SECURITIES PURCHASE AGREEMENT

 EXHIBIT 10.19

                         SECURITIES PURCHASE AGREEMENT

         SECURITIES  PURCHASE  AGREEMENT dated as of May 8, 1995, by and between
THE MICROCAP FUND, INC., a Maryland corporation (the "Fund" or "Purchaser"), and
UNIGENE  LABORATORIES,  INC., a Delaware  corporation  with a principal place of
business at 110 Little Falls Road, Fairfield, NJ 07004 ("Unigene").

                                 R E C I T A L:
                                 - - - - - - -

         A. Unigene is engaged  principally  in research and  development in the
field of biotechnology and plans to commence manufacturing peptide hormones. Its
common stock is traded on the NASDAQ stock market.

         B. The Fund is a closed-end mutual fund registered under the Investment
Company Act of 1940.

         C. Unigene  proposes to issue and sell to the Fund,  the "Note" and the
Fund desires to purchase (i) a Promissory Note in the aggregate principal amount
of  $2,000,000  secured by a first  lien on all of  Unigene's  assets;  and (ii)
warrants to  purchase  shares of  Unigene's  common  stock,  $.01 par value (the
"Common Stock") on the terms and conditions hereinafter set forth.

            NOW, THEREFORE, the parties hereto agree as follows:

            1. Issuance of Notes and Warrants.

               1.1  Closing.  (a) At the closing  (the  "Closing"),  which shall
occur  simultaneously  with the execution hereof at the offices of the Fund, 733
Third Avenue, New York, NY 10017, Unigene shall deliver to the Fund:

                            (i) the Note in the  principal  amount of $2,000,000
                            duly  executed by Unigene,  in the form of Exhibit A
                            hereto;

                            (ii) a warrant  agreement (the "Warrant  Agreement")
                            and warrant certificate  ("Warrants") to purchase up
                            to 75,000  shares of  Unigene's  Common  Stock  duly
                            executed by Unigene, in the form of Exhibits B-1 and
                            B-2 hereto;

                            (iii)   a   security    agreement   (the   "Security
                            Agreement")  duly executed by Unigene in the form of
                            Exhibit C hereto;

                            (iv) a first  mortgage on  Unigene's  real  property
                            located  at 110 Little  Falls  Road,  Fairfield,  NJ
                            07004 (the  "Mortgage") and a collateral  assignment
                            ("Collateral  Assignment") of Unigene's rights under
                            its lease for premises  located at 83 Fulton Street,
                            Boonton,  New Jersey in the form of Exhibits D and E
                            hereto  together  with  Consent  and Waiver from the
                            landlord  substantially  in the  form of  Exhibit  F
                            ("Landlord's Waiver"); and

                            (v) UCC-1 financing statements;

                            (vi) the  favorable  opinions  of Becker  Ross Stone
                            DeStefano  & Klein;  Ostrolenk  Faber Gerb & Soffen;
                            and Sinisi  VanDam & Sproviero,  counsel to Unigene,
                            substantially  in the forms of Exhibit  G-1, G-2 and
                            G-3 hereto;

                            (vii) UCC-3 termination statements and subordination
                            agreements,  and such other  instruments  of similar
                            effect,  duly  executed by any party (other than the
                            Fund) that has a lien or security interest in any of
                            Unigene's assets;

                            (viii)  Patent  Security   Agreement  and  Trademark
                            Security  Agreements  and Related  Documents  in the
                            form of Exhibits H and I; and

                            (ix) Collateral  Assignment of License Agreements in
                            the form of Exhibit J.

                     (b) At the Closing,  upon delivery by Unigene of all of the
documents and instruments set forth in subparagraph (a) above, the Fund shall:

                           (i) make  payment to  Unigene,  by wire  transfer  of
                           immediately  available funds to an account designated
                           by  Unigene  of  $2,000,000,  less (x) the  costs and
                           expenses  set forth in  Section  8.2  hereof  and (y)
                           amounts necessary to satisfy the Dejufra loan; and

                           (ii)  deliver  the Opinion of Counsel for the Fund in
                           the Form attached hereto as Exhibit K.

The Notes and the Warrants are hereinafter referred to as the "Securities".  The
Securities  together with any other document executed pursuant to this Agreement
are  hereinafter  referred to  collectively  as the  "Documents."  The  Security
Agreement,  the Patent Security  Agreement and the Trademark  Security Agreement
are sometimes referred to as the "Security Agreements".

            2. Definitions.

               2.1 For purposes  hereof,  the following terms have the following
meanings:

                  2.1.1  "Affiliate"  and  "Associate"  shall  have the  meaning
ascribed  to such  terms  as is set  forth  in Rule 405  promulgated  under  the
Securities Act of 1933, as amended.

                  2.1.2  "Claim"  means all  actions,  causes of action,  suits,
liabilities,   dues,  sums  of  money,  accounts,   reckonings,   bonds,  bills,
specialties,   covenants,  contracts,   controversies,   agreements,   promises,
variances,  trespasses,  damages, judgments,  extents,  executions,  claims, and
demands whatsoever, in law or equity.

                  2.1.3 "Encumbrance" means any title defect,  conflicting claim
of ownership,  order, decree,  judgment,  stipulation,  settlement,  attachment,
restriction,  lien, pledge, right of first refusal,  option,  security interest,
mortgage,  covenant, or any other encumbrance on Unigene's right to transfer the
Collateral  (as defined in the Security  Agreement) to Purchaser  other than (i)
liens for taxes,  assessments and other  governmental  charges or levies not due
and payable or which are currently  being contested in good faith by appropriate
proceedings,  and have been adequately reserved for in the Financial  Statements
(hereinafter defined), (ii) mechanics', workmen's,  repairmen's,  materialmen's,
warehousemen's, vendors' and carriers' liens, and other similar liens arising in
the ordinary course of business for charges which are not  delinquent,  or which
are  being  contested  in good  faith by  appropriate  proceedings  and have not
proceeded to judgment, and have been adequately reserved for, and (iii) liens in
respect of judgments or awards with respect to which there shall be a good faith
current  prosecution of an appeal or proceedings  for review which is secured by
an  appropriate  bond or a stay of execution  pending such appeal or proceedings
for review and which have been adequately reserved for.

                  2.1.4   "Financial   Statements"   means  the  (i)   financial
statements  of Unigene as  contained  in its Form 10-K for its fiscal year ended
December 31, 1994,  (ii)  unaudited  balance sheet of Unigene as of February 28,
1995 and, (iii) unaudited  statements of operations,  cash flows,  shareholders'
equity for the months ended January 31 and February 28, 1995.

                  2.1.5    "Permits"    means   permits,    licenses,    orders,
authorizations,  certification  or  approvals of any  federal,  state,  local or
foreign governmental or regulatory body, including,  without limitation, the DEA
and the FDA.

                  2.1.6 "Person" means an individual, partnership,  corporation,
trust,  unincorporated  organization,  government  or any  department  or agency
thereof and any other entity.

                  2.1.7  "Right"  means  any  right  of  benefit  of any  nature
whatsoever.

               2.2 Accounting Terms. Any accounting terms used in this Agreement
shall, unless otherwise  specifically  provided,  have the meanings  customarily
given them in  accordance  with  United  States  generally  accepted  accounting
principles  applied on a consistent  basis in accordance  with  Unigene's  prior
practices ("GAAP").

            3.  Representations  and  Warranties  of  Unigene.   Unigene  hereby
represents and warrants to the Fund that:

               3.1 Standing and  Qualification.  Unigene is a  corporation  duly
organized,  validly existing and in good standing under the laws of the State of
Delaware.  Unigene is not,  nor is it required to be,  qualified  or licensed to
transact  business  as a foreign  corporation  under the laws of any State other
than the  State of its  incorporation  and New  Jersey  in order to enable it to
conduct its  business  as it is  presently  being  conducted,  except  where the
failure to be so  qualified  or  licensed is not  reasonably  expected to have a
material adverse effect on its financial condition,  assets, business or results
or operation or its ability to perform its  obligations  hereunder.  Unigene has
full  corporate  power and  authority to own or lease its  properties  and other
assets and to conduct its business as it is now being conducted.

               3.2 Subsidiaries. Unigene does not own any capital stock or other
voting securities of any corporation, partnership or other organization. Unigene
is not a party to any  joint  venture  or  partnership  except  as set  forth on
Schedule  3.2.  Unigene  is the  sole  vehicle  through  which  Unigene  and its
Affiliates conducts its and their business.

               3.3  Capitalization.  The  authorized  capital  stock of  Unigene
consists of 31,000,000  shares of Common Stock,  of which,  as of March 1, 1995,
20,999,149  shares  are  issued  and  outstanding.   There  are  no  outstanding
dividends,  whether current or accumulated, due or payable on any of the capital
stock of Unigene.

               3.4 Interests in Securities.  Except as disclosed in Schedule 3.4
and  Unigene's  Form 10-K for the  year-end  December  31,  1994 (the "1994 Form
10-K"), there are no outstanding options,  convertible  securities,  warrants or
other rights to subscribe for or purchase from Unigene, nor any plans, contracts
or commitments  providing for the issuance by Unigene of, or for the granting by
Unigene  of rights to  acquire:  (i) any  capital  stock in  Unigene or (ii) any
securities  convertible  into or  exchangeable  for any  capital  stock or other
ownership interest in Unigene.

               3.5 Authority.  Unigene (i) has the full corporate  right,  power
and  authority  to  execute  and  deliver  this  Agreement  and to  perform  its
obligations hereunder and to execute,  deliver and perform its obligations under
the Documents, and (ii) has taken all necessary corporate actions to approve and
adopt this Agreement and such Documents and to authorize the performance of this
Agreement and such  Documents.  Upon execution and delivery,  this Agreement and
each of the Documents to which Unigene is a party is the duly authorized,  valid
and binding agreement of Unigene, enforceable against it, in accordance with its
terms,  except as such  enforceability may be limited by applicable  bankruptcy,
insolvency,  moratorium,  reorganization,  or similar  laws from time to time in
effect which affect the enforcement of creditors'  rights generally and by legal
and equitable  limitations on the availability of specific performance and other
equitable  remedies against it, public policy,  and with respect to the priority
of Purchasers' security interest, subject to applicable filing requirements.

               3.6 Absence of Conflicts and Consents.  Neither the execution and
delivery  of this  Agreement  and the  Documents  nor  the  consummation  of the
transactions  contemplated  hereby or thereby  will (i) breach or violate any of
the terms and conditions of the Articles of  Incorporation or Bylaws of Unigene,
or (ii) breach or violate any judgment,  order, injunction,  decree or ruling of
any court or any governmental  authority,  domestic or foreign, or any contract,
agreement  or  other  instrument  to  which  Unigene  is a  party  or any of its
respective properties,  Rights or assets is subject or which it is bound or with
any statute, law, ordinance,  rule or regulation of any Federal, state, local or
foreign  governmental  authority or regulatory  body, the breach or violation of
which (A) would  have a  material  adverse  effect  on the  properties,  assets,
business,  operations,  prospects or financial condition or (B) would impair the
ability of Unigene to  execute,  deliver or perform its  obligations  under this
Agreement or any Document,  (C) would terminate or result in the cancellation of
any  payments  under any such  agreement,  contract or  instrument  or (D) would
result in any material  damages or result in or, except as  contemplated  by the
Documents,  require the creation or imposition of any  Encumbrance of any nature
upon or with respect to any of its properties or assets.

               3.7  Title  to;  Condition  of  Assets;  Real  Property.  All  of
Unigene's  assets,   including  the  Premises  (defined  in  the  Mortgage)  and
Collateral (as defined in the Security  Agreement),  are owned free and clear of
all Encumbrances  except as set forth on Schedule 3.7, which shall be terminated
or subordinated to Purchasers' lien at the Closing.  All such personal  property
is in good  operating  condition  and in a state of reasonable  maintenance  and
repair,  fit for the purpose for which it is intended.  Unigene is the leasee of
property located at 83 Fulton Street,  Boonton, NJ pursuant to a lease dated May
20, 1993, as amended by First Amendment to Lease on that same day. Such lease is
in full force and effect and has not been  further  modified or amended,  and no
event has occurred that, with the passage of time or notice,  would constitute a
default thereunder.

               3.8 Conduct of Business.  (a) Since December 31, 1994,  except as
set forth in its 1994 Form 10-K, Unigene has preserved  substantially intact its
business organization.

                     (b)  Except as set forth in  Schedule  3.8 or the 1994 Form
10-K,  since  December 31, 1994 Unigene has  conducted  its business only in the
ordinary and usual course of business  consistent  with past  practice and there
has not been:

                             (i) any increase in its  indebtedness  for borrowed
                  money incurred by or on behalf of Unigene or any incurrence of
                  any  other   material   obligation  or  liability   (fixed  or
                  contingent) by or on behalf of Unigene, except for obligations
                  incurred in the ordinary  course of business  consistent  with
                  past practice;

                             (ii) except for increased indebtedness and decrease
                  in  stockholders  equity,  any material  adverse change in its
                  assets, liabilities, properties, business, financial condition
                  or  results  of  operations  or any  development  of which its
                  management has knowledge which is reasonably  likely to result
                  in any such change other than any such change  resulting  from
                  changes in general economic conditions;

                             (iii) any damage, destruction,  loss or claim to or
                  against any of its  property or other  assets,  whether or not
                  covered by insurance,  which materially  adversely affects its
                  assets, properties, business, profits or financial condition;

                             (iv) any sale, lease, transfer or other disposition
                  or  mortgage  or  pledge  of any of its  properties  or  other
                  assets,  or an  imposition  of any  Encumbrance  on any of its
                  properties or other  assets,  other than  transactions  in the
                  ordinary course of business consistent with past practice;

                             (v) any cancellation of any debts owed to or claims
                  held by or on behalf of  Unigene,  or any waiver or release of
                  any of its Rights of material value; or

                             (vi) any dividend or other  distribution or payment
                  in  respect  of,  any  subdivision,   consolidation  or  other
                  recapitalization  of its capital stock or any  declaration  or
                  authorization of any of the foregoing.

               3.9 Financial  Statements;  SEC Filings. The Financial Statements
(i) were  prepared  in  accordance  with the books of  account  and  records  of
Unigene,  which accurately reflects all assets and transactions of Unigene,  and
(ii) present fairly  Unigene's  financial  condition as of the dates thereof and
its results of operations for the periods then ended in accordance with GAAP. As
of the  Closing,  except as set forth in Schedule  3.4,  Unigene has no material
contingent liabilities, liabilities for taxes, unusual commitments or unrealized
or unanticipated losses not disclosed in such Financial Statements.  Unigene has
delivered  to the Fund its Forms 10-K for the fiscal  years ended  December  31,
1993 and 1994 and its Forms 10-Q for the first three fiscal  quarters of 1994 as
filed with the Securities Exchange  Commission.  Such reports do not contain any
untrue statement or omission of any material fact.

               3.10 Tax and Other Returns and Reports. (i) All federal, foreign,
state,  provincial and local tax returns and tax reports (or extensions relating
thereto)  required  to be filed by or on behalf of  Unigene  or any  affiliated,
combined or unitary group of which Unigene is or was a member have been filed on
a timely basis with the appropriate  governmental  agencies in all jurisdictions
in which such  returns and reports are required to be filed and all such returns
and reports were true and correct in all material  respects when filed; and (ii)
all federal,  foreign, state,  provincial and local income, profits,  franchise,
sales, use, occupancy, property, severance, excise, withholding, value added and
other taxes as shown on such returns (including interest and penalties) due from
Unigene  either  directly,  as part of the  consolidated  tax  return of another
taxpayer, or otherwise, have been fully and timely paid, or where payment is not
required to have been made,  Unigene  has set up an adequate  reserve or accrual
for such payment.

               3.11 Intellectual Property. (a) Schedule 3.11(a) accurately lists
all registered United States and Foreign Patents and Trademarks, and all pending
United States Patent and Trademark  applications that are owned or controlled by
Unigene.

                     (b)  Schedule  3.11(b)  accurately  lists all  intellectual
property  owned or controlled  by others  besides  Unigene,  the use of which is
licensed to  Unigene.  Unigene is not aware of any other  intellectual  property
owned or controlled by others besides Unigene that is material to the ability of
Unigene to operate its  business as it is  currently  conducted  or as currently
contemplated.

                     (c)  Schedule  3.11(c)  accurately  lists all  intellectual
property rights licensed or granted by Unigene to third parties.

               Unigene  is the sole and  exclusive  owner of the  entire  right,
title and interest in and to the  Intellectual  Property  identified on Schedule
3.11(a) and except for such licenses and rights  identified on Schedule 3.11(c),
Unigene has not granted nor does there exist by implication or operation of law,
any  license  or other  right  in  respect  thereof  which  does or which  will,
subsequent to the Closing, permit or enable any Person other than Unigene to use
the  Intellectual  Property  and,  moreover,  except  as set  forth in  Schedule
3.11(c), none of said Intellectual Property is subject to any Encumbrance. As of
the date of Closing,  there is no pending or threatened  claim  against  Unigene
asserting (A) that Unigene's use of any of said Intellectual  Property infringes
or violates any Rights of third parties, (B) that the past or present conduct of
Unigene's business  infringes or violates the Rights of third parties,  (C) that
any third  parties have any Rights to use any of said  Intellectual  Property or
(D) except as set forth in Schedule  3.14,  that any third  parties have or will
have any Right which could adversely affect Unigene's  ability to use any of the
Intellectual  Property after the Closing;  and to the best knowledge of Unigene,
there is no basis for any claim of the foregoing types. Neither the Intellectual
Property nor  Unigene's  past or present  conduct of its  business  infringes or
violates the Rights of third  parties.  During the past five (5) years,  Unigene
has not given any notice to any third  parties  asserting  infringement  by such
third parties of any of said Intellectual Property.  Unigene is not aware of any
bars or other  restrictions  with  respect to its Rights to utilize  any of said
Intellectual  Property, and no bars or other restrictions on Unigene's Rights to
utilize any of said Intellectual Property will be created by, or will, by reason
of any action or  inaction,  by  Unigene  before the  Closing,  exist  after the
consummation of the transactions contemplated hereby.

                     Nothing has come to the  attention of Unigene which has led
Unigene to form the opinion that any of said Intellectual Property is invalid or
that its rights in any of said  Intellectual  Property are  unenforceable in any
way, with the proviso that pending patent  applications  are merely requests for
patents,  and there can be no guarantee  that those requests will be granted and
that  any  patents   will   necessarily   be  issued  based  upon  said  pending
applications,   and  with  the  further  proviso   applications   for  trademark
registrations  are  merely  requests  for  registration  which  may or  may  not
ultimately result in registration with the U.S. Patent and Trademark Office. The
Closing,  in  accordance  with the terms of this  Agreement,  will not affect or
impair  Unigene's  right to  continue to use all of said  Intellectual  Property
without  the  impairment  or  alteration  thereof and without the payment of any
license  or other fees  (other  than that the  license  fees  payable  under the
License Agreements identified in Schedule 3.11(b)).

                     All  of  the  License  Agreements  identified  on  Schedule
3.11(b) are valid agreements, enforceable in accordance with their terms, except
that such  enforceability may be limited by applicable  bankruptcy,  insolvency,
moratorium,  reorganization,  bulk sales or similar  laws from  time-to-time  in
effect which affect the enforcement of creditors'  rights generally and by legal
and equitable  limitations on the availability of specific performance and other
equitable  remedies.  There is no pending or  threatened  claim  against  either
Unigene or, to the best  knowledge  of  Unigene,  the  licensor of any  Licensed
Intellectual  Property asserting that any of the Licensed  Intellectual Property
infringes or conflicts with the Rights of third parties,  or that the present or
past  conduct or  Unigene's  business  infringes or violates the Rights of third
parties,  and to the best  knowledge  of  Unigene,  no basis for any such  claim
exists.

               3.12 ERISA. It is in compliance  with ERISA; no Reportable  Event
has occurred and is continuing  with respect to any Plan; and it has no unfunded
vested liability under any Plan.

               3.13 Permits and Licenses.  (a) List of Governmental Permits. Set
forth on Schedule  3.13(a) is a list and  description  of all Permits  which are
issued to, held or used by Unigene, or for which Unigene has applied,  and which
are material to the operation  and  development  of its  business.  There are no
other Permits  which are material to the operation of Unigene's  business as now
conducted. Except as otherwise indicated, all Permits listed in Schedule 3.13(a)
are in good standing,  valid and effective in accordance  with their  respective
terms. Unigene owns the Permits,  free and clear of all Encumbrances and subject
to no Claims.

                     (b)  Compliance  with  Permits.  Except  as  set  forth  on
Schedule 3.13(b),  Unigene is in material  compliance with all Permits listed on
Schedule 3.13(a) and no governmental  proceedings or investigations  are pending
or threatened against it relating to noncompliance with such Permits.

               3.14 Litigation and Proceedings.  Except as set forth on Schedule
3.14,  there are no causes of action or other  litigations  or  arbitrations  or
regulatory,   administrative,   zoning  or  other  governmental  proceedings  or
investigations  threatened or presently pending, before any court,  governmental
agency or other forum either against  Unigene or any of its properties or assets
which relate in any way to Unigene or any of its properties or assets.

               3.15 FDA Status. The Unigene  manufacturing process is undergoing
formal validation in order to obtain GMP (Good  Manufacturing  Practice) status.
Unigene  has  completed  testing  of  the  manufacturing  equipment  and  is now
performing the various manufacturing process operations. Production of the first
batch of calcitonin is underway.  The validation process is essentially complete
when  three  consecutive  "consistency  batches"  (batches  in which  all of the
in-process and final product test  specifications have been met) of product have
been prepared.  Unigene has received no notice, and is not aware of any state of
facts that would lead it to believe,  that its Boonton, New Jersey facility will
not receive  United  States  Food and Drug  Administration  validation  to allow
Unigene to produce its Calcitonin  for human use in the United States.  Finally,
Unigene has been advised  verbally by the FDA that only brief clinical  programs
designed to test safety and  bioequivalence  should be required for the approval
of  Unigene's  injectable  Calcitonin  product.  Following  validation,  Unigene
intends to perform a  stability  study,  file an IND  (investigational  new drug
application) and initiate  clinical programs to support such product approval in
1995.

               3.16  Environmental  Laws. Unigene has received no notice, and is
not aware of any state of fact that would lead it to believe that there  exists,
or has existed at any real property  occupied by it, any  hazardous  material in
violation of any environmental law, rule or regulation.

               3.17  Judgments,  Orders  and  Consent  Decrees.  Unigene  is not
subject to any  judgment,  order or decree  of, or  agreement  with,  any court,
arbitrator or regulatory authority limiting,  restricting or adversely affecting
its conduct,  financial  condition or operating  result,  and no such  judgment,
order, decree or agreement is pending.

               3.18 No  Omissions.  No  representation,  warranty,  covenant  or
agreement of Unigene in this Agreement, any schedule or exhibit attached hereto,
or any Document contains nor shall contain any untrue statement of material fact
nor omits  nor  shall  omit to state any  material  fact  necessary  to make the
statements contained herein and therein not misleading.

            4.  Representations  and  Warranties  of the  Purchasers.  The  Fund
represents and warrants to Unigene that:

               4.1  Standing  and  Capacity.  It has  all  requisite  legal  and
corporate power to execute and deliver this Agreement and the other Documents to
which it is a party, to purchase the Notes and the Warrants,  and to perform its
obligations under this Agreement and the other Documents to which it is a party.
Each Purchaser has the capacity to enter into the  transaction  contemplated  by
the Documents; neither the execution, delivery nor performance of this Agreement
or the Documents  violates any law,  rule or  regulation,  of any  jurisdiction,
court or administrative judgment, order or decree or any agreement applicable to
or binding upon the Purchasers.

               4.2  Authority.  All action  necessary  for the  purchase  of the
Securities and the performance of its  obligations  under this Agreement and the
other  Documents  to which it is a party has been duly taken.  The  Agreement is
valid and binding upon the Fund and the Purchasers and enforceable in accordance
with its terms  except  as such  enforceability  may be  limited  by  applicable
bankruptcy, insolvency, moratorium,  reorganization, bulk sales, or similar laws
from time to time in effect which affect the  enforcement  of creditors'  rights
generally and by legal and equitable limitations on the availability of specific
performance and other equitable remedies against it, public policy.

               4.3 Investment Representation. It is acquiring the Securities for
investment,  for its own account as  principal  and not with the current view to
distribution  or trade thereof,  except as permitted under the Securities Act of
1933, as amended (the "Act"). It is an "accredited  investor" as defined in Rule
501(a) and that the  Questionnaire  form executed and delivered by it to Unigene
in connection with the transaction is true and accurate in all material respects
and does not omit any  material  information.  The  Notes,  Warrants  and Shares
issued upon exercise of the Warrants shall bear restrictive legends referring to
the Act.

            5.  Affirmative   Covenants.   Unigene  covenants  that,  until  the
principal of, and interest on, the Notes and all other  monetary  obligations to
the Fund under the Notes have been paid in full, it will:

               5.1 Corporate Existence.  Do all things necessary to preserve and
keep in full force and effect its  existence  (corporate  or other) and existing
name, rights and franchises,  and qualify and remain qualified to do business in
each  jurisdiction  in which the  failure  so to  qualify  would have an adverse
effect on its business,  operating  results,  assets or condition  (financial or
otherwise) or prospects.

               5.2 Insurance.  Schedule 5.2 lists insurance  coverage  currently
maintained  by the Company.  No change in such  insurance  coverage will be made
without the Fund's consent,  which will not be unreasonably withheld or delayed.
The Fund, in its individual  capacity and as agent for the Purchasers,  shall be
named as an  additional  insured on all such  policies,  certificates  for which
shall be delivered to the Fund at the Closing.  All such policies  shall provide
that they are  non-cancelable  without at least ten days prior written notice to
the Fund. Unigene hereby directs all insurers under policies of insurance to pay
all proceeds up to the  aggregate  amount due under the Note payable  thereunder
relating  to the  Collateral,  directly  to the Fund as Secured  Party under the
Security Agreement. Provided no Event of Default has occurred, To the extent the
proceeds are less than $100,000,  the Fund shall make such proceeds available to
Unigene solely to repair or replace any damaged Collateral.  If the proceeds are
greater than $100,000, the Fund shall make such proceeds available to Unigene to
repair or replace  the  damaged  Collateral  only to the extent same may, in the
Fund's reasonable judgment, be repaired or replaced in sufficient time to permit
Unigene to repay the Notes. Any insurance proceeds retained by the Fund shall be
applied to reduce  the  Obligations  (as  defined  in the  Security  Agreement).
Unigene irrevocably makes,  constitutes and appoints the Fund (and all officers,
employees  or  agents  designated  by the  Fund) as  Unigene's  true and  lawful
attorney (and  agent-in-fact) for the purpose of making,  settling and adjusting
claims under such policies of insurance (provided that until an Event of Default
exists and the  principal  sum is due and  payable,  the Fund shall not exercise
such authority),  endorsing the name of Unigene on any check, draft,  instrument
or other item of payment for the proceeds of such  policies of insurance and for
making  all  determinations  and  decisions  with  respect to such  policies  of
insurance.

               5.3  Keeping  of  Records  and Books of  Account.  Keep  adequate
records and books of account,  in which complete entries will be made reflecting
all of Unigene's financial transactions.

               5.4 Inspection  Rights.  At any reasonable time, and from time to
time, permit  representative of the Fund, and upon reasonable notice to Unigene,
to  examine  and make  copies of and  abstracts  from its  records  and books of
account of, and visit its properties during normal business hours and to discuss
its affairs,  finances and accounts with any of its officers and its independent
certified  public  accountants.  The  Fund and the  Purchasers  agree to keep in
confidence and not to utilize or disclose any confidential  information provided
to them,  including,  without limitation,  financial  statements or information,
business plans, proposed financing or acquisition plans,  information concerning
Unigene's  products,   patents,  patent  applications,   trade  secrets,  secret
processes or other  proprietary  information  unless and until such confidential
information is publicly disseminated by Unigene. This confidentiality  provision
shall  survive  the  Closing,  but shall  terminate  if Unigene  defaults on its
obligations and the Fund takes  possession of, or sells,  any of the Collateral.
In such event,  the Fund may disclose or use any  confidential  information in a
manner as it deems  necessary  (in its sole  judgment) to obtain  payment of all
Obligations.

               5.5 Compliance with Laws. Comply with the applicable requirements
of all laws and all rules, regulations and orders of any governmental authority,
the violation of which might be reasonably  expected to have a material  adverse
effect on its  business,  operating  results,  assets,  condition  (financial or
other) or prospects.

               5.6 Reporting Requirements. Furnish to the Fund:

                     (a)(i) Commencing with the month of April, 1995, as soon as
practicable  and in any  event  within 40 days  after the close of each  monthly
accounting period, unaudited financial statements, consisting of a balance sheet
as at the end of such monthly  period and  statements  of  operations,  and cash
flows of Unigene for such monthly  period and for the period from the  beginning
of the fiscal year to the end of such monthly period;

                     (ii) Commencing with the quarterly  period ending March 31,
1995,  as soon as  possible  and in any event  within 50 days after the close of
each of the first  three  quarterly  accounting  periods  of each  fiscal  year,
unaudited financial  statements,  consisting of a balance sheet as at the end of
such quarterly  period and statements of operations,  cash flows,  shareholders'
equity for such  quarterly  period and for the period from the  beginning of the
fiscal year to the end of such quarterly period; and

                     (iii)  Annually,  as soon  as  available  but in any  event
within 95 days after the close of each fiscal year of Unigene,  a balance  sheet
of Unigene  as at the end of such year and  statements  of income  and  retained
earnings and of cash flow of Unigene  reflecting  the results of its  operations
during  such  year,  which  financial  statements  shall  be used  by  Unigene's
certified public  accountants in the preparation of Unigene's  audited financial
statements  for such year end,  certified by the  President and Treasurer of the
Unigene  to fairly  present  its  financial  condition  at such year end and the
results of its operations for such period in accordance with GAAP.

The financial  statements  required to be delivered  under this  Subsection  (a)
shall contain  reasonable  detail and shall be certified by the Chief  Executive
Officer of Unigene and, in the case of the financial  statements  required to be
delivered  under clause (ii) above,  as (x) having been  prepared in  accordance
with GAAP,  subject to normal year-end audit adjustments  (except that footnotes
shall not be required on monthly and quarterly financial statements),  (y) being
complete and correct, and (z) presenting fairly the financial condition, results
of  operations,  shareholders'  equity  and cash  flows  which  they  purport to
present.

                     (b)  Together  with  the  quarterly  financial   statements
furnished  pursuant to Section  5.6(a),  there shall be  delivered to the Fund a
certificate  signed by the Chief Executive  Officer of Unigene stating that they
have caused a review of the affairs of Unigene to be made and that based thereon
nothing has come to their  attention  which would lead them to believe  that any
Event of  Default  or any event  which,  with the lapse of time or the giving of
notice or both could become an Event of Default has occurred or exists hereunder
or, if such is not the case,  specifying  the nature thereof and what action has
been taken or is being taken or is proposed to be taken with respect thereto.

                     (c) Promptly after Unigene  discovers the occurrence of any
Event of  Default  or any event  which,  with the lapse of time or the giving of
notice or both,  could  become an Event of  Default,  a statement  of  Unigene's
President or Chief  Financial  Officer  setting  forth  details of such Event of
Default or other  event and the action  taken,  or  proposed  to be taken,  with
respect thereto.

                     (d) Promptly after Unigene has knowledge thereof, notice of
any  action,  suit or  proceeding  known to it before any court or  governmental
authority,  domestic or foreign,  which might  reasonably  be expected to have a
material adverse effect on its business,  earnings,  assets condition (financial
or other), or prospects.

                     (e) Promptly after the sending or filing thereof, copies of
all proxy  statements,  financial  statements and reports which Unigene sends to
its shareholders,  and copies of all reports, and all registration statements it
files  with  the  U.S.  Securities  and  Exchange  Commission  or  the  National
Association of Securities Dealers,  and all federal,  state and local income tax
returns filed with the appropriate taxing authorities.

                     (f)  Such  other   information   respecting  the  business,
operating  results,  assets,  condition  (financial  or other) or  prospects  of
Unigene as the Fund may reasonably request from time to time.

                     (g)  Promptly,  but in  any  event  not  later  than  three
business days after the receipt of a reasonable  written demand from the Fund, a
certificate of its Chief Executive  Officer or the Chief Financial  Officer,  in
form  satisfactory  to  the  Fund,   stating  and  acknowledging  (a)  the  then
outstanding  principal  balance  of the Notes,  (b),  the fact that there are no
defenses, offsets or counterclaims thereto (or stating such defenses, offsets or
counterclaims,  if any);  (c) that no Event of Default and no event which,  with
the  giving of notice or the  lapse of time or both,  would  constitute  such an
Event of Default exists, or if such is not the fact, the facts and circumstances
relating to such Event of Default or other event;  and (d) that no litigation or
administrative   proceeding  has  been  instituted  by  or  against  Unigene  if
determined  would  have a material  adverse  effect on its  business,  operating
results, assets, condition (financial or other ) or prospects or, if such is not
the fact, the facts and circumstances relating to such litigation or proceeding.

               5.7 Use of  Proceeds.  The proceeds  from the sale of  Securities
will be used by it only to  repay  the  indebtedness  to  DeJufra,  Inc.  in the
principal amount of $1,000,000 plus accrued interest,  closing costs and counsel
fees and disbursements, and for working capital.

               5.8 Further Assurances. At and after the Closing, without further
consideration,  Unigene  shall take all such other  action and shall  procure or
execute,  acknowledge,  and deliver all such  further  certificates,  conveyance
instruments,  consents,  and  other  documents  the  Fund or their  counsel  may
reasonably request to perfect and protect Purchaser rights  contemplated by this
Agreement  including,  without  limitation,  its security interest in and to the
collateral under the Notes.

            6. Negative Covenants.  Unigene covenants that until all amounts due
under the Notes have been fully paid, unless otherwise expressly consented to in
writing by the Purchasers, it will not:

               6.1 Intentionally Omitted.

               6.2  Investments.  Make or  permit  to exist  any  investment  in
securities  or other  financial  instruments  (including  loans  and  advances),
except:

                     (a) Accounts  receivables arising in the ordinary course of
business;

                     (b) Notes or other  securities in connection  with any bona
fide settlement of account receivables owing in the ordinary course of business;

                     (c) Direct  obligations  of the United States of America or
any agency  thereof,  solely for  investment  purposes,  provided the same shall
mature within three months; and

                     (d)  Certificates of deposit,  time deposits,  money market
deposits,  bankers'  acceptances,  commercial  paper and similar short term bank
deposits or  instruments  having a maturity  of not more than three  months of a
commercial bank.

               6.3 Impair Value. Take any action which, in the Fund's reasonable
judgment,  would  result in a material  impairment  of the overall  value of any
property on which the Purchasers shall have a lien.

               6.4 Change of Business. Conduct any business, the nature of which
would differ in any  material  respect  from that  currently  conducted by it or
contemplated  as set forth in its 1994 Annual Report and 1994 Form 10-K or which
does not complement such business.

               6.5 No New Entities. Except as set forth in Schedule 3.2, form or
acquire any corporation,  partnership, joint venture or other kind of entity for
the  purpose  of  transferring  to such  person or entity  any of its  assets or
business of the type presently conducted by it, unless the assets so transferred
remain subject to the Purchasers' lien and Unigene's  interest in such entity is
pledged to the Fund.

               6.6  Merger;  Sale of  Assets.  (a)  Enter  into  any  merger  or
consolidation in which it is not the surviving  entity,  (b) liquidate,  wind up
its affairs or  dissolve,  or (c) sell,  lease,  transfer,  convey or  otherwise
dispose of all or substantially all of its assets or capital stock.

               6.7 Dividends.  Directly or indirectly,  declare or pay dividends
in respect of any of its capital stock or capital  shares or otherwise  make any
distribution  in respect of its capital  stock or capital  shares,  or redeem or
repurchase any shares of its capital stock or capital shares.

               6.8 Increase in  Compensation.  Directly or indirectly,  increase
compensation paid to any person who is or was an officer, director or Affiliates
of Unigene.

               6.9 No Amendment.  Make any material  amendment,  modification or
change  to  any  agreement  or  instrument  respecting  indebtedness  for  money
borrowed,  or waive any of its  rights or  privileges  thereunder,  without  the
Fund's prior written consent which will not be unreasonably withheld or delayed.

               6.10 Transaction with Affiliates and/or Associates.

                     (a)  Enter  into  any  transactions  with an  Affiliate  or
Associate (each within the meaning under Rule 405 of the Securities Act of 1933,
as  amended)  of  Unigene,  except in the  ordinary  course and  pursuant to the
reasonable  requirements of its business,  and in good faith and upon commercial
reasonable  terms or  conditions  that are no less  favorable  to such person or
entity  than  would be  obtainable  at the  time in a  comparable  arm's  length
transaction with a person or entity other than an Affiliate and/or an Associate.

                     (b) Except as expressly permitted by any other provision of
this Section 6, make any loan of money or property to any  Affiliate,  or become
contingently  liable (through guarantee or otherwise) to any person with respect
to any indebtedness of an Affiliate and/or Associate.

               6.11  Disposition  of  Collateral.   Sell,  assign,  exchange  or
otherwise dispose of any Collateral except in the ordinary course of business.

               6.12 Loans.  Make any loans or advances to any Person,  including
without  limitation  Unigene's  directors,  officers and  employees,  except (i)
advances to officers or employees  with respect to expenses  incurred by them in
the ordinary course of their duties which are properly  reimbursable by Unigene;
and (ii) loans to employees  not exceeding  $20,000 in the aggregate  during any
fiscal year of Unigene; and (iii) advances to collaborators, suppliers, material
men and with respect to research and  development  projects made in the ordinary
course of Unigene's business, but not to exceed $100,000 to any one Person.

               6.13 Guarantees.  Assume,  guaranty,  endorse or otherwise become
directly or contingently  liable in respect to (including  without limitation by
way of  agreement,  contingent or  otherwise,  to purchase,  provide funds to or
otherwise  invest in a debtor or otherwise to assure a creditor  against  loss),
any Indebtedness of any Person (except  guarantees by endorsement of instruments
for deposit or collection in the ordinary course of business.

               6.14 Removal of Hazardous  Substances.  Should  Unigene  cause or
permit  any  intentional  or  unintentional  act or  omission  resulting  in the
discharging of hazardous  substances or wastes into the atmosphere or waters, or
onto lands, resulting in damage to the natural resources without having obtained
a permit  issued by the  appropriate  governmental  authorities,  Unigene  shall
promptly  clean up same in accordance  with all  applicable  federal,  state and
local orders, statutes, laws, ordinances, rules and regulations.

               6.15 Intent and  Purpose.  It is the intent of the parties  that,
subject to this Article 6, until an Event of Default and the principal sum under
the Notes has become due and payable by acceleration  or otherwise,  Unigene may
conduct its business in the ordinary course, may use its cash, cash equivalents,
royalties,  licensing fees, milestone payments,  research sponsorship  payments,
interest,  dividends income, proceeds of loans and sales of securities, sales of
inventory, joint venture distributions for general corporate purposes.

            7. Events of Default.

               7.1 Event of Default.  Each of the following shall  constitute an
Event of Default under this Agreement, the Notes and Security Agreements:

                     (a) Unigene  shall  default in the payment of principal of,
or any  interest  on,  the  Notes,  when and as the same  shall  become  due and
payable; or

                     (b)  Unigene  shall  incur  an  Event  of  Default  in  the
performance  of its payment  obligations  for  borrowed  money under any note or
other  obligation  for  borrowed  money  which has  become  due and  payable  by
acceleration or otherwise.

                     (c) any  representation or warranty made by Unigene in this
Agreement,  the Notes, the Warrant Agreement or the Security Agreement or in any
other Document shall prove to be false or inaccurate in any material respect; or

                     (d) Unigene shall default in the  performance or compliance
with any covenant, condition or agreement to be performed or complied with by it
under this Agreement or any Documents delivered in connection herewith, and such
default shall  continue  unremedied  for a period of 14  consecutive  days after
Unigene  receives notice from the Fund or becomes aware, or with the exercise of
reasonable diligence should have been aware, of the Event, provided, however, if
Unigene  shall have  commenced to remedy such default  during such 14 day period
and is  diligently  seeking to remedy  such  default at the  expiration  of such
period,  then if the Fund is satisfied  that, with the exercise of due diligence
in the  circumstances,  Unigene  could not have remedied such default in such 14
day period and that, with the exercise of due diligence, such default is capable
of being remedied by Unigene within a further period of 10 consecutive days, and
the Fund so informs  Unigene  in writing  within  five  business  days after the
expiration of such initial 14 day period, no Event of Default shall be deemed to
have occurred under this Section 7.1(d),  unless such default is not remedied to
the satisfaction of the Fund by the expiration of such second 10 day period; or

                     (e) a  final  judgment  for the  payment  of  money  which,
together with all other such undischarged judgments,  against Unigene exceeds an
aggregate of $200,000  (after  taking into account any proceeds from third party
indemnifications  and insurance  proceeds which are paid to Unigene with respect
to such  liability)  shall have been entered  against Unigene if, within 14 days
after the entry  thereof,  such  judgment  shall  not have  been  discharged  or
execution  thereon  stayed  pending  appeal,  or if,  within  14 days  after the
expiration of any such stay, such judgment shall not have been discharged; or

                     (f) A proceeding  shall have been  instituted  or order for
relief shall have been made in respect of Unigene in an  involuntary  case under
any applicable  bankruptcy,  insolvency or other similar law now or hereafter in
effect, or for the appointment of a receiver,  liquidator,  assignee, custodian,
trustee,  sequestrator  (or similar  official) of Unigene or for any substantial
part of its property,  or for the winding-up or liquidation of its affairs,  and
such proceeding shall remain  undismissed or unstayed and in effect for a period
of 60 consecutive  days or such court shall enter a decree of order granting the
relief sought in such proceeding; or

                     (g)  Unigene  shall  commence  a  voluntary  case under any
applicable  bankruptcy,  insolvency  or other  similar law now or  hereafter  in
effect,  or shall consent to the entry of an order for relief in an  involuntary
case  under any such  law,  or shall  consent  to the  appointment  of or taking
possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator
(or other  similar  official)  of  Unigene  or for any  substantial  part of its
property,  or shall make a general  assignment for the benefit of creditors,  or
shall take any action in furtherance of any of the foregoing;

                     (h) Any material  provision of any  Document  shall,  after
execution  and delivery of such  Document,  for any reason cease to be valid and
binding on Unigene,  or Unigene  shall so state in writing or shall  contest the
validity or enforceability  thereof, or any Document shall otherwise cease to be
in full force and effect,  and, in such case, the Purchasers  shall be adversely
affected as a result thereof.

                     (i) If Warren  Levy and Ronald Levy cease to be officers of
Unigene.

               7.2 Consequences of an Event of Default.

                     (a) If an Event of Default  specified  in  Section  7.1(a),
(g), or (h) shall occur, the outstanding  principal of, and interest accrued on,
the Notes and all other  obligations of Unigene to the  Purchasers  hereunder or
under the Documents  shall be immediately  due and payable,  upon written notice
from the Fund.

                     (b) If an  Event  of  Default,  other  than  under  Section
7.1(a), (g) or (h) shall occur and continue, the Fund, at its option, on 14 days
prior written notice to Unigene,  may declare the outstanding  principal of, and
interest  accrued  on,  the Notes and all other  obligations  of  Unigene to the
Purchasers  hereunder  and under the  Documents to be forthwith due and payable,
and the same shall thereupon become and be immediately due and payable,  without
further notice of any kind.

                     (c) Upon an Event of Default and the  principal  sum of the
Notes is due and payable,  the Fund may exercise any one of its rights  provided
to a secured party under the Uniform  Commercial Code or other applicable law or
under this Agreement, the Security Agreement or any one or more of the Documents
delivered in connection with or pursuant to this Agreement.

            8. Miscellaneous.

               8.1  Notices.  All notices and other  communications  given to or
made upon any party hereto in connection  with this Agreement  shall,  except as
otherwise  expressly  herein  provided,  be  in  writing  (including  telecopied
communications) and personally delivered,  mailed, telecopied or sent by express
courier to the respective parties as follows:

if to Unigene, to:

Unigene Laboratories, Inc.
110 Little Falls Road
Fairfield, NJ 07004
Attn: Warren Levy

with a copy to:

Becker, Ross, Stone, DeStefano & Klein, Esq.
317 Madison Avenue
New York, NY 10017
Attn: Jesse Margolin, Esq.
Telecopier No.: (212) 490-0720

if to the Fund, to:

The Microcap Fund, Inc.
733 Third Avenue
New York, NY 10117
Attention: Joseph Lucchese
Telecopier No.: (212) 297-5696

with a copy to:

Greenberger & Forman
1370 Avenue of the Americas
New York, NY 10019-4602
Attention: Robert W. Forman, Esq.
Telecopier No.: (212) 757-4054

or in accordance with any subsequent  written direction from the recipient party
to the sending party. All such notices and other communications shall, except as
otherwise expressly herein provided, be effective upon delivery, if delivered by
hand;  two days after deposit in the mail, if sent by  registered  mail,  return
receipt  requested,  postage prepaid;  in the case of telecopy,  when the answer
back is received;  or if sent by express courier  providing  guaranteed next day
delivery, on the next succeeding Business Day.

               8.2 Costs.  Unigene will pay (i) the reasonable fees and expenses
of counsel for the Fund in connection  with the preparation of the Documents and
any waiver, consent or release by the Purchasers under any of the Documents, any
amendment  thereof,  or any Event of Default,  and (ii) if the Purchasers  shall
incur costs and/or expenses to collect, enforce or protect its rights under this
Agreement or any of the Documents, Unigene shall pay all of the reasonable costs
and  expenses  of  such  collection,   enforcement  and  protection,   including
reasonable  attorneys'  fees,  of the  Purchasers.  Whenever  counsel  fees  are
provided for in this  Agreement or any of the  Documents,  it is understood  and
agreed that the interests of the Fund and the  Purchasers  (and/or  Holders) are
substantially  similar and that there shall be no  allowance of counsel fees for
separate counsel of the Purchasers (and/or Holders).

               8.3   Representations  to  Survive.   All   representations   and
warranties  contained herein or in any other Document made or delivered pursuant
hereto or thereto or to be executed and delivered hereunder or thereunder, shall
be deemed to survive (a) the  execution  and delivery of this  Agreement and the
Documents and (b) any  investigation  made by or on behalf of the  Purchasers at
any time while any amounts under the Notes are outstanding.

               8.4 Successors and Assigns. All  representations,  warranties and
covenants in this Agreement by or on behalf of, or for the benefit of any of the
parties hereto,  shall be binding on and inure to the benefit of such party, its
successors and assigns. The foregoing notwithstanding, this Agreement, the Note,
and the other agreements,  documents and instruments  entered in or delivered in
connection herewith or therewith may not be assigned, in whole or in part and in
fact or by operation of law, by Unigene  without the prior  written  approval of
the Fund.

               8.5 Stamp or Other Tax. Should any stamp, recording tax or fee or
other similar tax become payable with respect to this  Agreement,  the Note, the
Security  Agreement,  the  Warrants  or any  other  document,  Unigene  promptly
following demand therefor will pay the same. This section shall not apply to any
income or withholding taxes or transfers by Purchasers or Holders.

               8.6 Cumulative Remedies.  No failure on the part of any Purchaser
to exercise,  and no delay in exercising,  any remedy, right, power or privilege
hereunder,  or under any  other  agreement,  security  or  instrument  delivered
pursuant  hereto,  shall  operate as a waiver  thereof;  nor shall any single or
partial  exercise of any such remedy,  right,  power or  privilege  preclude any
other or further exercise of any other such remedy,  right,  power or privilege,
and no waiver whatsoever shall be valid unless in writing signed by the Fund and
then only to the extent  specifically  set forth in such writing.  All remedies,
rights, powers and privileges afforded the Purchasers under this Agreement,  the
Note and any other agreements,  documents or instruments delivered in connection
herewith or therewith  shall be cumulative and not be exclusive of any remedies,
rights,  powers and privileges available by law and shall be available until the
Note and all  interest  thereon  and all other  indebtedness  of  Unigene to the
Purchasers  have  been  paid in  full.  The  Purchasers  may  exercise  any such
remedies, rights, powers and privileges in any order or priority.

               8.7  Severability.  In case any one or more of the  provisions of
this Agreement or the Documents shall be held invalid,  illegal or unenforceable
in any respect,  the  validity,  legality and  enforceability  of the  remaining
provisions hereof and thereof shall not be affected or impaired thereby.

               8.8 Governing Law. This Agreement and the rights and  obligations
of the parties hereto shall be governed by and construed in accordance  with the
laws of the State of New York,  except that the Security  Agreement and Mortgage
shall be governed by the laws of the state of New Jersey.

               8.9  Sole  Agreement;  Amendments.  It is  the  intention  of the
parties  that  this  Agreement  and the  Documents  shall  supersede  any  prior
negotiations,  discussions, commitments,  representations or agreements, written
or oral,  other  than as  specified  herein,  including  but not  limited to any
correspondence,  conversations,  discussions,  representations or other means of
communication not specified or set forth herein.  No amendment,  modification or
waiver of any provision of this  Agreement,  nor consent to any departure by any
party  herefrom,  shall in any event be  effective  unless  the same shall be in
writing and signed by the party to be charged and then such amendment, waiver or
consent  shall be effective  only in the specific  instance and for the specific
purpose for which given. Except as set forth in Section 5.4, the Confidentiality
Agreement  between  Unigene  and the Fund dated  March 21,  1995  shall  survive
Closing.

               8.10  Captions.  The headings of the  Sections of this  Agreement
have been  inserted  solely for  convenience  of reference and shall not modify,
define or limit the express provisions of this Agreement.

               8.11 Waiver.  The waiver by a party of a breach of any  provision
of this  Agreement or any Document shall not operate or be construed as a waiver
of any subsequent breach by any party.

               8.12 Right of the Fund to Perform Covenants.  If Unigene fails or
refuses to perform or comply with any  covenant,  condition  or  agreement to be
performed or complied by it under any  provision of this  Agreement or any other
Document to which it is a party,  Purchasers may, but shall not be obligated to,
perform or comply with such  provision  for the account of and at the expense of
such Person,  and Unigene  will,  jointly and  severally,  on demand,  reimburse
Purchasers  for all costs and expenses paid or incurred by them in performing or
complying with such  provision,  together with accrued  interest  thereon at the
Default Rate from the time such cost or expense was paid or incurred and payment
demanded until the same is reimbursed in full to Purchasers.

               8.13  Brokerage.  Each party  represents and warrants that it has
dealt with no broker or finder other than Commonwealth  Associates in connection
with the transaction  contemplated  hereby.  Each party shall indemnify and save
the other  harmless  from any and all claims for  broker's or  finder's  fees or
commissions  which arise out of any agreement  made by such  indemnifying  party
with respect to the subject matter of this Agreement.

                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Agreement to be duly executed, as of the day and year first above written.

                                                     UNIGENE LABORATORIES, INC.

                                                By:      /s/ Warren P. Levy
                                                    ----------------------------
                                                Name: Warren P. Levy
                                                Title:President

                                                     THE MICROCAP FUND, INC.

                                                By:  /s/ Kamal Mustafa
                                                    ----------------------------
                                                Name: Kamal Mustafa
                                                Title:President

                               WARRANT AGREEMENT

                  WARRANT  AGREEMENT  made  as of May  8,  1995  by and  between
Unigene Laboratories, Inc., a Delaware corporation (the "Company"), The Microcap
Fund, Inc., a Maryland corporation (the "Fund").

                              W I T N E S S E T H:
                              - - - - - - - - - -

                  WHEREAS, the Company proposes to issue to the Fund warrants to
initially  purchase up to 75,000 shares  (subject to adjustment) of common stock
(the "Shares") of the Company (the "Common Stock"); and

                  WHEREAS, the warrants are being issued as an inducement to the
Fund to loan to the Company  $2,000,000  evidenced by a secured  promissory note
(the  "Note")  pursuant  to the terms  and  conditions  of a certain  securities
purchase  agreement of even date herewith  (the  "Purchase  Agreement").  Unless
otherwise  indicated,  all capitalized  terms used herein shall have the meaning
ascribed to them in the Purchase  Agreement.  The term "Registered Holder" shall
mean the registered holder of the Warrants.

                  NOW,  THEREFORE,  in consideration of the premises,  and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

            1. Warrants.

               1.1 Initial  Warrants.  The Fund is hereby granted  warrants (the
"Initial  Warrants")  to  purchase,  at any time from the date hereof until 5:00
P.M., New York City time, on May 7, 2000 (the "Initial  Warrant Exercise Term"),
up to 75,000 Shares (subject to adjustment). Each Initial Warrant represents the
right to acquire one Share at an exercise price of $1.80 per share (the "Initial
Exercise Price"), subject to adjustment as hereinafter provided.

               1.2  Additional  Warrants (a) For each thirty day period that the
principal  balance of the Note is  outstanding,  the Company will deliver to the
Fund,  additional warrants (the "Additional  Warrants") to purchase, at any time
from the grant thereof until 5:00 P.M., New York City time, on May 7, 2000 up to
an aggregate of 100,000 Shares (subject to adjustment).  Each Additional Warrant
shall  represent the right to acquire one Share at the Initial  Exercise  Price,
subject to adjustment as hereinafter provided.

               1.3  The  Initial  Warrants  and  the  Additional   Warrants  are
hereinafter collectively referred to as the "Warrants".

               1.4 All Warrants  shall become void and shall not be  exercisable
from and after the end of their  respective  Warrant Exercise Terms. If the date
of  expiration  of  any  Warrant  Exercise  Term  above  set  forth  falls  on a
non-business  day at the offices of the Company,  such  expiration date shall be
extended to the next succeeding business at the offices of the Company.

            2. Warrant  Certificates.  The warrant  certificates  (the  "Warrant
Certificates")  to be delivered  pursuant to this Agreement shall be in the form
set forth as  Exhibit  A,  attached  hereto  and made a part  hereof,  with such
appropriate  insertions,  omissions,   substitutions  and  other  variations  as
required or permitted by this  Agreement.  All Warrants  shall be subject to the
terms and conditions of the Warrant Agreement.

            3. Exercise of Warrants.  The Warrants  initially are exercisable at
the  Exercise  Prices  set  forth  in  Article  1 above,  payable  in cash or by
certified or bank check to the order of the Company,  subject to  adjustment  as
provided  in Article 7 hereof.  As payment  for any  Shares  purchased  upon the
exercise  of any  Warrants  hereunder,  the  Purchasers  may elect to reduce the
principal  amount  then  outstanding  under the Notes by an amount  equal to the
product  of (x) the  number  of  Warrants  exercised  and (y)  their  respective
Exercise Price. Upon surrender of the Warrant  Certificate with the annexed Form
of Election to Purchase duly executed,  together with payment of the appropriate
Exercise Price for the Shares purchased, at the Company's principal offices, the
Registered  Holders shall be entitled to receive a certificate  or  certificates
for the Shares so purchased.  The purchase  rights  represented  by each Warrant
Certificate are exercisable at the option of the Registered Holders, in whole or
in part (but not as to fractional  shares of the Common  Stock).  In the case of
the  purchase  of less  than  all  the  Shares  purchasable  under  any  Warrant
Certificate,  the  Company  shall  cancel  said  Warrant  Certificate  upon  the
surrender  thereof and shall  execute and deliver a new Warrant  Certificate  of
like tenor for the balance of the Shares purchasable thereunder.

            4. Issuance of Certificates.

                  Upon the  exercise  of any of the  Warrants,  the  issuance of
certificates  for  the  Shares  issued  upon  exercise  thereof  shall  be  made
forthwith.  The Warrant  Certificates and  certificates  representing the Shares
shall,  (unless in the opinion of counsel to the Company the legend is no longer
required) bear a legend substantially similar to the following:

         THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE HAVE BEEN ACQUIRED FOR
         INVESTMENT  PURPOSES  ONLY.  NEITHER THE WARRANT NOR THE COMMON  SHARES
         ISSUABLE  UPON  EXERCISE  OF  THIS  WARRANT  HAVE  BEEN  REGISTERED  OR
         QUALIFIED UNDER THE SECURITIES LAWS OF THE UNITED STATES SECURITIES ACT
         OF 1933, AS AMENDED (THE "ACT"),  OR THE  SECURITIES  LAWS OF ANY STATE
         AND  MAY NOT BE  OFFERED  FOR  SALE,  SOLD  OR  OTHERWISE  TRANSFERRED,
         DIRECTLY OR INDIRECTLY,  OR DELIVERED,  UNLESS  REGISTERED OR QUALIFIED
         UNDER THE ACT AND OTHER  APPLICABLE  LAWS OF ANY SUCH STATE  UNLESS THE
         COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT OR
         OTHER  EVIDENCE   SATISFACTORY  TO  IT  THAT  AN  EXEMPTION  FROM  SUCH
         REGISTRATION OR QUALIFICATION IS AVAILABLE.

In the event that the number of Warrants  and/or the Exercise Price are adjusted
as  provided  for  herein,  the  Registered  Holder may  surrender  any  Warrant
Certificate  held  by  it  to  the  Company  for  cancellation,  and  upon  such
cancellation,  the Company  shall issue to the  Registered  Holder a new Warrant
Certificate  representing the adjusted number of Shares purchasable  thereunder,
and  reflecting  the  adjusted  Exercise  Price,  but  until  such  new  Warrant
Certificate is issued,  the old Warrant  Certificate  shall be deemed to reflect
the appropriate adjustments.

            5. Investment Intent. By its acceptance of a Warrant Certificate and
Certificates for Shares (if not registered), the Registered Holder covenants and
agrees that the Warrants are being acquired for its own account as an investment
and not with a view to the distribution thereof.

            6. Intentionally Omitted.

            7. Adjustments.

               7.1  Computation  of  Adjusted   Price.   Except  as  hereinafter
provided, in case the Company shall, at any time after the date hereof, issue or
sell without consideration or solely for a cash consideration less than the then
Exercise  Price,  any  shares  of Common  Stock,  including  shares  held in the
Company's  treasury)  then  forthwith  upon such issuance or sale,  the Exercise
Price  shall  (until  another  such  issuance  or sale) be  reduced to the price
calculated by multiplying it by a fraction,  the numerator of which shall be the
sum of (a) the number of Shares  outstanding prior to the issuance,  and (b) the
number of Shares which the aggregate cash consideration  received by the Company
for such issuance would have purchased at the Exercise Price then in effect, and
the denominator of which shall be the number of shares  outstanding  immediately
following such issuance.

               7.2 Options,  Rights,  Warrants and Convertible and  Exchangeable
Securities.  Except  with  respect to rights  described  in Section  7.7, if the
Company shall at any time after the date hereof issue, without  consideration or
solely  for cash  consideration  less than the  Exercise  Price  then in effect,
options,  rights or warrants to subscribe for shares of Common  Stock,  or issue
any  securities  convertible  into or  exchangeable  for shares of Common  Stock
(collectively,  the  "Convertible  Securities"),  the  Exercise  Price in effect
immediately  prior  to the  issuance  of such  Convertible  Securities  shall be
reduced to a price  determined  by making a computation  in accordance  with the
provisions  of Section 7.1 hereof.  For such  purposes,  all cash  consideration
received by the Company  upon  issuance  thereof and which the Company  would be
entitled to receive upon exercise of such Convertible Securities shall be deemed
to have been  received  upon  issuance of such  Convertible  Securities  and the
maximum number of Shares (without regard to anti-dilution  adjustments) issuable
upon full exercise thereof shall be deemed  outstanding  Shares for all purposes
after the issuance of such Convertible  Securities for which adjustment has been
made hereunder.  No adjustment shall be made for the issuance of shares upon the
exercise or conversion of any  Convertible  Security if any  adjustment was made
with respect to such Convertible Security.  Notwithstanding the foregoing,  upon
expiration  thereof,  the  Exercise  Price and  number of Shares  subject to the
Warrants shall be appropriately readjusted.

               7.3 Subdivision and Combination. In case the Company shall at any
time subdivide or combine the outstanding  shares of Common Stock,  the Exercise
Price shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.

               7.4 Adjustment in Number of Shares.  Upon each  adjustment of the
Exercise  Price  pursuant  to the  provisions  of this  Section 7, the number of
Shares  issuable  upon the  exercise  of each  Warrant  shall be adjusted to the
nearest full Share by multiplying a number equal to the Exercise Price in effect
immediately  prior to such  adjustment  by the  number of Shares  issuable  upon
exercise of the Warrants  immediately  prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.

               7.5 Reclassification,  Consolidation, Merger, etc. In case of any
reclassification or change of the outstanding shares of Common Stock (other than
a change in par value to no par value,  or from no par value to par value, or as
a result of a subdivision or combination),  or in the case of any  consolidation
of the Company with, or merger of the Company into,  another  corporation (other
than a consolidation or merger in which the Company is the surviving corporation
and which does not result in any  reclassification  or change of the outstanding
shares  of  Common  Stock,  except a  change  as a result  of a  subdivision  or
combination of such shares or a change in par value,  as  aforesaid),  or in the
case of a sale or  conveyance  to another  corporation  of the  property  of the
Company as an entirety,  the Registered  Holders shall thereafter have the right
to  purchase  the kind and  number of shares of stock and other  securities  and
property receivable upon such reclassification,  change, consolidation,  merger,
sale or conveyance as if the Registered Holders were the owners of the shares of
Common Stock underlying the Warrants  immediately  prior to any such events at a
price equal to the product of (x) the number of shares issuable upon exercise of
the  Warrants  and (y) the  Exercise  Price in effect  immediately  prior to the
record date for such reclassification,  change,  consolidation,  merger, sale or
conveyance as if such Registered Holders had exercised the Warrants.

               7.6 Dividends and Other Distributions with Respect to Outstanding
Securities.  In the event that the Company shall, except as set forth in Section
7.5, at any time prior to the exercise of all Warrants declare a dividend (other
than a dividend  consisting  solely of shares of Common Stock or a cash dividend
or  distribution  payable  out of current or  retained  earnings)  or  otherwise
distribute without consideration payable by the Company's  shareholders,  to its
shareholders any monies, assets,  property,  rights,  evidences of indebtedness,
securities (other than shares of Common Stock), whether issued by the Company or
by another person or entity, or any other thing of value, the Registered Holders
shall thereafter be entitled, in addition to the shares of Common Stock or other
securities  receivable upon the exercise thereof, to receive,  upon the exercise
of such  Warrants,  the same  monies,  property,  assets,  rights,  evidences of
indebtedness,  securities  or any other thing of value that they would have been
entitled to receive at the time of such dividend or distribution. At the time of
any such dividend or distribution,  the Company shall make appropriate  reserves
to ensure the timely performance of the provisions of this Subsection 7.6.

               7.7  Subscription  Rights  for  Shares of  Common  Stock or Other
Securities.  In the case the Company or an affiliate of the Company shall at any
time after the date hereof and prior to the exercise of all the Warrants  issue,
without  consideration  payable  by the  Company's  shareholders,  any rights to
subscribe  for shares of Common Stock or any other  securities of the Company or
of such affiliate to all the shareholders of the Company, the Registered Holders
of the  unexercised  Warrants  shall be  entitled,  in addition to the shares of
Common Stock or other  securities  receivable upon the exercise of the Warrants,
to receive  such  rights at the time such  rights are  distributed  to the other
shareholders of the Company.

               7.8  Adjustments of Less than $.10. No adjustment of the Exercise
Price shall be made unless such adjustment would require an increase or decrease
of at least $.10 in such price; provided that any adjustments which by reason of
this Section 7.8 are not required to be made shall be carried  forward and shall
be made at the time of and together with the next subsequent  adjustment  which,
together with any adjustment(s) so carried forward, shall require an increase or
decrease of at least $.10 in the Exercise Price then in effect hereunder. Actual
price adjustments shall be rounded to the nearest one-thousandths of a cent.

               7.9  Consideration;  Expenses,  etc. For the purposes hereof, the
consideration  received by the Company in any transaction  shall be deemed to be
the gross amount received therefor,  before deducting  underwriters'  discounts,
legal fees,  finders  fees and other costs and expenses  incurred in  connection
with such  issuance  or sale  determined  as of the date not later  than 45 days
after the date of the close of the  offering  with  respect to such  issuance or
sale.

               7.10 Exceptions to Adjustments.  Notwithstanding  anything to the
contrary herein set forth, no adjustment shall be required to be made:

                     (a)  upon the  issue or  exercise  of any  Warrants  issued
pursuant  to the  Purchase  Agreement  or to any  finders or  intermediaries  in
connection therewith; or

                     (b) upon the exercise of any option  heretofore  granted to
employees,  outside  directors  or  consultants  to the Company  pursuant to any
existing benefit plan of the Company; or

                     (c)  upon the  issuance  or sale of  Common  Stock or other
securities  upon the  exercise  or  exchange of any  Convertible  Securities  to
subscribe for or purchase Common Stock which were outstanding on the date of the
original issue of the Warrants; or

                     (d) upon the issuance of up to 100,000 additional shares of
Common Stock to currently  existing  subscribers  pursuant to the Company's 1994
Regulation S offering.

            8. Registration Rights.

               8.1  Registration  Under the Securities Act of 1933. The Warrants
and the Shares have not been  registered  for  purposes  of public  distribution
under the Act.

               8.2 Registrable Securities.  As used herein the term "Registrable
Security"  means the Shares and any shares of Common Stock issued upon any stock
split or stock  dividend in respect of such Shares.  In the event of any merger,
reorganization,  consolidation,  recapitalization  or other  change in corporate
structure  affecting  the Common  Stock,  such  adjustment  shall be made in the
definition of  "Registrable  Security" as is appropriate in order to prevent any
dilution or enlargement of the rights granted pursuant to this Section 8.

               8.3 Piggyback Registration. If, at any time before 6 months after
expiration of the last Warrant  Exercise Term,  the Company  proposes to prepare
and  file  one or more  registration  statements  or  post-effective  amendments
thereto  covering  equity  or  debt  securities  of the  Company,  or  any  such
securities of the Company held by its shareholders (in any such case, other than
in connection  with a merger,  acquisition  or pursuant to Form S-8 or successor
form),  (for  purposes  of  this  Section  8,   collectively,   a  "Registration
Statement"), it will give written notice of its intention to do so by registered
mail  ("Notice"),  at  least  thirty  days  prior  to the  filing  of each  such
Registration Statement, to each Registered Holder. Upon the written request of a
Registered Holder, made within thirty days after receipt of the Notice, that the
Company   include  such   Holder's   Registrable   Securities  in  the  proposed
Registration  Statement,  the Company shall use all reasonable efforts to effect
the registration  under the Act of the Registrable  Securities which it has been
so requested to register ("Piggyback Registration"),  at the Company's sole cost
and expense and at no cost or expense to the  Holders,  except for  underwriting
commissions  and discounts and the expenses and fees of their personal  counsel,
if any, which shall be payable by the Holders. The Company shall not be required
to effect more than one  registration  for each Holder of Warrants in accordance
with this  Section 8.3 unless the Company is unable to include all of the number
of Shares requested by a Registered  Holder to be registered in the Registration
Statement for which a Piggyback  Request is made. The Holders agree to cooperate
in a timely manner in connection with all such registrations.

               8.4 Demand  Registration.  At any time  before  six months  after
expiration  of the last  Warrant  Exercise  Term,  the Fund shall have the right
(which  right is in  addition  to the  registration  rights  provided  for under
Section  8.3),  exercisable  by  written  notice  to the  Company  (the  "Demand
Registration Request"), to have the Company prepare and file with the Securities
and Exchange Commission (the "Commission"), on one occasion, at the sole expense
of the Company except that the Holders shall pay  underwriting  commissions  and
discounts and the fees and expenses of their  personal  counsel,  a Registration
Statement and such other documents,  including a prospectus, as may be necessary
(in the opinion of both  counsel  for the Company and counsel for the Fund),  in
order to comply with the provisions of the Act and applicable  state  securities
laws,  limited to New York,  New Jersey and no more than 3 additional  non-merit
states, as may be reasonably requested by such counsel, so as to permit a public
offering and sale of the Registrable  Securities by the  participating  Holders,
and to take all steps necessary to keep such  registration  statement  effective
for one year  after  the  effective  date  thereof.  The  Company  shall  not be
obligated to effect more than one registration  hereunder for all Holders in the
aggregate.  The Holder agrees to cooperate in a timely manner in connection with
such  registration.  In no event  shall the Company be required to file a demand
registration statement for less than 75,000 Shares.

               8.5 Miscellaneous  Registration  Provisions.  The Company and the
Registered Holders agree as follows:

                     (a) In connection with any  registration  under Section 8.4
hereof,  the Company shall file the  Registration  Statement as expeditiously as
possible,  but in no event later than forty-five (45) days following  receipt of
any Demand  Request,  shall use its best  efforts to have any such  Registration
Statements declared effective at the earliest possible time.

                     (b) The Company  shall pay all costs,  fees and expenses in
connection with all  Registration  Statements filed pursuant to Sections 8.3 and
8.4 hereof  including,  without  limitation,  the Company's legal and accounting
fees, printing expenses, and blue sky fees and expenses, except for underwriting
commissions  and  discounts,  and the fees and  expenses  of  Holders'  personal
counsel,  if any, which shall be paid by each  participating  Holder,  and shall
furnish  each  participating  Holder with such number of  prospectuses  as shall
reasonably  be  requested.  The  Holders  agree  not to sell any  Shares  except
pursuant to an effective  registration  statement  and shall cease such sales if
notified  that  such  Registration   Statement  has  been  amended  or  requires
amendment.

                     (c) The Company will take all necessary action which may be
required in qualifying or registering the Registrable  Securities  included in a
Registration  Statement  for offering and sale under the  securities or blue sky
laws of such states as are reasonably requested by each participating Registered
Holder,  but limited to no more than New York, New Jersey and 3 additional  non-
merit states.

                     (d) The  Company  will  indemnify  and hold  harmless  each
participating  Registered Holder and any underwriter (as defined in the Act) for
such  Registered  Holder and each person,  if any, who controls such  Registered
Holder or underwriter within the meaning of the Act against any losses,  claims,
damages or liabilities  (or actions in respect  thereof),  joint or several,  to
which a Registered  Holder or underwriter or such controlling  person may become
subject, under the Act or otherwise,  insofar as such losses, claims, damages or
liabilities (or actions in respect  thereof) are caused by any untrue  statement
or alleged  untrue  statement of any material fact  contained,  on the effective
date thereof,  in any  Registration  Statement  under which the securities  were
registered under the Act, any prospectus  contained therein, or any amendment or
supplement  thereto,  or arise out of or are based upon the  omission or alleged
omission  to state  therein a material  fact  required  to be stated  therein or
necessary to make the statements therein not misleading;  and will reimburse any
such Registered  Holder,  underwriter and each such  controlling  person for any
legal  or  other  expenses   reasonably  incurred  by  such  Registered  Holder,
underwriter  or such  controlling  person in connection  with  investigating  or
defending any such loss, claim, damage, liability or action; provided,  however,
that the Company will not be liable in any such case to the extent that any such
loss,  damage,  expense  or  liability  arises out of or is based upon an untrue
statement,  alleged untrue  statement,  omission or alleged  omission so made in
conformity  with  written  information  furnished by such  Registered  Holder or
underwriter specifically for inclusion in the Registration Statement.

                     (e) Each participating Registered Holder will indemnify and
hold harmless the Company, each of its directors,  each of its officers who have
signed the  Registration  Statement,  and each person,  if any, who controls the
Company,  within the meaning of the Act, against any losses,  claims, damages or
liabilities to which the Company,  or any such director,  officer or controlling
person may become  subject under the Act or  otherwise,  insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) are caused by any
untrue statement of any material fact contained in said Registration  Statement,
said prospectus,  or amendment or amendments or supplement thereto, or arise out
of or are based upon the omission to state  therein a material  fact required to
be stated  therein or necessary to make the statements  therein not  misleading;
and will  reimburse  any legal or other  expenses,  reasonably  incurred  by the
Company or any such director,  officer or controlling  person in connection with
investigating or defending any such loss, claim, damage, liability or action; in
each case only to the extent, that such untrue statement or omission was so made
in reliance upon and in conformity  with written  information  furnished by such
Registered Holder specifically for inclusion in the Registration Statement.

                     (f) Promptly after receipt by an indemnified party pursuant
hereto of notice of any claim to which indemnity would apply or the commencement
of any action,  such indemnified  party will, if a claim thereof is made against
the  indemnifying  party pursuant hereto,  notify the indemnifying  party of the
commencement  thereof; but the omission so to notify the indemnifying party will
not relieve it from any  liability  which it may have to any  indemnified  party
otherwise than hereunder. In case such action is brought against any indemnified
party, and it notified the indemnifying party of the commencement  thereof,  the
indemnifying  party will be entitled to participate  in, and, to the extent that
it may wish, jointly with any other indemnifying  party similarly  notified,  to
assume the defense thereof, with counsel satisfactory to such indemnified party.

                     (g) Nothing  contained in this Agreement shall be construed
as requiring any Registered Holder to exercise its Warrants prior to the initial
filing of any Registration Statement or the effectiveness thereof.

                     (h) Each  Registered  Holder  agrees to use its  reasonable
best efforts to cooperate with the Company in connection  with any  registration
effected  pursuant to this  Section 8 and any  listing on a national  securities
exchange  (including  NASDAQ),   including  furnishing  the  Company  with  such
information  concerning it and executing and delivering such documents as may be
required by applicable securities laws or any national securities exchange.

                     (i) In connection with any registration pursuant to Section
8.3,  if  securities  are  proposed  to  be  offered  for  sale  pursuant  to  a
Registration  Statement by other  security  holders of the Company and the total
number of  securities  to be offered by the  Registered  Holders  and such other
selling security holders is required to be reduced pursuant to a written opinion
from the  Company's  managing  underwriter,  if any, for such  offering,  to the
effect  that the  inclusion  of all or a portion of the  Registrable  Securities
requested to be registered, when added to the securities being registered by the
Company or the selling  shareholder(s),  will  exceed the maximum  amount of the
Company's  securities which can be marketed (i) at a price reasonably related to
their  fair  market  value,  or  (ii)  without  otherwise  materially  adversely
affecting  the  entire  offering,  then  the  aggregate  number  of  Registrable
Securities to be offered by the Registered  Holders shall equal the number which
bears the same ratio to the maximum  number of securities  that the  underwriter
believes may be included for all the selling  security  holders  (including  the
Registered Holders) as the original number of Registrable Securities proposed to
be  sold by the  Registered  Holders  bears  to the  total  original  number  of
securities  proposed  to be  offered  by the  Registered  Holders  and the other
selling security holders.

                     (j) If the Fund is granted  registration rights pursuant to
a subsequent  loan,  the Warrants  issued under this Agreement may be registered
pursuant to the subsequent  grant,  and the  registration  rights granted herein
shall terminate.

            9. Exchange and Replacement of Warrant Certificates.

                  Each Warrant Certificate is exchangeable without expense, upon
the  surrender  thereof by such  Registered  Holder at the  principal  executive
office of the  Company,  for a new  Warrant  Certificate  of like tenor and date
representing in the aggregate the right to purchase the same number of Shares in
such  denominations  as shall be designated by the Registered  Holder thereof at
the time of such surrender.

                  Upon   receipt   by  the   Company  of   evidence   reasonably
satisfactory to it of the loss, theft,  destruction or mutilation of any Warrant
Certificate,  and,  in case of  loss,  theft or  destruction,  of  indemnity  or
security reasonably  satisfactory to it, and reimbursement to the Company of all
reasonable expenses  incidental thereto,  and upon surrender and cancellation of
the  Warrants,  if  mutilated,  the Company  will make and deliver a new Warrant
Certificate  of like tenor,  in lieu thereof.  The holder shall pay all transfer
taxes payable in connection with any transfer of a Warrant.

            10. Elimination of Fractional Interests.

                  The  Company  shall  not be  required  to  issue  certificates
representing  fractions  of shares of Common  Stock and shall not be required to
issue scrip or pay cash in lieu of fractional  interest,  it being the intent of
the parties that all  fractional  interests  shall be eliminated by rounding any
fraction up to the nearest whole number of shares of Common Stock.

            11. Reservation of Securities.

                  The Company shall at all times authorize,  allot,  reserve and
keep  available out of its  authorized  shares of Common  Stock,  solely for the
purpose of issuance upon the exercise of the Warrants,  such number of shares of
Common  Stock as shall  be  issuable  upon the  exercise  thereof.  The  Company
covenants  and agrees  that,  upon  exercise of the  Warrants and payment of the
Exercise Price therefor,  all shares of Common Stock issuable upon such exercise
shall be duly and validly  allotted and issued as fully paid and  non-assessable
shares and not subject to the preemptive  rights of any  shareholder and fee and
clear of all liens, claims and encumbrances of any nature whatsoever.

            12. Notices.

                  All  notices,  requests,  consents  and  other  communications
hereunder  shall be in  writing  and shall be deemed to have been duly made when
delivered,  or mailed by registered or certified mail,  return receipt requested
or by facsimile or overnight courier (with signature of recipient required):

                           (a)      If to the Fund, to the following address:

                                    The Microcap Fund, Inc.
                                    733 Third Avenue
                                    New York, New York  10017
                                    Attention:  Joseph Lucchese
                                    Telecopier No.:  (212) 297-5696

                                    with a copy to:

                                    Greenberger & Forman
                                    1370 Avenue of the Americas
                                    New York, NY  10019-4602
                                    Attention:  Robert W. Forman, Esq.
                                    Telecopier No.:  (212) 757-4054

                                       or

                           (b)      If to the Company, to the following address:

                                    Unigene Laboratories, Inc
                                    110 Little Falls Road
                                    Fairfield, NJ  07004
                                    Attention:  Warren Levy
                                    Telecopier No.:  (201) 227-6088

                                    with a copy to:

                                    Becker, Ross, Stone, DeStefano & Klein, Esq.
                                    317 Madison Avenue
                                    New York, NY 10017
                                    Attn:  Jesse Margolin, Esq.
                                    Telecopier No.:  (212) 490-0720

or such other  address as the Fund or the Company may  designate  in a notice to
the other party in accordance with the foregoing.

            13. Supplements and Amendments.

                  The Company and the  Registered  Holders may from time to time
supplement or amend this Agreement in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or inconsistent
with any provisions herein, or to make any other provisions in regard to matters
or questions arising hereunder which the Company and the Registered  Holders may
deem necessary or desirable and which the Company or the Registered Holders deem
not to adversely affect the interest of the Registered Holders.

            14. Successors; Restrictions on Transfer.

                  All the covenants and  provisions of this  Agreement by or for
the benefit of the Company and the Registered Holders shall inure to the benefit
of their  respective  heirs,  legal  representatives,  successors  and permitted
assigns.  Each  Registered  Holder's  rights  under  this  Agreement  and to the
Warrants  may be  assigned  or  transferred  by the  Registered  Holders  or any
Subsequent  Holder in whole (but not in part),  provided such  transfers  comply
with all  applicable  securities  laws and the Company  receives an opinion from
either its counsel or counsel to the transferor to that effect.

            15. Governing Law.

                  This   Agreement  and  each  Warrant   Certificate(s)   issued
hereunder shall be deemed governed by the laws of the State of New York.

            16. Benefits of This Agreement.

                  Nothing in this  Agreement  shall be  construed to give to any
person or  corporation  other than the  Company and the  Registered  Holders any
legal or  equitable  right,  remedy  or claim  under  this  Agreement;  and this
Agreement  shall be for the sole and  exclusive  benefit of the  Company and the
Registered Holders.

            17. Counterparts.

                  This  Agreement may be executed in any number of  counterparts
and  each  of such  counterparts  shall  for all  purposes  be  deemed  to be an
original,  and such counterparts shall together  constitute but one and the same
instrument.

                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Agreement to be duly executed, as of the day and year first above written.

                                                     UNIGENE LABORATORIES, INC.

                                                By:      /s/ Warren P. Levy
                                                    ----------------------------
                                                Name: Warren P. Levy
                                                Title:President

                                                     THE MICROCAP FUND, INC.

                                                By:  /s/ Kamal Mustafa
                                                    ----------------------------

                               SECURITY AGREEMENT

         SECURITY   AGREEMENT,   dated  as  of  May  8,  1995,  between  Unigene
Laboratories,  Inc., a Delaware corporation, with an address at 110 Little Falls
Road,  Fairfield,  NJ 07004 ("Unigene" or the "Debtor"),  and The Microcap Fund,
Inc., a Maryland corporation, with an address at 733 Third Avenue, New York, New
York 10017 (the "Secured Party").

         WHEREAS,  the Fund has extended  credit or will extend credit to Debtor
represented by a Note in the principal  amount of $2,000,000  which was executed
by Debtor in favor of the Fund  pursuant to a Securities  Purchase  Agreement of
even date herewith (the "Purchase Agreement"); and

         WHEREAS,  in  consideration  of the extension of credit under the Note,
the Debtor  wishes to grant a security  interest  in certain  collateral  to the
Secured Party.

         NOW, THEREFORE, the parties hereby agree as follows:

         1.  Grant  of a  Security  Interest.  To  secure  the  prompt  payment,
observance  and   performance  in  full  of  each  and  every   obligation  (the
"Obligations")  of Debtor under the Purchase  Agreement and Note,  Debtor hereby
grants to Secured Party a continuing  first priority  security  interest in, and
lien upon,  the  Collateral  (as defined in Section 2) which shall  terminate on
full payment of amounts owed under the Note.

         2. Collateral. (a) The Collateral covered by this Agreement consists of
all property (tangible or intangible) of every kind and nature, wherever located
and whether now owned or hereafter  owned or acquired by Debtor,  whether or not
affixed  to realty  including,  without  limitation,  Accounts,  Chattel  Paper,
Documents,  Instruments and General  Intangibles  including all books,  records,
documents and manuals  relating to Debtor's  process of making  calcitonin,  all
Proceeds and Products thereof in any form, all parts, accessories,  attachments,
special tools, additions, replacements,  substitutions and accessions thereto or
therefor,  and all increases or profits received therefor. All capitalized terms
used herein and not otherwise  defined shall have the meanings as defined in the
Uniform  Commercial  Code as in effect in the State of New Jersey (the "UCC") or
the Purchase Agreement, where applicable.

                  (b) Any and all  Collateral  described  or referred to in this
Agreement which is hereafter acquired shall, and without any further conveyance,
assignment or act on the part of the Debtor or the Secured Party,  become and be
subject to the security  interests  created  hereby as fully and  completely  as
though specifically described herein.

         3.  Debtor's  Representations  and  Warranties.  Except as set forth in
Schedule 3, Debtor represents and warrants, that:

                  (a)  Debtor  owns  the  Collateral   free  and  clear  of  any
Encumbrances (other than those permitted under the Purchase Agreement).

                  (b) Debtor has all necessary corporate power and authority and
has taken all corporate  action  necessary to execute,  deliver and perform this
Agreement  and the Note and to  encumber  and grant a security  interest  in the
Collateral.

                  (c)  There  is  no  effective  financing  statement  or  other
instrument  similar in effect covering all or any part of the Collateral on file
in any  recording  office  except as may have been filed in favor of the Secured
Party.

                  (d)  This  Agreement  creates  a valid  security  interest  of
Secured Party in the Collateral  securing payment of the  Obligations.  Upon the
filing  of the  financing  statements  and the  Patent  Security  Agreement  and
Trademark  Security  Agreement and the other instruments  similar in effect, the
Secured  Party  will  have a valid  and  perfected  first  priority  lien on and
security  interest  in the  Collateral  except  as to  purchase  money  security
interests created after the date of this Agreement.

                  (e) No consent,  authorization,  approval or other  action by,
and no notice to or filing with, any  governmental  authority,  regulatory body,
lessor, franchisor or other person or entity is required for the grant by Debtor
of the  security  interest  granted  hereby or for the  execution,  delivery  or
performance  of this  Agreement by Debtor or for the  perfection  or exercise by
Secured Party of its rights and remedies hereunder,  except filings of financing
documents in accordance with Sections 4(b) and 4(c) hereof.

                  (f) Debtor does not transact  any part of its  business  under
any tradenames, division names, assumed names or other name, except for its name
set forth in the preamble hereto;  Debtor's principal business address and chief
executive  office is as set forth in the preamble  hereto;  and Debtor's records
concerning the Collateral are kept at such address.

                  (g) Debtor  will  deliver to Secured  Party a schedule  of all
Accounts,  General  Intangibles  and Chattel  Paper from time to time as Secured
Party may  reasonably  request.  The amounts  represented  on such  schedules by
Debtor  to  Secured  Party as owing by each  Account  Debtor  or by all  Account
Debtors  are and will be, to the best of the  Company's  knowledge,  the correct
amounts  actually and  unconditionally  owing by such Account  Debtor or Account
Debtors  individually  and in the  aggregate,  except for normal cash  discounts
where applicable.

                  (h) Each Instrument and each Document constituting  Collateral
is genuine and in all respects what it purports to be.

                  (i)  Schedule  3(i) lists and  describes  the  location of all
tangible  Collateral and all records relating to intangible  Collateral.  Debtor
shall not remove any such  Collateral or records from said  locations  without 5
days prior written notice to the Secured Party.

         4. Debtor's Covenants. Debtor agrees and covenants that:

                  (a) The Collateral  will be used solely for business  purposes
of Debtor and will remain in the possession or under the control of Debtor (sale
or  replacement  in the ordinary  course  excepted) and will not be used for any
unlawful purpose. The Collateral will not be misused,  abused, wasted or allowed
to  deteriorate  (ordinary  wear  and  tear  excepted).  Debtor  will  keep  the
Collateral,  as  appropriate  and  applicable,  in  good  condition  and  repair
(ordinary wear and tear excepted),  and will clean,  shelter, and otherwise deal
with the Collateral in all such ways as are  considered  good practice by owners
of like property.

                  (b)  Debtor  has  executed  and will  promptly  file  with the
appropriate  governmental  authorities,  or deliver to Secured Party for filing,
UCC-1 Financing  Statements with respect to the Collateral.  Debtor shall, at no
cost to Secured Party, execute, acknowledge and deliver all such other documents
and instruments as Secured Party reasonably  deems necessary to create,  perfect
and continue the security interest in the Collateral contemplated hereby. Debtor
will  pay all  costs of title  searches  and  filing  of  financing  statements,
assignments  or other  documents in all public offices  reasonably  requested by
Secured Party, and will not, without the prior written consent of Secured Party,
file or  authorize  or permit to be filed in any  public  office  any  financing
statement,  assignment or other document  naming Debtor as debtor and not naming
Secured Party, as agent for the Holders, as secured party.

                  (c)  Debtor  shall  concurrently  herewith  deliver to Secured
Party the Patent Security Agreement and Trademark Security  Agreement,  executed
by  the  Debtor  in  favor  of the  Secured  Party,  and  all  other  Documents,
instruments  and other items as may be necessary  for Secured party to file such
Agreements with the United States Patent and Trademark Office. Debtor represents
and warrants to Secured Party that the  execution,  delivery and  performance of
this Agreement by Debtor will not violate or cause a default under any agreement
relating to the patents and trademarks described therein.

                  (d) Debtor will defend the  Collateral  against the claims and
demands of all other parties,  will keep the  Collateral  free from all security
interests or other encumbrances;  and will not sell,  transfer,  lease,  assign,
deliver or otherwise  dispose of any Collateral or any interest  therein without
the prior written consent of Secured Party, except that Debtor may sell or lease
Inventory in the ordinary course of Debtor's business and as otherwise permitted
under the Purchase Agreement.

                  (e) Debtor will, at Secured Party's request,  mark any and all
books and records to indicate the security interest created hereby.

                  (f) Debtor will notify  Secured  Party  promptly in writing of
any change in Debtor's business address or chief executive office, any change in
the address at which records  concerning  the Collateral are kept and any change
in Debtor's name, identity or corporate or other structure.

                  (g) Debtor will  prevent the  Collateral  or any part  thereof
from being or becoming an accession to other goods not covered by this  Security
Agreement.

                  (h)  Debtor  shall  pay  all  reasonable  expenses,  including
reasonable  attorneys'  fees  and  costs,  incurred  by  Secured  Party  in  the
preservation,  realization,  enforcement  or exercise of any of Secured  Party's
rights under this Agreement.

         5. Certain Provisions Concerning Collateral.

                  (a) Upon the occurrence of an Event of Default (defined below)
and the  principal sum under the Note being due and payable by  acceleration  or
otherwise,  Secured Party may notify any or all Account  Debtors of the security
interest  created  hereby and may also direct such  Account  Debtors to make all
payments on Collateral to Secured Party. In such event, all payments on and from
Collateral received by Secured Party directly or from Debtor shall be applied to
the  Obligations  in  accordance  with Section 7 and Secured Party may demand of
Debtor in writing,  before or after  notification to Account Debtors and without
waiving in any manner the security interest created hereby, that any payments on
and from the Collateral:  (i) shall be held by Debtor in trust for Secured Party
in the same  medium in which  received;  (ii) shall not be  commingled  with any
assets of Debtor;  and (iii)  shall be  delivered  to Secured  Party in the form
received,  properly  indorsed  to permit  collection,  not  later  than the next
business day  following the day of their  receipt;  and Debtor shall comply with
such demand. Debtor shall also promptly notify Secured Party of the return to or
repossession by Debtor of Goods underlying any Collateral, and Debtor shall hold
the same in trust for  Secured  Party and shall  dispose  of the same as Secured
Party directs.

                  (b) Debtor  hereby  assigns,  transfers and conveys to Secured
Party  effective  upon the  occurrence  of any Event of Default  hereunder,  the
nonexclusive  right and license to use all Intellectual  Property (as defined in
the  Purchase  Agreement)  owned or used by Debtor  together  with any  goodwill
associated  therewith,  all to the extent  necessary to enable  Secured Party to
realize on the  Collateral  and any successor or assign to enjoy the benefits of
the  Collateral.  This  right and  license  shall  inure to the  benefit  of all
successors, assigns and transferees of Secured Party and its successors, assigns
and transferees,  whether by voluntary conveyance, operation of law, assignment,
transfer, foreclosure, deed in lieu of foreclosure or otherwise.

                  (c)  Until  the  occurrence  of an  Event of  Default  and the
principal  sum under the Note is due and payable by  acceleration  or otherwise,
Debtor  reserves  the  right to  receive  all  income  from or  interest  on the
Collateral consisting of Instruments. Upon such an Event, Debtor will not demand
or receive  any  income  from or  interest  on such  Collateral  other than from
Inventory,  royalties,  licensing fees, milestone payments, research sponsorship
payments,  joint  ventures or loan  proceeds  and, if Debtor  receives  any such
income or interest without any demand by it, the same shall be held by Debtor in
trust  for  Secured  Party in the same  medium in which  received,  shall not be
commingled  with any assets of Debtor and shall be delivered to Secured Party in
the form received,  properly indorsed to permit  collection,  not later than the
next business day following the day of its receipt.  Secured Party may apply the
net cash receipts  from such income or interests to payment of the  Obligations,
provided  that Secured  Party shall  account for and pay over to Debtor any such
income or interest remaining after payment in full of the Obligations.  Until an
Event of Default and the  principal sum under the Note become due and payable by
acceleration or otherwise,  notwithstanding  any provision of this Agreement and
the Documents to the contrary,  Unigene may conduct its business in the ordinary
course, may use its cash, cash equivalents, royalties, licensing fees, milestone
payments, research sponsorship payments,  interest,  dividends, income, proceeds
of  loans  and  sales  of   securities,   sales  of  inventory,   joint  venture
distributions for general corporate purposes.

                  (d) If an Event of Default has occurred and the  principal sum
under  the  Note is due and  payable,  Debtor  authorizes  Secured  Party to (i)
receive any increase in or profits on the  Collateral  (other than Inventory and
Intellectual  Property,  (including,  without limitation,  any stock issued as a
result of any stock split or dividend,  any capital distributions and the like),
and to hold the same as part of the  Collateral,  (ii)  receive  any  payment or
distribution   on  the  Collateral   upon  redemption  by,  or  dissolution  and
liquidation of, the issuer thereof,  (iii) surrender such Collateral or any part
thereof in exchange therefor,  and (iv) hold the net cash receipts from any such
payment  or  distribution  described  in  clause  (ii)  hereof  as  part  of the
Collateral.  If  Debtor  receives  any  such  increase,   profits,  payments  or
distributions, Debtor will receive and deliver same promptly to Secured Party on
the same terms and conditions set forth in Section 5(c) hereof respecting income
or interest, to be held by Secured Party as part of the Collateral.

                  (e) Unigene  hereby  grants to the Secured  Party,  for a term
commencing on the Closing Date and continuing so long as any of the  Obligations
remain outstanding,  at a rental of $1.00 for such entire term, the right to the
use of all premises or places of business  which  Unigene now or  hereafter  may
have and where any  Collateral  may be located;  provided that the Secured Party
agrees not to exercise  such right  unless and until an Event of Default  occurs
and is  continuing  and the Secured  Party  determines  to  exercise  its rights
against Collateral hereunder.

                  (f) Subject to the  provisions  of Section 5.2 of the Purchase
Agreement,  Debtor  hereby  assigns  to the  Secured  Party all sums,  including
without  limitation  return of premiums,  which may become payable under any and
all of Debtor's  policies of insurance which insure the Collateral,  and directs
each insurance  company issuing any such policy to make payment thereof directly
to the Secured Party.

         6. Events of Default.  The  occurrence of any "Event of Default"  under
the Purchase  Agreement or the Note shall constitute an "Event of Default" under
this Security Agreement.

         7. Remedies on Default. Upon the occurrence of an Event of Default, the
Secured  Party,  for  the  benefit  of  the  Holders,  shall  have  all  rights,
privileges,  powers and remedies  provided a secured party under the UCC and any
other applicable law and such additional rights, privileges, powers and remedies
as are set forth  herein and in the  Purchase  Agreement.  Without  limiting the
foregoing,  upon the  existence  or  occurrence  of any Event of Default and the
principal sum under the Note is due and payable by acceleration or otherwise:

                  (a)  Secured   Party  may  require   Debtor  to  assemble  the
Collateral  and  make  it  available  to  Secured  Party  at a place  or  places
designated  by  Secured  Party,  and  Secured  Party  may  use and  operate  the
Collateral.  At any time following the occurrence of an Event of Default and the
principal  sum under the Note is due and  payable  and during  the  continuation
thereof,  the Secured  Party  shall have full power,  in its own name or that of
Debtor, to collect, endorse, compromise, settle, sell or otherwise deal with any
or all of the  Collateral  or  proceeds  thereof  in a  commercially  reasonable
manner.

                  (b) Secured Party may, in a  commercially  reasonable  manner,
sell, lease or otherwise  dispose of and deliver any or all Collateral at public
or private sale,  for cash,  upon credit or  otherwise,  at such prices and upon
such  terms  as  Secured  Party  deems  advisable  in its sole  discretion.  Any
requirement of reasonable  notice shall be met if such notice is given to Debtor
at its address  set forth  herein at least ten (10) days before the time of sale
or other disposition. Secured Party may be the purchaser at any such sale, if it
is  public,  and in such  event  Secured  Party  shall have all rights of a good
faith,  bona fide purchaser for value from a secured party after a default.  The
proceeds of any sale may be applied (in whatever  order and manner Secured Party
elects in its sole  discretion)  to all costs and  expenses  of sale  (including
without the payment of Obligations,  and any remaining proceeds shall be applied
in accordance with Article 9, Part 5, of the Uniform Commercial Code. The Debtor
shall remain liable to Secured Party for any deficiency.

                  (c)  Without  in any way  requiring  notice to be given in the
following  time and manner,  Debtor  agrees that any notice by Secured  Party of
sale,  disposition or other intended action hereunder or in connection herewith,
whether required by the UCC or otherwise,  shall constitute reasonable notice to
Debtor if such  notice is given,  at least  ten days  prior to such  action,  to
Debtor's  address  specified  above or to any other  address  which  Debtor  has
specified in writing to Secured Party as the address to which notices  hereunder
shall be given to Debtor.

                  (d) After an Event of Default and the  principal sum under the
Note is due and payable, Secured Party may demand, collect and sue on any of the
Accounts, Chattel Paper, Instruments and General Intangibles (in either Debtor's
or Secured Party's name at the latter's option); may enforce, compromise, settle
or discharge such  Collateral  without  discharging  the Obligations or any part
thereof;  and may indorse Debtor's name on any and all checks  commercial paper,
and any other Instruments pertaining to or constituting Collateral.

                  (e) Debtor will deliver to Secured  Party,  upon  demand,  all
Documents  and  all  Chattel  Paper  (duly   indorsed  to  the  Secured   Party)
constituting,  representing  or relating to the  Collateral or any part thereof,
and any schedules,  invoices,  shipping documents,  delivery receipts,  purchase
orders,  contracts or other documents representing or relating to the Collateral
or any part thereof.

         8.  Payments  After an Event of  Default.  All  payments  received  and
amounts  realized by the Secured Party pursuant to Section 7, including all such
payments and amounts  received  after the entire  unpaid  principal and interest
amount of the Note has been declared due and payable, as well as all payments or
amounts  then held or  thereafter  received by the Secured  Party as part of the
Collateral  while an Event of Default  shall be  continuing,  shall be  promptly
applied and distributed by the Secured Party in the following order of priority:

                  (a)  first,  to  the  payment  of  all  reasonable  costs  and
expenses,  including legal expenses and reasonable  attorneys' fees, incurred or
made  hereunder  by the Secured  Party,  and/or by any other  Holder or Holders,
including any such costs and expenses of foreclosure or suit, if any, and of any
sale or the  exercise  of any other  remedy  under  Section 7, and of all taxes,
assessments or liens superior to the lien granted under this Security Agreement,
except any taxes,  assessments  or other superior lien subject to which any said
sale under Section 7 hereof may have been made; and

                  (b)  second,  to the  payment to the Fund of the  amount  then
owing or unpaid on the Note; and

                  (c) third,  to the payment of the balance or surplus,  if any,
to the Debtor,  its  successors  and assigns,  or to whomsoever  may be lawfully
entitled to receive the same.

         9.  Power  of  Attorney.  Debtor  hereby  appoints  Secured  Party  the
attorney-in-fact  of Debtor to (i) prepare,  sign and file or record, for Debtor
in  Debtor's  name,  any  financing  statement  and to  take  any  other  action
reasonably  deemed by Secured  Party  necessary  or  desirable  to  perfect  and
continue the security  interest of Secured Party  hereunder,  and to perform any
obligations of Debtor hereunder,  at Debtor's expense, but without obligation to
do so; and (ii) after an Event of Default and the  principal  sum under the Note
is due and  payable to take any and all  actions  necessary  or  appropriate  to
collect,  compromise,  settle,  sell or  otherwise  deal  with any or all of the
Collateral  or  proceeds  thereof and to obtain,  adjust,  settle and cancel any
policies of  insurance  referred to herein or in the  Purchase  Agreement.  Such
power of attorney is coupled with an interest and is  irrevocable so long as any
monetary obligations under the Note remains outstanding.

         10. Secured Party's Right to Cure;  Reimbursement.  In the event Debtor
should fail to do any act as herein  provided,  Secured  Party may,  but without
obligation to do so, with  reasonable  notice to Debtor,  and without  releasing
Debtor  from any  obligation  hereof,  make or do the same in such manner and to
such  extent as Secured  Party may deem  necessary  to protect  the  Collateral,
including without limitation, the defense of any action purporting to affect the
Collateral  or the  rights or powers of Secured  Party  hereunder,  at  Debtor's
expense.  Debtor shall reimburse Secured Party for expenses  reasonably incurred
under this Section 10.

         11. Miscellaneous.

                  (a) This Agreement, together with the covenants and warranties
contained  in it,  shall  inure to the  benefit of Secured  Party,  the  Holders
(subject  to the  agency  of  Secured  Party)  and  their  respective  permitted
successors,  assigns, heirs and personal  representatives,  and shall be binding
upon Debtor, its successors and assigns.

                  (b) Any notice or other communication required or permitted to
be given  hereunder  shall be in writing and shall be mailed by certified  mail,
return  receipt  requested,  or by  Federal  Express,  Express  Mail or  similar
overnight  delivery or courier service or delivered against receipt to the party
to whom it is to be given at the  address  of such  party and in the  manner set
forth in the Purchase Agreement.

                  (c) This Agreement shall terminate on the satisfaction in full
of all of the  Obligations  for the payment of money under the Note and, on such
termination, Secured Party shall release to Debtor the security interest granted
in the Collateral hereunder;  provided, that if, after receipt of any payment of
all or any part of the Obligations, Secured Party is for any reason compelled to
surrender  such  payment  to any  person or  entity,  because  such  payment  is
determined to be void or voidable as a preference, an impermissible setoff, or a
diversion of trust funds, or for any other reason  relating to Debtor's  status,
this Agreement shall continue in full force  notwithstanding any contrary action
which may have been taken by Secured Party in reliance  upon such  payment,  and
any such contrary action so taken shall be without  prejudice to Secured Party's
rights under this  Agreement and shall be deemed to have been  conditioned  upon
such payment having become final and irrevocable.

                  (d) If any provision of this Agreement is invalid, illegal, or
unenforceable,  the balance of this Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance,  it shall  nevertheless
remain applicable to all other persons and circumstances.

                  (e) The headings in this Agreement are solely for  convenience
of reference and shall be given no effect in the construction or  interpretation
of this Agreement.

                  (f)  This   Agreement   may  be  executed  in  any  number  of
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

                  (g) This  Agreement  shall be  governed  by and  construed  in
accordance with the laws of the State of New Jersey.

                  (h) No course of dealing  and no delay or omission on the part
of the Secured Party in exercising any right or remedy shall operate as a waiver
thereof or otherwise  prejudice the Secured Party's rights,  powers or remedies.
No right,  power or remedy  conferred by this  Agreement  upon the Secured Party
shall be exclusive of any other right, power or remedy referred to herein or now
or hereafter available at law, in equity, by statute or otherwise,  and all such
remedies may be exercised singly or concurrently.

                  (i) This Agreement together with the Purchase Agreement,  Note
and Documents sets forth the entire understanding of the parties with respect to
the  subject  matter  hereof,  supersedes  all  existing  agreements  among them
concerning such subject matter, and may be modified only by a written instrument
duly executed by the party intended to be bound thereby,  except as set forth in
paragraph 8 of the Purchase Agreement.

                  (j) In the absence of willful  misconduct  taken or omitted in
bad faith,  gross  negligence  or other action  which,  by clear and  convincing
evidence,  substantially departs from commercially  reasonable conduct,  neither
the Fund nor any  attorney-in-fact  pursuant to this  Agreement  or any Document
shall be  liable to Debtor or any  other  person  for any act or  omission,  any
mistake  of fact or any  error of  judgment  in  exercising  any right or remedy
granted herein.

         IN WITNESS WHEREOF,  the parties have executed this Security  Agreement
on the date set forth above.

                                                     UNIGENE LABORATORIES, INC.

                                                By:      /s/ Warren P. Levy
                                                    ----------------------------
                                                Name: Warren P. Levy
                                                Title:President

                                                     THE MICROCAP FUND, INC.

                                                By:  /s/ Kamal Mustafa
                                                    ----------------------------

THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY. THIS NOTE HAS NOT BEEN
REGISTERED  OR  QUALIFIED  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE
"ACT"),  OR THE  SECURITIES  LAWS OF ANY STATE AND MAY NOT BE OFFERED  FOR SALE,
SOLD OR OTHERWISE  TRANSFERRED,  DIRECTLY OR  INDIRECTLY,  OR DELIVERED,  UNLESS
REGISTERED  OR  QUALIFIED  UNDER THE ACT AND OTHER  APPLICABLE  LAWS OF ANY SUCH
STATE UNLESS THE PAYOR SHALL HAVE RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO
IT OR OTHER EVIDENCE SATISFACTORY TO IT THAT AN EXEMPTION FROM SUCH REGISTRATION
OR QUALIFICATION IS AVAILABLE.

                            SECURED PROMISSORY NOTE

$2,000,000                                                           May 8, 1995
                                                              New York, New York

                  FOR VALUE RECEIVED,  the  undersigned,  UNIGENE  LABORATORIES,
INC., a Delaware  corporation  ("Unigene" or "Payor")  hereby promises to pay to
the order of Microcap Fund, Inc., a Delaware corporation, with an address at 733
Third  Avenue,  New  York,  New York (the  "Holder"),  the  principal  amount of
$2,000,000  with interest  thereon at the rate of 13% per annum, on July 7, 1995
(the "Maturity Date") at such Holder's above address, or such other place as the
Holder may  designate  in  writing.  From and after an Event of Default  and the
principal  amount being due by  acceleration or otherwise all unpaid amounts due
hereunder  shall bear  interest at the rate of 18% per annum.  Unless  otherwise
defined herein, capitalized terms used herein shall have the meaning ascribed to
them in the Purchase Agreement.

                  1. Interest and Payment.

                     1.1 In the  event  that a court of  competent  jurisdiction
shall finally determine that Payor shall have paid or agreed to pay hereunder or
under  the  Purchase  Agreement  or any of the  Documents  referred  to  therein
interest or other charges in excess of the maximum rate  permitted by law, it is
the  express  intent of the Payor and the Holder  that all such  excess  amounts
shall,  at the option of the Holder,  be held as cash  collateral  to secure the
payment  of this Note,  and the  provisions  of this Note  shall be  immediately
deemed reformed and amounts thereafter  collectible  hereunder reduced,  without
necessity of execution of a new document, so as to comply with the determination
of such court,  but so as to permit the recovery of the fullest amount otherwise
provided for in this Note.

                     1.2 If the Maturity Date or any extension  thereof falls on
a day which is not a business  day, then such Maturity Date shall be extended to
the next  succeeding  business  day and interest at the  applicable  rate on any
principal then due shall continue to accrue until such principal amount is fully
paid.

                  2.  Prepayment.  Payor may  prepay the  outstanding  principal
amount  of this  Note in whole or in part at any time,  without  payment  of any
premium or penalty.  All payments on this Note shall be applied first to accrued
interest  hereon  and the  balance  to the  payment  of  principal  hereof.  Any
prepayment  shall be made  pro-rata  with the other Notes in proportion to their
respective  outstanding  balance.  If Payor  prepays this Note during any period
that the Maturity Date has been extended,  it shall receive a pro rata rebate of
any prepaid interest.

                  3. Benefits Under Other Documents. This Note is the $2,000,000
Note referred to in the Purchase  Agreement pursuant to which it was issued, and
is subject to, and entitled to the benefits of, the Purchase  Agreement  (as the
same may be amended,  modified or supplemented  from time to time) and the other
Documents  referred  to  therein  (as  the  same  may be  amended,  modified  or
supplemented  from time to time).  The Purchase  Agreement,  among other things,
contains  provisions  for  acceleration  of the  Maturity  Date  hereof upon the
occurrence of certain stated Events of Default.

                  4. Security  Interest.  This Note is collateralized by a first
security  interest in all of Payor's assets pursuant to the Security  Agreement,
Fee Mortgage,  Collateral  Assignment  of Leasehold  Interest,  Patent  Security
Agreement and Trademark  Security  Agreement  between the Payor and the Fund, as
Secured Party.

                  5. Unconditional Obligation; Fees, Waivers, Other.

                     5.1 The  obligations  to make the payments  provided for in
this Note are absolute and unconditional.

                     5.2 The  Payor  agrees  to pay,  on  demand,  all costs and
expenses  paid or  incurred  by the  Holder in  seeking  to  collect  this Note,
including, without limitation, reasonable attorneys' fees and disbursements paid
or incurred by Holder,  with interest thereon at the rate of 18% per annum until
paid in full.

                     5.3  No  forbearance,   indulgence,  delay  or  failure  to
exercise any right or remedy with respect to this Note shall operate as a waiver
thereof,  nor as an acquiescence in any default, nor shall any single or partial
exercise of any right or remedy preclude any other or further  exercise  thereof
or the exercise of any other right or remedy.

                     5.4 This Note may not be modified or discharged (other than
by payment of this Note), except by a writing duly executed by the Payor and the
Fund.

                     5.5 Payor hereby  expressly  waives demand and  presentment
for  payment,  notice of  nonpayment,  notice of  dishonor,  protest,  notice of
protest,  and  diligence  in taking  any action to  collect  amounts  called for
hereunder,  and shall be directly  and  primarily  liable for the payment of all
sums owing and to be owing hereon, regardless of and, subject to and as provided
in the Purchase Agreement,  the Security Agreement and Patent Security Agreement
and  Trademark  Security  Agreement  provided for  therein,  without any notice,
diligence,  act or omission with respect to the  collection of any amount called
for hereunder or in connection with any right or Lien at any and all times which
the Payee had or is existing as security for any amount called for hereunder.

                  6. Miscellaneous.

                     6.1 The headings of the various paragraphs of this Note are
for convenience of reference only and shall in no way modify any of the terms or
provisions of this Note.

                     6.2 All notices required or permitted to be given hereunder
shall be in writing and shall be deemed to have been duly given when  personally
delivered or sent in the manner  provided in, and to the address of the intended
recipient  set forth in, the Purchase  Agreement or at such other address as the
intended recipient shall have hereafter given to the other party hereto pursuant
to the provisions of the Purchase Agreement.

                     6.3 THIS NOTE AND THE  OBLIGATIONS  OF THE  PAYOR,  AND THE
RIGHTS OF THE HOLDER, HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.

                     6.4 PAYOR HEREBY  KNOWINGLY,  VOLUNTARILY AND INTENTIONALLY
WAIVES  ANY  RIGHT  IT MAY HAVE TO TRIAL BY JURY IN  RESPECT  OF ANY  ACTION  OR
PROCEEDING  ARISING  OUT OF,  UNDER OR IN  CONNECTION  WITH  THIS  NOTE,  AND IN
CONNECTION  WITH ANY CLAIM,  OFFSET OR DEFENSE  ARISING IN CONNECTION  WITH SUCH
ACTION OR PROCEEDING,  WHETHER ARISING UNDER ANY STATUTE  (INCLUDING ANY FEDERAL
OR STATE  CONSTITUTION)  OR UNDER THE LAW OF CONTRACT,  TORT OR  OTHERWISE  AND,
INCLUDING,  WITHOUT LIMITATION, ANY CHALLENGE TO THE LEGALITY, VALIDITY, BINDING
EFFECT OR  ENFORCEABILITY  OF THIS PROVISION OR THIS NOTE.  PAYOR FURTHER WAIVES
THE RIGHT TO  INTERPOSE A  COUNTERCLAIM  OF ANY NATURE IN ANY ACTION  BROUGHT BY
HOLDER TO ENFORCE ITS RIGHTS HEREUNDER OR UNDER THE SECURITY AGREEMENT. FURTHER,
PAYOR HEREBY  CERTIFIES  THAT NO  REPRESENTATIVE  OR AGENT OF THE HOLDER OF THIS
NOTE HAS REPRESENTED,  EXPRESSLY OR OTHERWISE, THAT THE HOLDER WOULD NOT, IN THE
EVENT OF ANY SUCH  ACTION OR  PROCEEDING,  SEEK TO ENFORCE  THIS  WAIVER OF JURY
TRIAL PROVISION.  PAYOR HEREBY  ACKNOWLEDGES THAT THE HOLDER HAS BEEN INDUCED TO
ACCEPT THIS NOTE BY, INTER ALIA, THE PROVISIONS OF THIS SECTION.

                     6.5 This Note shall bind the Payor and its  successors  and
assigns and may be assigned by the Holder in whole but not in part.

                                                     UNIGENE LABORATORIES, INC.

                                                By:      /s/ Warren P. Levy
                                                    ----------------------------
                                                Name: Warren P. Levy
                                                Title:President 

Basic Info X:

Name: SECURITIES PURCHASE AGREEMENT
Type: Purchase Agreement
Date: May 22, 1995
Company: UNIGENE LABORATORIES INC
State: Delaware

Other info:

Date:

  • January 31
  • February 28 , 1995
  • March 1 , 1995
  • May 20 , 1993
  • December 31 , 1994
  • December 31 , 1993
  • April , 1995
  • March 31 , 1995
  • March 21 , 1995
  • May 7 , 2000
  • May 8 , 1995
  • July 7 , 1995

Organization:

  • Becker Ross Stone DeStefano & Klein ; Ostrolenk Faber Gerb & Soffen
  • Sinisi VanDam & Sproviero
  • Trademark Security Agreements and Related Documents
  • Collateral Assignment of License Agreements
  • Warranties of Unigene
  • the State of Delaware
  • First Amendment to Lease
  • Securities Exchange Commission
  • U.S. Patent and Trademark Office
  • United States Food and Drug Administration
  • Orders and Consent Decrees
  • Keeping of Records and Books of Account
  • U.S. Securities and Exchange Commission
  • National Association of Securities Dealers
  • DeJufra , Inc.
  • Affiliates andor Associates
  • Disposition of Collateral
  • Joseph Lucchese Telecopier No
  • Initial Exercise Price
  • Computation of Adjusted Price
  • Number of Shares
  • Subscription Rights for Shares of Common Stock or Other Securities
  • Miscellaneous Registration Provisions
  • Reservation of Securities
  • Greenberger & Forman
  • Warren Levy Telecopier No
  • DeStefano & Klein , Esq
  • Unigene Laboratories , Inc.
  • Debtor to Secured Party
  • Secured Party the Patent Security Agreement and Trademark Security Agreement
  • United States Patent and Trademark Office
  • Certain Provisions Concerning Collateral
  • Collateral to Secured Party
  • Debtor of Goods
  • Collateral consisting of Instruments
  • Uniform Commercial Code
  • Event of Default
  • State of New Jersey
  • Collateral Assignment of Leasehold Interest

Location:

  • United States Patent
  • ERISA
  • Boonton
  • United States of America
  • NJ
  • P.M.
  • New York City
  • New Jersey
  • Americas New York
  • Esq
  • Fairfield
  • Maryland
  • Delaware
  • Payor

Money:

  • $ .01
  • $ 1,000,000
  • $ 20,000
  • $ 100,000
  • $ 200,000
  • $ 1.80
  • $ .10
  • $ 1.00
  • $ 2,000,000

Person:

  • Ronald Levy
  • Warren Levy
  • Joseph Lucchese Telecopier
  • Robert W. Forman
  • Ross
  • Jesse Margolin
  • Kamal Mustafa
  • Warren P. Levy

Percent:

  • 13 %
  • 18 %