unigene will be responsible for all of the expenses
of the recall. In all other cases, USL will be responsible for all of the
expenses of the recall. For the purposes of this Agreement, the expenses of the
recall will include, without limitation, all expenses for notification of
customers and the destruction or return of the recalled Finished Product, as
well as all reasonable out-of-pocket costs incurred by Unigene and USL in
connection with any corrective action taken by Unigene and USL. USL will conduct
the recall process. USL and Unigene will fully cooperate with the other party to
assist in the recall process as reasonably necessary to complete the process.

ARTICLE 13.  REPRESENTATIONS, WARRANTIES, DISCLAIMERS

         13.1. Representations And Warranties.

               (a)   Each party represents and warrants to the other that:

                     (i)     As of the date of this Agreement, it is duly
                             organized and validly existing under the laws of
                             its state of incorporation or formation, and has
                             full corporate or partnership power and authority
                             to enter into this Agreement and to carry out the
                             provisions hereof.

                     (ii)    As of the date of this Agreement, it is duly
                             authorized to execute and deliver this Agreement
                             and is (and will continue to be) duly authorized to
                             perform its obligations hereunder, and the Person
                             or

<PAGE>

                             Persons executing this Agreement on its behalf has
                             been duly authorized to do so by all requisite
                             corporate or partnership action.

                     (iii)   This Agreement is legally binding upon it,
                             enforceable in accordance with its terms, subject
                             to applicable bankruptcy or other laws affecting
                             creditors' rights generally and to general
                             principles of equity. The execution, delivery and
                             performance of this Agreement by it does not
                             conflict with any agreement, instrument or
                             understanding, oral or written, to which it is a
                             party or by which it may be bound, nor violate any
                             material law or regulation of any court,
                             governmental body or administrative or other agency
                             having jurisdiction over it.

                     (iv)    It has not, and shall not during the Agreement
                             Term, grant any right to any Third Party which
                             would conflict with the rights granted to the other
                             party hereunder. There are no outstanding
                             assignments, grants, licenses, encumbrances,
                             obligations, or agreements, either written or
                             implied, inconsistent with the terms of this
                             Agreement, except in the case of Unigene as
                             expressly stated below in Section 13.1(c)(x). It
                             has (or shall have at the time performance is due)
                             maintained and shall maintain and keep in full
                             force and effect all agreements (including license
                             agreements) and filings (including patent filings)
                             necessary to perform its obligations hereunder.

              (b)    USL represents, warrants and covenants to Unigene that:

                     (i)     As of the date of this Agreement, to USL's actual
                             knowledge, there is no action, suit or inquiry or
                             investigation instituted by or before any court or
                             governmental agency which questions or threatens
                             the validity of this Agreement.

                     (ii)    USL agrees that, during the term of this Agreement,
                             USL shall comply with and assure compliance with
                             all laws and regulations applicable to its
                             manufacture of Vials (but only in the event and to
                             the extent that USL manufactures Vials), assembly,
                             packaging, outer labeling, maintenance of
                             government registration, transportation,
                             performance, sale or use of Finished Product.

                     (iii)   During the term of this Agreement, USL shall only
                             market Finished Product.

                     (iv)    To the extent that, during the term of this
                             Agreement, USL conducts manufacturing, packaging,
                             labeling or similar activities in conjunction with
                             Vials or Finished Product, all such activities will

<PAGE>

                             conform to and be performed in accordance with
                             their applicable Specifications. To the extent
                             that, during the term of this Agreement, USL
                             conducts manufacturing, packaging, labeling or
                             similar activities, USL warrants that all
                             manufacturing, packaging, labeling and similar
                             activities conducted by USL shall be conducted in
                             an FDA Registered Facility under cGMP.

                     (v)     As of the date of this Agreement, USL has no actual
                             knowledge of any adverse test results regarding
                             Vials or Finished Product that would render Vials
                             or Finished Product, or application thereof (now
                             existing or anticipated) unsuitable or unsafe, and
                             USL agrees promptly to disclose any such actual
                             knowledge as USL shall obtain during the term of
                             this Agreement.

                     (vi)    USL agrees, during the term of this Agreement,
                             promptly to disclose all pertinent, material
                             correspondence received from the U.S. Patent and
                             Trademark Office and FDA which relates to the
                             Licensed Patents, Vials, Finished Product or the
                             NDA.

              (c)    Unigene represents and warrants to USL that:

                     (i)     Except as previously disclosed by or on behalf of
                             Unigene to USL in writing, as of the date of this
                             Agreement, to Unigene's actual knowledge, there is
                             no action, suit, inquiry, investigation or any
                             threat thereof, that was instituted, or was
                             threatened to be instituted, by or before any court
                             or governmental agency which questions or threatens
                             the validity, priority, enforceability or ownership
                             of any Licensed Patent or the validity of this
                             Agreement.

                     (ii)    Unigene agrees that, during the term of this
                             Agreement, Unigene shall comply with and assure
                             compliance with all laws and regulations applicable
                             to its manufacture, packaging, labeling, government
                             registration, transportation, performance or use of
                             API, Product and Vials.

                     (iii)   All Product and Vials (as the case may be) sold by
                             Unigene to USL pursuant to this Agreement will,
                             during the term of this Agreement, conform to and
                             be performed in accordance with their applicable
                             Specifications. Unigene warrants that, during the
                             term of this Agreement, Product and Vials (as the
                             case may be) delivered by Unigene to USL shall be
                             manufactured in an FDA Registered Facility under
                             cGMP.

<PAGE>

                     (iv)    Unigene has not received any written notification
                             of, and as of the date of this Agreement, has no
                             actual knowledge that there is now pending or that
                             there have been any FDA regulatory orders to
                             restrict or limit the use of API, Product, Vials or
                             Finished Product, and Unigene agrees, during the
                             term of this Agreement, promptly to disclose any
                             such actual knowledge as Unigene shall obtain
                             during the term of this Agreement. Except as
                             previously disclosed to USL in writing, Unigene has
                             no actual knowledge of any adverse test results
                             regarding API, Product, Vials or Finished Product
                             that would render API, Product, Vials or Finished
                             Product, or application thereof (now existing or
                             anticipated) unsuitable or unsafe, and Unigene
                             agrees, during the term of this Agreement, promptly
                             to disclose any such actual knowledge as Unigene
                             shall obtain during the term of this Agreement.

                     (v)     To Unigene's actual knowledge, as of the date of
                             this Agreement, the development and reduction to
                             practice of the Licensed Patents as related to API,
                             Product, Vials or Finished Product have not
                             constituted or involved the misappropriation of
                             trade secrets of any Third Party that would
                             reasonably be expected to materially impair
                             Unigene's rights under the Licensed Patents, and
                             Unigene agrees, during the term of this Agreement,
                             promptly to disclose any such actual knowledge as
                             Unigene shall obtain during the term of this
                             Agreement.

                     (vi)    To Unigene's actual knowledge, as of the date of
                             this Agreement, no Third Party is using or
                             infringing information or processes covered by the
                             Licensed Patents as they relate to API, Product,
                             Vials or Finished Product.

                     (vii)   Except as previously disclosed to USL in writing,
                             to Unigene's actual knowledge, as of the date of
                             this Agreement, there is no outstanding written
                             order, judgment, decree or stipulation regarding
                             API, Product, Vials or Finished Product or
                             restricting their respective uses, or use of the
                             Technical Information or the Licensed Patents as
                             contemplated by this Agreement, and, to Unigene's
                             actual knowledge, there is no legal, governmental
                             or regulatory proceeding pending or threatened
                             against Unigene that materially impairs the
                             Licensed Patents or the use or sale of API, API,
                             Product, Vials or Finished Product, and Unigene
                             agrees, during the term of this Agreement, promptly
                             to disclose any such actual knowledge as Unigene
                             shall obtain during the term of this Agreement.

<PAGE>

                     (viii)  To Unigene's actual knowledge, as of the date of
                             this Agreement, Unigene has made available to USL
                             all pertinent, material correspondence received
                             from the U.S. Patent and Trademark Office and FDA
                             which relates to the Licensed Patents, API,
                             Product, Vials, Finished Product or the NDA, and
                             Unigene agrees, during the term of this Agreement,
                             promptly to disclose any such knowledge as Unigene
                             shall obtain during the term of this Agreement.

                     (ix)    Unigene has disclosed to USL any material third
                             party patents which Unigene has considered as being
                             of possible relevance to the manufacture, use or
                             sale of the Product, Vials and the Finished
                             Product.

                     (x)     **.

         13.2. Disclaimer of Warranties, Etc. THE REPRESENTATIONS, WARRANTIES,
COVENANTS AND CONDITIONS OF THE PARTIES SET FORTH IN THIS AGREEMENT ARE
EXCLUSIVE AND IN LIEU OF ALL OTHER REPRESENTATIONS, WARRANTIES, COVENANTS AND
CONDITIONS, WHETHER WRITTEN, ORAL, EXPRESS OR IMPLIED BY STATUTE OR OTHERWISE.
EXCEPT AS EXPRESSLY SET FORTH HEREIN, EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL
WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE
WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR
ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN ALL CASES WITH
RESPECT THERETO.

ARTICLE 14.  NONCOMPETITION

         14.1. Covenant Not to Compete.

               (a)   During the period commencing on the Effective Date and
continuing until ** after the expiration of USL's obligation to pay Earned
Royalties (the "Restricted Period"), USL, other than pursuant to this Agreement,
shall not, and shall cause its Affiliates to not, engage in the Territory in
developing, manufacturing, marketing, or selling ** without the prior written
consent of Unigene. Also, if USL decides to develop, market or sell a ** product
other than a ** product (after reasonable inquiry and due diligence by USL
regarding the market and product) in the Territory, and Unigene is developing
such a product and has the authority and right to grant to USL exclusive rights
in that product in the Territory similar to the rights granted hereunder, then
before USL begins to develop, market or sell any other such ** product USL will
give Unigene written notice of its interest, and the parties shall enter into
good faith discussions regarding the grant of rights by Unigene to USL in
Unigene's such other ** product. USL shall be free to pursue such other **
product without restriction if: (1) Unigene does not give USL written notice of
its interest in entering into such good faith discussions within ** (**) days
following the date of USL's written notice of interest; (2) the parties do not
sign a terms

<PAGE>

sheet outlining basic financial terms regarding a proposed transaction within **
(**) days following the date of USL's written notice of interest; or (3) the
parties do not sign a definitive agreement regarding the grant of rights by
Unigene to USL in such other ** product within ** (**) days following the date
of USL's written notice of interest. Notwithstanding the foregoing provisions of
this Section 14.1(a), the restrictive covenants of USL contained in this ARTICLE
14 shall expire and be of no further force or effect in the event of that USL
terminates this Agreement for cause pursuant to Section 16.3(b) or USL
terminates this Agreement pursuant to Section 17.1(c).

               (b)   During the Restricted Period, Unigene, other than pursuant
to this Agreement, shall not, and shall cause its Affiliates to not, engage in
the Territory in developing, manufacturing, marketing or selling a ** product
for use in the Field and in the Territory without the prior written consent of
USL; provided, however, the foregoing shall not restrict Unigene's ability to
develop, manufacture, market, use or sell API to Third Parties, provided,
further, that after USL's obligation to pay Earned Royalties ends, Unigene shall
** (1) those reflected in the computation of **, (2) the price and terms on
which Unigene ** for supply to USL hereunder, or (3) the price and terms on
which Unigene ** for the production of Product and Vials, in the event that USL
commences production of some or all of the Product and Vials for Finished
Products pursuant to Section 7.3(b) or Section 2.5. Notwithstanding the
foregoing provisions of this Section 14.1(b), the restrictive covenants of
Unigene contained in this ARTICLE 14 shall expire and be of no further force or
effect in the event of that Unigene terminates this Agreement for cause pursuant
to Section 16.3(b) or USL terminates this Agreement pursuant to Section 17.1(c).

               (c)   If either party violates its respective covenant not to
compete under Sections 14.1(a) and 14.1(b), the Restricted Period of that
party's covenant not to compete shall be deemed increased by the number of days
during which such party violated its covenant not to compete.

               (d)   Each party acknowledges that, in consideration of the
mutual promises and covenants set forth herein, both the length of time and the
geographic scope of the restrictions set forth in this ARTICLE 14 are considered
by it to be reasonable given the nature of Product and are necessary to the
protection of the other party's rights hereunder.

ARTICLE 15.    CONFIDENTIALITY; PUBLICATION

         15.1. Confidentiality. The receiving party shall not transfer any
samples or disclose any Confidential Information of the disclosing party to any
Third Party other than in confidence to those of the receiving party's own
employees and attorneys to whom disclosure is necessary, on a "need to know"
basis, to carry out the receiving party's rights and obligations hereunder. The
receiving party shall not make any other use (commercial or otherwise) of the
Confidential Information except as contemplated under this Agreement without the
prior written consent of the disclosing party. At all times the receiving party
shall protect the disclosing party's Confidential Information with at least the
same degree of care it uses to protect its own Confidential Information, such
care to be of the type and degree of care that would be used by a

<PAGE>

reasonable and prudent business person. The obligations of confidentiality and
restrictions on the use of Confidential Information contained herein shall
continue in force for a period five (5) years following any termination of this
Agreement.

         15.2. Exceptions. Confidential Information shall not include any
information which the receiving party can prove falls into any of the following
categories:

               (a)   information that is now known or becomes known to the
public through no fault of receiving party;

               (b)   information that, at the time of disclosure by the
disclosing party, was already known to the receiving party;

               (c)   information that is or was disclosed to the receiving
party, free of any obligation of confidentiality, by a Third Party who has the
right to disclose the same;

               (d)   information that is independently developed by receiving
party employees without access to the disclosing party's Confidential
Information, as demonstrated by competent proof; or

               (e)   as required to be disclosed by judicial authorities,
provided that the receiving party promptly informs the disclosing party in
writing of such obligation and affords the disclosing party the opportunity to
oppose such order.

         15.3. Ownership of Confidential Information. Except as expressly
provided herein to the contrary, Confidential Information is, and will remain,
the property of the disclosing party, and the receiving party has no claim of
ownership to the Confidential Information of the disclosing party. At the
written request of the disclosing party, the receiving party agrees to return to
the disclosing party any Confidential Information furnished by the disclosing
party containing any Confidential Information (regardless of form or author),
and all copies thereof; provided, however, that the receiving party may retain a
copy of Confidential Information received from the disclosing party for solely
for legal archival purposes. In the event the receiving party has included
Confidential Information of the other party in any of its own internally
prepared documents, the receiving party shall not be obligated to deliver those
internal documents to the disclosing party, but the receiving party shall
collect and segregate all such internal documents from its other flies and shall
certify in writing to the disclosing party that such internal documents: (a)
have been collected and segregated; (b) will not be duplicated; and (c) will be
maintained confidential in accordance with this Agreement or have been
destroyed.

         15.4. Terms of Agreement. The parties agree that this Agreement and the
terms hereof shall be considered Confidential Information of both parties.
Notwithstanding the foregoing, either party may disclose such terms as are
required to be disclosed under strictures of confidentiality to bona fide
potential investors or lenders, or as otherwise required pursuant to applicable
law.

<PAGE>

         15.5.  Authorized Disclosure. Each party may disclose Confidential
Information belonging to the other party solely to the extent such disclosure is
reasonably necessary in the following instances:

                (a)  filing or prosecuting patents relating to the Agreement;

                (b)  FDA, SEC and other required governmental or regulatory
filings;

                (c)  prosecuting or defending litigation;

                (d)  complying with applicable court orders or governmental
regulations;

                (e)  conducting pre-clinical or clinical trials;

Notwithstanding the foregoing, in the event a party is required to make a
disclosure of the other party's Confidential Information pursuant to this
Section 15.5, it shall give reasonable advance notice to the other party of such
disclosure and use efforts to secure confidential treatment of such information
at least as diligent as such party would use to protect its own confidential
information, but in no event less than reasonable efforts. In any event, the
parties agree to take all reasonable action to avoid disclosure of Confidential
Information hereunder. The parties shall consult with each other on the
provisions of this Agreement to be redacted in any filings made by the parties
with the SEC or as otherwise required by law.

         15.6.  Prior Confidentiality Agreements. Unigene and USL agree that the
confidentiality provisions set forth in this ARTICLE 15 shall govern all
disclosures of Confidential Information prior to the Effective Date and that any
prior agreements relating by the same (including, without limitation, the Mutual
Confidentiality Agreement, dated as of July 1, 2002, by and between USL and
Unigene) are superseded by this Agreement.

ARTICLE 16.  TERM

         16.1.  Agreement Term. The term of this Agreement shall commence on the
Effective Date and continue through the expiration of USL's obligation to pay
Royalties under Article 4, and continue thereafter **, it being understood and
agreed that after expiration of USL's obligation to pay Royalties under Article
4, USL shall have a fully paid up, royalty-free right and license under the
licenses and rights granted under this Agreement, unless earlier terminated
pursuant to this ARTICLE 16 or extended upon terms mutually agreeable to both
parties.

         16.2.  Termination by Mutual Agreement. The parties may at any time
terminate this Agreement by written agreement executed by both Unigene and USL.

         16.3.  Termination for Cause. Each party shall have the right to
terminate this Agreement immediately upon delivery to the other of written
notice upon the occurrence of any of the following:

<PAGE>

                (a)  Upon or after the insolvency, dissolution or winding up of
the other party (other than a dissolution or winding up for the purpose of
reconstruction or amalgamation); or

                (b)  Upon or after the breach of any material provision of this
Agreement by the other party if the breaching party has not cured such breach
within the sixty (60) day period following written notice of such breach by the
non-breaching party. The notice described in the immediately preceding sentence
shall state the nature of the breach in reasonable detail and that the
terminating party views such alleged breach as a basis for terminating this
Agreement under this Section 16.3(b). Notwithstanding the foregoing, if the
breach cannot reasonably be cured within sixty (60) days through no fault or
delay on the part of the breaching party, the breaching party shall not be in
breach of this Agreement if said party promptly (i) notifies the non-breaching
party of delay and its cause; and (ii) commences to cure the breach and
diligently and in good faith continues to cure the breach; provided, however,
that in no event shall the breaching party's cure period be extended for more
than an additional ** (**) days.

                (c)  This Agreement may be terminated as provided in Sections
5.3(a) and (b), and 17.1(c).

                (d)  Notwithstanding anything contained in the Agreement to the
contrary, if there is a dispute between the parties as to whether the alleged
material breach occurred or whether it has been cured, and either party, prior
to the expiration of the applicable cure period, initiates arbitration under
Section 17.2 to resolve that dispute, the applicable cure period will be deemed
extended for a period of forty-five (45) days after the entry of final judgment
by a court of competent jurisdiction on an arbitration award determining (as
applicable) that the breach specifically alleged in the Notice of Cure in fact
occurred, is material and has not been cured.

         16.4.  Accrued Rights, Surviving Obligations.

                (a)  Expiration or termination of this Agreement shall not
affect any rights or obligations of either party accruing prior to such
expiration or termination. Certain rights shall survive termination as set forth
below. The provisions of this Section 16.4, together with Sections 8.2, 13.2,
14.1, 16.5, 17.2, 17.3, 17.4 and 17.6 and ARTICLES 3, 4, 6, 9, 12 and 15, and
any other provision which by its terms is intended to survive the termination of
this Agreement, shall survive the expiration or termination of this Agreement.

                (b)  Promptly after termination of this Agreement each party
shall return or dispose of any material, technology or know-how of the other in
the accordance with the instructions of the other, except for such material or
information that is (i) required to be retained by applicable law; (ii)
reasonably necessary to effect any licenses that remain in force pursuant to
this ARTICLE 16; or (iii) retained solely for legal archival purposes (for
purposes of this clause (iii), in each case, limited to one copy or specimen).

                (c)  In the event this Agreement is terminated for any reason
after commencement of commercial sales of Finished Product by USL and/or its
Affiliates, USL and its Affiliates shall have the right to continue to complete
assembly of Finished Product, and to

<PAGE>

sell all inventory of Finished Product so produced and also any Finished Product
on hand as of the date of termination subject to the applicable terms of this
Agreement, including, but not limited to, Earned Royalty obligations.

         16.5.  Bankruptcy Provisions. All rights (including any marketing and
distribution rights) granted under or pursuant to the Agreement by Unigene to
USL are, and shall otherwise be deemed to be, for purposes of Section 365(n) of
the U.S. Bankruptcy Code, licenses of rights to "intellectual property" as
defined under Section 101(35A) of the U.S. Bankruptcy Code. The Parties agree
that USL, as licensee of such rights under this Agreement, shall retain and may
fully exercise all of its rights and elections under the U.S. Bankruptcy Code,
subject to performance by USL of its preexisting obligations under the
Agreement. The Parties further agree that, in the event of the ** of a
bankruptcy proceeding by or against Unigene under the U.S. Bankruptcy Code, USL
shall be entitled to a complete duplicate of (or complete access to, as
appropriate) any such intellectual property and all embodiments of such
intellectual property, and same, if not already in its possession, shall be
promptly delivered to USL (a) upon any such ** of a bankruptcy proceeding upon
written request therefor by USL, unless Unigene elects to continue to perform
all of its obligations under this Agreement, or (b) if not delivered under (a)
above, upon the rejection of this Agreement by or on behalf of Unigene upon
written request therefor by USL.

ARTICLE 17.  MISCELLANEOUS

         17.1.  Assignments.

                (a)  Except as provided in this Section 17.1, this Agreement may
not be assigned or transferred by either party without the prior written consent
of the other, which consent will not be unreasonably withheld.

                (b)  Subject to Section 17.1(c) and Section 17.1(d), any party
may assign its rights hereunder to an Affiliate or, subject to the terms of this
Section 17.1, to a purchaser in connection with a merger or consolidation of
such party, or a sale of all or substantially all of the assets or business of
that party to which the Product relates (in each case, outside of a bankruptcy
proceeding in which USL is the bankrupt party).

                (c)  If USL is the assignor and the assignee is ** another party
engaged in the business of marketing or selling a ** product, such assignment of
this Agreement by USL shall be subject to the prior written approval of Unigene.
USL shall give prior written notice of the anticipated assignment to such a
party, and within ** (**) days after Unigene's receipt of USL's notice, Unigene
shall give USL written notice whether it approves or does not approve of such an
assignment. If Unigene fails to give written notice under the preceding sentence
within the specified time frame, Unigene shall be deemed to have approved of
such assignment. If Unigene does not approve of such an assignment, USL may
terminate this Agreement effective on the date specified in such notice of
termination.

<PAGE>

                (d)  If USL is the assignor and the assignee is engaged in the
business of marketing or selling a ** product that is not a ** product, then USL
shall give prior written notice of the anticipated assignment to such a party,
and within ** (**) days after Unigene's receipt of USL's notice, Unigene shall
notify USL either (1) that Unigene elects to permit ** the assignment of this
Agreement to such assignee, or alternatively (2) that Unigene elects, at the
time of the assignment of this Agreement to such assignee, **, and
contemporaneously to grant such assignee all rights, and deliver such documents
and do such things, **, as reasonably required to permit USL to provide the
assignee all rights to commercialize the Finished Product as provided to USL
under this Agreement (it being the intention of the parties that such ** shall
not present an impediment in any respect to the assignee's ability to
commercialize the Finished Product or otherwise to exercise the rights under
this Agreement). If Unigene fails to give written notice of its election under
the preceding sentence within the specified time frame, Unigene shall be deemed
to have elected to permit the ** to such assignee.

                (e)  Any assignment of this Agreement by either Unigene or USL
shall not release the assigning party hereto from its duties and obligations
under this Agreement, and in the event of any such assignment of this Agreement
the assignee must agree in writing to be bound by the terms and conditions of
this Agreement. Any purported assignment, delegation, sale, transfer or other
disposition in violation of this Section 17.1 shall be null and void. This
Agreement shall be binding upon, and inure to the benefit of, Unigene and USL
and their respective successors and assigns, to the extent such assignments are
in accordance with this Section 17.1.

         17.2.  Governing Law. This Agreement shall be governed by the
substantive laws of the State of New York (without regard to the principles
regarding conflicts of law). All disputes arising out of or relating to this
Agreement (including any questions of fraud or questions concerning the validity
or enforceability of this Agreement) shall, unless earlier resolved by mutual
agreement, be finally settled by arbitration to be held in Chicago, Illinois
pursuant to the then existing Commercial Rules of the American Arbitration
Association. The arbitration panel shall consist of three arbitrators. Each
party shall appoint one arbitrator within thirty (30) days from the date of
filing any demand for arbitration and the third arbitrator (as well as any other
vacancies on the panel) shall be appointed by the American Arbitration
Association. The arbitration hearing will take place and the award will be made
within ninety (90) days of the filing of any demand for arbitration. Any
determination as to the arbitrability of an issue or dispute shall be made by
the arbitrators. Judgment upon the award of a majority of the arbitrators shall
be binding upon the parties hereto and may be entered in any court having
jurisdiction. Specific performance and injunctive relief may be ordered by the
award. The parties shall each pay their respective costs and attorney fees. The
fees and costs to be paid to the AAA for the arbitration shall be allocated
between Unigene and USL so that (a) the party initiating arbitration (the
"Initiating Party") shall pay a portion of the arbitration fees and costs to be
paid to the AAA proportionate to the aggregate amount of the disputed items
submitted to arbitration that are decided against the Initiating Party relative
to the total amount of all disputed items submitted to arbitration, and (b) the
non-Initiating Party shall pay the balance. In the event that a dollar value
cannot be assigned to a matter taken to arbitration, the arbitration expenses

<PAGE>

shall be allocated between Unigene and USL in accordance with the decision of
the arbitration panel that reflects the relative fault of the parties. As the
sole exception to arbitration, each party shall have the right to obtain
injunctive relief from any court having jurisdiction so as to preserve that
party's rights for resolution in any pending or imminent arbitration
proceedings, but no such injunction shall prohibit or postpone such arbitration
proceedings and the injunctions may be modified or vacated as a result of the
arbitration award.

         17.3.  Equitable Relief. Each party acknowledges and agrees that,
notwithstanding anything to the contrary contained herein, any breach by such
party or its Affiliates of ARTICLE 8, 14 or 15 hereof shall cause irreparable
harm to the other party and that the other party's remedies at law for any such
breach or threat of breach shall be inadequate, and that the other party shall
be entitled to an injunction or injunctions to prevent such breaches and to
enforce specifically such terms and provisions, in addition to any other remedy
to which the other party may be entitled at law.

         17.4.  Public Announcements. Except as permitted under this Section
17.4 or as otherwise agreed to by the parties, neither party shall issue a press
release or public statement regarding the existence of this Agreement or the
terms thereof without the prior written consent of the other, which consent
shall not be unreasonably withheld. Nothing herein shall prohibit any
disclosures by either party required by law, regulation or stock exchange rule,
but in such event such party shall seek confidential treatment of the terms of
this Agreement to the extent feasible, and nothing shall prohibit disclosure to
the parties' stockholders or to potential investors or lenders provided that
such potential investors or lenders have agreed in writing to keep confidential
the disclosed information on terms not less restrictive than those contained in
this Agreement. Further, Unigene shall be entitled to disclose to its
stockholders only the existence of this Agreement, the amount of the Signing
Fee, the sum of the Signing Fee and Milestone Payments (assuming the milestones
are met, and without specifying the Milestones or specific Milestone Payments),
and that Unigene is entitled to receive a transfer price on the Vials and API
(as applicable) and royalties on sales but without disclosing the amount of such
Transfer Price, Royalties or the royalty percentage.

         17.5.  Non-Waiver. A waiver of any breach of any provision of this
Agreement shall not be construed as a continuing waiver of other breaches of the
same or other provisions of this Agreement.

         17.6.  Disclaimer of Agency. Nothing herein contained shall be deemed
to create a joint venture, employer-employee, agency or partnership relationship
between the parties hereto. Neither party shall have any power to enter into any
contracts or commitments in the name of, or on behalf of, the other party, or to
bind the other party in any respect whatsoever.

         17.7.  Notices. Any notices, requests and other communications
hereunder shall be in writing and shall be personally delivered or sent by
international express delivery service, registered or certified air mail, return
receipt requested, postage prepaid, or by facsimile (confirmed by prepaid
registered or certified air mail letter or by international express delivery
mail) (e.g., FedEx)), and shall be deemed to have been properly served to the
addressee upon

<PAGE>

receipt of such written communication, to the following addresses of the
parties, or such other address as may be specified in writing to the other
parties hereto:

           If to Unigene:             Unigene Laboratories, Inc.
                                      110 Little Falls Road
                                      Fairfield, New Jersey  07004
                                      Attention: President
                                      Telephone: 973-882-0860
                                      Telecopy:  973-227-6088

           with a required copy to:   Dechert
                                      Princeton Pike Corporate Center
                                      997 Lenox Drive
                                      Building 3, Suite 210
                                      Lawrenceville, New Jersey 08648-5218
                                      Attention: Allen Bloom, Esq.
                                      Telephone: 609-620-3214
                                      Telecopy:  609-620-3259

           if to USL                  Upsher-Smith Laboratories, Inc.
                                      14905 23rd Avenue North
                                      Minneapolis, Minnesota 55447
                                      Attention: President and COO
                                      Telephone: 763-473-4412
                                      Telecopy:  763-476-4026

           with a required copy to:   Lindquist & Vennum P.L.L.P.
                                      4200 IDS Center
                                      Minneapolis, MN 55402
                                      Attention: Joel H. Green, Esq.
                                      Telephone: 612-371-5778
                                      Telecopy:  612-371-3207

         17.8.  Entirety of Agreement. This Agreement embodies the entire
understanding between the parties relating to the subject matter hereof, whether
written or oral, and there are no prior representations, warranties or
agreements between the parties not contained in this Agreement.

         17.9.  Severability. If any provision of this Agreement is declared
invalid or unenforceable by a court having competent jurisdiction, it is
mutually agreed that this Agreement shall endure except for the part declared
invalid or unenforceable by order of such court. The parties shall consult and
use their best efforts to agree upon a valid and enforceable provision which
shall be a reasonable substitute for such invalid or unenforceable provision in
light of the

<PAGE>

intent of this Agreement. In the event that no such agreement can be reached,
the parties shall request that the court reform the provision.

         17.10. Amendments and Modifications. Any amendment or modification of
any provision of this Agreement must be in writing, dated and signed by both
parties hereto.

         17.11. Compliance with Applicable Laws. Each of Unigene and USL
covenants and agrees that all of its activities under or pursuant to this
Agreement shall comply with all applicable laws, rules and regulations.

         17.12. Headings. Any headings contained herein are for directory
purposes only, do not constitute a part of this Agreement, and shall not be
employed in interpreting this Agreement.

         17.13. Counterparts. This Agreement may be executed in any number of
counterparts and each such counterpart shall be deemed to be an original.

         17.14. Force Majeure. Each party shall be excused for any failure or
delay in performing any of its obligations under this Agreement, if such failure
or delay is caused by Force Majeure, provided that such party shall (a) promptly
notify the other party in writing of the occurrence or circumstance upon which
it intends to rely to excuse its performance; (b) immediately resume performance
after the cause of delay is removed; and (c) use all commercially reasonable
efforts to minimize the duration of such delay. In the event of a Force Majeure
affecting Unigene's performance, Unigene will allocate materials, personnel and
resources equitably and not give any preference to any particular customers
including to Unigene itself. For purposes of this Agreement, "Force Majeure"
shall mean any act of God, accident (other than arising out of the asserting
party's negligence), explosion (other than arising out of the asserting party's
negligence), fire (other than arising out of the asserting party's negligence),
storm, earthquake, flood, drought, riot, embargo, civil commotion, war, act of
war or terrorism, act or order of any governmental authority, inability to
obtain or delay in the delivery of raw materials, parts or completed merchandise
by the supplier thereof, or any other circumstances or event beyond the
reasonable control of the party relying upon such circumstance or event.

         17.15. No Rights or Licenses by Implication. No rights or licenses with
respect to Product or any intellectual property rights or technology of either
party are granted or deemed granted hereunder or in connection herewith, other
than those rights expressly granted in this Agreement.

                     [REST OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have signed this Agreement.

                                         UPSHER SMITH LABORATORIES, INC.

                                         By:     ______________________________

                                         Name:   ______________________________

                                         Title:  ______________________________

                                         UNIGENE LABORATORIES, INC.

                                         By:     ______________________________

                                         Name:   ______________________________

                                         Title:  ______________________________

<PAGE>

                 EXHIBIT A - PROJECTIONS AND TARGETED NET SALES

--------------------------------------------------------------------------------
MARKET **                  PROJECTIONS of Net Sales     TARGETED NET SALES
---------                  ------------------------     ------------------

--------------------------------------------------------------------------------
**                         **                           **
--------------------------------------------------------------------------------
**                         **                           **
--------------------------------------------------------------------------------
**                         **                           **
--------------------------------------------------------------------------------
**                         **                           **
--------------------------------------------------------------------------------
** and each Market **      **                           **
thereafter
--------------------------------------------------------------------------------

**

<PAGE>

                      EXHIBIT B - MANUFACTURING PROCEDURES

1.   Specifications. Unigene shall, at its expense, manufacture (or have
manufactured) API, Product and Vials in accordance with the Specifications and
cGMP, and the applicable NDA.

2.   Quality Assurance Investigations. ** for any API, Product or Vials found
not to conform with the Specifications. Unigene ** communicate to USL any
quality issues or failures of audits of the FDA that affect USL's ability to
obtain, promote or sell Finished Product. Unigene ** USL with copies of all
investigation reports relating to API, Product or Vials **.

3.   Access to Facilities. USL will ** to the facilities of Unigene (or its
contract manufacturer, as the case may be) at mutually agreeable times for the
sole purpose of auditing compliance with cGMP and for overall compliance with
the Act. Absent unusual circumstances, such audits will be limited to ** audit
** and will be conducted by a reasonable number of employees of USL who are
subject to the same requirements of confidentiality as USL. The parties will
cooperate in scheduling and conducting such audits so as not to unreasonably
interfere with Unigene's day-to-day operations, it being understood that Unigene
will need to make personnel and facilities available in the conduct of such
audits.

4.   Labeling, Packaging and Promotional Materials. **.

5.   Rejected Vials.

5.1. Within ** (**) days of receipt of Vials, USL will either accept or reject
such Vials. **. In the event of rejection, USL's notice to Unigene will specify
in reasonable detail how the Vials lot failed to conform to the Specifications.
Unigene will have an opportunity to investigate and reevaluate any such Vials.
All Vials will be submitted to inspection and evaluation in accordance with
Unigene's SOPs to determine whether or not they meet the Specifications. As to
any Vials which do not comply with the Specifications and are rejected by USL
("Rejected Vials"), Unigene must ** that Rejected Vials promptly, but in all
events within ** (**) days of USL's notice of rejection. Unigene will make
arrangements with USL for the return or disposal of all Rejected Vials, at **
expense.

5.2  **.

5.3  In the event USL commences production of some or all of its requirements
for Vials, pursuant to Section 7.3 or Section 2.5 of the Agreement, references
in this Section 5 of Exhibit, to Rejected Vials shall be deemed changed to
reference instead Rejected API.

6.   Product Documentation.

<PAGE>

6.1. Unigene will maintain adequate and accurate books and records, including
but not limited to, manufacturing records and lot traceability records, with
respect to each lot of Vials. These records will be retained by Unigene for a
period after completion of the applicable lot of Vials equal to the later of (a)
** (**) months or (b) ** after the expiration date of the applicable lot of
Vials.

6.2. Unigene will test each shipment of Vials before delivery to USL, and will
provide to USL a Certificate of Analysis which sets forth the items tested,
specifications and test results for each lot delivered, all in a manner which
complies with the NDA, the Act and other applicable laws and regulatory
requirements. The appropriate Certificate of Analysis will accompany each
shipment of Vials shipped to USL.

6.3. Unigene agrees that its quality assurance function shall, within ** (**)
Business Days following the manufacture of each batch, review the manufacturing
records for all steps in the manufacture of such batch. Upon discovery of any
deviation from cGMP or from any warranty hereunder Unigene shall conduct
promptly an appropriate investigation to determine the cause of such deviation
and take appropriate action at its expense to avoid recurrence. Unigene shall
provide a copy of any such investigation report to USL.

6.4. **.

6.5. Unigene will promptly notify USL of, and provide USL with copies of, any
correspondence and/or other documentation received or prepared by Unigene in
connection with (1) receipt of any warning letter or other regulatory
correspondence from the FDA or any other regulatory authority in connection with
the manufacture, packaging and storage of Vials; (2) any recall of Vials.

7.   Stability Testing and Validation. Unigene must perform its standard
stability test program as committed to in the NDA for Vials and as defined in
Unigene's SOPs and the applicable FDA guidelines. Unigene will provide USL with
a copy of its stability report, as it becomes available, for any Product.
Unigene will, within ** (**) Business Days, after an Out Of Specification
("OOS") result in the stability testing for any Product, and prior to re-testing
for stability, notify USL of those results.

8.   Validation Work or Additional Testing. Unigene will undertake all
validation work as may be required by the NDA, cGMP, the Act or other applicable
law, Unigene's SOPs, or as otherwise agreed upon by the parties.

9.   FDA Inspection. Unigene must advise USL promptly if Unigene receives
notification that an authorized agent of the FDA or other governmental agency
intends to visit the manufacturing facility, if that visit is related directly
to API, Product or Vials.

<PAGE>

10.  Changes to Specifications. Neither Unigene, nor any subcontractor of
Unigene, may make any changes to Specifications, testing methods, manufacturing
process, or equipment without prior written approval from USL (which shall not
be unreasonably withheld), including without limitation any changes in the
quality, method of manufacture, or materials used in the manufacture of the
Product or Vials.

11.  Changes Requested by USL. If USL at any time requests a change to Product
or Vials and Unigene agrees such change is reasonable, that change will be
incorporated within the master batch record and/or Specifications via a written
Change Request form, reviewed and agreed upon by both Unigene and USL at USL's
expense.

12.  Changes Required by Regulatory Authorities. In the event the FDA requires a
change **, Unigene may make such change, and shall then notify USL and such
change will become a part of the Specifications. After the NDA **, any change
required by any regulatory authority with respect to the Product or Vials will
be made effective ** via a change request form prior to such incorporation. At
the time of that incorporation, any such change will become part of the
Specifications. If Unigene is required by any regulatory authority to perform
validation studies for purposes of validating new manufacturing process or
cleaning procedures or new materials and product assay procedures with respect
to the Product or Vials in order to continue to engage in the manufacture of
that Product or Vials for USL, those studies must be conducted in accordance
with this Agreement and at Unigene's expense.

13.  Waste Disposal. Unigene shall dispose of all wastes in accordance with all
applicable laws, rules and regulations.

14.  Information for USL **. Without limiting the generality of the foregoing,
** with the following information in a timely manner for** : **.

15.  Change of Terminology. In the event USL commences production of some or all
of its requirements for Vials, pursuant to Section 7.3 or Section 2.5 of the
Agreement, references in this Exhibit B, to Product or Vials shall, as
applicable, be deemed changed to reference instead API.

<PAGE>

                       EXHIBIT C - ** AND FIRST AMENDMENT

                                       **

<PAGE>

                          EXHIBIT D - SECOND AMENDMENT

                                       **

<PAGE>

                          EXHIBIT E - ** LETTER TO USL

Upsher-Smith Laboratories, Inc.
14905 23rd Avenue North
Minneapolis, MN 55447

Ladies and Gentlemen:

     Unigene Laboratories, Inc., a Delaware corporation ("Unigene") entered into
that certain **. Section 6 of the ** provides that Unigene **, including without
limitation, any ** that is inconsistent with ** without ** .

     Unigene desires to enter into a license agreement, substantially in the
form attached (the "License Agreement") with Upsher-Smith Laboratories, Inc.
("USL"), under which Unigene grants a license to USL in relation to certain
Licensed Patents (as defined in the License Agreement). The ** being licensed to
USL under the License Agreement constitute a portion of the ** described in the
** Agreement.

     For good and valuable consideration, the receipt and sufficiency are hereby
acknowledged, the undersigned, ** Party hereby:

**.
                                           Sincerely,

                                           **

<PAGE>

                                   EXHIBIT F

<TABLE>
<S>                                                      <C>                                      <C>
Form PTO-1595                                            RECORDATION FORM COVER SHEET                  U.S. DEPARTMENT OF COMMERCE
(Rev. 03/01)                                                   PATENTS ONLY                       U.S. Patent and Trademark Office
OMB No. 0651-0027 (exp. 5/31/2002)
  Tab settings
</TABLE>

   To the Honorable Commissioner of Patents and Trademarks: Please record the
                  attached original documents or copy thereof.

<TABLE>
<S>                                                                      <C>
1. Name of conveying party(ies):                                         2. Name and address of receiving party(ies)

   Unigene Laboratories, Inc.                                            Name: **

                                                                         Internal Address:_____________________________________

Additional name(s) of conveying party(ies) attached? [ ] Yes [X] No      ______________________________________________________

                                                                         ______________________________________________________
3. Nature of conveyance:

   [ ] Assignment                [ ] Merger                              Street Address: **

   [X] Security Agreement        [ ] Change of Name
                                                                         ______________________________________________________
   [ ] Other_______________________________________________________
                                                                         City: **             State: **         Zip: **

Execution Date: November 26, 2002                                        Additional name(s) & address(es) attached? [ ] Yes [X] No

4. Application number(s) or patent number(s):

   If this document is being filed together with a new application, the execution date of the application is: _________

   A. Patent Application No.(s)                                             B. Patent No.(s)

   **                                                                       **

                                             Additional numbers attached? [X] Yes [ ] No

5. Name and address of party to whom correspondence concerning           6. Total number of applications and patents involved: [13]
   document should be mailed:

   Name: **                                                              7. Total fee (37 CFR 3.41)..................$ 520.00

   Internal Address: **                                                     [ ] Enclosed

   ________________________________________________________________         [X] Authorized to be charged to deposit account

   ________________________________________________________________      8. Deposit account number:

   Street Address: **
                                                                            **
    **

   City: **              State: **   Zip: **                                (Attach duplicate copy of this page if paying by deposit
                                                                            account)
</TABLE>

                              DO NOT USE THIS SPACE

9. Statement and signature.

   To the best of my knowledge and belief, the foregoing information is true and
   correct and any attached copy is a true copy of the original document.

   Allen Bloom                     /s/ Allen Bloom           November 26, 2002
   ----------------------------    ---------------          -------------------
      Name of Person Signing          Signature                    Date

  Total number of pages including cover sheet, attachments, and documents: [ ]

     Mail documents to be recorded with required cover sheet information to:
              Commissioner of Patents & Trademarks, Box Assignments
                             Washington, D.C. 20231

<PAGE>

                                   EXHIBIT G

                    CSC THE UNITED STATES CORPORATION COMPANY
              FILING PREPARATION - LISTING OF UNANSWERED QUESTIONS

Project ID:           181242
Project Type:         UCC3
Project Description:  Unigene Laboratories
Project Reference:    322875

You have provided answers for all questions presented; no unanswered questions
remain.

JURISDICTION LIST

STATE ID     JURISDICTION
DE           Secretary of State
NJ           Department of Treasury/Commercial Recording

                                   Page No: 1

<PAGE>

[GRAPHIC APPEARS HERE]

UCC FINANCING STATEMENT AMENDMENT

FOLLOW INSTRUCTIONS (front and back) CAREFULLY

A. NAME & PHONE OF CONTACT AT FILER [optional]

B. SEND ACKNOWLEDGMENT TO: (Name and Address)

      Corporation Service Company
      Suite 100, 2730 Gateway Oaks Drive
      Sacramento, CA 95833

                                   THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY

<TABLE>
<S>                                             <C>                             <C>
1a. INITIAL FINANCING STATEMENT FILE #                                          1b. This FINANCING STATEMENT AMENDMENT is
1099704                                         09/12/2001                          to be filed [for record] (or recorded) in the
                                                                                [ ] REAL ESTATE RECORDS.
</TABLE>

2. [ ] TERMINATION: Effectiveness of the Financing Statement identified above
       is terminated with respect to security interest(s) of the Secured Party
       authorizing this Termination Statement.

3. [ ] CONTINUATION: Effectiveness of the Financing Statement identified above
       with respect to security interest(s) of the Secured Party authorizing
       this Continuation Statement is continued for the additional period
       provided by applicable law.

4. [ ] ASSIGNMENT (full or partial): Give name of assignee in item 7a or 7b
       and address of assignee in item 7c; and also give name of assignor in
       item 9.

5. AMENDMENT (PARTY INFORMATION): This Amendment affects [ ] Debtor or
   [ ] Secured Party of record. Check only one of these two boxes.

   Also check one of the following three boxes and provide appropriate
   information items in 6 and/or 7.

<TABLE>
   <S>                                               <C>                                      <C>
   [ ] CHANGE name and/or address: Give current      [ ] DELETE name: Give record name to     [ ] ADD name: Complete item 7a or 7b,
       record name in item 6a or 6b; also give           be deleted in item 6a or 6b.             and also item 7c; also complete
       new name (if name change) in item 7a or 7b                                                 items 7d-7g (if applicable).
       and/or new address (if address change) in
       item 7c.
</TABLE>

6. CURRENT RECORD INFORMATION:

    6a. ORGANIZATION'S NAME:

OR

<TABLE>
<S>                                             <C>                <C>                         <C>                       <C>
    6b. INDIVIDUAL'S LAST NAME                                     FIRST NAME                  MIDDLE NAME               SUFFIX

7. CHANGED (NEW) OR ADDED INFORMATION:

    7a. ORGANIZATION'S NAME

OR

    7b. INDIVIDUAL'S LAST NAME                                     FIRST NAME                  MIDDLE NAME               SUFFIX

7c. MAILING ADDRESS                                                CITY                        STATE   POSTAL CODE       COUNTRY

7d. TAX ID #: SSN OR EIN     ADD'L INFO RE      7e. TYPE OF        7f. JURISDICTION OF         7g. ORGANIZATIONAL
                             ORGANIZATION           ORGANIZATION       ORGANIZATION                ID #, if any
                             DEBTOR                                                                                        [ ] NONE
</TABLE>

8. AMENDMENT (COLLATERAL CHANGE): check only one box.

   Describe collateral [ ] deleted or [X] added, or give entire [ ] restated
   collateral description, or describe collateral [ ] assigned.

   **

9. NAME OF ** PARTY OF RECORD AUTHORIZING THIS AMENDMENT (name of assignor, if
   this is an Assignment). If this is an Amendment authorized by a Debtor which
   adds collateral or adds the authorizing Debtor, or if this is a Termination
   authorized by a Debtor, check here [X] and enter name of DEBTOR authorizing
   this Amendment.

    9a. ORGANIZATION'S NAME

        Unigene Laboratories, Inc.

OR

<TABLE>
    <S>                                                            <C>                         <C>                       <C>
    9b. INDIVIDUAL'S LAST NAME                                     FIRST NAME                  MIDDLE NAME               SUFFIX
</TABLE>

10. OPTIONAL FILER REFERENCE DATA           CSC ID: 181242 DE-Secretary of State

ACKNOWLEDGMENT COPY -- NATIONAL UCC FINANCING STATEMENT AMENDMENT (FORM UCC3)
(REV. 07/29/98)

<PAGE>

UCC FINANCING STATEMENT AMENDMENT ADDENDUM

FOLLOW INSTRUCTIONS (front and back) CAREFULLY

11. INITIAL FINANCING STATEMENT FILE # (same as item 1a on Amendment form)

 1099704                                     09/12/2001

12. NAME OF PARTY AUTHORIZING THIS AMENDMENT (same as item 9 on Amendment form)

     12a. ORGANIZATION'S NAME

     Unigene Laboratories, Inc.

OR

<TABLE>
     <S>                                                           <C>                         <C>
     12b. INDIVIDUAL'S LAST NAME                                   FIRST NAME                  MIDDLE NAME, SUFFIX
</TABLE>

13. Use this space for additional information

                                   THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY

** Parties
**

FILING OFFICE COPY -- NATIONAL UCC FINANCING STATEMENT AMENDMENT ADDENDUM (FORM
UCC3Ad)(REV. 07/29/98)

<PAGE>

[GRAPHIC APPEARS HERE]

UCC FINANCING STATEMENT AMENDMENT

FOLLOW INSTRUCTIONS (front and back) CAREFULLY

A. NAME & PHONE OF CONTACT AT FILER [optional]

B. SEND ACKNOWLEDGMENT TO: (Name and Address)

      Corporation Service Company
      Suite 100, 2730 Gateway Oaks Drive
      Sacramento, CA 95833

                                   THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY

<TABLE>
<S>                                             <C>                             <C>
1a. INITIAL FINANCING STATEMENT FILE #                                          1b. This FINANCING STATEMENT AMENDMENT is
01922681                                        08/17/1999                          to be filed [for record] (or recorded) in the
                                                                                [ ] REAL ESTATE RECORDS.
</TABLE>

2. [ ] TERMINATION: Effectiveness of the Financing Statement identified above
       is terminated with respect to security interest(s) of the Secured Party
       authorizing this Termination Statement.

3. [ ] CONTINUATION: Effectiveness of the Financing Statement identified above
       with respect to security interest(s) of the Secured Party authorizing
       this Continuation Statement is continued for the additional period
       provided by applicable law.

4. [ ] ASSIGNMENT (full or partial): Give name of assignee in item 7a or 7b
       and address of assignee in item 7c; and also give name of assignor in
       item 9.

5. AMENDMENT (PARTY INFORMATION): This Amendment affects [ ] Debtor or [ ]
   Secured Party of record. Check only one of these two boxes.

   Also check one of the following three boxes and provide appropriate
   information in items 6 and/or 7.

<TABLE>
   <S>                                               <C>                                       <C>
   [ ] CHANGE name and/or address: Give current      [ ] DELETE name: Give record name to      [ ] ADD name: Complete item 7a or 7b,
       record name in item 6a or 6b; also give           be deleted in item 6a or 6b.              and also item 7c; also complete
       new name (if name change) in item 7a or 7b                                                  items 7d-7g (if applicable).
       and/or new address (if address change) in
       item 7c.
</TABLE>

6. CURRENT RECORD INFORMATION:

    6a. ORGANIZATION'S NAME:

OR

<TABLE>
<S>                                             <C>                <C>                         <C>                       <C>
    6b. INDIVIDUAL'S LAST NAME                                     FIRST NAME                  MIDDLE NAME               SUFFIX

7. CHANGED (NEW) OR ADDED INFORMATION:

    7a. ORGANIZATION'S NAME

OR

    7b. INDIVIDUAL'S LAST NAME                                     FIRST NAME                  MIDDLE NAME               SUFFIX

7c. MAILING ADDRESS                                                CITY                        STATE   POSTAL CODE       COUNTRY

7d. TAX ID #: SSN OR EIN     ADD'L INFO RE      7e. TYPE OF        7f. JURISDICTION OF         7g. ORGANIZATIONAL
                             ORGANIZATION           ORGANIZATION       ORGANIZATION                ID #, if any
                             DEBTOR                                                                                        [ ] NONE
</TABLE>

8. AMENDMENT (COLLATERAL CHANGE): check only one box.

   Describe collateral [ ] deleted or [X] added, or give entire [ ] restated
   collateral description, or describe collateral [ ] assigned.

   **

9. NAME OF ** PARTY OF RECORD AUTHORIZING THIS AMENDMENT (name of assignor,
   if this is an Assignment). If this is an Amendment authorized by a Debtor
   which adds collateral or adds the authorizing Debtor, or if this is a
   Termination authorized by a Debtor, check here [X] and enter name of DEBTOR
   authorizing this Amendment.

    9a. ORGANIZATION'S NAME

        Unigene Laboratories, Inc.

OR

<TABLE>
    <S>                                                            <C>                         <C>                       <C>
    9b. INDIVIDUAL'S LAST NAME                                     FIRST NAME                  MIDDLE NAME               SUFFIX
</TABLE>

10. OPTIONAL FILER REFERENCE DATA  Debtor(s)       Unigene Laboratories, Inc.

                    CSC ID:181242 NJ-Department of Treasury/Commercial Recording

ACKNOWLEDGMENT COPY -- NATIONAL UCC FINANCING STATEMENT AMENDMENT (FORM UCC3)
(REV. 07/29/98)

<PAGE>

UCC FINANCING STATEMENT AMENDMENT ADDENDUM

FOLLOW INSTRUCTIONS (front and back) CAREFULLY

11. INITIAL FINANCING STATEMENT FILE # (same as item 1a on Amendment form)

 01922681                                    08/17/1999

12. NAME OF PARTY AUTHORIZING THIS AMENDMENT (same as item 9 on Amendment form)

     12a. ORGANIZATION'S NAME

     Unigene Laboratories, Inc.

OR

<TABLE>
     <S>                                                           <C>                         <C>
     12b. INDIVIDUAL'S LAST NAME                                   FIRST NAME                  MIDDLE NAME, SUFFIX
</TABLE>

13. Use this space for additional information

                                   THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY

** Parties
**

FILING OFFICE COPY -- NATIONAL UCC FINANCING STATEMENT AMENDMENT ADDENDUM (FORM
UCC3Ad)(REV. 07/29/98)

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