EXHIBIT 10.35

                         COMMON STOCK PURCHASE AGREEMENT

         COMMON STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of December
18, 2000 by and between UNIGENE LABORATORIES,  INC., a Delaware corporation (the
"Company"),  and  FUSION  CAPITAL  FUND II,  LLC  (together  with its  permitted
assigns,  the "Buyer").  Capitalized terms used herein and not otherwise defined
herein are defined in Section 10 hereof.

                                    WHEREAS:

         Subject to the terms and  conditions set forth in this  Agreement,  the
Company  wishes  to sell to the  Buyer,  and the  Buyer  wishes  to buy from the
Company, up to Twenty One Million Dollars  ($21,000,000) of the Company's common
stock, par value $.01 per share (the "Common Stock"). The shares of Common Stock
to be purchased hereunder are referred to herein as the "Purchase Shares."

         NOW THEREFORE, the Company and the Buyer hereby agree as follows:

         1.       PURCHASE OF COMMON STOCK.

         Subject to the terms and  conditions  set forth in  Sections 6, 7 and 9
below,  the Company  hereby  agrees to sell to the Buyer,  and the Buyer  hereby
agrees to purchase from the Company, shares of Common Stock as follows:

         (a) Commencement of Purchases of Common Stock. The purchase and sale of
Common Stock  hereunder  shall  commence  (the  "Commencement")  within five (5)
Trading Days following the date of satisfaction (or waiver) of the conditions to
the  Commencement  set forth in Sections 6 and 7 below (or such later date as is
mutually  agreed  to  by  the  Company  and  the  Buyer),   (the  date  of  such
Commencement, the "Commencement Date").

         (b) Buyer's Purchase Rights and Obligations.  Subject to the provisions
of Sections  1(d), the Buyer:  (i) shall purchase  shares of Common Stock during
each Monthly  Period  equal to the Monthly Base Amount at the Purchase  Price in
accordance  with  Section  1(e),  and (ii) at any time on or after the  Maturity
Date,  shall have the right to purchase  shares of Common Stock up to the entire
remaining  Available  Amount at the Purchase  Price in  accordance  with Section
1(e).  Within  three (3) Trading Days of receipt of Purchase  Shares,  the Buyer
shall pay to the Company an amount equal to the Purchase  Amount with respect to
such Purchase  Shares as full payment for the purchase of the Purchase Shares so
received.  The Company  shall not issue any  fraction of a share of Common Stock
upon any  purchase.  All shares of Common Stock  (including  fractions  thereof)
issuable upon a purchase under this  Agreement  shall be aggregated for purposes
of  determining  whether the purchase would result in the issuance of a fraction
of a share of Common  Stock.  If,  after  the  aforementioned  aggregation,  the
issuance  would result in the issuance of a fraction of a share of Common Stock,
the Company  shall round such  fraction of a share of Common Stock up or down to
the nearest whole share. All payments made under this Agreement shall be made in
lawful  money of the United  States of America by wire  transfer of  immediately
available  funds to such account as the Company may from time to time  designate
by written notice in accordance with the provisions of this Agreement.  Whenever
any amount  expressed to be due by the terms of this Agreement is due on any day
which is not a Trading Day, the same shall instead be due on the next succeeding
day which is a Trading Day.

<PAGE>

         (c) Company's  Mandatory Purchase Rights. If (A) the Closing Sale Price
of the Common  Stock on each of the five (5) Trading Days  immediately  prior to
the first  Trading Day of any Monthly  Period is at least $4.00 and (B) no Event
of Default has  occurred  and is  continuing,  then the  Company  shall have the
right, so long as no Event of Default has occurred and is continuing and so long
as the Sale Price of the Common Stock remains at least $4.00 during such Monthly
Period and the immediately succeeding Monthly Period,  exercisable by delivering
written notice (a "Mandatory  Purchase  Notice") to the Buyer on or prior to the
first Trading Day of such Monthly  Period to require that the Buyer  purchase at
the  Purchase  Price such  Available  Amount as  specified by the Company in the
Mandatory  Purchase  Notice  during  such  Monthly  Period  and the  immediately
succeeding  Monthly  Period on such Trading Days during such Monthly  Periods as
the  Buyer  shall  determine.  The  Company  acknowledges  and  agrees  that the
Company's  mandatory  purchase  rights  represent  an  agreement by the Buyer to
extend  financial  accommodations  to the  Company.  Accordingly,  it shall be a
condition to the exercise of the  Company's  Mandatory  Purchase  Rights that no
Event of Default  shall  have  occurred  and is  continuing,  and the  Company's
delivery of a Mandatory  Purchase Notice shall be deemed a representation to the
Buyer that no Event of Default has occurred and is  continuing.  The Company may
revoke a Mandatory  Purchase Notice, in whole or in part, by delivering  written
notice  thereof to the Buyer (a "Revocation of Mandatory  Purchase  Notice").  A
Revocation of Mandatory  Purchase  Notice shall be effective only as to Purchase
Notices which are in excess of the Monthly Base Amount and which have a Purchase
Date  later  than  three (3)  Trading  Days  after  receipt  by the Buyer of the
Revocation of Mandatory  Purchase Notice.  Any Purchase Notices submitted by the
Buyer  which have a Purchase  Date on or prior to the third  (3rd)  Trading  Day
after receipt by the Buyer of the Revocation of Mandatory  Purchase  Notice must
be honored by the Company as otherwise provided herein.

         (d)      Limitations on Purchases.

                  (i)      Intentionally Omitted

                  (ii) Limitation on Beneficial  Ownership.  The Buyer shall not
         have the right to purchase  shares of Common Stock under this Agreement
         to the  extent  that after  giving  effect to such  purchase  the Buyer
         together with its affiliates would  beneficially own in excess of 4.99%
         of the outstanding  shares of the Common Stock following such purchase.
         For purposes hereof,  the number of shares of Common Stock beneficially
         owned by the Buyer and its  affiliates or acquired by the Buyer and its
         affiliates,  as the case may be, shall  include the number of shares of
         Common Stock issuable in connection  with a Purchase  Notice under this
         Agreement  with respect to which the  determination  is being made, but
         shall  exclude  the  number of shares of Common  Stock  which  would be
         issuable  upon (1) a purchase of the remaining  Available  Amount which
         has not been submitted for purchase,  and (2) exercise or conversion of
         the unexercised or unconverted  portion of any other  securities of the
         Company  (including,  without  limitation,  any warrants)  subject to a
         limitation  on  conversion  or  exercise  analogous  to the  limitation
         contained herein beneficially owned by the Buyer and its affiliates. If
         the 4.99%  limitation is ever reached the Company shall have the option
         to increase such  limitation to 9.99% by delivery of written  notice to
         the Buyer.  Thereafter,  if the 9.99%  limitation  is ever reached this
         shall not  effect or limit  the  Buyer's  obligation  to  purchase  the
         Monthly  Base  Amount or the  Company's  Mandatory  Purchase  Rights as
         otherwise provided in this Agreement.  For purposes of this Section, in
         determining the number of outstanding  shares of Common Stock the Buyer
         may  rely on the  number  of  outstanding  shares  of  Common  Stock as
         reflected in (1) the  Company's  most recent Form 10-Q or Form 10-K, as
         the case may be, (2) a more recent public  announcement  by the Company
         or (3) any other written  communication  by the Company or its transfer
         agent setting  forth the number of shares of Common Stock  outstanding.
         Upon the reasonable  written or oral

                                       2
<PAGE>

         request of the Buyer,  the Company shall promptly confirm orally and in
         writing  to the Buyer  the  number  of  shares  of  Common  Stock  then
         outstanding.  In any case, the number of  outstanding  shares of Common
         Stock shall be determined  after giving  effect to any purchases  under
         this  Agreement  by the Buyer since the date as of which such number of
         outstanding  shares of Common Stock was  reported.  Except as otherwise
         set forth  herein,  for purposes of this Section  1(d)(ii),  beneficial
         ownership  shall be determined in accordance  with Section 13(d) of the
         Securities Exchange Act of 1934, as amended.

                  (iii) Company's Right to Suspend Purchases. If at any time the
         Closing  Sale  Price of the  Common  Stock is below the Fixed  Purchase
         Price for three consecutive  Trading Days, the Company shall have three
         (3) Trading  Days from the last day of such three  consecutive  Trading
         Day Period to give written notice (a "Purchase  Suspension  Notice") to
         the Buyer  suspending  any and all  purchases  by the Buyer  under this
         Agreement.  The Purchase  Suspension Notice shall be effective only for
         Purchase  Notices  which  have a  Purchase  Date  later  than three (3)
         Trading  Days after  receipt of the Purchase  Suspension  Notice by the
         Buyer.  Any  Purchase  Notices  submitted  by the  Buyer  which  have a
         Purchase  Date on or prior to the third (3rd) Trading Day after receipt
         by the  Buyer  of the  Company's  Purchase  Suspension  Notice  must be
         honored by the Company as  otherwise  provided  herein.  Such  purchase
         suspension   shall  continue  in  effect  until  the  earlier  of:  (A)
         revocation in writing by the Company,  at its sole  discretion;  or (B)
         such  time as the Sale  Price of the  Common  Stock is above  the Fixed
         Purchase  Price.  After  the  delivery  to  the  Buyer  of  a  Purchase
         Suspension  Notice  from the  Company,  the  Buyer  shall no  longer be
         obligated  to purchase  any  Purchase  Shares  from the  Company  under
         Section 1 of this Agreement.

         (e)  Mechanics  of  Purchasing.  The purchase of shares of Common Stock
under this Agreement shall be conducted in the following manner:

                  (i)  Buyer's  Delivery  Requirements.  To  purchase  shares of
         Common Stock under this Agreement on any date, the Buyer shall transmit
         by facsimile (or otherwise  deliver) on or prior to 11:59 p.m., Central
         Time  on such  date,  a copy of a fully  executed  notice  of  purchase
         substantially  in the form attached  hereto as Exhibit A (the "Purchase
         Notice") to the Company.

                  (ii) Company's Response. Upon receipt by the Company of a copy
         of a Purchase Notice, the Company shall as soon as practicable,  but in
         no event later than one (1) Trading Day after  receipt of such Purchase
         Notice,  send via facsimile (or otherwise  deliver),  a confirmation of
         receipt of such Purchase  Notice in the form attached hereto as Exhibit
         B (a "Company  Confirmation  of Purchase  Notice") to (1) the Buyer and
         (2) along with a copy of the Purchase Notice, the Company's  designated
         transfer  agent  (the  "Transfer  Agent"),   which  confirmation  shall
         constitute an irrevocable  instruction to the Transfer Agent to process
         such Purchase Notice in accordance with the terms herein.  Upon receipt
         by the Transfer Agent of a copy of the executed  Purchase  Notice and a
         copy of the applicable  Company  Confirmation of Purchase  Notice,  the
         Transfer Agent shall, on the first (1st) Trading Day following the date
         of receipt of the Company Confirmation of Purchase Notice, (A) provided
         the Transfer Agent is  participating  in The Depository Trust Company's
         ("The DTC") Fast Automated  Securities  Transfer  Program,  credit such
         aggregate  number of shares of Common Stock to which the Buyer shall be
         entitled to the Buyer's or its designee's  balance account with The DTC
         through its Deposit  Withdrawal At Custodian ("DWAC") system, or (B) if
         the  Transfer  Agent is not  participating  in The DTC  Fast  Automated
         Securities  Transfer Program and DWAC system,  issue and surrender to a
         common  carrier for  overnight  delivery to the address as specified in
         the Purchase Notice, a certificate,

                                       3
<PAGE>

         registered in the name of the Buyer or its designee,  for the number of
         shares of Common Stock to which the Buyer shall be entitled.

                  (iii) Dispute  Resolution.  In the case of a dispute as to the
         determination  of the Purchase Price or the  arithmetic  calculation of
         the Purchase  Rate,  the Company shall  instruct the Transfer  Agent to
         issue to the Buyer the  number  of shares of Common  Stock  that is not
         disputed  and shall submit the disputed  determinations  or  arithmetic
         calculations  to the Buyer via facsimile  within one (1) Trading Day of
         receipt of the Buyer's  Purchase  Notice.  If the Buyer and the Company
         are unable to agree upon the  determination  of the  Purchase  Price or
         arithmetic  calculation of the Purchase Rate within one (1) Trading Day
         of  such  disputed   determination  or  arithmetic   calculation  being
         submitted to the Buyer,  then the Company  shall within one (1) Trading
         Day submit via facsimile (A) the disputed determination of the Purchase
         Price to an  independent,  reputable  investment  bank  selected by the
         Company  and  approved  by the  Buyer  or (B) the  disputed  arithmetic
         calculation of the Purchase Rate to the Company's independent,  outside
         accountant.  The  Company  shall  cause  the  investment  bank  or  the
         accountant,  as the case  may be,  to  perform  the  determinations  or
         calculations  and notify the  Company  and the Buyer of the  results no
         later than the fifth (5th) day after the date it receives  the disputed
         determinations or calculations.  Such investment bank's or accountant's
         determination or calculation, as the case may be, shall be binding upon
         all parties absent manifest error.

                  (iv) Record Holder.  The person or persons entitled to receive
         the  shares  of  Common  Stock  issuable  upon a  purchase  under  this
         Agreement  shall be treated for all  purposes  as the record  holder or
         holders of such shares of Common Stock on the Purchase Date.

                  (v) Company's Failure to Timely Deliver Shares. If within five
         (5) Trading Days after the Company's  receipt of a copy of the Purchase
         Notice properly submitted in accordance with the term and conditions of
         this  Agreement  (subject  to  extension  in  accordance  with  Section
         1(e)(iii) for a good faith dispute made in accordance with the terms of
         Section  1(e)(iii)) (the "Share Delivery  Period"),  the Transfer Agent
         shall fail to issue Purchase  Shares via credit to the Buyer's  account
         with DTC for the  number  of  Purchase  Shares to which  such  Buyer is
         entitled upon such Buyer's submission of the applicable Purchase Notice
         or,  if the  Transfer  Agent  is not  participating  in  The  DTC  Fast
         Automated  Securities  Transfer  Program  and DWAC  system,  issue  and
         surrender  to the  address  as  specified  in the  Purchase  Notice,  a
         certificate,  registered in the name of the Buyer or its designee,  for
         the  number  of shares  of  Common  Stock to which  the Buyer  shall be
         entitled.  (a "Purchase  Failure"),  in addition to all other available
         remedies  which such Buyer may pursue  under  applicable  laws and this
         Agreement  (including  indemnification  obligations  of the Company set
         forth in Section 8 hereof),  the Company  shall pay in cash, on demand,
         additional  damages to the Buyer for each day after  such  fifth  (5th)
         Trading  Day that the  issuance of such  Purchase  Shares is not timely
         effected,  in an amount  equal to 1.5% of the product of (I) the number
         of Purchase  Shares not issued to the Buyer on a timely basis  pursuant
         to Section  1(e)(ii)  and to which such Buyer is entitled  and (II) the
         Closing Sale Price of the Common Stock on the Purchase Date.

                  (vi) Book Entry.  Notwithstanding anything to the contrary set
         forth herein,  upon purchase of any portion of the Available  Amount in
         accordance  with the terms  hereof,  the Buyer shall not be required to
         physically  surrender this Agreement to the Company.  The Buyer and the
         Company shall each  maintain  records  showing the remaining  Available
         Amount and the dates and  Purchase  Amounts for each  purchase or shall
         use such other  method,  reasonably  satisfactory  to the Buyer and the
         Company, so as not to require physical surrender of this Agreement upon

                                       4
<PAGE>

         each purchase.  The Buyer and any permitted assignee,  by acceptance of
         this Agreement, acknowledge and agree that, by reason of the provisions
         of this paragraph,  following  purchase of any portion of the Available
         Amount,  the remaining  Available  Amount under this Agreement shall be
         less than the aggregate Available Amount set forth on the face hereof.

         (f) Taxes.  The Company shall pay any and all taxes that may be payable
with  respect to the  issuance and delivery of any shares of Common Stock to the
Buyer made under of this Agreement.

         2.       BUYER'S REPRESENTATIONS AND WARRANTIES.

         The Buyer represents and warrants to the Company that:

         (a) Investment  Purpose.  The Buyer is entering into this Agreement and
acquiring the Commitment  Shares (as defined in Section 7(b) hereof) for its own
account  for  investment  only and not with a view  towards,  or for  resale  in
connection with, the public sale or distribution  thereof;  provided however, by
making the  representations  herein, the Buyer does not agree to hold any of the
Commitment Shares for any minimum or other specific term.

         (b) Accredited  Investor Status. The Buyer is an "accredited  investor"
as that term is defined in Rule 501(a)(3) of Regulation D.

         (c) Reliance on Exemptions.  The Buyer  understands that the Commitment
Shares are being offered and sold to it in reliance on specific  exemptions from
the registration requirements of United States federal and state securities laws
and that the Company is relying in part upon the truth and  accuracy of, and the
Buyer's   compliance   with,  the   representations,   warranties,   agreements,
acknowledgments  and  understandings  of the Buyer set forth  herein in order to
determine the  availability  of such exemptions and the eligibility of the Buyer
to acquire the Commitment Shares.

         (d)  Information.  The  Buyer  has been  furnished  with all  materials
relating to the business,  finances and  operations of the Company and materials
relating  to the  offer  and  sale  of the  Commitment  Shares  that  have  been
reasonably  requested  by the  Buyer,  including,  without  limitation,  the SEC
Documents (as defined in Section 3(f) hereof).  The Buyer  understands  that its
investment in the  Commitment  Shares  involves a high degree of risk. The Buyer
(i) is able to bear the economic risk of an investment in the Commitment  Shares
including a total loss,  (ii) has such knowledge and experience in financial and
business  matters that it is capable of  evaluating  the merits and risks of the
proposed investment in the Commitment Shares and (iii) has had an opportunity to
ask questions of and receive answers from the officers of the Company concerning
the financial  condition and business of the Company and others matters  related
to an investment in the Commitment Shares.  Neither such inquiries nor any other
due diligence investigations conducted by the Buyer or its representatives shall
modify,   amend  or  affect  the  Buyer's   right  to  rely  on  the   Company's
representations  and  warranties  contained  in  Section 3 below.  The Buyer has
sought such accounting,  legal and tax advice as it has considered  necessary to
make an informed  investment  decision  with respect to its  acquisition  of the
Commitment Shares.

         (e) No Governmental Review. The Buyer understands that no United States
federal  or state  agency or any other  government  or  governmental  agency has
passed on or made any  recommendation or endorsement of the Commitment Shares or
the fairness or suitability of the investment in the Commitment  Shares nor have
such  authorities  passed  upon or  endorsed  the merits of the  offering of the
Commitment Shares.

                                       5
<PAGE>

         (f) Transfer or Resale.  The Buyer  understands that except as provided
in the Registration  Rights  Agreement (as defined in Section 6(a) hereof):  (i)
the Commitment  Shares have not been and are not being registered under the 1933
Act or any  state  securities  laws,  and may not be  offered  for  sale,  sold,
assigned or transferred unless (A) subsequently  registered thereunder or (B) an
exemption  exists  permitting  such  Commitment  Shares to be sold,  assigned or
transferred  without such  registration;  (ii) any sale of the Commitment Shares
made in  reliance on Rule 144 may be made only in  accordance  with the terms of
Rule  144  and  further,  if  Rule  144 is not  applicable,  any  resale  of the
Commitment Shares under circumstances in which the seller (or the person through
whom the sale is made)  may be  deemed  to be an  underwriter  (as that  term is
defined in the 1933 Act) may require  compliance with some other exemption under
the 1933 Act or the  rules  and  regulations  of the SEC  thereunder;  and (iii)
neither the Company nor any other person is under any obligation to register the
Commitment  Shares  or the  Purchase  Shares  under  the 1933  Act or any  state
securities  laws or to comply  with the terms and  conditions  of any  exemption
thereunder.

         (g)  Validity;  Enforcement.  This  Agreement has been duly and validly
authorized,  executed  and  delivered  on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable  against the Buyer in accordance with
its terms,  subject as to enforceability to general  principles of equity and to
applicable bankruptcy, insolvency,  reorganization,  moratorium, liquidation and
other  similar laws  relating to, or affecting  generally,  the  enforcement  of
applicable creditors' rights and remedies.

         (h) Residency. The Buyer is a resident of the State of Illinois.

         (i) No Prior Short  Selling.  The Buyer  represents and warrants to the
Company  that at no time  prior  to the  date of this  Agreement  has any of the
Buyer,  its agents,  associates,  representatives  or  affiliates  engaged in or
effected, in any manner whatsoever, directly or indirectly, any (i) "short sale"
(as such term is defined  in Rule 3b-3 of the 1934 Act) of the  Common  Stock or
(ii) hedging transaction, which establishes a net short position with respect to
the Common Stock.

         3.       REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

         The Company represents and warrants to the Buyer that:

         (a) Organization and Qualification.  The Company and its "Subsidiaries"
(which for  purposes of this  Agreement  means any entity in which the  Company,
directly or indirectly, owns 50% or more of the voting stock or capital stock or
other similar  equity  interests)  are  corporations  duly organized and validly
existing in good standing under the laws of the  jurisdiction  in which they are
incorporated,  and have the requisite corporate power and authority to own their
properties  and to carry on their business as now being  conducted.  Each of the
Company and its  Subsidiaries  is duly qualified as a foreign  corporation to do
business and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business  conducted by it makes such qualification
necessary,  except to the extent  that the failure to be so  qualified  or be in
good  standing  could not  reasonably  be  expected  to have a Material  Adverse
Effect. As used in this Agreement,  "Material Adverse Effect" means any material
adverse  effect on any of: (i) the  business,  properties,  assets,  operations,
results  of   operations   or  financial   condition  of  the  Company  and  its
Subsidiaries,  if any,  taken as a whole,  (ii)  the  transactions  contemplated
hereby or by the  agreements  and  instruments  to be entered into in connection
herewith  or (iii) the  authority  or  ability of the  Company  to  perform  its
obligations under the Transaction Documents (as defined in Section 3(b) hereof).
The Company has no Subsidiaries except as set forth on Schedule 3(a).

                                       6
<PAGE>

        (b)  Authorization;  Enforcement;  Validity.  (i)  The  Company  has the
requisite   corporate  power  and  authority  to  enter  into  and  perform  its
obligations under this Agreement,  the Registration Rights Agreement (as defined
in Section 6(a) hereof) and each of the other agreements (the forms of which are
attached hereto) to be entered into by the parties hereto in connection with the
transactions  contemplated  by this Agreement  (collectively,  the  "Transaction
Documents"),  and to issue the  Commitment  Shares  and the  Purchase  Shares in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
the  Transaction  Documents  by the  Company and the  consummation  by it of the
transactions contemplated hereby and thereby,  including without limitation, the
issuance of the  Commitment  Shares and the  reservation  for  issuance  and the
issuance of the Purchase Shares  issuable under this  Agreement,  have been duly
authorized  by the  Company's  Board of  Directors  and no  further  consent  or
authorization  is  required  by the  Company,  its  Board  of  Directors  or its
shareholders, (iii) this Agreement has been, and each other Transaction Document
shall be on or prior to the  Commencement  Date,  duly executed and delivered by
the  Company and (iv) this  Agreement  constitutes,  and each other  Transaction
Document  upon its  execution on behalf of the Company,  shall  constitute,  the
valid and binding  obligations of the Company enforceable against the Company in
accordance  with their terms,  except as such  enforceability  may be limited by
general   principles   of   equity   or   applicable   bankruptcy,   insolvency,
reorganization,   moratorium,  liquidation  or  similar  laws  relating  to,  or
affecting generally, the enforcement of creditors' rights and remedies.

        (c) Capitalization.  As of the date hereof, the authorized capital stock
of the Company consists of 60,000,000 shares of Common Stock, of which as of the
date hereof,  44,425,929  shares are issued and  outstanding,  7,290 are held as
treasury  shares,  3,150,000  shares are reserved  for issuance  pursuant to the
Company's stock option plans of which only  approximately  750,000 shares remain
available and 676,000 shares are issuable and reserved for issuance  pursuant to
securities  (other than stock options  issued  pursuant to the  Company's  stock
option plans)  exercisable or exchangeable  for, or convertible  into, shares of
Common  Stock.  No other shares or classes of capital  stock of the Company have
been  authorized by the Company.  All of such  outstanding  shares have been, or
upon  issuance  will be,  validly  issued and are fully paid and  nonassessable.
Except as disclosed in Schedule  3(c),  (i) no shares of the  Company's  capital
stock are subject to preemptive  rights or any other similar rights or any liens
or  encumbrances  suffered  or  permitted  by the  Company,  (ii)  there  are no
outstanding debt securities,  (iii) there are no outstanding options,  warrants,
scrip, rights to subscribe to, calls or commitments of any character  whatsoever
relating to, or securities  or rights  convertible  into,  any shares of capital
stock of the  Company or any of its  Subsidiaries,  or  contracts,  commitments,
understandings  or arrangements by which the Company or any of its  Subsidiaries
is or may  become  bound to issue  additional  shares  of  capital  stock of the
Company  or any of its  Subsidiaries  or  options,  warrants,  scrip,  rights to
subscribe to, calls or commitments of any character  whatsoever  relating to, or
securities  or rights  convertible  into,  any  shares of  capital  stock of the
Company or any of its Subsidiaries, (iv) there are no agreements or arrangements
under which the Company or any of its  Subsidiaries is obligated to register the
sale of any of their  securities  under the 1933 Act  (except  the  Registration
Rights Agreement), (v) there are no outstanding securities or instruments of the
Company or any of its  Subsidiaries  which  contain  any  redemption  or similar
provisions,  and  there  are  no  contracts,   commitments,   understandings  or
arrangements  by which the Company or any of its  Subsidiaries  is or may become
bound to redeem a security of the Company or any of its Subsidiaries, (vi) there
are no securities or instruments containing  anti-dilution or similar provisions
that will be triggered by the issuance of the Commitment  Shares or the Purchase
Shares as  described in this  Agreement  and (vii) the Company does not have any
stock appreciation  rights or "phantom stock" plans or agreements or any similar
plan or  agreement.  The  Company  has  furnished  to the Buyer true and correct
copies of the  Company's  Certificate  of  Incorporation,  as amended  and as in
effect on the date hereof (the "Certificate of Incorporation"), and the

                                       7
<PAGE>

Company's  By-laws,  as  amended  and as in  effect  on  the  date  hereof  (the
"By-laws"),  and summaries of the terms of all  securities  convertible  into or
exercisable for Common Stock, if any, and copies of any documents containing the
material rights of the holders thereof in respect thereto.

         (d)  Issuance  of  Securities.  The  Commitment  Shares  have been duly
authorized and, upon issuance in accordance with the terms hereof,  shall be (i)
validly  issued,  fully  paid and  non-assessable  and (ii) free from all taxes,
liens and charges with respect to the issue thereof.  6,000,000 shares of Common
Stock have been duly  authorized  and reserved for issuance upon purchase  under
this Agreement. Upon issuance and payment therefore in accordance with the terms
and conditions of this  Agreement,  the Purchase Shares shall be validly issued,
fully paid and  nonassessable  and free from all taxes,  liens and charges  with
respect to the issue  thereof,  with the  holders  being  entitled to all rights
accorded to a holder of Common Stock.

         (e) No Conflicts.  Except as disclosed in Schedule 3(e), the execution,
delivery and  performance  of the  Transaction  Documents by the Company and the
consummation by the Company of the transactions  contemplated hereby and thereby
(including, without limitation, the reservation for issuance and issuance of the
Purchase  Shares)  will not (i)  result in a  violation  of the  Certificate  of
Incorporation,  any Certificate of  Designations,  Preferences and Rights of any
outstanding  series of  preferred  stock of the  Company or the  By-laws or (ii)
conflict  with,  or constitute a default (or an event which with notice or lapse
of time or both would become a default)  under,  or give to others any rights of
termination,   amendment,   acceleration  or  cancellation  of,  any  agreement,
indenture or  instrument  to which the Company or any of its  Subsidiaries  is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree  (including  federal and state  securities  laws and  regulations and the
rules and regulations of the Principal  Market  applicable to the Company or any
of its  Subsidiaries) or by which any property or asset of the Company or any of
its Subsidiaries is bound or affected, except in the case of conflicts, defaults
and  violations  under clause (ii),  which could not  reasonably  be expected to
result in a Material  Adverse  Effect.  Except as  disclosed  in Schedule  3(e),
neither the Company nor its  Subsidiaries  is in  violation of any term of or in
default under its Certificate of Incorporation,  any Certificate of Designation,
Preferences  and  Rights of any  outstanding  series of  preferred  stock of the
Company or By-laws or their  organizational  charter or  by-laws,  respectively.
Except as  disclosed  in  Schedule  3(e),  neither  the  Company  nor any of its
Subsidiaries  is in violation of any term of or is in default under any material
contract, agreement, mortgage,  indebtedness,  indenture,  instrument, judgment,
decree or order or any statute,  rule or regulation applicable to the Company or
its  Subsidiaries,  except for possible  conflicts,  defaults,  terminations  or
amendments  which could not  reasonably  be expected to have a Material  Adverse
Effect. The business of the Company and its Subsidiaries is not being conducted,
and shall not be conducted,  in violation of any law,  ordinance,  regulation of
any governmental entity, except for possible violations, the sanctions for which
either individually or in the aggregate could not reasonably be expected to have
a Material Adverse Effect. Except as specifically contemplated by this Agreement
and as required  under the 1933 Act,  the Company is not  required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or  governmental  agency or any  regulatory or  self-regulatory  agency in
order for it to  execute,  deliver or perform  any of its  obligations  under or
contemplated by the Transaction Documents in accordance with the terms hereof or
thereof.  Except as disclosed in Schedule  3(e),  all consents,  authorizations,
orders,  filings  and  registrations  which the  Company is  required  to obtain
pursuant to the preceding  sentence shall be obtained or effected on or prior to
the Commencement  Date. Except as disclosed in Schedule 3(e), the Company is not
and has not been since January 1, 1999, in violation of the listing requirements
of the Principal Market.

                                       8
<PAGE>

         (f)  SEC  Documents;  Financial  Statements.  Except  as  disclosed  in
Schedule 3(f),  since January 1, 1999, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "1934 Act") (all of the foregoing  filed prior to the date
hereof and all exhibits included therein and financial  statements and schedules
thereto and  documents  incorporated  by  reference  therein  being  hereinafter
referred to as the "SEC  Documents").  As of their  respective  dates (except as
they have been correctly  amended),  the SEC Documents  complied in all material
respects with the  requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents,  and none of the
SEC Documents, at the time they were filed with the SEC (except as they may have
been correctly  amended),  contained any untrue  statement of a material fact or
omitted to state a material fact  required to be stated  therein or necessary in
order to make the statements  therein, in light of the circumstances under which
they were made, not  misleading.  As of their  respective  dates (except as they
have been correctly amended),  the financial  statements of the Company included
in the  SEC  Documents  complied  as to  form  in  all  material  respects  with
applicable  accounting  requirements  and the published rules and regulations of
the SEC with respect  thereto.  Such financial  statements have been prepared in
accordance with generally accepted accounting principles,  consistently applied,
during the periods  involved  (except (i) as may be otherwise  indicated in such
financial  statements  or the  notes  thereto  or (ii) in the case of  unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position  of  the  Company  as of the  dates  thereof  and  the  results  of its
operations  and cash flows for the periods then ended  (subject,  in the case of
unaudited statements, to normal year-end audit adjustments).

         (g) Absence of Certain  Changes.  Except as disclosed in Schedule 3(g),
since  September  30,  2000,  there has been no material  adverse  change in the
business, properties,  operations,  financial condition or results of operations
of the Company or its  Subsidiaries.  The  Company has not taken any steps,  and
does not currently expect to take any steps, to seek protection  pursuant to any
bankruptcy  law  nor  does  the  Company  or any of its  Subsidiaries  have  any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.

         (h)  Absence  of  Litigation.  There is no  action,  suit,  proceeding,
inquiry  or  investigation  before or by any  court,  public  board,  government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the Company's or
the Company's  Subsidiaries'  officers or directors in their capacities as such,
which  could  reasonably  be  expected  to have a  Material  Adverse  Effect.  A
description of each action, suit, proceeding, inquiry or investigation before or
by any court, public board, government agency,  self-regulatory  organization or
body  which,  as of the date of this  Agreement,  is  pending or  threatened  in
writing  against  or  affecting  the  Company,  the  Common  Stock or any of the
Company's  Subsidiaries  or any of the Company's or the Company's  Subsidiaries'
officers or  directors  in their  capacities  as such,  is set forth in Schedule
3(h).

         (i) Acknowledgment  Regarding Buyer's Status. The Company  acknowledges
and  agrees  that the Buyer is acting  solely in the  capacity  of arm's  length
purchaser  with  respect  to the  Transaction  Documents  and  the  transactions
contemplated hereby and thereby. The Company further acknowledges that the Buyer
is not acting as a  financial  advisor or  fiduciary  of the  Company (or in any
similar capacity) with respect to the Transaction Documents and the transactions
contemplated  hereby and thereby and any advice given by the Buyer or any of its
representatives  or agents in connection with the Transaction  Documents and the
transactions contemplated hereby and thereby is merely incidental to the Buyer's
purchase of the Purchase  Shares.  The Company  further  represents to the Buyer
that the

                                       9
<PAGE>

Company's decision to enter into the Transaction Documents has been based solely
on the  independent  evaluation  by the  Company  and  its  representatives  and
advisors.

         (j) No  General  Solicitation.  Neither  the  Company,  nor  any of its
affiliates,  nor any person  acting on its or their  behalf,  has engaged in any
form of general  solicitation  or general  advertising  (within  the  meaning of
Regulation  D under  the 1933 Act) in  connection  with the offer or sale of the
Commitment  Shares  or the  Purchase  Shares  other the  registration  statement
contemplated in Section 4(a) hereof.

         (k)  No  Integrated  Offering.  Neither  the  Company,  nor  any of its
affiliates,  nor any  person  acting on its or their  behalf  has,  directly  or
indirectly,  made any offers or sales of any security or solicited any offers to
buy any security,  under circumstances that would require registration of any of
the  Commitment  Shares or  Purchase  Shares  under  the 1933 Act or cause  this
offering of the Commitment Shares or Purchase Shares to be integrated with prior
offerings  by the  Company  for  purposes  of  the  1933  Act or any  applicable
shareholder approval provisions,  including, without limitation, under the rules
and  regulations of any exchange or automated  quotation  system on which any of
the securities of the Company are listed or designated,  nor will the Company or
any of its Subsidiaries take any action or steps that would require registration
of any of the  Commitment  Shares or the  Purchase  Shares under the 1933 Act or
cause the offering of the Commitment  Shares or Purchase Shares to be integrated
with other offerings.

         (l) Dilutive Effect. The Company  understands and acknowledges that the
number of Purchase  Shares  purchasable  under this  Agreement  will increase in
certain  circumstances.  The Company further acknowledges that its obligation to
issue  Purchase  Shares  under this  Agreement in  accordance  with the term and
conditions  hereof is absolute  and  unconditional  regardless  of the  dilutive
effect  that  such  issuance  may  have  on the  ownership  interests  of  other
shareholders of the Company.

         (m) Intellectual  Property Rights. The Company and its Subsidiaries own
or possess  adequate  rights or licenses to use all material  trademarks,  trade
names, service marks, service mark registrations, service names, patents, patent
rights,    copyrights,    inventions,    licenses,    approvals,    governmental
authorizations,  trade secrets and rights  necessary to conduct their respective
businesses as now conducted.  Except as set forth on Schedule 3(m),  none of the
Company's  material  trademarks,   trade  names,  service  marks,  service  mark
registrations,  service names, patents, patent rights,  copyrights,  inventions,
licenses,   approvals,   government  authorizations,   trade  secrets  or  other
intellectual  property  rights have expired or terminated,  or, by the terms and
conditions  thereof,  are scheduled to expire or terminate within two years from
the date of this  Agreement.  The Company and its  Subsidiaries  do not have any
knowledge of any infringement by the Company or its Subsidiaries of any material
trademark,  trade name rights, patents, patent rights,  copyrights,  inventions,
licenses, service names, service marks, service mark registrations, trade secret
or other  similar  rights of others,  or of any such  development  of similar or
identical  trade secrets or technical  information by others and,  except as set
forth on Schedule 3(m),  there is no claim,  action or proceeding  being made or
brought against, or to the Company's  knowledge,  being threatened against,  the
Company or its Subsidiaries  regarding  trademark,  trade name, patents,  patent
rights,  invention,  copyright,  license,  service names, service marks, service
mark registrations,  trade secret or other infringement,  which could reasonably
be expected to have a Material Adverse Effect.

         (n)  Environmental  Laws. The Company and its  Subsidiaries  (i) are in
compliance with any and all applicable  foreign,  federal,  state and local laws
and  regulations  relating to the  protection  of human  health and safety,  the
environment  or  hazardous  or  toxic   substances  or  wastes,   pollutants  or

                                       10
<PAGE>

contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable  Environmental Laws to conduct
their  respective  businesses  and  (iii) are in  compliance  with all terms and
conditions of any such permit, license or approval, except where, in each of the
three  foregoing  clauses,  the  failure to so comply  could not  reasonably  be
expected to have, individually or in the aggregate, a Material Adverse Effect.

         (o) Title.  The Company and its  Subsidiaries  have good and marketable
title in fee simple to all real  property and good and  marketable  title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects  except  such  as are  described  in  Schedule  3(o)  or  such as do not
materially  affect the value of such property and do not interfere  with the use
made and  proposed  to be made of such  property  by the  Company and any of its
Subsidiaries.  Any real property and facilities  held under lease by the Company
and any of its  Subsidiaries  are  held  by them  under  valid,  subsisting  and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such  property and buildings by the
Company and its Subsidiaries.

         (p) Insurance.  The Company and each of its Subsidiaries are insured by
insurers of recognized  financial  responsibility  against such losses and risks
and in such  amounts as  management  of the  Company  believes to be prudent and
customary  in the  businesses  in which the  Company  and its  Subsidiaries  are
engaged.  Neither the Company nor any such  Subsidiary has any reason to believe
that it will not be able to renew its  existing  insurance  coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue  its business at a cost that would not  materially  and
adversely  affect  the  condition,  financial  or  otherwise,  or the  earnings,
business or operations of the Company and its Subsidiaries, taken as a whole.

         (q) Regulatory  Permits.  The Company and its Subsidiaries  possess all
material  certificates,  authorizations  and permits  issued by the  appropriate
federal,  state or foreign  regulatory  authorities  necessary to conduct  their
respective  businesses,  and neither the  Company  nor any such  Subsidiary  has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.

         (r) Tax Status.  The Company and each of its  Subsidiaries  has made or
filed all federal and state income and all other  material tax returns,  reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its  Subsidiaries  has set aside
on its books  provisions  reasonably  adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental  assessments and
charges  that are  material  in amount,  shown or  determined  to be due on such
returns,  reports and  declarations,  except those being contested in good faith
and has set aside on its books provision  reasonably adequate for the payment of
all taxes for periods  subsequent to the periods to which such returns,  reports
or declarations  apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any  jurisdiction,  and the officers of the
Company know of no basis for any such claim.

         (s) Transactions With Affiliates.  Except as set forth on Schedule 3(s)
and other than the grant or  exercise  of stock  options  disclosed  on Schedule
3(c), none of the officers,  directors, or employees of the Company is presently
a party to any transaction  with the Company or any of its  Subsidiaries  (other
than for services as employees, officers and directors), including any contract,
agreement or other  arrangement  providing for the  furnishing of services to or
by,  providing for rental of real or personal  property to or from, or otherwise
requiring payments to or from any officer,  director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in

                                       11
<PAGE>

which any  officer,  director,  or any such  employee  has an  interest or is an
officer, director, trustee or partner.

         (t) Application of Takeover  Protections.  The Company and its board of
directors have taken or will take prior to the  Commencement  Date all necessary
action, if any, in order to render  inapplicable any control share  acquisition,
business  combination,  poison pill (including any  distribution  under a rights
agreement) or other similar  anti-takeover  provision  under the  Certificate of
Incorporation  or the laws of the state of its  incorporation  which is or could
become  applicable to the Buyer as a result of the transactions  contemplated by
this Agreement,  including,  without  limitation,  the Company's issuance of the
Commitment  Shares and the  Purchase  Shares and the  Buyer's  ownership  of the
Commitment Shares and the Purchase Shares.

         (u) Foreign  Corrupt  Practices.  Neither the  Company,  nor any of its
Subsidiaries,  nor any director, officer, agent, employee or other person acting
on behalf of the  Company or any of its  Subsidiaries  has, in the course of its
actions  for, or on behalf of, the  Company,  used any  corporate  funds for any
unlawful contribution,  gift,  entertainment or other unlawful expenses relating
to  political  activity;  made any direct or  indirect  unlawful  payment to any
foreign or  domestic  government  official  or employee  from  corporate  funds;
violated  or is in  violation  of any  provision  of the  U.S.  Foreign  Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe,  rebate,  payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.

         4.       COVENANTS.

         (a) Filing of Registration  Statement.  The Company shall within thirty
(30)  Trading  Days  from  the date  hereof  file a new  registration  statement
covering the sale of at least 6,000,000 Purchase Shares and 1,331,009 Commitment
Shares. The Buyer and its counsel shall have a reasonable  opportunity to review
and comment upon such  registration  statement or amendment to such registration
statement  and any  related  prospectus  prior to its filing  with the SEC.  The
Company  shall use its best  efforts  to have  such  registration  statement  or
amendment declared effective by the SEC at the earliest possible date.

         (b) Blue Sky. The Company shall,  on or before the  Commencement  Date,
take such action, if any, as the Company shall reasonably determine is necessary
in order to obtain an exemption for or to qualify the Commitment  Shares and the
Purchase  Shares  for  sale  to the  Buyer  pursuant  to  this  Agreement  under
securities or "Blue Sky" laws of the states of the United  States  designated by
the Buyer,  and shall provide  evidence of any such action so taken to the Buyer
on or prior to the  Commencement  Date.  The Company  shall make all filings and
reports relating to the offer and sale of the Commitment Shares and the Purchase
Shares required under applicable  securities or "Blue Sky" laws of the states of
the United States following the Commencement Date.

         (c) No Variable Priced Financing. Other than pursuant to this Agreement
or in connection  with a licensing  agreement with a  pharmaceutical  company or
current licensees of the Company, the primary purpose of which is not to make an
equity investment in the Company,  the Company agrees that beginning on the date
of this  Agreement and ending on the date of  termination  of this Agreement (as
provided  in  Section  11(k)  hereof),  neither  the  Company  nor  any  of  its
Subsidiaries shall, without the prior written consent of the Buyer, contract for
any equity financing  (including any debt financing with an equity component) or
issue any equity  securities  of the  Company or any  Subsidiary  or  securities
convertible or exchangeable  into or for equity securities of the Company or any
Subsidiary  (including debt securities with an equity  component)  which, in any
case (i) are convertible  into or exchangeable  for

                                       12
<PAGE>

an indeterminate  number of shares of common stock, (ii) are convertible into or
exchangeable  for Common  Stock at a price which varies with the market price of
the Common  Stock,  (iii)  directly or  indirectly  provide for any  "re-set" or
adjustment of the purchase  price,  conversion  rate or exercise price after the
issuance of the security, or (iv) contain any "make-whole" provision based upon,
directly or indirectly,  the market price of the Common Stock after the issuance
of the security, in each case, other than reasonable and customary anti-dilution
adjustments for issuance of shares of Common Stock at a price which is below the
market price of the Common Stock.

         (d) Listing.  The Company shall  promptly  secure the listing of all of
the Purchase Shares and Commitment Shares upon each national securities exchange
and automated  quotation  system,  if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and shall maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all such
securities  from  time to time  issuable  under  the  terms  of the  Transaction
Documents.  The Company  shall  maintain the Common  Stock's  authorization  for
quotation  on  the  Principal  Market.  Neither  the  Company  nor  any  of  its
Subsidiaries  shall take any action that would be reasonably  expected to result
in the delisting or suspension of the Common Stock on the Principal Market.  The
Company shall  promptly,  and in no event later than the following  Trading Day,
provide to the Buyer copies of any notices it receives from the Principal Market
regarding  the  continued  eligibility  of the Common  Stock for listing on such
automated  quotation  system or securities  exchange.  The Company shall pay all
fees and expenses in  connection  with  satisfying  its  obligations  under this
Section.

         (e)  Limitation  on Short  Sales and  Hedging  Transactions.  The Buyer
agrees that  beginning on the date of this  Agreement  and ending on the date of
termination of this  Agreement as provided in Section  11(k),  the Buyer and its
agents,  representatives and affiliates shall not in any manner whatsoever enter
into or effect,  directly or  indirectly,  any (i) "short sale" (as such term is
defined  in Rule 3b-3 of the 1934 Act) of the  Common  Stock or (ii)  hedging or
other  transaction  that  establishes  a net short  position with respect to the
Common Stock;  provided,  however, that such restrictions shall not apply if the
Buyer  submits to the  Company  within one Trading Day after a sale of shares of
Common  Stock a  Purchase  Notice  entitling  the  Buyer to  receive a number of
Purchase  Shares at least  equal to the number of shares so sold and the Company
fails to timely issue to the Buyer the number of Purchase  Shares at least equal
to the number of shares so sold in accordance with the terms of this Agreement.

         (f) Limitation on Sales of Commitment Shares. The Buyer agrees that the
Buyer shall not  transfer or sell the  Commitment  Shares (as defined in Section
7(b)  hereof)  until  the  Maturity  Date  or  until  this  Agreement  has  been
terminated,  provided,  however,  that such restrictions shall not apply: (i) to
transfers to or among  affiliates (as defined in the 1934 Act), (ii) to a pledge
in  connection  with a bona  fide loan (but not the  foreclosure  thereon)  or a
deposit to a margin  account,  or (iii) if an Event of Default has occurred,  or
any event  which,  after notice  and/or lapse of time,  would become an Event of
Default,  including any failure by the Company to timely issue  Purchase  Shares
under this  Agreement.  Notwithstanding  the  forgoing,  the Buyer may  transfer
Commitment  Shares to a third  party in order to settle a sale made by the Buyer
where the Buyer reasonably expects the Company to deliver Purchase Shares to the
Buyer under this Agreement so long as the Buyer maintains  ownership of the same
overall number of shares of Common Stock by "replacing" the Commitment Shares so
transferred with Purchase Shares when the Purchase Shares are actually issued by
the Company to the Buyer.

         (h) Due Diligence. The Buyer shall have the right, from time to time as
the Buyer may reasonably deem appropriate,  to perform  reasonable due diligence
on the Company during normal  business  hours.  The Company and its officers and
employees  shall  reasonably  cooperate  with the Buyer

  0                                     13
<PAGE>

in connection  with any  reasonable  request by the Buyer related to the Buyer's
due diligence of the Company.

         5.       TRANSFER AGENT INSTRUCTIONS.

         All of the  Purchase  Shares and  Commitment  Shares to be issued under
this  Agreement  shall be issued  without  any  restrictive  legend and shall be
issued by the Company's  transfer  agent via The DTC Fast  Automated  Securities
Transfer Program,  by crediting the appropriate number of shares of Common Stock
to which the Buyer shall be entitled  to the Buyer's or its  designee's  balance
account with The DTC through The DTC DWAC system,  or, if the Transfer  Agent is
not participating in The DTC Fast Automated Securities Transfer Program and DWAC
system, issue and surrender to the Buyer, a certificate,  registered in the name
of the Buyer or its designee,  for the number of shares of Common Stock to which
the Buyer shall be entitled. The Company shall issue irrevocable instructions to
its transfer agent, and any subsequent  transfer agent, to issue Purchase Shares
in the name of the Buyer or its respective  nominee(s),  for the Purchase Shares
(the  "Irrevocable  Transfer Agent  Instructions").  The Company warrants to the
Buyer that no instruction other than the Irrevocable Transfer Agent Instructions
referred  to in this  Section 5, will be given by the  Company  to its  transfer
agent with respect to the Purchase Shares and that the Commitment Shares and the
Purchase Shares shall otherwise be freely  transferable on the books and records
of the  Company  as and to  the  extent  provided  in  this  Agreement  and  the
Registration  Rights Agreement  subject to the provisions of Section 4(f) in the
case of the Commitment Shares.

         6.       CONDITIONS TO THE COMPANY'S OBLIGATION TO COMMENCE
                  SALES OF SHARES OF COMMON STOCK.

         The  obligation  of the  Company  hereunder  to  commence  sales of the
Purchase  Shares  is  subject  to the  satisfaction  of  each  of the  following
conditions on or before the  Commencement  Date,  provided that these conditions
are for the Company's  sole benefit and may be waived by the Company at any time
in its sole discretion by providing the Buyer with prior written notice thereof:

         (a) The Buyer shall have executed each of the Transaction  Documents to
which  it is a party  and  delivered  the  same  to the  Company  including  the
Registration Rights Agreement substantially in the form of Exhibit C hereto (the
"Registration Rights Agreement").

         (b)  Subject  to  the  Company's   compliance   with  Section  4(a),  a
registration  statement  covering the sale of the Commitment Shares and at least
6,000,000  Purchase Shares shall have been declared effective under the 1933 Act
by the SEC and no stop order with respect to the Registration Statement shall be
pending or threatened by the SEC.

         (c) The  representations  and warranties of the Buyer shall be true and
correct  in  all  material  respects  as of the  date  when  made  and as of the
Commencement  Date as though made at that time (except for  representations  and
warranties  that  speak  as of a  specific  date),  and  the  Buyer  shall  have
performed,  satisfied and complied in all material  respects with the covenants,
agreements and conditions required by this Agreement to be performed,  satisfied
or complied with by the Buyer at or prior to the Commencement Date.

         7.       CONDITIONS TO THE BUYER'S OBLIGATION TO COMMENCE
                  PURCHASES OF SHARES OF COMMON STOCK.

                                       14
<PAGE>

         The  obligation of the Buyer to commence  purchases of Purchase  Shares
under  this  Agreement  is  subject  to  the  satisfaction,  on  or  before  the
Commencement  Date,  of each of the  following  conditions,  provided that these
conditions  are for the Buyer's  sole  benefit and may be waived by the Buyer at
any time in its sole  discretion  by providing  the Company  with prior  written
notice thereof:

         (a) The Company shall have executed each of the  Transaction  Documents
and delivered the same to the Buyer including the Registration  Rights Agreement
substantially in the form of Exhibit C hereto.

         (b) The  Company  shall have  issued to the Buyer a number of shares of
Common Stock (the "Commitment Shares") equal to 8% of $21,000,000 divided by the
lower of (A) the  arithmetic  average of the  Closing  Sale Prices of the Common
Stock  for the five (5)  consecutive  Trading  Days  immediately  preceding  the
Trading Day which is two (2) Trading Days prior to the Commencement Date and (B)
the  arithmetic  average of the Closing  Sale Prices of the Common Stock for the
five (5) consecutive  Trading Days  immediately  preceding the date hereof.  The
number  of   Commitment   Shares  shall  be   appropriately   adjusted  for  any
reorganization,  recapitalization,  non-cash  dividend,  stock  split  or  other
similar  transaction  occurring  on or  prior  to  the  Commencement  Date.  The
Commitment  Shares shall be issued to the Buyer without any  restrictive  legend
and shall be issued by the Company's  transfer  agent via The DTC Fast Automated
Securities  Transfer Program,  by crediting the appropriate  number of shares of
Common  Stock  to which  the  Buyer  shall be  entitled  to the  Buyer's  or its
designee's  balance account with The DTC through The DTC DWAC system,  or if the
Transfer  Agent  is not  participating  in The  DTC  Fast  Automated  Securities
Transfer  Program  and  DWAC  system,  issue  and  surrender  to  the  Buyer,  a
certificate,  registered  in the  name of the  Buyer  or its  designee,  for the
appropriate  number  of shares  of  Common  Stock to which  the  Buyer  shall be
entitled.

         (c) The Common Stock shall be authorized for quotation on the Principal
Market, trading in the Common Stock shall not have been within the last 365 days
suspended by the SEC or the  Principal  Market and the  Purchase  Shares and the
Commitment Shares shall be approved for listing upon the Principal Market.

         (d) The Buyer shall have received the opinions of the  Company's  legal
counsel  dated  as of  the  Commencement  Date  covering  customary  matters  in
customary form.

         (e) The representations and warranties of the Company shall be true and
correct  in all  material  respects  (except  to the  extent  that  any of  such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such  representations  and warranties  shall be true and
correct  without further  qualification)  as of the date when made and as of the
Commencement  Date as though made at that time (except for  representations  and
warranties  that  speak  as of a  specific  date)  and the  Company  shall  have
performed, satisfied and complied with the covenants,  agreements and conditions
required by the  Transaction  Documents to be  performed,  satisfied or complied
with by the Company at or prior to the  Commencement  Date. The Buyer shall have
received a  certificate,  executed by the CEO,  President or CFO of the Company,
dated as of the Commencement  Date, to the foregoing effect in the form attached
hereto as Exhibit E.

         (f)  The  Board  of  Directors  of  the  Company   shall  have  adopted
resolutions  substantially  in the form attached hereto as Exhibit F which shall
be in full force and effect  without any amendment or  supplement  thereto as of
the Commencement Date.

                                       15
<PAGE>

         (g) As of the Commencement Date, the Company shall have reserved out of
its  authorized and unissued  Common Stock,  solely for the purpose of effecting
purchases of Purchase  Shares  hereunder,  at least  6,000,000  shares of Common
Stock.

         (h) The Irrevocable Transfer Agent Instructions, in the form of Exhibit
G attached  hereto,  shall have been delivered to and acknowledged in writing by
the Company and the Company's transfer agent.

         (i) The  Company  shall  have  delivered  to the  Buyer  a  certificate
evidencing  the  incorporation  and good standing of the Company in the State of
Delaware  issued by the Secretary of State of the State of Delaware as of a date
within ten (10) Trading Days of the Commencement Date.

         (j) The Company shall have  delivered to the Buyer a certified  copy of
the Certificate of  Incorporation  as certified by the Secretary of State of the
State of Delaware within ten (10) Trading Days of the Commencement Date.

         (k) The  Company  shall  have  delivered  to the  Buyer  a  secretary's
certificate  executed  by  the  Secretary  of  the  Company,  dated  as  of  the
Commencement Date, in the form attached hereto as Exhibit H.

         (l) A registration statement covering the sale of all of the Commitment
Shares and at least 6,000,000 Purchase Shares shall have been declared effective
under the 1933 Act by the SEC and no stop order with respect to the registration
statement  shall be pending or  threatened  by the SEC.  The Company  shall have
prepared and delivered to the Buyer a final form of Prospectus to be used by the
Buyer in  connection  with any sales of any  Commitment  Shares or any  Purchase
Shares. The Company shall have made all filings under all applicable federal and
state  securities  laws  necessary to consummate  the issuance of the Commitment
Shares and the Purchase  Shares  pursuant to this  Agreement in compliance  with
such laws.

         (m) No Event of Default has occurred,  or any event which, after notice
and/or lapse of time, would become an Event of Default has occurred.

         (n) On or prior to the  Commencement  Date,  the Company shall take all
necessary action, if any, and such actions as reasonably requested by the Buyer,
in  order  to  render  inapplicable  any  control  share  acquisition,  business
combination,  shareholder rights plan or poison pill (including any distribution
under a rights  agreement) or other similar  anti-takeover  provision  under the
Certificate of Incorporation or the laws of the state of its incorporation which
is or could  become  applicable  to the  Buyer as a result  of the  transactions
contemplated by this Agreement,  including,  without  limitation,  the Company's
issuance  of the  Commitment  Shares and the  Purchase  Shares  and the  Buyer's
ownership of the Commitment Shares and the Purchase Shares.

         8.       INDEMNIFICATION.

         In  consideration  of  the  Buyer's   execution  and  delivery  of  the
Transaction  Documents  and  acquiring  the  Commitment  Shares and the Purchase
Shares hereunder and in addition to all of the Company's other obligations under
the Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless the Buyer and all of its affiliates, shareholders, officers, directors,
employees and direct or indirect  investors  and any of the  foregoing  person's
agents or other representatives (including,  without limitation,  those retained
in  connection   with  the   transactions

                                       16
<PAGE>

contemplated  by this  Agreement)  (collectively,  the  "Indemnitees")  from and
against any and all actions,  causes of action,  suits, claims,  losses,  costs,
penalties,  fees,  liabilities and damages, and expenses in connection therewith
(irrespective  of whether any such Indemnitee is a party to the action for which
indemnification  hereunder is sought), and including reasonable  attorneys' fees
and disbursements (the "Indemnified Liabilities"), incurred by any Indemnitee as
a result of, or arising  out of, or  relating  to (a) any  misrepresentation  or
breach of any  representation or warranty made by the Company in the Transaction
Documents or any other certificate,  instrument or document  contemplated hereby
or thereby,  (b) any breach of any  covenant,  agreement  or  obligation  of the
Company  contained  in  the  Transaction  Documents  or any  other  certificate,
instrument  or  document  contemplated  hereby or  thereby,  or (c) any cause of
action, suit or claim brought or made against such Indemnitee and arising out of
or resulting  from the  execution,  delivery,  performance or enforcement of the
Transaction   Documents  or  any  other  certificate,   instrument  or  document
contemplated  hereby  or  thereby,   other  than  with  respect  to  Indemnified
Liabilities  which  directly and primarily  result from the gross  negligence or
willful  misconduct  of  the  Indemnitee.  To  the  extent  that  the  foregoing
undertaking  by the Company  may be  unenforceable  for any reason,  the Company
shall make the maximum  contribution to the payment and  satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law.

         9.       EVENTS OF DEFAULT.

         An "Event of Default"  shall be deemed to have  occurred at any time as
any of the following events occurs:

         (a) while any  registration  statement  is  required  to be  maintained
effective  pursuant  to the  terms of the  Registration  Rights  Agreement,  the
effectiveness of such registration  statement lapses for any reason  (including,
without limitation, the issuance of a stop order) or is unavailable to the Buyer
for sale of all of the  Registrable  Securities (as defined in the  Registration
Rights  Agreement)  in  accordance  with the  terms of the  Registration  Rights
Agreement,  and such lapse or unavailability  continues for a period of ten (10)
consecutive  Trading  Days or for more than an  aggregate of thirty (30) Trading
Days in any 365-day period;

         (b) the  suspension  from  trading or failure of the Common Stock to be
listed on the Principal Market for a period of ten (10) consecutive Trading Days
or for more than an aggregate of thirty (30) Trading Days in any 365-day period;

         (c) the  failure of the  Company or the Common  Stock to fully meet the
requirements  for continued  listing on the Principal Market for a period of ten
(10)  consecutive  Trading  Days or for more than an  aggregate  of thirty  (30)
Trading Days in any 365-day period;

         (d) the Company's or the Transfer Agent's notice, verbal or written, to
the  Buyer,  including  by way of  public  announcement,  at  any  time,  of its
intention  not to comply with a proper  request for purchase of Purchase  Shares
under this Agreement that is tendered in accordance  with the provisions of this
Agreement,  or the failure of the Company to deliver a Company  Confirmation  of
Purchase  Notice to the Buyer and to the Transfer  Agent in accordance  with the
provisions  of this  Agreement  within two (2) Trading Days after the receipt by
the  Company of a Purchase  Notice  (subject to  extension  in  accordance  with
Section  1(e)(iii) for a good faith dispute made in accordance with the terms of
Section 1(e)(iii)); or the failure for any reason by the Transfer Agent to issue
Purchase  Shares to the Buyer within five (5) Trading Days after the  applicable
Purchase Date;

         (e)      intentionally omitted;

                                       17
<PAGE>

         (f) the Company  breaches  any  representation,  warranty,  covenant or
other term or  condition  under any  Transaction  Document if such breach  could
reasonably be expected to have a Material Adverse Effect and except, in the case
of a breach of a  covenant  which is  reasonably  curable,  only if such  breach
continues for a period of at least ten (10) Trading Days;

         (g) except as set forth on Schedule 9(g), any payment default under any
contract  whatsoever  or any  acceleration  prior to maturity  of any  mortgage,
indenture,  contract or  instrument  under which there may be issued or by which
there may be secured or evidenced  any  indebtedness  for money  borrowed by the
Company  or for money  borrowed  the  repayment  of which is  guaranteed  by the
Company,  whether such  indebtedness or guarantee now exists or shall be created
hereafter, which in any case, is in excess of $1,000,000;

         (h) if any Person  commences a proceeding  against the Company pursuant
to or within the meaning of any Bankruptcy Law;

         (i) if the Company  pursuant to or within the meaning of any Bankruptcy
Law; (A) commences a voluntary  case,  (B) consents to the entry of an order for
relief against it in an involuntary  case, (C) consents to the  appointment of a
Custodian of it or for all or  substantially  all of its  property,  (D) makes a
general assignment for the benefit of its creditors,  (E) becomes insolvent,  or
(F) is generally unable to pay its debts as the same become due; or

         (j) a court of competent  jurisdiction  enters an order or decree under
any Bankruptcy Law that; (A) is for relief against the Company in an involuntary
case, (B) appoints a Custodian of the Company or for all or substantially all of
its property, or (C) orders the liquidation of the Company or any Subsidiary.

In addition  to any other  rights and  remedies  under  applicable  law and this
Agreement, including the Buyer termination rights under Section 11(k) hereof, so
long as an Event of Default  has  occurred  and is  continuing,  or if any event
which, after notice and/or lapse of time, would become an Event of Default,  has
occurred  and is  continuing,  the Buyer shall not be  obligated to purchase any
shares of Common  Stock  under  this  Agreement.  If  pursuant  to or within the
meaning of any  Bankruptcy  Law, the Company  commences a voluntary  case or any
Person commences a proceeding  against the Company, a Custodian is appointed for
the  Company or for all or  substantially  all of its  property,  or the Company
makes a general assignment for the benefit of its creditors, (any of which would
be an Event of Default as described in Sections 9(h), 9(i) and 9(j) hereof) this
Agreement shall automatically  terminate without any liability or payment to the
Company without further action or notice by any Person.  No such  termination of
this Agreement shall affect the Company's or the Buyer's  obligations under this
Agreement with respect to pending  purchases and the Company and the Buyer shall
complete  their  respective  obligations  with respect to any pending  purchases
under this Agreement.

         10.      CERTAIN DEFINED TERMS.

         For  purposes of this  Agreement,  the  following  terms shall have the
following meanings:

         (a)      "1933 Act" means the Securities Act of 1933, as amended.


<PAGE>


         (b)  "Available  Amount"  means  initially  Twenty One Million  Dollars
$21,000,000  in the  aggregate  which  amount  shall be reduced by the  Purchase
Amount as the Buyer  purchases  shares of Common  Stock  pursuant  to  Section 1
hereof.

         (c) "Bankruptcy  Law" means Title 11, U.S. Code, or any similar federal
or state law for the relief of debtors.

         (d) [Intentionally Omitted].

         (e) "Closing  Sale Price" means,  for any security as of any date,  the
last closing trade price for such  security on the Principal  Market as reported
by  Bloomberg,  or,  if the  Principal  Market is not the  principal  securities
exchange or trading  market for such  security,  the last closing trade price of
such security on the principal  securities exchange or trading market where such
security is listed or traded as reported by Bloomberg.

         (f) "Custodian" means any receiver,  trustee,  assignee,  liquidator or
similar official under any Bankruptcy Law.

         (g) "Fixed Purchase Price" means $15.00, appropriately adjusted for any
reorganization,  recapitalization,  non-cash  dividend,  stock  split  or  other
similar transaction.

         (h)  "Major   Transaction"   means  any  of  the  following:   (A)  the
consolidation,  merger or other business combination of the Company into another
Person  (other  than  pursuant  to a migratory  merger  effected  solely for the
purpose of changing the jurisdiction of  incorporation of the Company);  (B) any
transaction by the Company, including the contract, license, sale or acquisition
by the Company of securities,  services,  assets or property,  which involves or
which could reasonably be expected to involve a fair value of $5,000,000 or more
in a single transaction or series of related  transactions;  (C) the issuance of
debt or equity  securities in a transaction or a series of related  transactions
involving  the  receipt  by the  Company of  aggregate  proceeds  of  $5,000,000
(including fees and expenses paid with respect to the issuance  thereof) or more
with  any  entity  other  than  the  Buyer  or any of its  affiliates;  or (D) a
purchase,  tender or exchange  offer made by any person  other than the Buyer or
any of the Buyer's affiliates to the holders of more than 50% of the outstanding
shares of Common Stock.

         (i) "Mandatory  Purchase Rights" means the mandatory purchase rights of
the Company pursuant to Section 1(c).

         (j)  "Maturity  Date"  means  the date  that is 720  calendar  days (24
Monthly Periods) from the  Commencement  Date which such date may be extended by
up to an additional six (6) months by the Company,  in its sole  discretion,  by
written notice to the Buyer].

         (k) "Monthly  Base Amount"  means Eight  Hundred  Seventy Five Thousand
Dollars ($875,000) per Monthly Period.

         (l)  "Monthly  Period"  means each  successive  30 calendar  day period
commencing with the Commencement Date.

                                       19
<PAGE>

         (m)  "Person"  means an  individual  or entity  including  any  limited
liability  company, a partnership,  a joint venture, a corporation,  a trust, an
unincorporated  organization  and a  government  or  any  department  or  agency
thereof.

         (n)  "Principal  Market" means The Nasdaq OTC/  Bulletin  Board market,
provided,  however,  that (i) in the event the  Company's  Common  Stock is ever
listed for trading on the Nasdaq National Market,  Nasdaq SmallCap Market or the
American  Stock  Exchange,  than the  "Principal  Market"  shall mean such other
market on which the Company's Common Stock is then listed, and (ii) for purposes
of Section 9(c) hereof only,  "Principal  Market" shall mean The Nasdaq SmallCap
Market in respect of the  requirements  for  continued  listing on the Principal
Market.

         (o)  "Purchase  Amount  means  the  portion  of  the  Available  Amount
submitted in a Purchase  Notice to be used to purchase  Common Stock pursuant to
Section 1 hereof.

         (p)  "Purchase  Date"  means the actual  date that the Buyer  submits a
Purchase Notice to the Company to purchase Common Stock hereunder so long as the
Buyer shall  transmit by facsimile (or  otherwise  deliver) to the Company on or
prior to 11:59 p.m., Central Time on such date.

         (q) "Purchase  Price"  means,  as of any Purchase Date or other date of
determination,  the lower of the (A) Fixed  Purchase  Price and (B) the Variable
Purchase Price, each in effect as of such date.

         (r) "Purchase Rate" means the number of shares of Common Stock issuable
upon  purchase  of a  Purchase  Amount  as  determined  in  accordance  with the
following formula: Purchase Amount divided by the Purchase Price.

         (s) "Sale  Price"  means,  for any  security as of any date,  the trade
price for such security  (other than in a trade  effected by the Buyer or any of
its  affiliates)  on the Principal  Market as reported by Bloomberg,  or, if the
Principal Market is not the principal  securities exchange or trading market for
such  security,  the trade price of such  security on the  principal  securities
exchange or trading  market where such  security is listed or traded as reported
by Bloomberg.

         (t) "SEC" means the United States Securities and Exchange Commission.

         (u) "Trading Day" means any day on which the  Principal  Market is open
for customary trading.

         (v) "Variable  Purchase  Price" means, as of any Purchase Date or other
date of  determination,  the lower of: (A) the  lowest  Sale Price of the Common
Stock  on the  Purchase  Date or such  other  date of  determination  or (B) the
arithmetic  average of any five (5) Closing  Sale  Prices for the Common  Stock,
selected by the Buyer,  during the fifteen (15) consecutive  Trading Days ending
on the Trading Day  immediately  preceding  such  Purchase Date or other date of
determination   (to  be   appropriately   adjusted   for   any   reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction).

         11.      MISCELLANEOUS.

         (a) Governing Law; Jurisdiction;  Jury Trial. The corporate laws of the
State of Delaware shall govern all issues  concerning the relative rights of the
Company and its shareholders.  All other questions  concerning the construction,
validity,  enforcement  and  interpretation  of this  Agreement  and  the

                                       20
<PAGE>

other Transaction  Documents shall be governed by the internal laws of the State
of  Illinois,  without  giving  effect to any choice of law or  conflict  of law
provision or rule (whether of the State of Illinois or any other  jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of  Illinois.  Each party  hereby  irrevocably  submits  to the  exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago, for
the  adjudication  of any  dispute  hereunder  or under  the  other  Transaction
Documents  or in  connection  herewith  or  therewith,  or with any  transaction
contemplated  hereby or discussed herein,  and hereby  irrevocably  waives,  and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or  proceeding  is  brought in an  inconvenient  forum or that the venue of such
suit,  action or proceeding is improper.  Each party hereby  irrevocably  waives
personal  service of process and  consents to process  being  served in any such
suit,  action or  proceeding  by  mailing a copy  thereof  to such  party at the
address for such notices to it under this Agreement and agrees that such service
shall  constitute  good and  sufficient  service of process and notice  thereof.
Nothing  contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST,  A JURY TRIAL FOR THE ADJUDICATION
OF ANY  DISPUTE  HEREUNDER  OR IN  CONNECTION  HEREWITH  OR ARISING  OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

         (b)  Counterparts.  This  Agreement  may be  executed  in  two or  more
identical  counterparts,  all of  which  shall  be  considered  one and the same
agreement and shall become effective when  counterparts have been signed by each
party and  delivered to the other  party;  provided  that a facsimile  signature
shall be  considered  due  execution  and shall be  binding  upon the  signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.

         (c) Headings.  The headings of this  Agreement are for  convenience  of
reference  and shall not form part of, or affect  the  interpretation  of,  this
Agreement.

         (d)  Severability.  If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction,  such invalidity or unenforceability shall
not affect the validity or  enforceability of the remainder of this Agreement in
that  jurisdiction  or the validity or  enforceability  of any provision of this
Agreement in any other jurisdiction.

         (e) Entire Agreement;  Amendments.  Except for (1) the  Confidentiality
Agreement  dated  October  13,  2000  between  the  Company  and the Buyer  (the
"Confidentiality  Agreement") and (2) the Letter Agreement dated the date hereof
between the Company and the Buyer (the "Letter  Agreement"),  (i) this Agreement
supersedes  all other prior oral or written  agreements  between the Buyer,  the
Company, their affiliates and persons acting on their behalf with respect to the
matters  discussed herein including that certain  Confidential  Term Sheet dated
November 14, 2000, and (ii) this Agreement,  the other Transaction Documents and
the  instruments  referenced  herein  contain  the entire  understanding  of the
parties  with  respect to the  matters  covered  herein and  therein.  Except as
specifically set forth in the Confidentiality  Agreement,  the Letter Agreement,
this Agreement or the other Transaction Documents and the instruments referenced
herein or therein,  neither the Company nor the Buyer makes any  representation,
warranty,  covenant or undertaking with respect to such matters. No provision of
this  Agreement may be amended other than by an instrument in writing  signed by
the Company and the Buyer,  and no provision  hereof may be waived other than by
an instrument in writing signed by the party against whom enforcement is sought.

                                       21
<PAGE>

         (f) Notices.  Any notices,  consents,  waivers or other  communications
required or permitted to be given under the terms of this  Agreement  must be in
writing  and will be deemed  to have  been  delivered:  (i) upon  receipt,  when
delivered  personally;  (ii)  upon  receipt,  when sent by  facsimile  (provided
confirmation of transmission  is  mechanically or  electronically  generated and
kept on file by the sending party);  or (iii) one Trading Day after deposit with
a  nationally  recognized  overnight  delivery  service,  in each case  properly
addressed to the party to receive the same. The addresses and facsimile  numbers
for such communications shall be:

         If to the Company:
                  Unigene Laboratories, Inc.
                  110 Little Falls Road
                  Fairfield, New Jersey 07004
                  Telephone:        973-882-0860
                  Facsimile:        973-227-6088
                  Attention:        Dr. Warren Levy

         With a copy to:
                  Covington & Burling
                  1201 Pennsylvania Avenue, N.W.
                  Washington, D.C. 20004
                  Telephone:        202-662-5276
                  Facsimile:         202-778-5276
                  Attention:         D. Michael Lefever

         If to the Buyer:
                  Fusion Capital Fund II, LLC
                  222 Merchandise Mart Plaza, Suite 9-112
                  Chicago, IL 60654
                  Telephone:        312-644-6644
                  Facsimile:        312-644-6244
                  Attention:        Steven G. Martin

         If to the Transfer Agent:
                  Registrar & Transfer Company
                  10 Commerce Drive
                  Cranford, NJ 07016
                  Telephone:        908-497-2300
                  Facsimile:        908-497-2310
                  Attention: Ms. Florence Bogaenko

or at such other address and/or facsimile number and/or to the attention of such
other person as the  recipient  party has  specified by written  notice given to
each other  party  three (3)  Trading  Days prior to the  effectiveness  of such
change.  Written  confirmation  of receipt  (A) given by the  recipient  of such
notice,   consent,   waiver  or  other   communication,   (B)   mechanically  or
electronically  generated by the sender's facsimile machine containing the time,
date, and recipient facsimile number or (C) provided by a nationally  recognized
overnight  delivery service,  shall be rebuttable  evidence of personal service,
receipt by facsimile or receipt from a nationally  recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above, respectively.

                                       22
<PAGE>

         (g)  Successors and Assigns.  This Agreement  shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
The  Company  shall not  assign  this  Agreement  or any  rights or  obligations
hereunder without the prior written consent of the Buyer, including by merger or
consolidation.  The Buyer may not assign its rights under this Agreement without
the consent of the Company,  other than to an affiliate of the Buyer  controlled
by Steven G. Martin or Joshua B. Scheinfeld.

         (h) No Third Party  Beneficiaries.  This  Agreement is intended for the
benefit of the parties  hereto and their  respective  permitted  successors  and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

         (i)  Publicity.  The  Buyer  shall  have the  right to  approve  before
issuance  any press  releases  or any other  public  disclosure  (including  any
filings  with the SEC) with  respect to the  transactions  contemplated  hereby;
provided,  however,  that the  Company  shall be  entitled,  without  the  prior
approval  of any Buyer,  to make any press  release or other  public  disclosure
(including  any filings  with the SEC) with respect to such  transactions  as is
required  by  applicable  law and  regulations  (although  the  Buyer  shall  be
consulted  by the  Company in  connection  with any such press  release or other
public  disclosure  prior  to its  release  and  shall be  provided  with a copy
thereof).

         (j) Further Assurances. Each party shall do and perform, or cause to be
done and  performed,  all such  further acts and things,  and shall  execute and
deliver all such other agreements,  certificates,  instruments and documents, as
the other  party may  reasonably  request  in order to carry out the  intent and
accomplish  the  purposes  of  this  Agreement  and  the   consummation  of  the
transactions contemplated hereby.

         (k) Termination. This Agreement may be terminated only as follows:

                  (i) By the Buyer any time an Event of Default  exists  without
         any  liability  or payment to the Company.  However,  if pursuant to or
         within the  meaning of any  Bankruptcy  Law,  the  Company  commences a
         voluntary  case  or any  Person  commences  a  proceeding  against  the
         Company,  a  Custodian  is  appointed  for  the  Company  or for all or
         substantially  all of its  property,  or the  Company  makes a  general
         assignment for the benefit of its creditors,  (any of which would be an
         Event of Default as described in Sections  9(h),  9(i) and 9(j) hereof)
         this Agreement shall  automatically  terminate without any liability or
         payment to the Company  without further action or notice by any Person.
         No such termination of this Agreement under this Section 11(k)(i) shall
         affect the Company's or the Buyer's  obligations  under this  Agreement
         with respect to pending  purchases  and the Company and the Buyer shall
         complete  their  respective  obligations  with  respect to any  pending
         purchases under this Agreement.

                  (ii)  In the  event  that  the  Commencement  shall  not  have
         occurred, the Company shall have the option to terminate this Agreement
         for any reason or for no reason  without  liability of any party to any
         other party.  If this Agreement is terminated  pursuant to this Section
         11(k)(ii),  the Company shall issue to the Buyer the Commitment  Shares
         immediately  prior to the termination  hereof. In such case, the number
         of Commitment Shares shall be equal to 8% of $21,000,000 divided by the
         lower of (A) the  arithmetic  average of the Closing Sale Prices of the
         Common  Stock for the five (5)  consecutive  Trading  Days  immediately
         preceding  the Trading  Day which is two (2) Trading  Days prior to the
         date of termination of this Agreement and (B) the arithmetic average of
         the  Closing  Sale  Prices  of  the  Common  Stock  for  the  five  (5)
         consecutive  Trading Days  immediately  preceding the date hereof.  The
         number of  Commitment  Shares shall

                                       24
<PAGE>

         be  appropriately  adjusted for any  reorganization,  recapitalization,
         non-cash dividend, stock split or other similar transaction.

                  (iii)  In the  event  that  the  Commencement  shall  not have
         occurred on or before March 31, 2001, due to the failure to satisfy the
         conditions  set forth in  Sections  6 and 7 above  with  respect to the
         Commencement  (and the  nonbreaching  party's  failure  to  waive  such
         unsatisfied condition(s)), the nonbreaching party shall have the option
         to  terminate  this  Agreement at the close of business on such date or
         thereafter  without  liability of any party to any other party. If this
         Agreement is terminated  pursuant to this Section  11(k)(iii)  prior to
         the  Commencement  other than solely as a result of any material breach
         of the Buyer's  obligation  hereunder,  the Company  shall issue to the
         Buyer the Commitment Shares immediately upon the termination hereof. In
         such case,  the  number of  Commitment  Shares  shall be equal to 8% of
         $21,000,000  divided by the lower of (A) the arithmetic  average of the
         Closing  Sale Prices of the Common  Stock for the five (5)  consecutive
         Trading  Days  immediately  preceding  the Trading Day which is two (2)
         Trading Days prior to the date of termination of this Agreement and (B)
         the  arithmetic  average of the Closing Sale Prices of the Common Stock
         for the five (5)  consecutive  Trading Days  immediately  preceding the
         date hereof.  The number of  Commitment  Shares shall be  appropriately
         adjusted for any reorganization,  recapitalization,  non-cash dividend,
         stock split or other similar transaction.

                  (iv) If by the Maturity  Date, for any reason or for no reason
         the full  Available  Amount under this Agreement has not been purchased
         as provided for in Section 1 of this  Agreement,  by the Buyer  without
         any liability or payment to the Company.

                  (v) At any time after the  Commencement  Date,  and so long as
         the Company has  provided  appropriate  notice as described  below,  if
         during any ten (10) consecutive  Trading Days the Closing Sale Price of
         the Common Stock is below the Fixed Purchase Price for each of such ten
         (10)  Trading  Days,  the Company  shall have three (3) Trading Days to
         give  written  notice (a  "Company  Termination  Notice")  to the Buyer
         electing to terminate this  Agreement  without any liability or payment
         to the Buyer (a "Company Termination").  The Company Termination Notice
         shall not be  effective  until three (3) Trading Days after it has been
         received by the Buyer.  Any  Purchase  Notices  submitted  by the Buyer
         which have a Purchase  Date on or prior to the third (3rd)  Trading Day
         after receipt by the Buyer of the Company  Termination  Notice, must be
         honored by the Company as otherwise  provided  herein.  The Company may
         not deliver a Company  Termination Notice or otherwise effect a Company
         Termination  in   anticipation   of  or  in  connection  with  a  Major
         Transaction until such Major  Transaction  (whether or not consummated)
         has been publicly disclosed for a period of at least sixty (60) Trading
         Days.  In the event that within  sixty (60)  Trading  Days of a Company
         Termination,  the Company publicly  discloses that a Major  Transaction
         has been consummated or may be consummated, the Buyer shall be entitled
         to the following  payment equal to the Purchase Rate  (determined as of
         the date of the Company  Termination  Notice assuming a Purchase Amount
         equal to the remaining  Available Amount)  multiplied by the amount, if
         any that (A) the  arithmetic  average of the Closing Sale Price for the
         Common Stock for the ten (10) Trading Days  following  either:  (1) the
         public  disclosure of the Major  Transaction or (2) the consummation of
         the Major  Transaction,  as  selected  by the  Buyer,  exceeds  (B) the
         Purchase  Price  determined as of the date the Company  Termination  is
         effected. Any payments under the previous sentence shall be made either
         in the form of cash or  registered,  freely  tradable  shares of Common
         Stock,  eleven  (11)  Trading  Days  following  either:  (1) the public
         disclosure  of the Major  Transaction  or (2) the  consummation  of the
         Major  Transaction,  as selected by the Buyer.  To the extent that such
         payment has not been

                                       24
<PAGE>

         paid by the fifth  (5th)  Trading  Date  after its due date,  the Buyer
         shall be  entitled  to  interest  at an annual  rate of twenty  percent
         (20.0%) of the unpaid amount,  payable on demand.  If paid in shares of
         Common Stock, the "dollar value" per share of Common Stock shall be the
         average of the Closing Sale Prices of the Common Stock for the five (5)
         consecutive Trading Days prior to the payment date.

                  (vi) This Agreement shall automatically  terminate on the date
         that the  Company  sells and the Buyer  purchases  Twenty  One  Million
         Dollars  ($21,000,000) of Common Stock as provided herein,  without any
         action or notice on the part of any party.

Except as set forth in Sections 11(k)(i) and 11(k)(vi),  any termination of this
Agreement  pursuant to this  Section  11(k) shall be effected by written  notice
from the Company to the Buyer, or the Buyer to the Company,  as the case may be,
setting forth the basis for the  termination  hereof.  The  representations  and
warranties  of the Company and the Buyer  contained  in Sections 2 and 3 hereof,
the indemnification  provisions set forth in Section 8 hereof and the agreements
and covenants set forth in Section 11, shall  survive the  Commencement  and any
termination of this Agreement. No termination of this Agreement shall effect the
Company's  or the  Buyer's  obligations  under this  Agreement  with  respect to
pending  purchases and the Company and the Buyer shall complete their respective
obligations with respect to any pending purchases under this Agreement.

         (l) No  Financial  Advisor,  Placement  Agent,  Broker or  Finder.  The
Company  acknowledges that it has retained Gruntal & Co. as financial advisor in
connection with the transactions contemplated hereby. The Company represents and
warrants  to the Buyer  that it has not  engaged  any other  financial  advisor,
placement   agent,   broker  or  finder  in  connection  with  the  transactions
contemplated  hereby.  The Buyer  represents and warrants to the Company that it
has not engaged any  financial  advisor,  placement  agent,  broker or finder in
connection  with the  transactions  contemplated  hereby.  The Company  shall be
responsible for the payment of any fees or commissions, if any, of any financial
advisor,  placement  agent,  broker or finder  relating to or arising out of the
transactions  contemplated  hereby.  The Company  shall pay,  and hold the Buyer
harmless against, any liability, loss or expense (including, without limitation,
attorneys' fees and out of pocket expenses)  arising in connection with any such
claim.

         (m) No Strict Construction. The language used in this Agreement will be
deemed to be the language  chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.

         (n) Remedies,  Other  Obligations,  Breaches and Injunctive Relief. The
Buyer's remedies  provided in this Agreement shall be cumulative and in addition
to all other remedies available to the Buyer under this Agreement,  at law or in
equity  (including  a decree of specific  performance  and/or  other  injunctive
relief),  no remedy of the Buyer  contained  herein  shall be deemed a waiver of
compliance  with the  provisions  giving rise to such remedy and nothing  herein
shall limit the Buyer's  right to pursue  actual  damages for any failure by the
Company to comply with the terms of this  Agreement.  The  Company  acknowledges
that a breach by it of its obligations  hereunder will cause irreparable harm to
the Buyer and that the remedy at law for any such breach may be inadequate.  The
Company  therefore  agrees that,  in the event of any such breach or  threatened
breach,  the  Buyer  shall be  entitled,  in  addition  to all  other  available
remedies,  to an  injunction  restraining  any breach,  without the necessity of
showing economic loss and without any bond or other security being required.

         (o)  Changes to the Terms of this  Agreement.  This  Agreement  and any
provision  hereof may only be amended by an instrument in writing  signed by the
Company and the Buyer. The term

                                       25
<PAGE>

"Agreement" and all reference thereto, as used throughout this instrument, shall
mean  this   instrument  as  originally   executed,   or  if  later  amended  or
supplemented, then as so amended or supplemented.

         (p) Enforcement Costs. If: (i) this Agreement is placed by the Buyer in
the hands of an attorney for enforcement or is enforced by the Buyer through any
legal proceeding;  or (ii) an attorney is retained to represent the Buyer in any
bankruptcy,   reorganization,   receivership  or  other  proceedings   affecting
creditors'  rights  and  involving  a claim  under this  Agreement;  or (iii) an
attorney is retained to represent the Buyer in any other proceedings  whatsoever
in connection with this  Agreement,  then the Company shall pay to the Buyer, as
incurred by the Buyer,  all reasonable costs and expenses  including  attorneys'
fees  incurred in  connection  therewith,  in addition to all other  amounts due
hereunder.

         (q)  Failure  or  Indulgence  Not  Waiver.  No  failure or delay in the
exercise of any power,  right or privilege  hereunder  shall operate as a waiver
thereof,  nor shall any single or partial  exercise of any such power,  right or
privilege  preclude  other or further  exercise  thereof or of any other  right,
power or privilege.

                                    * * * * *

                                       26
<PAGE>

         IN WITNESS  WHEREOF,  the Buyer and the Company have caused this Common
Stock Purchase Agreement to be duly executed as of the date first written above.

                           THE COMPANY:

                           UNIGENE LABORATORIES, INC.

                           By:___________________________
                           Name: Warren Levy
                           Title: Chief Executive Officer

                           BUYER:

                           FUSION CAPITAL FUND II, LLC
                           BY: FUSION CAPITAL PARTNERS, LLC
                           BY: SGM HOLDINGS CORP.

                           By:__________________________
                           Name: Steven G. Martin
                           Title: President


<PAGE>

                                    SCHEDULES


Schedule 3(a)          Subsidiaries
Schedule 3(c)          Capitalization
Schedule 3(e)          Conflicts
Schedule 3(f)          1934 Act Filings
Schedule 3(g)          Material Changes
Schedule 3(h)          Litigation
Schedule 3(m)          Intellectual Property
Schedule 3(o)          Liens
Schedule 3(s)          Certain Transactions
Schedule 9(g)          Certain Indebtedness

                                    EXHIBITS


Exhibit A              Form of Purchase Notice
Exhibit B              Form of Company Confirmation of Purchase Notice
Exhibit C              Form of Registration Rights Agreement
Exhibit D              [Intentionally Omitted]
Exhibit E              Form of Officer's Certificate
Exhibit F              Form of Resolutions of Board of Directors of the Company
Exhibit G              Form of Irrevocable Transfer Agent Instructions
Exhibit H              Form of Secretary's Certificate


<PAGE>



                              DISCLOSURE SCHEDULES

Schedule 3(a) - Subsidiaries

Schedule 3(c) - Capitalization

Schedule 3(e) - No Conflicts

Schedule 3(f) - 1934 Act Filings

Schedule 3(g) - Absence of Certain Changes

Schedule 3(h) - Litigation

Schedule 3(m) - Intellectual Property Rights

Schedule 3(o) - Title

Schedule 3(s) - Transactions with Affiliates

Schedule 9(g)


<PAGE>



                                    EXHIBIT A

                             FORM OF PURCHASE NOTICE

         Reference is made to the Common Stock  Purchase  Agreement (the "Common
Stock Purchase  Agreement") between UNIGENE  LABORATORIES,  INC. (the "Company")
and  FUSION  CAPITAL  FUND II,  LLC dated  __________.  In  accordance  with and
pursuant to the Common Stock Purchase  Agreement,  the undersigned hereby elects
to  purchase  shares of common  stock,  par value  $.01 per share  (the  "Common
Stock"),  of the Company for the Available Amount indicated below as of the date
specified below.

         Purchase Date:
                                           -------------------------------------
         Monthly Period Dates:
                                           -------------------------------------
         Initial Available Amount:         $21,000,000
         Monthly Base Amount:              $875,000

         Remaining Available Amount
         prior to this purchase:           $
         --------                          -------------------------------------

         Remaining Monthly Base Amount
         prior to this purchase:           $
         --------                          -------------------------------------

         Available Amount to be purchased: $
                                           --------

         Remaining Available Amount
         after this purchase:              $
         -----                             -------------------------------------

         Remaining Monthly Base Amount
         after this purchase:              $
         -----                             -------------------------------------

Please confirm the following information:
         Purchase Price per share:         $
                                           -------------------------------------

             Fixed Purchase Price of $____
             Low Sale Price on Date Hereof
             Average of [____] Closing Sale Prices for _______($___),
             ________($___), _______($___), _______($___) and ________($___).

         Number of shares of Common Stock to be issued:
                                                        ------------------------

Please  issue  the  shares  of  Common  Stock in the  following  name and to the
following address:

         Issue to:
                                 ----------------------------------------------

                                 ----------------------------------------------

                                 ----------------------------------------------


         Authorized Signature:
                                 ----------------------------------------------
                                 Name:
                                      -----------------------------------------
                                 Title:
                                       ----------------------------------------
                                 Phone #:
                                         --------------------------------------

         Broker DTC Participant Code:    ________________
         Account Number* :               ________________

         * Note that receiving broker must initiate transaction on DWAC System.

<PAGE>

                                    EXHIBIT B

                 FORM OF COMPANY CONFIRMATION OF PURCHASE NOTICE

         Reference is made to the Common Stock  Purchase  Agreement (the "Common
Stock Purchase  Agreement") between UNIGENE  LABORATORIES,  INC. (the "Company")
and FUSION CAPITAL FUND II, LLC dated ________.  In accordance with and pursuant
to the Common Stock Purchase  Agreement,  the  undersigned  hereby  confirms and
authorizes the issuance of shares of common stock, par value $.01 per share (the
"Common  Stock") of the Company,  in  connection  with the  Purchase  Notice (as
defined in the Common Stock Purchase Agreement)  attached hereto.  Specifically,
the Company hereby confirms the following information:

         Purchase Date:
                                                 -------------------------------
         Monthly Period Dates:
                                                 -------------------------------
         Initial Available Amount:               $21,000,000.00
         Monthly Base Amount:                    $875,000.00

         Remaining Available Amount
         prior to this purchase:                 $
         --------                                -------------------------------

         Remaining Monthly Base Amount
         prior to this purchase:                 $
         --------                                -------------------------------

         Available Amount to be purchased:       $
                                                 -------------------------------

         Remaining Available Amount
         after this purchase:                    $
         -----                                   -------------------------------

         Remaining Monthly Base Amount
         after this purchase:                    $
         -----                                   -------------------------------

         Purchase Price per share:               $
                                                 -------------------------------

         Number of shares of Common
         Stock to be issued:                     -------------------------------


The shares of Common Stock shall be issued in the name and to the address as set
forth in the applicable Purchase Notice.

         Authorized Signature
                                      ------------------------------------------
                                      Name:
                                            ------------------------------------
                                      Title:
                                             -----------------------------------
                                      Phone #:
                                              ----------------------------------
                                      Fax #:
                                            ------------------------------------


<PAGE>


                                    EXHIBIT C

                      FORM OF REGISTRATION RIGHTS AGREEMENT

[Sent separately]

<PAGE>

                                    EXHIBIT E

                          FORM OF OFFICER'S CERTIFICATE

             This  Officer's  Certificate  ("Certificate")  is  being  delivered
pursuant to Section 7(e) of that certain Common Stock Purchase  Agreement  dated
as of  _________,  2000  ("Common  Stock  Purchase  Agreement"),  by and between
UNIGENE LABORATORIES,  INC., a Delaware corporation (the "Company"),  and FUSION
CAPITAL FUND II, LLC (the "Buyer").  Terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Common Stock Purchase Agreement.

             The undersigned, ___________, ______________ of the Company, hereby
certifies as follows:

                  1.  I am  the  _____________  of  the  Company  and  make  the
         statements contained in this Certificate;

                  2. The representations and warranties of the Company contained
         in the Common Stock  Purchase  Agreement are true and correct as of the
         date hereof;

                  3. The Company has  performed,  satisfied  and complied in all
         material respects with covenants, agreements and conditions required by
         the Transaction  Documents to be performed,  satisfied or complied with
         by the Company at or prior to the Commencement Date.

         IN WITNESS WHEREOF,  I have hereunder signed my name on this ___ day of
___________.

                                             -------------------------------
                                             Name:
                                             Title:

         The  undersigned  as  Secretary of  ________,  a ________  corporation,
hereby certifies that ___________ is the duly elected, appointed,  qualified and
acting  ________ of  _________  and that the  signature  appearing  above is his
genuine signature.

                                    ----------------------------------------
                                    Secretary


<PAGE>

                                    EXHIBIT F

                           FORM OF COMPANY RESOLUTIONS

         WHEREAS,  there has been presented to the Board of Directors of UNIGENE
LABORATORIES,  INC.,  (the  "Corporation")  a draft of a Common  Stock  Purchase
Agreement (the "Purchase  Agreement")  by and among the  Corporation  and Fusion
Capital Fund II, LLC  ("Fusion"),  providing for the purchase by Fusion of up to
Twenty One Million Dollars  ($21,000,000) of the Corporation's common stock, par
value $.01 (the "Common Stock"); and

         WHEREAS,  after careful  consideration of the Purchase  Agreement,  the
documents  incident  thereto and other factors  deemed  relevant by the Board of
Directors, the Board of Directors has determined that it is advisable and in the
best interests of the Corporation to engage in to  transactions  contemplated by
the Purchase Agreement.

                              Transaction Documents

         RESOLVED, that the transactions described in the Purchase Agreement are
hereby    approved   and    ____________________________________________    (the
"Authorized  Officers")  are  severally  authorized  to execute  and deliver the
Purchase Agreement,  and any other agreements or documents  contemplated thereby
(including,   without   limitation,   a  registration   rights   agreement  (the
"Registration  Rights  Agreement")  providing  for the sale of the shares of the
Company's Common Stock issuable in respect of the Purchase  Agreement) on behalf
of the Corporation,  with such amendments,  changes,  additions and deletions as
the Authorized Officers may deem to be appropriate and approve on behalf of, the
Corporation,  such approval to be conclusively  evidenced by the signature of an
Authorized Officer thereon; and

         FURTHER  RESOLVED,  that the terms and  provisions of the  Registration
Rights Agreement by and among the Corporation and Fusion are hereby approved and
the Authorized  Officers are authorized to execute and deliver the  Registration
Rights Agreement  (pursuant to the terms of the Purchase  Agreement),  with such
amendments,  changes, additions and deletions as the Authorized Officer may deem
appropriate  and  approve  on behalf of, an  Corporation,  such  approval  to be
conclusively evidenced by the signature of an Authorized Officer thereon; and

         FURTHER RESOLVED, that the terms and provisions of the Form of Transfer
Agent Instructions (the  "Instructions")  are hereby approved and the Authorized
Officers are authorized to execute and deliver the Instructions (pursuant to the
terms of the Purchase Agreement),  with such amendments,  changes, additions and
deletions as the Authorized  Officers may deem appropriate and approve on behalf
of, the Corporation, such approval to be conclusively evidenced by the signature
of an Authorized Officer thereon; and

                         Execution of Purchase Agreement

         FURTHER  RESOLVED,  that the Corporation be and it hereby is authorized
to execute the Purchase Agreement  providing for the purchase of common stock of
the Corporation having an aggregate value of up to $___________; and

<PAGE>

                            Issuance of Common Stock

         FURTHER  RESOLVED,  that the Corporation is hereby  authorized to issue
the  Commitment  Shares (as defined in the Purchase  Agreement)  and that,  upon
issuance of the  Commitment  Shares  pursuant  to the  Purchase  Agreement,  the
Commitment  Shares  will be duly  authorized,  validly  issued,  fully  paid and
nonassessable with no personal liability attaching to the ownership thereof; and

         FURTHER  RESOLVED,  that the Corporation is hereby  authorized to issue
shares of Common  Stock upon the  purchase  of shares of Common  Stock up to the
available  amount  under the  Purchase  Agreement  (the  "Purchase  Shares")  in
accordance  with the terms of the Purchase  Agreement and that, upon issuance of
the Purchase Shares pursuant to the Purchase Agreement, the Purchase Shares will
be duly  authorized,  validly  issued,  fully  paid  and  nonassessable  with no
personal liability attaching to the ownership thereof; and

         FURTHER   RESOLVED,   that  the  Corporation  shall  initially  reserve
_________  shares of Common  Stock for  issuance  as Purchase  Shares  under the
Purchase Agreement.

                             Registration Statement

         The  management of the  Corporation  has prepared an initial draft of a
Registration  Statement on Form ___ (the  "Registration  Statement") in order to
register  the  sale  of  the   Purchase   Shares  and  the   Commitment   Shares
(collectively, the "Shares"); and

         The Board of  Directors  has  determined  to approve  the  Registration
Statement and to authorize the  appropriate  officers of the Corporation to take
all such actions as they may deem appropriate to effect the Offering; and

         NOW, THEREFORE,  BE IT RESOLVED, that the officers and directors of the
Corporation  be, and each of them hereby is,  authorized and directed,  with the
assistance of counsel and accountants for the Corporation,  to prepare,  execute
and file with the  Securities and Exchange  Commission  (the  "Commission")  the
Registration   Statement,   which   Registration   Statement   shall   be  filed
substantially in the form presented to the Board of Directors, with such changes
therein as the Chief Executive  Officer of the Corporation or any Vice President
of  the  Corporation  shall  deem  desirable  and in the  best  interest  of the
Corporation and its shareholders  (such officer's  execution  thereof  including
such changes shall be deemed to evidence conclusively such determination); and

         FURTHER RESOLVED,  that the officers of the Corporation be, and each of
them hereby is,  authorized  and  directed,  with the  assistance of counsel and
accountants  for  the  Corporation,  to  prepare,  execute  and  file  with  the
Commission all amendments,  including post-effective amendments, and supplements
to the  Registration  Statement,  and  all  certificates,  exhibits,  schedules,
documents and other instruments relating to the Registration  Statement, as such
officers  shall deem  necessary or  appropriate  (such  officer's  execution and
filing thereof shall be deemed to evidence conclusively such determination); and

         FURTHER RESOLVED,  that the execution of the Registration Statement and
of any amendments and  supplements  thereto by the officers and directors of the
Corporation  be,  and  the  same  hereby  is,  specifically   authorized  either
personally or by the Authorized  Officers as such  officer's or director's  true
and lawful attorneys-in-fact and agents; and

<PAGE>

         FURTHER RESOLVED, that the Authorized Officers are hereby is designated
as "Agent for Service" of the  Corporation in connection  with the  Registration
Statement  and the  filing  thereof  with  the  Commission,  and the  Authorized
Officers hereby are,  authorized to receive  communications and notices from the
Commission with respect to the Registration Statement; and

         FURTHER RESOLVED,  that the officers of the Corporation be, and each of
them hereby is, authorized and directed to pay all fees, costs and expenses that
may  be  incurred  by  the  Corporation  in  connection  with  the  Registration
Statement; and

         FURTHER RESOLVED,  that it is desirable and in the best interest of the
Corporation  that the  Shares be  qualified  or  registered  for sale in various
states;  that the  officers of the  Corporation  be, and each of them hereby is,
authorized to determine the states in which appropriate action shall be taken to
qualify  or  register  for sale all or such part of the  Shares as they may deem
advisable;  that said  officers  be, and each of them hereby is,  authorized  to
perform  on  behalf  of the  Corporation  any and all such acts as they may deem
necessary or advisable in order to comply with the  applicable  laws of any such
states, and in connection therewith to execute and file all requisite papers and
documents,  including, but not limited to, applications,  reports, surety bonds,
irrevocable  consents,  appointments  of  attorneys  for  service of process and
resolutions; and the execution by such officers of any such paper or document or
the doing by them of any act in  connection  with the  foregoing  matters  shall
conclusively  establish  their  authority  therefor from the Corporation and the
approval and  ratification  by the  Corporation  of the papers and  documents so
executed and the actions so taken; and

         FURTHER  RESOLVED,  that if, in any state  where the  securities  to be
registered or qualified for sale to the public,  or where the  Corporation is to
be registered in connection with the public offering of the Shares, a prescribed
form of  resolution  or  resolutions  is  required to be adopted by the Board of
Directors,  each such  resolution  shall be  deemed  to have been and  hereby is
adopted,  and the Secretary is hereby  authorized to certify the adoption of all
such resolutions as though such resolutions were now presented to and adopted by
the Board of Directors; and

         FURTHER  RESOLVED,  that  the  officers  of the  Corporation  with  the
assistance of counsel be, and each of them hereby is, authorized and directed to
take all necessary  steps and do all other things  necessary and  appropriate to
effect the listing of the Shares on the __________.

                               Approval of Actions

         RESOLVED, that, without limiting the foregoing, the Authorized Officers
are, and each of them hereby is, authorized and directed to proceed on behalf of
the Corporation  and to take all such steps as deemed  necessary or appropriate,
with the  advice  and  assistance  of  counsel,  to  cause  the  Corporation  to
consummate  the  agreements  referred to herein and to perform  its  obligations
under such agreements; and

         RESOLVED,  that the Authorized Officers be, and each of them hereby is,
authorized,  empowered  and  directed  on  behalf  of  and in  the  name  of the
Corporation,  to take or cause  to be taken  all  such  further  actions  and to
execute and  deliver or cause to be  executed  and  delivered  all such  further
agreements,   amendments,   documents,    certificates,    reports,   schedules,
applications,  notices,  letters and  undertakings and to incur and pay all such
fees and expenses as in their judgment  shall be necessary,  proper or desirable
to carry into  effect  the  purpose  and intent of any and all of the  foregoing
resolutions, and that all actions heretofore taken by any officer or director of
the  Corporation  in  connection  with  the  transactions  contemplated  by  the
agreements  described herein are hereby approved,  ratified and confirmed in all
respects.

<PAGE>

                                    EXHIBIT G

                       FORM OF TRANSFER AGENT INSTRUCTIONS

                               [Commencement Date]

[TRANSFER AGENT]
[Address]

Attn:  __________________

Ladies and Gentlemen:

         Reference is made to that certain Common Stock Purchase  Agreement (the
"Common  Stock  Purchase  Agreement"),  dated as of  ____________,  2000, by and
between UNIGENE LABORATORIES,  INC., a Delaware corporation (the "Company"), and
FUSION CAPITAL FUND II, LLC (together with its assigns,  the "Buyer"),  pursuant
to which the  Company  may sell to the Buyer up to Twenty  One  Million  Dollars
($21,000,000)  of the  Company's  common  stock,  par value  $.01 per share (the
"Common  Stock").  The shares of Common  Stock to be  purchased  thereunder  are
referred to herein as, the  "Purchase  Shares."  This letter  shall serve as our
irrevocable  authorization  and  direction  to you  (provided  that  you are the
transfer agent of the Company at such time) to issue the Purchase  Shares to the
Buyer from time to time upon  surrender to you of a properly  completed and duly
executed  Purchase  Notice,  in the form  attached  hereto as  Exhibit  I, and a
Company  Confirmation of Purchase Notice, in the form attached hereto as Exhibit
II.

         Specifically,  upon  receipt  by the  Company  of a copy of a  Purchase
Notice, the Company shall as soon as practicable, but in no event later than one
(1) Trading Day (as defined below) after receipt of such Purchase Notice,  send,
via facsimile,  a Company  Confirmation  of Purchase  Notice to the Buyer and to
you, which  confirmation  shall constitute an irrevocable  instruction to you to
process such Purchase Notice in accordance with the terms of these  instructions
and the Company  Confirmation of Purchase Notice. Upon your receipt of a copy of
the executed Purchase Notice and a copy of the applicable  Company  Confirmation
of Purchase  Notice,  you shall use your best efforts to, within two (2) Trading
Day  following  the date of  receipt of the  Company  Confirmation  of  Purchase
Notice,  (A) issue and surrender to a common  carrier for overnight  delivery to
the address as specified in the Purchase  Notice,  a certificate,  registered in
the name of the Buyer or its designee,  for the number of shares of Common Stock
to which the Buyer shall be entitled as set forth in the Company Confirmation of
Purchase Notice or (B) provided you are  participating  in The Depository  Trust
Company ("DTC") Fast Automated Securities Transfer Program,  upon the request of
the Buyer,  credit such aggregate  number of shares of Common Stock to which the
Buyer shall be entitled to the Buyer's or its  designee's  balance  account with
DTC through its Deposit  Withdrawal At Custodian  ("DWAC")  system  provided the
Buyer causes its bank or broker to initiate the DWAC transaction. ("Trading Day"
shall mean any day on which the Nasdaq Market is open for customary trading.)

         The  Company  hereby  confirms  to you and the Buyer that  certificates
representing the Purchase Shares shall not bear any legend restricting  transfer
of the Purchase  Shares  thereby and should not be subject to any  stop-transfer
restrictions and shall otherwise be freely transferable on the books and records
of the  Company  provided  that the  Company  counsel  delivers  the  Notice  of
Effectiveness set forth in Exhibit III attached hereto, and that if the Purchase
Shares are not registered for sale under the

<PAGE>

Securities  Act of 1933,  as amended,  then the  certificates  for the  Purchase
Shares shall bear the following legend:

         "THE  SECURITIES   REPRESENTED  BY  THIS   CERTIFICATE  HAVE  NOT  BEEN
         REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  OR APPLICABLE
         STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
         AND MAY NOT BE OFFERED FOR SALE,  SOLD,  TRANSFERRED OR ASSIGNED IN THE
         ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
         THE SECURITIES ACT OF 1933, AS AMENDED,  OR APPLICABLE STATE SECURITIES
         LAWS, OR AN OPINION OF COUNSEL, IN A FORM REASONABLY  ACCEPTABLE TO THE
         COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
         STATE  SECURITIES  LAWS OR UNLESS SOLD  PURSUANT TO RULE 144 UNDER SAID
         ACT."

         The Company hereby  confirms to you and the Buyer that no  instructions
other  than as  contemplated  herein  will be given to you by the  Company  with
respect to the Purchase Shares.

         Please be  advised  that the Buyer is  relying  upon this  letter as an
inducement  to purchase  shares of Common Stock under the Common Stock  Purchase
Agreement  and,  accordingly,  the Buyer is a third party  beneficiary  to these
instructions.

         Should you have any questions concerning this matter, please contact me
at (___) ___-____.

                          Very truly yours,


                          -----------------------------

                          By:__________________________

                          Name: _______________________

                          Its: ________________________



ACKNOWLEDGED AND AGREED:
[TRANSFER AGENT]
By:

Name:
Title
Date:


cc:   FUSION CAPITAL FUND II, LLC

<PAGE>

                                    EXHIBIT I
                         TO TRANSFER AGENT INSTRUCTIONS

                             FORM OF PURCHASE NOTICE

See attached.


[Attach Exhibit A to Common Stock Purchase Agreement.]


<PAGE>



                                   EXHIBIT II
                         TO TRANSFER AGENT INSTRUCTIONS

                 FORM OF COMPANY CONFIRMATION OF PURCHASE NOTICE

See attached.




[Attach Exhibit B to Common Stock Purchase Agreement.]


<PAGE>


                                   EXHIBIT III
                         TO TRANSFER AGENT INSTRUCTIONS

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT


[Date]

[TRANSFER AGENT]
[Address]

Attn:  __________________

Ladies and Gentlemen:

          We are counsel to UNIGENE  LABORATORIES,  INC., a Delaware corporation
(the  "Company"),  and have  represented  the  Company in  connection  with that
certain Common Stock Purchase Agreement (the "Common Stock Purchase  Agreement")
entered  into by and among the  Company  and  FUSION  CAPITAL  FUND II, LLC (the
"Buyer")  pursuant  to which (i) the  Company may sell to the Buyer up to Twenty
One Million Dollars  ($21,000,000) of the Company's common stock, par value $.01
per share (the  "Common  Stock" and the shares of Common  Stock to be  purchased
thereunder  are  referred  to herein as, the  "Purchase  Shares"),  and (ii) the
Company  has agreed to issue to the Buyer  _______  shares of Common  Stock (the
"Commitment  Shares").  Pursuant to the Common  Stock  Purchase  Agreement,  the
Company also has entered into a  Registration  Rights  Agreement  with the Buyer
(the  "Registration  Rights  Agreement")  pursuant to which the Company  agreed,
among other things,  to register the Purchase  Shares and the Commitment  Shares
under the  Securities  Act of 1933,  as amended (the "1933 Act").  In connection
with the Company's obligations under the Common Stock Purchase Agreement and the
Registration   Rights  Agreement,   on   _____________,   the  Company  filed  a
Registration   Statement  (File  No.   333-_____________)   (the   "Registration
Statement") with the Securities and Exchange  Commission (the "SEC") relating to
the sale of the Purchase Shares and the Commitment Shares.

          In connection  with the foregoing,  we advise you that a member of the
SEC's  staff has  advised  us by  telephone  that the SEC has  entered  an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF  EFFECTIVENESS]  on [ENTER DATE OF  EFFECTIVENESS]  and we have no knowledge,
after  telephonic  inquiry of a member of the SEC's  staff,  that any stop order
suspending its  effectiveness  has been issued or that any  proceedings for that
purpose are pending  before,  or threatened by, the SEC and the Purchase  Shares
and the Commitment  Shares are available for sale under the 1933 Act pursuant to
the Registration Statement.

          The Buyer has confirmed it shall comply with all  securities  laws and
regulations   applicable  to  it  including   applicable   prospectus   delivery
requirements upon sale of the Commitment Shares or the Purchase Shares.

                             Very truly yours,
                             [Company Counsel]

                             By:____________________


cc:       FUSION CAPITAL FUND II, LLC

<PAGE>


                                    EXHIBIT H

                         FORM OF SECRETARY'S CERTIFICATE

         This  Secretary's   Certificate   ("Certificate")  is  being  delivered
pursuant to Section 7(k) of that certain Common Stock Purchase  Agreement  dated
as of  __________,  2000 ("Common  Stock  Purchase  Agreement"),  by and between
UNIGENE  LABORATORIES,  INC., a Delaware  corporation (the "Company") and FUSION
CAPITAL  FUND II, LLC (the  "Buyer"),  pursuant to which the Company may sell to
the Buyer up to Twenty One Million Dollars ($21,000,000) of the Company's Common
Stock, par value $.01 per share (the "Common Stock").  Terms used herein and not
otherwise  defined shall have the meanings  ascribed to them in the Common Stock
Purchase Agreement.

The  undersigned,  ____________,  Secretary of the Company,  hereby certifies as
follows:

                  1. I am the  Secretary of the Company and make the  statements
         contained in this Secretary's Certificate.

                  2.  Attached  hereto  as  Exhibit  A and  Exhibit  B are true,
         correct and complete  copies of the  Company's  bylaws  ("Bylaws")  and
         Certificate  of  Incorporation  ("Articles"),  in each case, as amended
         through the date  hereof,  and no action has been taken by the Company,
         its directors, officers or shareholders, in contemplation of the filing
         of any  further  amendment  relating  to or  affecting  the  Bylaws  or
         Articles.

                  3. Attached hereto as Exhibit C are true, correct and complete
         copies of the resolutions duly adopted by the Board of Directors of the
         Company  on  _____________,  at which a quorum was  present  and acting
         throughout.  Such  resolutions  have  not  been  amended,  modified  or
         rescinded and remain in full force and effect and such  resolutions are
         the only  resolutions  adopted by the Company's Board of Directors,  or
         any committee  thereof,  or the shareholders of the Company relating to
         or affecting (i) the entering into and  performance of the Common Stock
         Purchase Agreement, or the issuance,  offering and sale of the Purchase
         Shares and the  Commitment  Shares and (ii) and the  performance of the
         Company  of  its  obligation   under  the   Transaction   Documents  as
         contemplated therein.

                  4. As of the date hereof, the authorized,  issued and reserved
         capital  stock of the  Company  is as set  forth on  Exhibit  D hereto.

<PAGE>

                  IN WITNESS  WHEREOF,  I have hereunder  signed my name on this
         ___ day of ____________.


                                         -------------------------------
                                         Secretary

         The  undersigned  as  ___________  of  UNIGENE  LABORATORIES,  INC.,  a
Delaware  corporation,  hereby certifies that  ____________ is the duly elected,
appointed,  qualified and acting Secretary of _________,  and that the signature
appearing above is his genuine signature.


                                         -------------------------------