FORM 10Q
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1996
                               ------------------

                                  OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

For the transition period from_______________  to_____________

For Quarter Ended___________  Commission file number  0-16005

                           Unigene Laboratories, Inc.
             -----------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                         22-2328609
-------------------------------                         -------------------
(State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                         Identification No.)

110 Little Falls Road, Fairfield, New Jersey                    07004
--------------------------------------------                  ---------
(Address of principal executive offices)                      (Zip Code)

Registrant's telephone number, including area code: (201)882-0860
                                                     ------------

--------------------------------------------------------------------------------
(Former  name,  former  address and former  fiscal year,  if changed  since last
report.)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.     Yes [ X ]  No [  ]
<PAGE>
         APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
            PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be filed by  Sections  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes [  ]     No  [  ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date:

Common Stock, $.01 Par Value--35,197,134 shares as of November 1, 1996
<PAGE>

                                      INDEX

                           UNIGENE LABORATORIES, INC.

PART I. FINANCIAL INFORMATION                              

Item 1. Financial Statements (Unaudited)
 
         Condensed balance sheets-September 30, 1996 and December 31, 1995

         Condensed statements of operations-Three months ended September 30,1996
               and 1995; Nine months ended September 30, 1996 and 1995

         Condensed  statements  of cash flows- Nine months ended  September  30,
               1996 and 1995

         Notes to condensed financial statements- September 30, 1996

Item 2. Management's Discussion and Analysis of Financial
         Condition and Results of Operations                


PART II. OTHER INFORMATION                                  


SIGNATURES                                                  
<PAGE>
<TABLE>
<CAPTION>
                         PART I. FINANCIAL INFORMATION

                                                     UNIGENE LABORATORIES, INC.
                                                      CONDENSED BALANCE SHEETS

                                              September 30                December 31
                                                  1996                        1995
                                             ------------                ------------
                                              (Unaudited)
<S>                                          <C>                         <C>
ASSETS
Current assets:
   Cash and cash equivalents .............   $    489,537                $    258,627
   Accounts receivable ...................        100,954                        --
   Prepaid expenses and other
      current assets .....................      1,048,214                     434,159
                                             ------------                ------------
        Total current assets .............      1,638,705                     692,786

Property, plant and equipment-net
   of accumulated depreciation and
   amortization ..........................     10,643,923                  11,513,019
Patents and other assets .................      1,229,094                   1,125,828
Unamortized debt issue costs .............        166,000                        --
                                             ------------                ------------
                                             $ 13,677,722                $ 13,331,633
                                             ============                ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable ......................   $  1,202,859                $  2,859,264
   Accrued expenses ......................        674,020                     644,663
   Notes payable - stockholders ..........      1,190,000                   1,250,000
                                             ------------                ------------
         Total current liabilities .......      3,066,879                   4,753,927

   Notes payable - stockholders ..........        655,000                     655,000
   Note payable - other ..................           --                     3,300,000
   9.5% convertible debentures ...........      2,350,000                        --
   10% convertible debentures ............      1,450,000                        --

Stockholders' equity:
   Common stock-par value $.01 per share;
      authorized 48,000,000 shares, issued
      and outstanding 29,534,340 shares in
      1996 and 23,813,171 shares in 1995 .        295,343                     238,132
   Additional paid-in capital ............     47,021,741                  38,110,512
   Accumulated deficit ...................    (41,160,210)                (33,724,907)
   Less: Treasury stock, at cost,
      7,290 shares .......................         (1,031)                     (1,031)
                                             ------------                ------------
        Total stockholders' equity .......      6,155,843                   4,622,706
                                             ------------                ------------
                                             $ 13,677,722                $ 13,331,633
                                             ============                ============
See notes to condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                     UNIGENE LABORATORIES, INC.
                                                 CONDENSED STATEMENTS OF OPERATIONS
                                                            (Unaudited)


                                                                Three Months Ended                          Nine Months Ended
                                                                  September 30                                September 30
                                                     ----------------------------------          ----------------------------------
                                                          1996                  1995                  1996                  1995
                                                     ------------          -------------         ------------          -------------
<S>                                                  <C>                   <C>                   <C>                   <C>
Licensing and
  other revenue ............................         $      1,719          $        468          $    307,528          $      6,074
                                                     ------------          ------------          ------------          ------------
Operating expenses:
   Research and
     development ...........................            2,285,977             1,771,791             5,836,932             5,214,464
   General and
     administrative ........................              531,172               574,134             1,440,382             1,669,403
                                                     ------------          ------------          ------------          ------------
                                                        2,817,149             2,345,925             7,277,314             6,883,867
                                                     ------------          ------------          ------------          ------------
   Operating loss ..........................           (2,815,430)           (2,345,457)           (6,969,786)           (6,877,793)
                                                     ------------          ------------          ------------          ------------
Other income (expense):
   Interest/other income ...................               24,461                10,463               161,253                13,983
   Interest expense ........................             (166,129)             (164,735)             (626,771)             (258,738)
                                                     ------------          ------------          ------------          ------------
                                                         (141,668)             (154,272)             (465,518)             (244,755)
                                                     ------------          ------------          ------------          ------------
Net loss ...................................         $ (2,957,098)         $ (2,499,729)         $ (7,435,304)         $ (7,122,548)
                                                     ============          ============          ============          ============

Net loss per share .........................         $       (.11)         $       (.12)         $       (.29)         $       (.34)
                                                     ============          ============          ============          ============

Weighted average
 number  of shares
 outstanding                                           28,127,903            21,507,522            25,732,668            21,164,060
                                                     ============          ============          ============          ============

See notes to condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                           UNIGENE LABORATORIES, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                         Nine Months Ended
                                                            September 30,
                                                        1996            1995
                                                    -----------     ------------
<S>                                                 <C>             <C>
Cash used for operations........................    $(8,435,855)    $(5,818,375)
                                                    -----------     -----------
Investing activities:
Construction of leasehold improvements .........         (2,950)       (379,834)
Purchase of property, plant & equipment ........       (228,954)       (146,616)
Increase in patents and other assets ...........           (506)        (92,562)
                                                    -----------     -----------
                                                       (342,410)       (619,012)
                                                    -----------     -----------
Financing activities:
   Sales of stock, net of related expenses .....        300,440       1,954,334
   Proceeds from issuance of 10% convertible
     debentures, net of related expenses .......      8,137,000            --
   Proceeds from issuance of notes payable .....           --         3,755,000
   Repayment of debt ...........................        (60,000)           --
   Exercise of stock options and warrants ......        631,735         150,922
                                                    -----------     -----------
                                                      9,009,175       5,860,256
                                                    -----------     -----------
Net increase (decrease) in cash and
  cash equivalents .............................        230,910        (577,131)
Cash and cash equivalents at
   beginning of year ...........................        258,627         592,011
                                                    -----------     -----------
Cash and cash equivalents at
   end of period ...............................    $   489,537     $    14,880
                                                    ===========     ===========
Supplemental cash flow information:
   Exchange of note payable for
   9.5% convertible debentures .................    $ 3,300,000
                                                    ===========
   Conversion of 10% convertible
   debentures into common stock ................    $ 7,630,000
                                                    ===========
   Conversion of 9.5% convertible
   debentures into common stock ................    $   950,000
                                                    ===========
See notes to condensed financial statements.
</TABLE>
<PAGE>
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1996

NOTE A-BASIS OF PRESENTATION

The accompanying  unaudited condensed financial statements have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information and with the  instructions to Form 10-Q and Article 10 of Regulation
S-X.  Accordingly,  they do not include  all of the  information  and  footnotes
required by generally  accepted  accounting  principles  for complete  financial
statements.  In the opinion of management,  all adjustments considered necessary
for a fair presentation have been included. Operating results for the nine month
period ended  September 30, 1996 are not  necessarily  indicative of the results
that  may be  expected  for the  year  ended  December  31,  1996.  For  further
information,  please refer to the Company's  financial  statements and footnotes
thereto  included in the Company's annual report on Form 10-K for the year ended
December 31, 1995.

NOTE B - DEBT FINANCING

In March 1996, the Company completed a private placement of $9.08 million of 10%
Convertible Debentures.  The Company received net proceeds of approximately $8.1
million as a result of this placement.  These  debentures  mature March 4, 1999.
The debentures are  convertible  into Common Stock at a conversion rate equal to
the  lower of $2.00 per share or 85% of the  average  market  price per share of
Common  Stock  during the ten days  preceding  the date of  conversion.  Through
September 30, 1996,  $7,630,000 of principal  amount of these  debentures,  plus
accrued  interest,  had been converted into  approximately  4,058,000  shares of
Common Stock.  As of November 1, 1996,  $8,230,000 of principal  amount of these
debentures,  plus  accrued  interest,  has  been  converted  into  approximately
4,404,000 shares of Common Stock.

In March 1996,  the Company  exchanged  secured  indebtedness  in the  principal
amount of $3,300,000 for 9.5% Senior Secured Convertible  Debentures of an equal
principal  amount.  These  debentures  mature  November 15, 1998, are secured by
substantially  all of the Company's  assets,  and are convertible into shares of
Common Stock at a conversion  rate of $1.15 per share,  subject to certain reset
provisions.  Through  September 30, 1996,  $950,000 of principal amount of these
debentures had been converted into approximately 826,000 shares of Common Stock.
As of November 1, 1996,  $1,869,000 of principal  amount of these debentures has
been converted into approximately 1,625,000 shares of Common Stock.

NOTE C - CLASS B WARRANTS

The Company's Class B Warrants expired unexercised on September 10, 1996.

NOTE D - EQUITY FINANCING

In October 1996, the Company completed a private placement of 4,218,804 units at
a price of $1.75 per unit.  Each unit  consists of one share of Common Stock and
two  warrants  each of which  entitles  the holder to purchase 1/4 of a share of
Common Stock at a price of $3.00 per share.  The fee paid to the placement agent
consisted of an additional 296,935 units in lieu of cash  compensation.  The net
proceeds to the Company were approximately $7.1 million.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Operating  revenues  for the first nine months of 1996  include a license fee of
$300,000 from the Company's joint venture in China. Other operating revenues are
from  hormone and enzyme  sales which were $7,000 and $6,000 for the nine months
ended September 30, 1996 and 1995, respectively.

Research and  development,  the Company's  largest  expense,  increased 29% from
$1,772,000 to  $2,286,000  and 12% from  $5,214,000 to $5,837,000  for the three
months and nine months ended  September 30, 1996,  respectively,  as compared to
the same periods in 1995. The increases were primarily  related to the Company's
oral clinical  trials,  its injectable  clinical  trials and the  sponsorship of
collaborative research programs.

General and administrative  expenses decreased 7% from $574,000 to $531,000, and
14% from  $1,669,000  to  $1,440,000  for the three months and nine months ended
September 30, 1996,  respectively,  as compared to the same periods in 1995. The
decreases were primarily due to a reduction in fees and related expenses related
to the Company's financing activities.

Interest  and other income  increased  $14,000 and $147,000 for the three months
and nine months ended September 30, 1996, respectively,  as compared to the same
periods in 1995. The increases were due to increased  interest  income earned on
the proceeds of financings which provided  additional  funds to be invested,  as
well as gains on settlement of debt.

Interest  expense  increased  $1,000 and  $368,000 for the three months and nine
months ended September 30, 1996, as compared to the same periods in 1995.
This was due to increased borrowings by the Company.

As a result of increased  research and development  costs,  partially  offset by
increased interest income and decreased general and administrative expenses, net
loss increased $457,000 or 18% for the three months ended September 30, 1996, as
compared to the corresponding  period in 1995. As a result of increased research
and  development  costs and  interest  expense,  partially  offset by  increased
licensing  and   interest/other   income,  as  well  as  decreased  general  and
administrative  expenses,  net loss increased $313,000 or 4% for the nine months
ended September 30, 1996, as compared to the corresponding period in 1995.

As of December  31, 1995,  the Company had  available  for income tax  reporting
purposes  net  operating  loss   carryforwards  in  the  approximate  amount  of
$34,000,000,  expiring  from 1996 through  2010,  which are  available to reduce
future  earnings which would  otherwise be subject to federal income taxes.  For
the nine months ending September 30, 1996, the Company had additional  losses of
approximately  $7,435,000.  In addition,  the Company has investment tax credits
and research and  development  credits in the amounts of $69,000 and $1,470,000,
respectively,  which are available to reduce the amount of future federal income
taxes. These credits expire from 1996 through 2010.

The Company follows Statement of Financial  Accounting  Standards No. 109 ("FASB
109"),  "Accounting  for Income  Taxes".  Given the  Company's  past  history of
incurring  operating losses, any deferred tax assets that are recognizable under
FASB 109 have been fully  reserved.  As of January 1, 1996,  under FASB 109, the
Company  had  deferred  tax assets of  approximately  $15,100,000,  subject to a
valuation  allowance of  $15,100,000.  The  deferred  tax assets were  generated
primarily as a result of the Company's  net  operating  losses and available tax
credits.  For the nine month period ended  September  30,  1996,  the  Company's
deferred tax assets and valuation  allowances  each  increased by  approximately
$2,850,000.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

During  1994,  the Company  completed  construction  of its  peptide  production
facility in  Boonton,  New  Jersey.  The  facility  was  constructed  in a shell
building that is being leased under a ten year net lease which began in February
1994.  The  Company  has two ten year  renewal  options  as well as an option to
purchase  the  facility.  The total cost of leasehold  improvements  and process
equipment for this facility,  including  validation  costs  associated  with the
facility's construction, is approximately $11.9 million.

In March 1996, the Company completed a private placement of $9.08 million of 10%
Convertible Debentures.  The Company received net proceeds of approximately $8.1
million as a result of this placement.  These  debentures  mature March 4, 1999.
The debentures are  convertible  into Common Stock at a conversion rate equal to
the lower of $2.00 per share or 85% of the average market price per share of the
Common Stock during the ten days preceding the date of conversion. The placement
agent received as a fee a five-year warrant to purchase 454,000 shares of Common
Stock at an exercise price of $2.10 per share.

In March 1996,  the Company  exchanged  secured  indebtedness  in the  principal
amount of $3,300,000 for 9.5% Senior Secured Convertible  Debentures of an equal
principal  amount.  These  debentures  mature  November 15, 1998, are secured by
substantially  all of the Company's  assets,  and are convertible into shares of
Common Stock at a conversion  rate of $1.15 per share,  subject to certain reset
provisions.

For additional information on the aforementioned Convertible Securities,  please
refer to Note B under Notes to Condensed Financial Statements.

The Company,  at September 30, 1996, had cash and cash  equivalents of $490,000,
an increase of $231,000 from December 31, 1995.

In October 1996, the Company completed a private placement of 4,218,804 units at
a price of $1.75 per unit.  Each unit  consists of one share of Common Stock and
two  warrants  each of which  entitles  the holder to purchase 1/4 of a share of
Common Stock at a price of $3.00 per share.  The fee paid to the placement agent
consisted of an additional 296,935 units in lieu of cash  compensation.  The net
proceeds to the Company were approximately $7.1 million.

The  Company's  ability to  generate  additional  cash from  operations  depends
primarily  upon signing  research or  licensing  agreements,  achieving  defined
benchmarks in such agreements,  receiving  regulatory approval for its products,
and marketing  hormones and enzyme  products.  The Company has one joint venture
agreement in effect, which contributed $300,000 to 1996 revenues. However, there
can be no assurance that any additional  revenues will be recognized or received
under this agreement.

Management  believes  that the Company has  sufficient  financial  resources  to
sustain its  operations  at the current level through the third quarter of 1997.
The Company requires additional funds through financing or licensing  agreements
to ensure continued operations beyond that point. There can be no assurance that
these additional funds will be obtained.
<PAGE>
PART II. OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits:

         (1)   Registration  Rights  Agreement,  dated  October 11, 1996,  among
               Unigene  Laboratories,  Inc., BT Securities  Corporation  and the
               Purchasers named therein; and

         (2)   Warrant   Agreement,   dated  October  11,  1996,  among  Unigene
               Laboratories,  Inc., BT Securities Corporation and the Purchasers
               named therein.

(b)      Reports on Form 8-K:

         (1)   August 7, 1996  (extension of the expiration  date of its Class B
               Warrants to September 10, 1996);

         (2)   October 11, 1996  (completion  of sale of units,  including a pro
               forma balance sheet as of August 31, 1996,  showing the financial
               effect of the offering).

<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                   UNIGENE LABORATORIES, INC.
                                   -----------------------------
                                   (Registrant)


November 11, 1996                              /s/ Warren P. Levy
                                                   -------------- 
                                                   Warren P. Levy 
                                                   President
                                                  (Chief Executive Officer)


November 11, 1996                              /s/ Jay Levy
                                                   --------- 
                                                   Jay Levy 
                                                   Treasurer
                                                   (Chief Financial Officer and
                                                    Chief Accounting Officer)

<PAGE>
                          REGISTRATION RIGHTS AGREEMENT 


         This  Registration  Rights  Agreement  (this  "Agreement")  is made and
entered into as of October 11, 1996, by and among UNIGENE LABORATORIES,  INC., a
Delaware  corporation (the "Company"),  each of the undersigned  purchasers (the
"Purchasers"), which Purchasers are each executing a Subscription Agreement (the
"Purchase  Agreements")  relating to an offering (the "Offering") by the Company
of Units (the  "Units"),  each  consisting  of one share (the  "Shares")  of the
Company's  common  stock,  par  value  $.01  per  share  (the  "Common  Stock"),
one-quarter  (1/4) of a Class C Warrant  (the  "Class C  Warrants"),  each whole
Class C Warrant  exercisable  immediately  to purchase one share of Common Stock
(the "Class C Warrant Shares"),  and one-quarter (1/4) of a Class D Warrant (the
"Class D Warrants,"  and together  with the Class C Warrants,  and including the
Warrants  contained  in the  Placement  Agent  Units  (as  defined  below),  the
"Warrants"),  each whole Class D Warrant exercisable immediately to purchase one
share of Common Stock (the "Class D Warrant Shares," and together with the Class
C Warrant  Shares,  and  including  the  shares of Common  Stock  issuable  upon
exercise of the Warrants  contained in the Placement  Agent Units (as defined in
the Placement Agency Agreement  relating to the Offering (the "Placement  Agency
Agreement")),   the  "Warrant  Shares"),  and  BT  Securities  Corporation  (the
"Placement  Agent"),  to which the Company is issuing the Placement Agent Units.
In addition,  if within 30 days after the date hereof, either or both of Olympus
Securities,  Ltd.  or  Nelson  Partners  shall  execute  a  counterpart  to this
Agreement,  such entity  shall be a Purchaser  for all purposes  hereunder  with
respect  to  the  number  of  Units  purchased  by  such  entity  pursuant  to a
Subscription  Agreement  between such entity and the Company  (provided that the
aggregate  number of such  additional  Units covered by this Agreement shall not
exceed the number of Units that such  entities  would be entitled to purchase by
reason of the  Offering  pursuant to Section  2.2.5 of an Amended  and  Restated
Securities  Purchase  Agreement,  dated as of March 6,  1996,  by and among such
entities and the Company).

         In order to induce the Purchasers to enter into the Purchase Agreements
and the  Placement  Agent to enter  into the  Placement  Agency  Agreement,  the
Company  has  agreed  to  provide  the  registration  rights  set  forth in this
Agreement.  Capitalized  terms used  herein  without  definition  shall have the
meanings set forth in the Purchase Agreements.

         The parties hereby agree as follows:

         1.       Definitions.

         (a)      "Closing" means the closing of the Offering.

         (b)      "Closing Date" means the date of the Closing.

         (c) "Registrable Securities" means (i) the Shares included in the Units
to be sold to the Purchasers pursuant to the Purchase Agreements and included in
the Placement  Agent Units to be issued to the Placement  Agent  pursuant to the
Placement  Agency  Agreement,  (ii) the Warrant Shares issuable upon exercise of
the  Warrants  and  (iii)  any  securities  of  the  Company  or  any  successor
corporation  issued as, or  issuable  upon the  conversion  or  exercise  of any
warrant,  right  or  other  security  that is  issued  as a  dividend  or  other
distribution with respect to, or in exchange for, the Shares or Warrant Shares.
<PAGE>
         (d)   "Restricted   Registrable   Securities"   means  the  Registrable
Securities until (i) a registration  statement under the Securities Act of 1933,
as amended (the "Securities Act"), covering such Registrable Securities has been
declared  effective  and they have been  disposed of pursuant to such  effective
registration  statement,  (ii) they are eligible for  distribution to the public
pursuant  to Rule  144(k) (or any  similar  provision  then in force)  under the
Securities Act or (iii) they have been otherwise transferred and the Company has
delivered new  certificates or other evidences of ownership for them not subject
to any stop transfer order or other restriction on transfer (including,  without
limitation, sale) by reason of any requirements of the Securities Act.

         2.       Shelf Registration.

         (a) Shelf  Registration  Statement.  The Company shall prepare and file
with the Securities and Exchange  Commission  (the  "Commission") a registration
statement for an offering to be made on a continuous  basis pursuant to Rule 415
under  the  Securities  Act  covering  the  resale  of  all  of  the  Restricted
Registrable   Securities  (the  "Shelf  Registration   Statement")  as  soon  as
practicable  after the date of closing of the Offering.  The Shelf  Registration
Statement  shall  be  on  Form  S-3  or  another   appropriate  form  permitting
registration of such Restricted Registrable Securities for resale by the holders
thereof  in the  manner  or  manners  designated  by  them  (including,  without
limitation, one or more underwritten offerings). Except for securities which the
holders thereof are entitled to have included  pursuant to (i) the  Registration
Rights  Agreement,  dated  as of March  12,  1996,  among  the  Company,  Swartz
Investments, LLC, and the purchasers of the Company's 10% Convertible Debentures
due March 4, 1999, (ii) Warrant No. DU100,  dated March 15, 1995,  issued by the
Company to Dejufra,  Inc.  and (iii)  Warrant No.  DU101,  dated April 15, 1995,
issued by the  Company  to  Dejufra,  Inc.,  the  Company  shall not  permit any
securities  other than the Restricted  Registrable  Securities to be included in
the Shelf Registration Statement.

         The Company shall use its best efforts to cause the Shelf  Registration
Statement to be declared effective under the Securities Act within 90 days after
the date of the  closing  of the  Offering  and to keep the  Shelf  Registration
Statement continuously effective under the Securities Act until all the Warrants
have been exercised or expired and all Registrable  Securities shall have ceased
to be  Restricted  Registrable  Securities  (the  "Effectiveness  Period").  The
Company shall be deemed not to have used its best efforts to keep a registration
statement effective during the Effectiveness  Period if it voluntarily takes any
action  that would  result in  selling  holders  of the  Restricted  Registrable
Securities  covered thereby not being able to sell such  Restricted  Registrable
Securities  during that period unless such action is required by applicable  law
or unless the Company  complies with the  provisions of Section  4(A)(i)  hereof
solely as it relates to a matter covered by Section 4(A)(c)(v) hereof.

         (b)  Selection  of  Investment  Bankers  and  Managers.  If one or more
holders of Restricted  Registrable  Securities covered by the Shelf Registration
Statement  desire  to  sell  such  Restricted   Registrable   Securities  in  an
underwritten  offering,  the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the holders of
a majority  of the  Restricted  Registrable  Securities  to be  included in such
offering.  If any  holder  of  Restricted  Registrable  Securities  requests  an
underwritten  offering,  the  Company  shall  notify all  holders of  Restricted
Registrable  Securities  thereof  at least  ten days  prior to the  filing  of a
supplemental prospectus.
<PAGE>
         (c)  Expenses.  The Company  shall pay all  Registration  Expenses  (as
hereinafter  defined)  incurred in connection  with the  Company's  registration
obligations pursuant to this Section 2.

         3.       Holdback Agreement.

         If  and  to  the  extent  requested  by  the  managing  underwriter  or
underwriters,  the Company agrees not to effect any public sale or  distribution
of its equity securities,  or any securities convertible into or exchangeable or
exercisable  for such  equity  securities,  during  the seven days prior to, and
during the 90-day period  beginning on, the effective  date of any  underwritten
offering  pursuant  to the Shelf  Registration  Statement  (except  pursuant  to
registrations on Form S-8 or any successor form to Form S-8).

         4.       Registration Procedures.

         (A) In connection with the registration  provided for in Section 2, the
Company will promptly:

         (a) furnish each holder of Restricted Registrable Securities,  at least
three  business  days prior to filing the Shelf  Registration  Statement  or any
amendment thereto with the Commission, copies of such registration statement and
amendments  as proposed to be filed and all  exhibits  thereto,  and  thereafter
furnish such number of copies of such registration statement, each amendment and
supplement thereto (in each case including all exhibits thereto), the prospectus
included in such registration  statement and amendments  thereto (including each
preliminary  prospectus)  and such other documents as such seller may reasonably
request in order to facilitate the  disposition  of the  Restricted  Registrable
Securities  owned  by  such  seller.  The  Company  shall  not  file  the  Shelf
Registration  Statement or any amendment thereto if the holders of a majority of
the Restricted  Registrable  Securities covered by such registration  statement,
their counsel, or the managing underwriters, if any, shall reasonably object;

         (b)  prepare  and  file  with  the  Commission   such   amendments  and
post-effective  amendments  to  the  Shelf  Registration  Statement  as  may  be
necessary to keep such  registration  statement  continuously  effective for the
Effectiveness  Period; cause the prospectus in the Shelf Registration  Statement
to be supplemented by any prospectus supplement required by applicable law, and,
if required, as so supplemented to be filed pursuant to Rule 424 (or any similar
provisions  then in  force)  under  the  Securities  Act;  and  comply  with the
provisions of the  Securities  Act and the  Securities  Exchange Act of 1934, as
amended (the "Exchange  Act"),  applicable to it with respect to the disposition
of all securities  covered by such registration  statement as so amended or such
prospectus as so supplemented;
<PAGE>
         (c) notify the selling  holders of Restricted  Registrable  Securities,
their counsel and the managing underwriters,  if any, promptly (but in any event
within three  business  days),  and confirm  such notice in writing,  (i) when a
prospectus or any prospectus supplement or post-effective  amendment thereto has
been filed, or any post-effective  amendment  thereto,  when the same has become
effective under the Securities Act (including in such notice a written statement
that any holder may, upon request,  obtain,  at the sole expense of the Company,
such number of copies as are  requested of the Shelf  Registration  Statement or
post-effective  amendment thereto including financial  statements and schedules,
documents  incorporated or deemed to be incorporated by reference and exhibits),
(ii)  of the  issuance  by the  Commission  of any  stop  order  suspending  the
effectiveness of the Shelf Registration  Statement or of any order preventing or
suspending  the  use of any  preliminary  prospectus  or the  initiation  of any
proceedings for that purpose, (iii) if at any time when a prospectus is required
by the Securities Act to be delivered in connection with sales of the Restricted
Registrable  Securities  the  representations  and  warranties  of  the  Company
contained in any agreement  contemplated  by Section  4(A)(j) hereof cease to be
true and correct,  (iv) of the receipt by the Company of any  notification  with
respect to the suspension of the  qualification or exemption from  qualification
of a registration  statement or any of the Restricted Registrable Securities for
offer or sale in any jurisdiction,  or the initiation of any proceeding for such
purpose,  (v) of the  happening of any event,  the existence of any condition or
any  information  becoming  known  that  makes any  statement  made in the Shelf
Registration  Statement or related  prospectus or any document  incorporated  or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in or amendments or  supplements  to the
Shelf  Registration  Statement,  prospectus  or  documents  so that it will  not
contain any untrue  statement  of a material  fact or omit to state any material
fact required to be stated therein or necessary to make the  statements  therein
not misleading,  and that in the case of the prospectus, it will not contain any
untrue  statement of a material fact or omit to state any material fact required
to be stated  therein or necessary to make the statements  therein,  in light of
the  circumstances  under which they were made, not misleading,  and (vi) of the
determination  by the  Company  that a  post-effective  amendment  to the  Shelf
Registration Statement would be appropriate;

         (d)  use  its  best  efforts  to  prevent  the  issuance  of any  order
suspending the effectiveness of the Shelf Registration Statement or of any order
preventing or suspending the use of a prospectus or suspending the qualification
(or  exemption  from  qualification)  of  any  of  the  Restricted   Registrable
Securities for sale in any  jurisdiction,  and, if any such order is issued,  to
use its best  efforts  to obtain  the  withdrawal  of any such  order as soon as
practicable;

         (e) upon and after the filing of the Shelf  Registration  Statement and
if requested by the managing underwriter or underwriters (if any) or the holders
of a majority of the Restricted  Registrable Securities being sold, (i) promptly
include in a prospectus  supplement  or  post-effective  amendment  thereto such
information as the managing  underwriter or underwriters (if any), such holders,
or counsel for any of them  reasonably  request to be included  therein and (ii)
make all required filings of such prospectus  supplement or such  post-effective
amendment as soon as practicable after the Company has received  notification of
the matters to be  included  in such  prospectus  supplement  or  post-effective
amendment;
<PAGE>
         (f) prior to any public offering of Restricted Registrable  Securities,
to use its  reasonable  best  efforts to  register  or qualify  such  Restricted
Registrable  Securities  (and to cooperate  with selling  holders of  Restricted
Registrable  Securities,  the managing underwriter or underwriters,  if any, and
their  respective  counsel in connection with the  registration or qualification
(or  exemption  from such  registration  or  qualification)  of such  Restricted
Registrable Securities) for offer and sale under the securities or Blue Sky laws
of such  jurisdictions  within the United States as any selling  holder,  or the
managing  underwriter or underwriters  reasonably request in writing;  provided,
however,  that where  Restricted  Registrable  Securities are offered other than
through an  underwritten  offering,  the Company  agrees to cause its counsel to
perform  Blue Sky  investigations  and  file  registrations  and  qualifications
required to be filed  pursuant to this  Section  4(A)(f);  use  reasonable  best
efforts  to keep any  effective  registration  or  qualification  (or  exemption
therefrom)  effective during the period such registration  statement is required
to be kept  effective  and do any  and  all  other  acts  or  things  reasonably
necessary or advisable to enable the  disposition in such  jurisdictions  of the
Restricted  Registrable  Securities  covered  by  the  applicable   registration
statement;  provided,  however,  that the  Company  shall not be required to (A)
qualify  generally  to do business in any  jurisdiction  where it is not then so
qualified,  (B) take any  action  that would  subject  it to general  service of
process in any such jurisdiction  where it is not then so subject or (C) subject
itself to taxation in excess of a nominal dollar amount in any such jurisdiction
where it is not then so subject;

         (g)  cooperate  with the  selling  holders  of  Restricted  Registrable
Securities and the managing  underwriter or underwriters,  if any, to facilitate
the timely  preparation  and delivery of  certificates  representing  Restricted
Registrable  Securities  that are sold,  which  certificates  shall not bear any
restrictive  legends;  and enable such Restricted  Registrable  Securities to be
registered in such names as the managing underwriter or underwriters, if any, or
holders may reasonably request;

         (h) use  reasonable  best efforts to cause the  Restricted  Registrable
Securities covered by the Shelf Registration  Statement to be registered with or
approved by such other governmental agencies or authorities as may be reasonably
necessary to enable the holders thereof or the underwriter or  underwriters,  if
any,  to dispose of such  Restricted  Registrable  Securities,  except as may be
required solely as a consequence of the nature of a selling  holder's  business,
in which case the Company will  cooperate in all  reasonable  respects  with the
filing of such registration statement and the granting of such approvals;

         (i) upon the occurrence of any event contemplated by Section 4(A)(c)(v)
or 4(A)(c)(vi) hereof, as promptly as practicable prepare (but in no event later
than 30 days) and (subject to Section  4(A)(a) hereof) file with the Commission,
at the sole expense of the Company, a supplement or post-effective  amendment to
the Shelf  Registration  Statement or a supplement to the related  prospectus or
any document incorporated or deemed to be incorporated therein by reference,  or
file any  other  required  document  so that,  as  thereafter  delivered  to the
purchasers of such Restricted Registrable  Securities,  such prospectus will not
contain an untrue  statement  of a material  fact or omit to state any  material
fact required to be stated therein or necessary to make the statements  therein,
in light of the circumstances under which they were made, not misleading;
<PAGE>
         (j)  in  connection  with  any  underwritten   offering  of  Restricted
Registrable Securities pursuant to the Shelf Registration Statement,  enter into
an underwriting  agreement as is customary in  underwritten  offerings of equity
securities  similar to the Common  Stock and take all such other  actions as are
reasonably  requested by the managing  underwriter or  underwriters  in order to
facilitate the  registration or the  disposition of such Restricted  Registrable
Securities and, in such connection, (i) make such representations and warranties
to, and covenants  with,  the  underwriters  with respect to the business of the
Company and its  subsidiaries  and the  registration  statement,  prospectus and
documents,  if any,  incorporated  or deemed  to be  incorporated  by  reference
therein,  in each case, as are  customarily  made by issuers to  underwriters in
underwritten  offerings of equity  securities  similar to the Common Stock,  and
confirm  the same in  writing if and when  requested;  (ii)  obtain the  written
opinion  of  counsel  to the  Company,  dated  the  effective  date of the Shelf
Registration Statement, and customary written updates thereof in form, scope and
substance  reasonably   satisfactory  to  the  holders  of  a  majority  of  the
Registrable  Securities  and their counsel,  and to the managing  underwriter or
underwriters,  addressed to such holders and the underwriters,  and covering the
matters customarily  covered in opinions requested in underwritten  offerings of
equity  similar to the Common Stock and such other  matters as may be reasonably
requested by such holders and the managing  underwriter or  underwriters;  (iii)
obtain "cold comfort"  letters and updates thereof in form,  scope and substance
reasonably  satisfactory  to  the  holders  of a  majority  of  the  Registrable
Securities and their counsel,  and to the managing  underwriter or  underwriters
from the independent public  accountants of the Company (and, if necessary,  any
other independent  public accountants of any subsidiary of the Company or of any
business  acquired by the Company for which  financial  statements and financial
data are, or are required to be,  included or  incorporated  by reference in the
registration statement),  addressed to the holders of the Registrable Securities
and each of the underwriters,  such letters to be in customary form and covering
matters of the type customarily  covered in "cold comfort" letters in connection
with underwritten offerings of equity similar to the Common Stock and such other
matters as reasonably requested by a majority of the Registrable  Securities and
their counsel, and by the managing  underwriter or underwriters;  and (iv) if an
underwriting  agreement  is  entered  into,  the same  shall  contain  customary
indemnification  provisions  and  procedures  with  respect to all parties to be
indemnified  pursuant to said  Section.  The above shall be done at each closing
under such underwriting agreement, or as and to the extent required thereunder;

         (k) upon the filing of the Shelf Registration Statement and after entry
into  a  confidentiality   agreement  in  customary  form,  make  available  for
inspection by any selling holder of such Restricted Registrable Securities being
sold,  any  underwriter  participating  in any such  disposition  of  Restricted
Registrable  Securities,  if any, and any  attorney,  accountant  or other agent
retained  by  any  such  selling  holder  or  underwriter   (collectively,   the
"Inspectors"),  at the offices where normally kept, during  reasonable  business
hours and upon reasonable advance notice to the Company, all financial and other
records,  pertinent  corporate  documents and instruments of the Company and its
respective  subsidiaries  (collectively,  the  "Records") as shall be reasonably
necessary   to  enable   them  to  exercise   any   applicable   due   diligence
responsibilities, and cause the officers, directors and employees of the Company
and its subsidiaries to supply all information  reasonably requested by any such
Inspector in  connection  with such  registration  statement  and any road show.
<PAGE>
Records which the Company determines,  in good faith, to be confidential and any
Records which it notifies the Inspectors are confidential shall not be disclosed
by the  Inspectors  unless (i) the  disclosure  of such  Records is necessary to
avoid  or  correct  a  material   misstatement  or  material   omission  in  the
registration  statement,  including the prospectus  included  therein,  (ii) the
release of such Records is ordered  pursuant to a subpoena or other order from a
court of competent jurisdiction, (iii) disclosure of such information is, in the
reasonable  opinion of counsel for any  Inspector,  necessary  or  advisable  in
connection with any action,  claim,  suit or proceeding,  directly or indirectly
involving  such  Inspector  and arising  out of,  based  upon,  relating  to, or
involving this Agreement,  or any  transactions  contemplated  hereby or arising
hereunder,  or (iv) the  information  in such  Records  has been made  generally
available to the public.  Each  selling  holder of such  Restricted  Registrable
Securities will be required to agree that information obtained by it as a result
of such inspections  shall be deemed and kept confidential and shall not be used
by it as the basis for any market  transactions in the securities of the Company
unless and until such  information  is generally  available to the public.  Each
selling holder of such  Restricted  Registrable  Securities  will be required to
further agree that it will,  upon  learning  that  disclosure of such Records is
sought in a court of competent jurisdiction or by any regulatory authority, give
prompt  notice to the  Company and allow the  Company to  undertake  appropriate
action to prevent disclosure of the Records deemed confidential at the Company's
sole expense;

         (l)  make  generally  available  to  its  securityholders  as  soon  as
practicable, but in any event not later than eighteen months after the effective
date of the  registration  statement  (as  defined  in  Rule  158(c)  under  the
Securities  Act),  an  earnings  statement  of the  Company  (which  need not be
audited)  complying  with Section 11(a) of the  Securities Act and the rules and
regulations  of the  Commission  thereunder  (including,  at the  option  of the
Company, Rule 158);

         (m)  cooperate  with each seller of Restricted  Registrable  Securities
covered  by the  Shelf  Registration  Statement  and each  underwriter,  if any,
participating in the disposition of such Restricted  Registrable  Securities and
their  respective  counsel in connection with any filings required to be made by
the member of the National Association of Securities Dealers,  Inc. (the "NASD")
with the NASD;

         (n) use its best efforts to list the Restricted  Registrable Securities
for trading on the NASDAQ  National  Market  System if the Common  Stock is then
listed on the NASDAQ National Market System, and such other markets or exchanges
on which the  Common  Stock is then  listed  for  trading,  prior to their  sale
pursuant to the Shelf Registration Statement; and

         (o) use its best efforts to take all other  reasonable  steps necessary
or  advisable  to  effect  the  registration  under  the  Securities  Act of the
Restricted Registrable Securities covered by the Shelf Registration Statement.

         (B) The  Company  may require  each  seller of  Restricted  Registrable
Securities covered by the Shelf Registration  Statement to furnish in writing to
the Company such information  regarding such seller and the distribution of such
Restricted  Registrable  Securities  as the  Company  may,  from  time to  time,
reasonably  require in connection  with filings with the Securities and Exchange
Commission or state  securities  authorities.  The Company may exclude from such
<PAGE>
registration   the   Restricted   Registrable   Securities  of  any  seller  who
unreasonably  fails to furnish such  information  within a reasonable time after
receiving  such  request.  Each such  seller  agrees to furnish  promptly to the
Company  all  information  required  to  be  disclosed  in  order  to  make  the
information  previously  furnished to the Company by such seller not  materially
misleading.

         (C)  Each  holder  of  Restricted   Registrable  Securities  agrees  by
acquisition of such Restricted  Registrable  Securities,  upon actual receipt of
any notice from the Company of the happening of any event of the kind  described
in Section  4(A)(c)(ii),  4(A)(c)(iv),  4(A)(c)(v),  or 4(A)(c)(vi)  hereof,  to
forthwith  discontinue  disposition of such  Restricted  Registrable  Securities
pursuant to the Shelf Registration  Statement until such holder's receipt of the
copies of the supplemented or amended prospectus contemplated by Section 4(A)(i)
hereof, or until it is advised in writing (the "Advice") by the Company that the
use of the applicable prospectus may be resumed.

         5.       Registration Expenses.

         (a) Registration  Expenses shall be borne as set forth in Section 2(c).
Registration  Expenses  ("Registration  Expenses") shall consist of all expenses
incidental to the Company's  performance of or compliance  with this  Agreement,
including  without  limitation (i) all  registration and filing fees (including,
without  limitation,  (A) fees with respect to filings  required to be made with
the NASD in connection with an  underwritten  offering and (B) fees and expenses
of  compliance  with  state  securities  or Blue  Sky laws  (including,  without
limitation, reasonable fees and disbursements of counsel in connection with Blue
Sky  qualifications  of the Restricted  Registrable  Securities),  (ii) printing
expenses,  including, without limitation,  expenses of printing certificates for
Restricted  Registrable  Securities and of printing prospectuses if the printing
of prospectuses  is requested by the managing  underwriter or  underwriters,  if
any, or by the holders of the Restricted  Registrable Securities included in the
Shelf Registration  Statement,  (iii) messenger and delivery expenses, (iv) fees
and disbursements of counsel for the Company,  (v) fees and disbursements of all
independent  public  accountants  referred  to in  Section  4(A)(j)(iii)  hereof
(including,  without  limitation,  the  expenses of any special  audit and "cold
comfort"  letters  required  by or  incident  to such  performance),  (vi)  fees
associated  with  making the  Restricted  Registrable  Securities  eligible  for
trading  through The Depository  Trust Company,  (vii)  Securities Act liability
insurance,  if the Company desires such  insurance,  (viii) fees and expenses of
all other persons retained by the Company, (ix) internal expenses of the Company
(including,  without  limitation,  all  salaries  and  expenses of officers  and
employees of the Company performing legal or accounting duties), (x) the expense
of any annual audit,  (xi) the fees and expenses incurred in connection with the
listing of the securities to be registered on NASDAQ or any securities  exchange
on which the Common  Stock is then listed,  and (xii) the  expenses  relating to
printing,   word  processing  and  distributing  all  registration   statements,
underwriting  agreements,  securities  sales  agreements and any other documents
necessary in order to comply with this Agreement.  Registration  Expenses do not
include any underwriting discounts or sales commissions.

         (b)  The  Company  shall   reimburse  the  holders  of  the  Restricted
Registrable  Securities being registered under the Shelf Registration  Statement
for the reasonable fees and disbursements of not more than one counsel chosen by
the  holders  of a  majority  of the  Restricted  Registrable  Securities  to be
included in the Shelf Registration Statement.
<PAGE>
         6.       Indemnification.

         (p) The Company  agrees to indemnify  and hold  harmless each holder of
Restricted Registrable Securities,  its affiliates, and its and their respective
officers, directors, employees and agents, and each person, if any, who controls
any such person (each, a "Control  Person") within the meaning of either Section
15  of  the  Securities  Act  or  Section  20  of  the  Exchange  Act  (each,  a
"Participant"),  from  and  against  any and all  losses,  claims,  damages  and
liabilities (including,  without limitation, the reasonable legal fees and other
expenses  actually incurred in connection with any suit, action or proceeding or
any claim  asserted)  caused  by,  arising  out of or based  upon (A) any untrue
statement  or alleged  untrue  statement  of a material  fact  contained  in any
registration  statement  (or any  amendment  thereto)  or upon any  omission  or
alleged  omission to state therein a material fact required to be stated therein
or necessary to make the statements  therein not  misleading,  or (B) any untrue
statement  or alleged  untrue  statement  of a material  fact  contained  in any
related  prospectus  (or any  amendments  or  supplements  thereto)  or upon any
omission or alleged  omission to state  therein a material  fact  required to be
stated  therein or necessary  to make the  statements  therein,  in light of the
circumstances  under which they were made, not  misleading;  provided,  however,
that the Company  will not be required to  indemnify a  Participant  if (i) such
losses,  claims,  damages or liabilities  are caused by any untrue  statement or
omission or alleged  untrue  statement or omission  made in reliance upon and in
conformity with information relating to any Participant furnished to the Company
in writing by or on behalf of such Participant expressly for use therein or (ii)
if such  Participant  sold to the  person  asserting  the claim  the  Restricted
Registrable  Securities  which are the  subject  of such  claim and such  untrue
statement or omission or alleged  untrue  statement or omission was contained or
made in any  preliminary  prospectus  and  corrected  in the  prospectus  or any
amendment or supplement  thereto and the  prospectus  does not contain any other
untrue  statement  or  omission  or alleged  untrue  statement  or omission of a
material fact that was the subject  matter of the related  proceeding  and it is
established  by the  Company in the  related  proceeding  that such  Participant
failed  to  deliver  or  provide  a  copy  of  the  prospectus  (as  amended  or
supplemented)  to such person with or prior to the  confirmation  of the sale of
such  Restricted  Registrable  Securities  sold to such  person if  required  by
applicable  law,  unless  such  failure  to  deliver  or  provide  a copy of the
prospectus (as amended or  supplemented)  was a result of  noncompliance  by the
Company with Section 4 of this Agreement.

         (q) Each Participant  agrees,  severally and not jointly,  to indemnify
and hold harmless the Company, its directors, officers, employees and agents and
each person who  controls  the  Company  within the meaning of Section 15 of the
Securities  Act or  Section  20 of the  Exchange  Act to the same  extent as the
foregoing indemnity from the Company to each Participant,  but only with respect
to information relating to such Participant  furnished to the Company in writing
by or on  behalf  of such  Participant  expressly  for  use in any  registration
statement or prospectus, any amendment or supplement thereto, or any preliminary
prospectus.  Notwithstanding  the foregoing,  under no  circumstances  shall any
Purchaser  (including all  Participants  with respect  thereto) or the Placement
Agent  (including all  Participants  with respect  thereto) be  responsible  for
amounts  that  in the  aggregate  exceed  the  value  of,  in the  case  of each
Purchaser,  the  Units  purchased  by  such  Purchaser  or,  in the  case of the
Placement  Agent,  the  Placement  Agent Units  delivered  to it pursuant to the
Placement  Agency  Agreement,  determined by multiplying such number of Units or
Placement  Agent  Units,  as  applicable,  by the Offer Price (as defined in the
Confidential Private Placement Memorandum relating to the Offering).
<PAGE>
         (r) If any suit,  action,  proceeding  (including any  governmental  or
regulatory investigation),  claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs,  such person (the "Indemnified Person") shall promptly
notify the person against whom such  indemnity may be sought (the  "Indemnifying
Person")  in  writing,   and  the  Indemnifying  Person,  upon  request  of  the
Indemnified  Person,  shall  retain  counsel  reasonably   satisfactory  to  the
Indemnified Person to represent the Indemnified Person and any other Indemnified
Person  in such  proceeding  and  shall  pay the  reasonable  fees and  expenses
actually incurred by such counsel related to such proceeding; provided, however,
that the failure to so notify the  Indemnifying  Person  shall not relieve it of
any obligation or liability which it may have hereunder or otherwise (unless and
only to the extent that such failure  directly results in the loss or compromise
of  any  material  rights  or  defenses  by  the  Indemnifying  Person  and  the
Indemnifying  Person was not  otherwise  aware of such action or claim).  In any
such proceeding,  any Indemnified  Person shall have the right to retain its own
counsel,  but the fees and expenses of such  counsel  shall be at the expense of
such Indemnified  Person unless (i) the Indemnifying  Person and the Indemnified
Person  shall  have  mutually  agreed  in  writing  to the  contrary,  (ii)  the
Indemnifying  Person  shall have failed  within a  reasonable  period of time to
retain counsel  reasonably  satisfactory to the Indemnified  Person or (iii) the
named parties in any such proceeding  (including any impleaded  parties) include
both the Indemnifying  Person and the Indemnified  Person and  representation of
both  parties  by the same  counsel  would be  inappropriate  due to  actual  or
potential  differing interests between them. It is understood that, unless there
exists a conflict among Indemnified  Persons, the Indemnifying Person shall not,
in connection with any one such proceeding or separate but substantially similar
related  proceedings  in the same  jurisdiction  arising out of the same general
allegations,  be liable for the fees and expenses of more than one separate firm
(in addition to any local  counsel) for all  Indemnified  Persons,  and that all
such fees and expenses  shall be paid  promptly as they are  incurred.  Any such
separate  firm for the  Participants  and such control  persons of  Participants
shall be designated in writing by  Participants  who sold a majority in interest
of Restricted  Registrable Securities sold by all such Participants and any such
separate  firm for the  Company,  its  directors,  its officers and such control
persons of the  Company  shall be  designated  in writing  by the  Company.  The
Indemnifying Person shall not have any  indemnification  obligation with respect
to any settlement of any proceeding  effected  without its prior written consent
(which  consent shall not be  unreasonably  withheld),  but if settled with such
consent or if there be a final  non-appealable  judgment for the  plaintiff  for
which the  Indemnified  Person is entitled to  indemnification  pursuant to this
Agreement,  the  Indemnifying  Person agrees to indemnify and hold harmless each
Indemnified  Person  from and against  any loss or  liability  by reason of such
settlement or judgment.  No Indemnifying Person shall, without the prior written
consent of the  Indemnified  Person,  effect any settlement or compromise of any
pending or threatened  proceeding in respect of which any Indemnified  Person is
or could have been a party,  and indemnity  could have been sought  hereunder by
such  Indemnified  Person,  unless such settlement (A) includes an unconditional
written release of such  Indemnified  Person,  in form and substance  reasonably
satisfactory to such Indemnified  Person,  from all liability on claims that are
the subject matter of such settlement,  (B) does not include any statement as to
an  admission  of fault,  culpability  or  failure to act by or on behalf of any
Indemnified Person and (C) the sole relief provided is monetary damages that are
paid in full by the Indemnifying Party.
<PAGE>
         (s) If  the  indemnification  provided  for in  the  first  and  second
paragraphs of this Section 6 is for any reason  unavailable  to, or insufficient
to hold  harmless,  an  Indemnified  Person in  respect of any  losses,  claims,
damages or liabilities referred to therein,  then each Indemnifying Person under
such paragraphs,  in lieu of indemnifying such Indemnified Person thereunder and
in order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such  Indemnified  Person as a result of such  losses,
claims,  damages or liabilities in such  proportion as is appropriate to reflect
the  relative  fault  of the  Indemnifying  Persons  on the  one  hand  and  the
Indemnified  Persons  on the other hand in  connection  with the  statements  or
omissions  or alleged  statements  or  omissions  that  resulted in such losses,
claims,  damages or liabilities  (or actions in respect  thereof).  The relative
fault of the parties  shall be  determined  by reference to, among other things,
whether  the  untrue or  alleged  untrue  statement  of a  material  fact or the
omission or alleged  omission to state a material  fact  relates to  information
supplied by the Company on the one hand or such  Participant  on the other,  the
parties'  relative intent,  knowledge,  access to information and opportunity to
correct  or  prevent  such  statement  or  omission,  and  any  other  equitable
considerations appropriate in the circumstances.

         (t) The  parties  agree  that it  would  not be just and  equitable  if
contribution  pursuant to this Section 6 were  determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
other  method  of  allocation  that  does  not  take  account  of the  equitable
considerations  referred to in the immediately  preceding paragraph.  The amount
paid or  payable by an  Indemnified  Person as a result of the  losses,  claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal  or  other  expenses  actually  incurred  by such  Indemnified  Person  in
connection with  investigating  or defending any such action or claim. No person
guilty of fraudulent  misrepresentation  (within the meaning of Section 11(f) of
the Securities  Act) shall be entitled to  contribution  from any person who was
not guilty of such fraudulent misrepresentation.

         (u) The indemnity and contribution agreements contained in this Section
6 will be in  addition  to any  liability  which the  Indemnifying  Persons  may
otherwise have to the Indemnified Persons referred to above.

         7.       Participation in Underwritten Registrations.

         No owner of Restricted  Registrable  Securities may  participate in any
underwritten  offering  of Common  Stock of the  Company  pursuant  to the Shelf
Registration   Statement   unless  such  owner   completes   and   executes  all
questionnaires,   powers  of  attorney  (coupled  with  a  custody   agreement),
indemnities,   underwriting  agreements  and  such  other  documents  reasonably
required under the terms of customary underwriting arrangements.

         8.       Rules 144 and 144A.

         The Company  covenants that it will use its best efforts to file timely
the reports required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations adopted by the Commission  thereunder,  and it
will take such  further  action as any record  owner of  Restricted  Registrable
Securities may reasonably request,  all to the extent required from time to time
to  enable  such  owner  to  sell  Restricted   Registrable  Securities  without
registration  under the  Securities  Act within the limitation of the exemptions
<PAGE>
provided by (a) Rule 144 under the  Securities  Act, as such Rule may be amended
from time to time, or (b) any similar or successor rule or regulation  hereafter
adopted by the  Commission.  If and when Rule 144A under the  Securities Act (or
any similar or successor rule or regulation hereafter adopted by the Commission)
is applicable to a sale of Restricted Registrable Securities, the Company agrees
to make available to any record owner of Restricted  Registrable  Securities the
information required by Rule 144A(d)(4) under the Securities Act, if applicable,
in order to permit resales of Restricted Registrable Securities pursuant to Rule
144A. Upon the request of any record owner of Restricted Registrable Securities,
the Company will deliver to such owner a written  statement as to whether it has
complied with such requirements.

         9.       Liquidated Damages.

         (a) Each of the Company,  the Purchasers and the Placement Agent agrees
that the holders of Restricted Registrable Securities will suffer damages if the
Company  fails to fulfill  its  obligations  under  Section 2  (irrespective  of
whether the Company uses its best  efforts) and that it would not be feasible to
ascertain the extent of such damages with precision.  Accordingly,  if the Shelf
Registration  Statement  has not  become  effective  on or prior to the 90th day
after the closing of the Offering,  then the Company  agrees that, as liquidated
damages  and not as a  penalty,  the  exercise  price of each  Warrant  shall be
reduced  automatically  by $.20.  The  exercise  price of each  Warrant  will be
further adjusted downward at the rate of $.00667 per day for each day after such
90th day until the Shelf Registration Statement is declared effective, but in no
event  shall the  exercise  price be  reduced  to less than the par value of the
Common  Stock  on the  date  hereof.  In  addition,  if  holders  of  Restricted
Registrable Securities are required to discontinue  disposition thereof pursuant
to Section  4(C)  hereof for more than an  aggregate  of 120 days after the date
that the Shelf Registration Statement is initially declared effective,  then the
Company  agrees that, as liquidated  damages and not as a penalty,  the exercise
price of each Warrant shall be reduced  automatically at the rate of $.00667 per
day for each day after the 120th day on which holders of Restricted  Registrable
Securities  are required to  discontinue  disposition  thereof,  but in no event
shall the  exercise  price be  reduced  to less than the par value of the Common
Stock on the date hereof.

         (b) The parties hereto agree that the liquidated  damages  provided for
in this Section 9  constitute  a reasonable  estimate of the damages that may be
incurred  by  holders  of  Restricted  Registrable  Securities  by reason of the
failure of the Shelf Registration Statement to be declared effective.

         10.      Termination.

         This  Agreement   shall  terminate  on  the  later  of  (i)  the  fifth
anniversary  of the  date of this  Agreement  and  (ii)  the  expiration  of the
Effectiveness  Period.  The  provisions  of Section 6 hereof shall  survive such
termination.

         11.      Miscellaneous.

         (v) No  Inconsistent  Agreements.  The  Company has not, as of the date
hereof, and the Company shall not, after the date of this Agreement,  enter into
any agreement with respect to any of its securities  that is  inconsistent  with
the rights granted to the holders of Restricted  Registrable  Securities in this
Agreement or otherwise  conflicts with the provisions  hereof.  The Company will
not enter  into any  agreement  which  will  grant any such  rights  that are in
conflict with the rights afforded by this Agreement.
<PAGE>
        (w) Amendments and Waivers. The provisions of this Agreement may not be
amended,  modified or  supplemented,  and waivers or consents to departures from
the  provisions  hereof may not be given,  otherwise than with the prior written
consent  of the  Company  and the  holders  of not less than a  majority  of the
Restricted  Registrable  Securities,  for which purpose each holder of a Warrant
will be deemed the holder of the number of Restricted Registrable Securities for
which such Warrant is then exercisable.  Notwithstanding the foregoing, a waiver
or consent to depart from the  provisions  hereof with  respect to a matter that
relates  exclusively  to  the  rights  of  holders  of  Restricted   Registrable
Securities  whose  securities are being sold pursuant to the Shelf  Registration
Statement  and that does not directly or  indirectly  affect,  impair,  limit or
compromise the rights of other holders of Restricted  Registrable Securities may
be given  by  holders  of at  least a  majority  of the  Restricted  Registrable
Securities being sold by such holders pursuant to such registration statement.

         (x)  Notices.  All notices  and other  communications  provided  for or
permitted hereunder shall be made in writing and be delivered by hand or sent by
registered or certified mail, return receipt  requested and postage prepaid,  or
by  facsimile  transmission,  followed  by a  confirmation  copy  sent by either
overnight or two (2) day courier):

         (i) if to a holder of Restricted  Registrable Securities other than the
Placement Agent, at the most current address given by such holder to the Company
in writing;

         (ii)  if to the  Placement  Agent,  at its  address  set  forth  in the
Placement Agency Agreement; and

         (iii) if to the  Company,  at its  address  set  forth in the  Purchase
Agreements.

All such notices and communications shall be deemed to have been duly given when
delivered by hand,  if  personally  delivered;  five  business  days after being
deposited in the mail,  postage  prepaid,  if mailed;  upon receipt,  if sent by
facsimile  (followed by a confirmation  copy sent by either overnight or two (2)
day courier).

         (d) Third Party  Beneficiaries.  Each  registered  holder of Restricted
Registrable Securities, whether or not such holder is a party to this Agreement,
is an intended beneficiary of this Agreement, and this Agreement may be enforced
by such person.  Nothing in this Agreement shall be construed to give any person
or entity,  other than the Company,  the registered  holders of the Warrants and
the  registered  holders  of  Restricted  Registrable  Securities,  any legal or
equitable right, remedy or claim under this Agreement.

         (e) Successors and Assigns.  This Agreement  shall inure to the benefit
of and be  binding  upon the  successors  and  permitted  assigns of each of the
parties  hereto  and  the  registered  holders  of  the  Restricted  Registrable
Securities;  provided,  however,  that  this  Agreement  shall  not inure to the
benefit of or be binding  upon a  successor  or assign  unless and to the extent
such successor or assign holds Restricted Registrable Securities.

         (f)  Counterparts.  This  Agreement  may be  executed  in any number of
counterparts,  each of which when so executed  shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.

         (g) Headings.  The headings in this  Agreement are for  convenience  of
reference only and shall not limit or otherwise affect the meaning hereof.
<PAGE>
         (h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK,  WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW. EACH OF THE PARTIES  HERETO  AGREES,  AND EACH  BENEFICIARY
SHALL BE BOUND,  TO SUBMIT TO THE  JURISDICTION  OF ANY STATE OR  FEDERAL  COURT
LOCATED  IN THE  SOUTHERN  DISTRICT  OF THE  STATE OF NEW YORK IN ANY  ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.

         (i) Severability.  If any term,  provision,  covenant or restriction of
this  Agreement  is held by a court of  competent  jurisdiction  to be  invalid,
illegal,  void  or  unenforceable,  the  remainder  of  the  terms,  provisions,
covenants and restrictions set forth herein shall to the extent permitted by law
remain in full  force and effect and shall in no way be  affected,  impaired  or
invalidated,  and the parties  hereto  shall use their best  efforts to find and
employ an alternative means to achieve the same or substantially the same result
as that  contemplated  by such invalid,  illegal,  void or  unenforceable  term,
provision,  covenant or restriction.  It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining  terms,
provisions,  covenants and restrictions  without including any term,  provision,
covenant or restriction that may be hereafter declared invalid, illegal, void or
unenforceable.

         (j)  Restricted  Registrable  Securities  Held  by the  Company  or its
Affiliates.  Whenever  the  consent  or  approval  of  holders  of  a  specified
percentage  of  Restricted   Registrable   Securities  is  required   hereunder,
Restricted Registrable Securities held by the Company or its affiliates (as such
term is  defined in Rule 405 under the  Securities  Act) shall not be taken into
account in determining whether such consent or approval was given by the holders
of such required percentage.

         (k) Entire Agreement.  This Agreement,  the Warrant Agreement governing
the Warrants  (the  "Warrant  Agreement"),  the Purchase  Agreements  and,  with
respect to the Placement  Agent,  the Placement Agency Agreement are intended by
the  parties as a final  expression  of their  agreement  and  intended  to be a
complete  and  exclusive  statement of the  agreement  of the parties  hereto in
respect of the subject matter  contained  herein.  This  Agreement,  the Warrant
Agreement, the Purchase Agreements and, with respect to the Placement Agent, the
Placement  Agency Agreement  supersede all prior agreements  between the parties
with respect to such subject  matter.  There are no  representations,  promises,
warranties  or  undertakings  between  the parties  hereto  with  respect to the
subject  matter  hereof,  other  than those set forth or  referred  to herein or
therein or in the Confidential  Private Placement Memorandum dated September 27,
1996, as it may be amended or supplemented  to the date hereof,  relating to the
Offering.


                                              [signature pages follow]

<PAGE>
         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.


                                                     UNIGENE LABORATORIES, INC.


                                               By:   /s/Ronald S. Levy
                                                     ----------------- 
                                                        Ronald S. Levy
                                                        Vice President


                                                     BT SECURITIES CORPORATION



                                               By:   /s/Peter R. Barry
                                                     -----------------
                                                        Peter R. Barry
                                                        Vice President


                                         [additional signature pages follow]


<PAGE>
                          REGISTRATION RIGHTS AGREEMENT

                                 SIGNATURE PAGE
                            FOR INDIVIDUAL PURCHASERS




Jeffrey Dobbs
Name of Purchaser                                         Name of Purchaser
(Please print or type)                                   (Please print or type)

/s/Jeffrey Dobbs
----------------
Signature                                                 Signature
<PAGE>



                          REGISTRATION RIGHTS AGREEMENT

                                 SIGNATURE PAGE
                            FOR INDIVIDUAL PURCHASERS




William J. Jacobs
Name of Purchaser                                         Name of Purchaser
(Please print or type)                                    (Please print or type)


/s/William J. Jacobs
--------------------
Signature                                                     Signature



<PAGE>
                          REGISTRATION RIGHTS AGREEMENT

                                 SIGNATURE PAGE
                            FOR INDIVIDUAL PURCHASERS




Stephen J. Mazur
Name of Purchaser                                         Name of Purchaser
(Please print or type)                                    (Please print or type)


/s/Stephen J. Mazur
-------------------
Signature                                                     Signature



<PAGE>
                          REGISTRATION RIGHTS AGREEMENT

                                 SIGNATURE PAGE
                            FOR INDIVIDUAL PURCHASERS




Vincent A. Rossi, Jr.
Name of Purchaser                                         Name of Purchaser
(Please print or type)                                    (Please print or type)


/s/Vincent A. Rossi, Jr.
------------------------
Signature                                                     Signature




<PAGE>
                          REGISTRATION RIGHTS AGREEMENT

                                 SIGNATURE PAGE
                           FOR PARTNERSHIP PURCHASERS


Annapurna Partners, L.P.
Name of Partnership (Please print or type)


By /s/Hope Taitz
   -------------
     Signature of a General Partner
     Name: Hope Taitz
     Title: President
            Ely Capital Advisors, LLC (authorized representative)

By ________________________________________________
     Signature of Additional General Partner
     (if required by partnership agreement)


By _____________________________________________
     Signature of Additional General Partner
     (if required by partnership agreement)



<PAGE>
                          REGISTRATION RIGHTS AGREEMENT

                                 SIGNATURE PAGE
                           FOR PARTNERSHIP PURCHASERS


Catalyst Partners, L.P.
Name of Partnership (Please print or type)


By /s/Allison J. Rosen
   -------------------
     Signature of a General Partner
     Name: Allison J. Rosen

By /s/
     Signature of Additional General Partner
   Name: Hope Taitz

By _____________________________________________
     Signature of Additional General Partner
     (if required by partnership agreement)



<PAGE>
                          REGISTRATION RIGHTS AGREEMENT

                                 SIGNATURE PAGE
                           FOR PARTNERSHIP PURCHASERS


CL Investment Partnership II, L.P.
Name of Partnership (Please print or type)


By /s/Ted Ammon
   ------------
     Signature of a General Partner
     Name:  Ted Ammon

By ________________________________________________
     Signature of Additional General Partner
     (if required by partnership agreement)


By _____________________________________________
     Signature of Additional General Partner
     (if required by partnership agreement)

<PAGE>
                          REGISTRATION RIGHTS AGREEMENT

                                 SIGNATURE PAGE
                           FOR PARTNERSHIP PURCHASERS


Turnberry Capital Partners, L.P.
Name of Partnership (Please print or type)


By /s/
     Name: Turnberry Capital Management, L.P.
     Its General Partner

By /s/Vincent A. Rossi, Jr.
   ------------------------
     Signature of Additional General Partner
     Name: Vincent A. Rossi, Jr.
     Title: Managing Director

By _____________________________________________
     Signature of Additional General Partner
     (if required by partnership agreement)



<PAGE>
                          REGISTRATION RIGHTS AGREEMENT

                                 SIGNATURE PAGE
                           FOR PARTNERSHIP PURCHASERS


Woodstead Associates II, L.P.
Name of Partnership (Please print or type)
By: RDS Woodstead, Inc., its General Partner

By /s/David A. Persing
   -------------------
     Signature of a General Partner
     Name: David A. Persing
     Title: Senior Vice President

By _____________________________________________
     Signature of Additional General Partner
     (if required by partnership agreement)



<PAGE>
                          REGISTRATION RIGHTS AGREEMENT

                                 SIGNATURE PAGE
                           FOR PARTNERSHIP PURCHASERS


Nelson Partners
Name of Partnership (Please print or type)


By /s/Cre Dupuy
   ------------
     Signature of Officer
     Name: Cre Dupuy

By ---------------------------------------------
     Signature of Additional General Partner
     (if required by partnership agreement)

By _____________________________________________
     Signature of Additional General Partner
     (if required by partnership agreement)




<PAGE>
                          REGISTRATION RIGHTS AGREEMENT

                                 SIGNATURE PAGE
                            FOR CORPORATE PURCHASERS


Continental Casualty Company
Name of Corporation (Please print or type)


By /s/Richard Dubberke
   -------------------
     Signature of Authorized Agent
     Name:   Richard Dubberke
     Title:  Vice President

<PAGE>
                          REGISTRATION RIGHTS AGREEMENT

                                 SIGNATURE PAGE
                            FOR CORPORATE PURCHASERS



Legg Mason High Yield Fund
Name of Corporation (Please print or type)


By /s/Trudie Whitehead
   -------------------
     Signature of Authorized Agent
     Name:   Trudie Whitehead
     Title:  Portfolo Manager/Principal


<PAGE>
                          REGISTRATION RIGHTS AGREEMENT

                                 SIGNATURE PAGE
                            FOR CORPORATE PURCHASERS



Olympus Securities, Ltd.
Name of Corporation (Please print or type)


By /s/Cre Dupuy
   ------------
     Signature of Authorized Agent
     Name:  Cre Dupuy
     Title:  Alternate Director

<PAGE>
                                WARRANT AGREEMENT


         This  Agreement  (the  "Agreement"),  dated as of October 11, 1996,  is
entered  into among  Unigene  Laboratories,  Inc., a Delaware  corporation  (the
"Company"),  those individuals and entities  purchasing Units (as defined below)
in a private  offering  (the  "Offering")  by the  Company  who have  executed a
signature page hereto,  and BT Securities  Corporation,  the Placement Agent for
the Offering (the "Placement Agent").  In addition,  if within 30 days after the
date hereof, either or both of Olympus Securities, Ltd. or Nelson Partners shall
execute a counterpart to this Agreement, such entity shall be deemed a purchaser
of  Units  for all  purposes  hereunder  with  respect  to the  number  of Units
purchased  by such entity  (provided  that the number of such  additional  Units
covered  by this  Agreement  shall not  exceed  the  number  of Units  that such
entities  would be entitled to  purchase by reason of the  Offering  pursuant to
Section 2.2.5 of an Amended and Restated Securities Purchase Agreement, dated as
of March 6, 1996, by and among such entities and the Company).

 
                              W I T N E S S E T H: 


         WHEREAS,  the Company shall issue in the Offering  3,945,000 Units (the
"Units"),  each Unit to consist of one share of the Company's  common stock, par
value  $.01 per  share  (the  "Common  Stock"),  one-quarter  (1/4) of a Class C
warrant  (the "Class C  Warrants"),  each whole Class C Warrant  exercisable  to
purchase  one  share of  Common  Stock  (the  "Class  C  Warrant  Shares"),  and
one-quarter  (1/4) of a Class D warrant  (the "Class D  Warrants,"  and together
with  the  Class C  Warrants,  the  "Warrants"),  each  whole  Class  D  Warrant
exercisable to purchase one share of Common Stock (the "Class D Warrant Shares,"
and together with the Class C Warrant Shares, the "Warrant Shares");

         WHEREAS,  pursuant to the Placement  Agency  Agreement  relating to the
Offering,  the  Company  has  agreed  to issue to the  Placement  Agent  296,935
additional Units (the "Placement Agent Units"),  the Placement Agent Units to be
identical to the Units issued in the Offering.  For purposes of this  Agreement,
the term "Class C Warrants"  shall include the Class C Warrants  included in the
Placement  Agent Units,  the term "Class D Warrants"  shall  include the Class D
Warrants  included in the  Placement  Agent  Units,  the term  "Warrants"  shall
include  the  Warrants  included  in the  Placement  Agent  Units,  and the term
"Warrant  Shares" shall include the Warrant Shares issuable upon exercise of the
Warrants included in the Placement Agent Units; and

         WHEREAS,  the  Company  desires  to set forth  herein  the terms of the
Warrants  and to provide  for the  issuance  of  certificates  representing  the
Warrants.
<PAGE>
         NOW,  THEREFORE,  in consideration of the above and foregoing  premises
and the mutual promises and agreements hereinafter set forth, it is agreed that:

         1.      Warrant Certificates.

                  (a) (i) Each  Warrant  shall  entitle the holder in whose name
the  certificate  shall be  registered  on the transfer  books of the Company (a
"Warrant  Holder") to purchase one share of Common  Stock at the exercise  price
set forth in Section 3(a), subject to modification and adjustment as provided in
Section 8 hereof.  The Warrant  certificates shall be detached from certificates
representing   shares  of  Common  Stock  comprising  the  Units  and  shall  be
distributed to the purchasers  thereof and the Placement Agent at the closing of
the Offering (the "Closing  Date").  The Class C Warrant  certificates  shall be
detached from the Class D Warrant certificates.

                  (b)   Warrants   shall  be  issuable   only  in  whole  number
denominations or in quarterly  fractions  thereof both upon initial issuance and
in connection with any exercise,  transfer or exchange.  Following their initial
issuance,  no Warrant  certificates shall be issued except for: (i) certificates
issued upon the  exercise of any Warrant to evidence  the  unexercised  Warrants
held by the  exercising  Warrant  Holder,  (ii)  certificates  issued  upon  any
transfer or exchange of  certificates or as  replacements  for mutilated,  lost,
stolen or  destroyed  certificates  or (iii)  certificates  issued to reflect an
adjustment or change in the kind or amount of securities issuable upon exercise,
or the exercise price thereof, pursuant to Section 8.

         2.       Form and Execution of Certificates.

                  (a) The Warrants shall be issued in registered  form only. The
forms of Warrant  certificates  shall be  substantially  as  attached  hereto as
Exhibits A and B and shall  include  any such other  terms and legends as may be
required to comply with any applicable  law or the rules and  regulations of any
stock exchange or market.

                  (b) Each Warrant  certificate shall be sequentially  numbered.
Each  Warrant  certificate  representing  Class C Warrants  shall have set forth
thereon the designation "WC" and each Warrant  certificate  representing Class D
Warrants  shall  have set  forth  thereon  the  designation  "WD."  The  Warrant
certificates shall be dated the date of their issuance.

                  (c)  The  Company  shall  act  as its  own  warrant  agent  in
connection with the issuance,  registration,  transfer, exchange and exercise of
Warrants,  or in its sole discretion,  upon notice to the Warrant  Holders,  may
appoint an entity that is  registered as "transfer  agent" under the  Securities
Exchange Act of 1934,  as amended (the  "Exchange  Act"),  to perform any one or
more of such transactions (the "Warrant Agent").

                  (d) The  Warrant  certificates  shall be  manually  signed  on
behalf  of the  Company  by  proper  officers  thereof  (or,  in the case of the
appointment  of a  Warrant  Agent  other  than  the  Company,  by the  facsimile
signatures  of the proper  officers  of the  Company  and  countersigned  by the
Warrant Agent) and shall not be valid for any purpose  unless so signed.  In the
event any officer of the Company who executed  certificates (whether manually or
by  facsimile)  shall cease to be an officer of the Company,  such  certificates
shall have the same  force and  effect as though  the  person  who  signed  such
certificate had not ceased to be an officer of the Company.
<PAGE>
         3.       Exercise; Expiration.

                  (a) Subject to the provisions of this Agreement,  each Warrant
may be exercised at a price (the  "Exercise  Price") of $3.00 per Warrant Share,
subject to  adjustment  as provided  herein,  at any time during the period (the
"Warrant  Exercise  Period")  commencing  on the  Closing  Date and,  subject to
Section 3(b) hereof,  terminating on a date (the "Warrant Expiration Date") that
(i) in the case of the Class C Warrants is the third  anniversary of the Closing
Date or such  earlier  date as is provided  for in Section  3(b) and (ii) in the
case of the Class D Warrants is the third  anniversary of the Closing Date or if
the Warrant  Expiration Date is a Saturday,  Sunday,  or a day on which banks in
New  York are not  open  for  business  (a  "Business  Day"),  then the  Warrant
Expiration Date shall be the next Business Day; provided,  however,  that if the
Shelf  Registration  Statement (as defined in the Registration  Rights Agreement
(as defined  below)) has not become  effective  within 90 days after the Closing
Date, or if the Shelf Registration Statement,  regardless of when it is declared
effective,  does not remain effective through the Warrant  Expiration Date, then
the Warrant Exercise Period shall be extended for, respectively,  (A) the number
of days  elapsed  from the 90th day after the Closing Date through the date that
the Shelf  Registration  Statement becomes effective and (B) such number of days
as is necessary to provide that the Warrants are exercisable for the same number
of  trading  days for  which  they  would  have been  exercisable  had the Shelf
Registration Statement not ceased to be effective. Except as provided in Section
3(b) hereof,  any such extension of the Warrant Exercise Period shall not extend
the 30-day period referred to in Section 3(b).

                  (b) The Company shall have the right, in its sole  discretion,
on or after June 30, 1997, (i) to reduce the Exercise Price of the Warrants to a
price that is 25% or more below the average  Closing  Price (as  defined  below)
over the 10  consecutive  trading days prior to the effective  date of the price
reduction (the "Price  Reduction Date") (or if the Closing Price is based on the
fair  market  value,  the  Closing  Price on the  trading day prior to the Price
Reduction Date), and (ii) simultaneously  accelerate the Warrant Expiration Date
with  respect to the Class C Warrants to the date that is 30 trading  days after
the date  notice is given to the  Warrant  Holders of the price  reduction  (the
"Notice Date") or, if such 30th trading day is not a Business Day, then the next
Business  Day. The Company may exercise its  discretion  under this Section 3(b)
only if the Shelf Registration  Statement is then effective.  If after the Price
Reduction Date and prior to the accelerated  Warrant  Expiration Date, the Shelf
Registration  Statement  ceases to be  effective,  then the  Warrant  Expiration
Period with respect to the Class C Warrants shall be extended for such number of
days as is  necessary  to  provide  that the  Shelf  Registration  Statement  is
effective for 30 trading days following the Notice Date.

                  (c) The  Exercise  Price  of the  Warrants  shall  be  reduced
automatically if (i) the Shelf  Registration  Statement has not become effective
on or prior to the 90th day after the Closing  Date or (ii) holders of shares of
Common  Stock or Warrant  Shares are  required  pursuant to Section  4(C) of the
Registration  Rights  Agreement  to  discontinue  disposition  of such shares or
Warrant  Shares for more than an  aggregate  of 120 days after the date that the
Shelf Registration Statement is initially declared effective,  to the extent and
as more fully described in the Registration Rights Agreement.
<PAGE>
                  (d)  A  Warrant  shall  be  deemed  to  have  been   exercised
immediately prior to the close of business on the date (an "Exercise Date") that
the Warrant Holder has delivered to the Company at its corporate offices located
at 110 Little Falls Road,  Fairfield,  NJ 07004 (the "Corporate Office"),  or at
any such other  office or agency as the Company may  designate,  (i) the Warrant
certificate  with the  Election to Purchase  certification  duly  executed  (the
"Exercise  Form") and (ii) payment in full of the aggregate  Exercise  Price. An
Exercise  Form shall be executed by the Warrant  Holder  thereof or his attorney
duly authorized in writing.  Payment of the Exercise Price of each Warrant shall
be in cash or by official bank or certified check,  money order or wire transfer
of an amount equal to the Exercise Price then in effect,  in lawful money of the
United  States of America.  In addition,  if at any time of exercise the Warrant
Shares  deliverable upon exercise of a Warrant have not been registered for sale
by the Company under the  Securities  Act of 1933,  as amended (the "Act"),  the
Company may  require a written  representation  from the  Warrant  Holder to the
effect that (i) the holder is an  "accredited  investor"  as defined by Rule 501
under the Act (or such other  reasonable  representations  as shall be necessary
for the Company to conclude  that the sale of the Warrant  Shares to the Warrant
Holder is an exempt  transaction  under the  Securities  Act),  (ii) the Warrant
Shares being  acquired upon exercise are being  purchased for investment and not
for distribution in violation of the Act, (iii)  acknowledging that such Warrant
Shares  have not been  registered  under  the Act and (iv)  agreeing  that  such
Warrant  Shares  may not be sold or  transferred  unless  there is an  effective
registration  statement  relating thereto under the Act or such sale or transfer
is not in  violation  of the Act.  The person  entitled  to receive  the Warrant
Shares  deliverable  on exercise shall be treated for all purposes as the holder
of such Warrant Shares as of the close of business on the Exercise Date.

                  (e) The Company shall not be obligated to issue any fractional
shares of Common Stock in connection  with the exercise of any Warrant.  In lieu
of issuing any fractional  Warrant Shares,  the Company shall pay to any Warrant
Holder who otherwise would have been entitled to a fractional Warrant Share cash
(without  interest)  in an  amount  determined  by  multiplying  the  fractional
interest to which such Warrant Holder would otherwise be entitled by the average
of the  closing  sale  prices for the  Common  Stock as  reported  on the NASDAQ
National Market (or, if the Common Stock is not then listed for trading thereon,
on such other  principal  market or exchange  on which the Common  Stock is then
traded  or, if no closing  sale price is  reported  by the  principal  market or
exchange  on which the  Common  Stock is then  traded,  then the  average of the
closing bid and asked prices as reported) over the 10  consecutive  trading days
immediately  prior to (but not  including)  the Exercise  Date (or if no bid and
asked  prices are  reported,  then the fair market  value of the Common Stock as
determined by an investment banking firm mutually  acceptable to the Company and
the holders of a majority of the  then-outstanding  Warrants,  based on the fair
market value on the trading day  immediately  prior to the Exercise  Date) (such
average daily price over such ten-day period or fair market value being referred
to herein as the "Closing Price").

                  (f) No Warrant may be exercised by the Warrant Holder, nor may
any Warrant Shares be issued or delivered by the Company, unless on the Exercise
Date (i) there is an  effective  registration  statement  covering the offer and
sale of the  applicable  Warrant Shares under the Act and the Warrant Shares are
registered  or  qualified  for sale under  applicable  securities  or "Blue Sky"
statutes; or (ii) an exemption from registration or qualification  thereunder is
applicable.
<PAGE>
                  (g) Within two  Business  Days after the  Exercise  Date,  the
Company, at its own expense, shall cause to be issued and sent for next Business
Day  delivery  to the  person  or  persons  entitled  to  receive  the  same,  a
certificate or  certificates in the name of the Warrant Holder for the number of
Warrant Shares  deliverable on such exercise.  All Warrant Shares delivered upon
the  exercise  of  the  Warrants  shall  be  validly  issued,   fully  paid  and
nonassessable.

                  (h) The Company  may deem and treat the Warrant  Holder as the
absolute  owner thereof for all purposes,  and the Company shall not be affected
by any notice to the contrary.  No Warrant  shall entitle the holder  thereof to
any of the rights of  shareholders  or to any  dividend  declared  on the Common
Stock  unless such holder  shall have  exercised  the Warrant on or prior to the
record date fixed by the Board of Directors for the  determination of holders of
Common Stock entitled to such dividends or other rights.

         4.       Registration Rights.

                  The holders of  Warrants  and  Warrant  Shares  shall have the
registration  rights provided for in the Registration  Rights Agreement executed
by the Company,  the Placement  Agent and the Warrant Holders on the date hereof
(the  "Registration  Rights  Agreement").  The Registration  Rights Agreement is
incorporated herein by reference as if set forth fully herein.

         5.       Reservation of Shares and Payment of Taxes.

                  (a) The Company  covenants  that it shall at all times reserve
and have  available  from its  authorized  Common Stock such number of shares of
Common  Stock as shall  then be  issuable  on the  exercise  of all  outstanding
Warrants.  The Company  covenants that all Warrant Shares shall be free from all
taxes, liens and charges with respect to the issuance thereof.

                  (b) The Company  shall pay all  documentary,  stamp or similar
taxes and other  government  charges  that may be  imposed  with  respect to the
issuance of the  Warrants,  and the  issuance or delivery of any Warrant  Shares
upon the  exercise  of the  Warrants,  except that in the event that the Warrant
Shares are to be delivered  in a name other than the name of the Warrant  Holder
reflected on the  certificate  for the Warrant,  no such delivery  shall be made
unless the person  requesting the same has paid to the Company the amount of any
such taxes, charges, or transfer fees incident thereto.

         6.       Registration of Transfer.

                  (a) The Warrant certificates may, subject to provisions of the
Federal  securities  and  state  securities  laws  and  the  provisions  of this
Agreement,  be transferred in whole or in part.  Certificates  to be transferred
shall be surrendered to the Company at its Corporate Office or such other office
or agency as the Company may designate.
<PAGE>
                  (b) The Company shall keep transfer books which shall register
Warrant   certificates  and  the  transfer  thereof.   On  due  presentment  for
registration of transfer of any  certificate,  the Company shall execute,  issue
and deliver to the transferee or transferees a new  certificate or  certificates
representing  an equal  aggregate  number of securities.  All such  certificates
shall be duly endorsed or be accompanied by a written  instrument or instruments
of transfer in form  reasonably  satisfactory  to the Company,  together with an
opinion of counsel, reasonably satisfactory in form and substance to counsel for
the Company,  that an exemption from registration under the Act for the transfer
exists and a written  representation from the transferee that (i) the Warrant is
being  acquired  for  investment  and not  for  distribution  otherwise  than in
compliance  with the Act,  (ii)  acknowledging  that  the  Warrant  has not been
registered under the Act and (iii) agreeing that the Warrant,  if not registered
under the Act, may not be transferred unless there is an effective  registration
statement  with  respect  thereto or in the opinion of  counsel,  which shall be
satisfactory in form and substance to counsel for the Company,  such transfer is
an exempt transaction under the Act.

                  (c) Prior to due  presentment  for  registration  of  transfer
thereof,  the Company may treat the Warrant Holder as the absolute owner thereof
(notwithstanding  any notations of ownership or writing thereon made by anyone),
and the Company shall not be affected by any notice to the contrary.

         7.       Loss or Mutilation.

                  On receipt  by the  Company of  satisfactory  evidence  of the
loss, theft,  destruction or mutilation of any Warrant certificate,  the Company
shall  execute  and  deliver to a Warrant  Holder in lieu  thereof a new Warrant
certificate representing an equal number of Warrants. In the case of loss, theft
or  destruction  of any  certificate,  the Warrant  Holder  shall be required to
indemnify  the  Company  and,  in the case of a  Warrant  Holder  that is not an
institutional investor, to post an indemnity bond as a condition to the issuance
of a  replacement  certificate.  In the event a certificate  is mutilated,  such
certificates  shall be surrendered and canceled by the Company prior to delivery
of a new  certificate.  The  Warrant  Holder  shall also  comply with such other
regulations and pay such other reasonable charges as the Company may prescribe.

         8.       Adjustment of Exercise
                  Price and Number of Shares Purchasable.

                  (a) (i)  Except as  otherwise  provided  in  Section  8(b) and
         subject to the  exceptions  set forth in Section 8(c), in the event the
         Company shall,  at any time or from time to time after the date hereof,
         (A) sell or issue any shares of Common  Stock for a  consideration  per
         share  that is less  than the  Closing  Price of the  Common  Stock (as
         defined in Section  3(e)) on the last trading day preceding the date of
         the sale or  issuance,  (B) issue any shares of Common Stock as a stock
         dividend to the holders of shares of Common Stock,  or (C) subdivide or
         combine the outstanding shares of Common Stock into a greater or lesser
         number of shares of Common  Stock,  then in each such case the Exercise
         Price in effect immediately prior to such event shall be changed to the
         Exercise  Price   (calculated  to  the  nearest  cent)   determined  by
         multiplying the Exercise Price in effect immediately prior thereto by a
         fraction,  (1) the numerator of which shall be the sum of the number of
<PAGE>
         shares of Common Stock outstanding immediately prior to the issuance of
         such  additional  shares and the number of shares of Common  Stock that
         the aggregate consideration received (determined as provided in Section
         8(b)) for the issuance of such additional  shares would purchase at the
         Closing Price and (2) the  denominator of which shall be the sum of the
         number  of shares of Common  Stock  outstanding  immediately  after the
         issuance  of such  additional  shares.  Such  adjustment  shall be made
         successively whenever such an issuance is made.

                           (ii)  Upon  the  adjustment  of  the  Exercise  Price
         pursuant to this  Section 8, the total number of shares of Common Stock
         purchasable  upon  exercise  of each  Warrant  shall be such  number of
         shares  (calculated to the nearest one-tenth of a share) purchasable at
         the  Exercise  Price in  effect  immediately  prior to such  adjustment
         multiplied  by a  fraction,  (1) the  numerator  of which  shall be the
         Exercise Price in effect  immediately  prior to such adjustment and (2)
         the  denominator  of  which  shall  be the  Exercise  Price  in  effect
         immediately after such adjustment.

                  (b) For purposes of Section  8(a),  the  following  provisions
         shall be applicable:

                           (i) The number of shares of Common Stock  outstanding
         at any given time shall not  include  shares of Common  Stock  owned or
         held by or for the account of the Company,  and the sale of such shares
         shall be a sale for purposes of Section 8(a).

                           (ii) No  adjustment  of the  Exercise  Price shall be
         made unless such adjustment would require an increase or decrease of at
         least $.01 in the Exercise Price; provided that any adjustments that by
         reason of this clause (ii) are not required to be made shall be carried
         forward  and  shall be made at the time of and  together  with the next
         subsequent  adjustment  that,  together with all adjustments so carried
         forward,  require  an  increase  or  decrease  of at least  $.01 in the
         Exercise Price.

                           (iii) In  the  event of (A) the  sale by the  Company
         (or as a  component  of a unit being sold) of any rights or warrants to
         subscribe  for or purchase,  or any options for the purchase of, either
         Common  Stock  or  any  securities   that  are   convertible   into  or
         exchangeable   for  Common  Stock  (such   securities   convertible  or
         exchangeable into Common Stock being herein referred to as "Convertible
         Securities") or (B) the issuance by the Company, without the receipt by
         the Company of any consideration therefor, of any rights or warrants to
         subscribe  for or purchase,  or any options for the purchase of, Common
         Stock or  Convertible  Securities  (in either case  whether or not such
         rights,  warrants or options,  or the right to convert or exchange such
         Convertible Securities, are immediately exercisable), and the price per
         share for which  Common  Stock is  issuable  upon the  exercise of such
         rights,  warrants or options or upon the conversion or exchange of such
         Convertible   Securities   (determined  by  dividing  (1)  the  minimum
         aggregate  consideration  payable to the Company  upon the  exercise of
         such  rights,  warrants or  options,  plus the  consideration,  if any,
         received  by the  Company  for the  issuance  or  sale of such  rights,
<PAGE>
         warrants or options, plus, in the case of such Convertible  Securities,
         the minimum aggregate amount of additional consideration, if any (other
         than the surrender of such  Convertible  Securities),  payable upon the
         conversion  or exchange  thereof,  by (2) the total  maximum  number of
         shares of Common  Stock  issuable  upon the  exercise  of such  rights,
         warrants  or  options  or  upon  the  conversion  or  exchange  of  the
         Convertible  Securities  issuable  upon the  exercise  of such  rights,
         warrants or options) is less than the Closing Price of the Common Stock
         on the last trading day  preceding  the date of the issuance or sale of
         such rights, warrants or options, then for purposes of Section 8(a) the
         total  maximum  number  of shares of  Common  Stock  issuable  upon the
         exercise of such rights,  warrants,  or options and upon the conversion
         or  exchange  of such  Convertible  Securities  shall be  deemed  to be
         outstanding  shares of Common  Stock as of the date of the  issuance or
         sale of such  rights,  warrants  or options and shall be deemed to have
         been sold for cash in an amount equal to such price per share.

                           (iv) In the event of the sale by the  Company  of any
         Convertible  Securities,  whether  or not the  right of  conversion  or
         exchange thereunder is immediately exercisable, and the price per share
         for which Common Stock is issuable  upon the  conversion or exchange of
         such  Convertible  Securities  (determined  by  dividing  (1) the total
         amount of  consideration  received  by the Company for the sale of such
         Convertible Securities, plus the minimum aggregate amount of additional
         consideration,  if any (other than the  surrender  of such  Convertible
         Securities),  payable upon the conversion or exchange  thereof,  by (2)
         the total  maximum  number of shares of Common Stock  issuable upon the
         conversion or exchange of such Convertible Securities) is less than the
         Closing Price of the Common Stock on the last trading day preceding the
         date of the sale of such Convertible  Securities,  then for purposes of
         Section  8(a) the total  maximum  number  of  shares  of  Common  Stock
         issuable upon the conversion or exchange of such Convertible Securities
         shall be deemed to be outstanding shares of Common Stock as of the date
         of the sale of such Convertible  Securities and shall be deemed to have
         been sold for cash in an amount equal to such price per share.

                             (v) In the  case  of the  sale  by the  Company  of
         shares of Common Stock,  Convertible Securities,  or rights or warrants
         to  subscribe  for or the  purchase of, or options for the purchase of,
         Common Stock or Convertible Securities in exchange for property, assets
         or rights (other than cash), the fair market value of the consideration
         received by the Company  shall be determined in good faith by the Board
         of  Directors.  Whenever the Board of Directors of the Company shall be
         required to make a determination in good faith of the fair market value
         of any  consideration  and determine such value to be in excess of $7.5
         million,  such  determination  shall be  supported  by an opinion of an
         independent  appraiser or financial advisor of recognized standing that
         is selected by the Board of Directors.
<PAGE>
                           (vi) On the  expiration  of any rights or warrants to
         subscribe  for or purchase,  or any options for the purchase of, Common
         Stock or  Convertible  Securities,  or the  termination of any right to
         convert or  exchange  Convertible  Securities,  in respect of which any
         adjustments  previously  shall have been made in accordance with clause
         (iii),  (iv), (v) or (viii) of this Section 8(b), the Exercise Price in
         effect  immediately prior to the time of such expiration or termination
         shall be adjusted to such  Exercise  Price as would be  applicable  had
         such  adjustments  not been made with respect to (A) the issuance of or
         the  adjustment  of the  Exercise  Price of such  rights,  warrants  or
         options which have expired or (B) the issuance of or the  adjustment of
         the  conversion or exercise  price of such  Convertible  Securities the
         rights under which to convert or exchange have terminated.

                           (vii) In case of the sale or issuance for cash of any
         shares of Common  Stock,  any  Convertible  Securities,  any  rights or
         warrants to subscribe for or purchase,  or any options for the purchase
         of, Common Stock or Convertible Securities,  the consideration received
         by the  Company  therefor  shall be deemed to be the gross  sales price
         therefor  without  deducting  therefrom any expense paid or incurred by
         the Company or any underwriting discounts or commissions or concessions
         paid or allowed by the Company in connection therewith.

                           (viii) In case the Company shall make a  nonmandatory
         modification  to the rights of conversion,  exchange or exercise of any
         outstanding  securities of the type  described in  paragraphs  (iii) or
         (iv) above ("Covered  Securities")  subsequent to the issuance  thereof
         and, as a consequence of such modification, the consideration per share
         received and to be received by the Company, after giving effect to such
         modification,  is less  than  the  Closing  Price  on the  date of such
         modification   (after  giving  effect  to  the  deemed   expiration  or
         cancellation of the  then-outstanding  Covered Securities in accordance
         with the  provisions of paragraph  (vi)),  the Exercise Price in effect
         after such modification shall be determined by multiplying the Exercise
         Price in effect immediately prior to such event by a fraction,  (A) the
         numerator  of which  shall be the  number of  shares  of  Common  Stock
         outstanding on the date of the modification,  plus the number of shares
         of  Common  Stock  that the  aggregate  consideration  received  by the
         Company upon the original issuance of such Covered Securities,  if any,
         and receivable by the Company for the conversion, exchange and exercise
         of the Covered  Securities,  after giving  effect to the  modification,
         would  purchase at the Closing Price and (B) the  denominator  of which
         shall be the number of shares of Common Stock  outstanding  on the date
         of the modification, plus the number of shares of Common Stock issuable
         upon  conversion,   exchange  and  exercise  of  the  modified  Covered
         Securities.

                  (ix) In the  event  that the  Company  subsequent  to the date
         hereof shall issue any  securities of the type  described in paragraphs
         (iii) or (iv)  above  ("Future  Securities")  and the terms of any such
         Future  Securities  provide  for  anti-dilution  adjustments  that  are
         triggered  as  a  consequence   of  the   operation  of   anti-dilution
         adjustments  in any other  securities  issued by the Company,  then the
         Warrants  shall be adjusted  pursuant to the terms of this Section 8 to
         give  effect  to such  adjustment  in the same  manner  and to the same
         extent as is provided for under the terms of such other security.
<PAGE>
                  (x) If the  Company  shall  issue any  rights or  warrants  to
         subscribe for or purchase, or options for the purchase of, Common Stock
         or Convertible  Securities  with a variable  exercise  price,  or shall
         issue Convertible  Securities with a variable  conversion price,  other
         than variability  that solely is the result of customary  anti-dilution
         adjustments  ("Variable  Securities"),  no adjustment  contemplated  by
         Section 8(a) with respect to such Variable  Securities shall be made at
         the time of the  issuance of such  Variable  Securities.  Instead,  the
         adjustments  contemplated by Section 8(a) shall be made as follows: (i)
         all Variable  Securities as to which the exercise or  conversion  price
         became  fixed prior to the date of exercise of a Warrant will be deemed
         to have been issued on the date that the exercise or  conversion  price
         of  such  Variable  Securities  became  fixed  and  (ii)  all  Variable
         Securities as to which the exercise or conversion price is not fixed as
         of the date of the exercise of such Warrant will be deemed to have been
         issued as of the close of business on the last  business day  preceding
         the date of exercise  of such  Warrant  with an exercise or  conversion
         price  equal to the  variable  price  then in effect,  except  that the
         adjustment  pursuant  to  paragraph  (ii)  of  Section  8(a)  shall  be
         calculated to the nearest 1/1000th of a share. Within two business days
         of a request received from any Warrant Holder, the Company shall advise
         such Warrant  Holder of the Exercise  Price and the number of shares of
         Common Stock  purchasable upon the exercise of each Warrant  recomputed
         as of the date of such request in  accordance  with the  provisions  of
         this paragraph (x).

                  (c) No adjustment to the Exercise  Price of the Warrants or to
        the number of shares of Common  Stock  purchasable  upon the exercise of
        each Warrant will be made:

                           (i)  upon  the  issuance  or sale  of any  securities
         (including  stock  options) of the Company that are issued  pursuant to
         any stock option or stock bonus plan or  arrangement of the Company for
         the benefit of directors, officers or employees of the Company, that is
         in effect on the date hereof; or

                           (ii) upon  the sale or  exercise  of the  Warrants or
        any adjustment to the Exercise Price thereof; or

                           (iii) upon the  issuance  or sale of Common  Stock or
         Convertible  Securities  as the result of the exercise of any rights or
         warrants to subscribe for or purchase,  or any options for the purchase
         of, Common Stock or Convertible Securities, whether or not such rights,
         warrants or options were  outstanding  on the date of this Agreement or
         were thereafter issued or sold (provided that adjustments were made for
         the  issuance of such rights,  warrants  and options and each  required
         adjustment under Section 8(b)(viii)); or

                           (iv) upon the issuance or sale of Common Stock as the
         result of the  conversion  or exchange of any  Convertible  Securities,
         whether or not such Convertible Securities were outstanding on the date
         of this  Agreement or were  thereafter  issued or sold  (provided  that
         adjustments were made for the issuance of such  Convertible  Securities
         and each required adjustment under Section 8(b)(viii)); or
<PAGE>
                           (v)  upon  the  issuance  of  any  additional   Units
         contemplated  by the  introductory  paragraph of this Agreement and the
         Confidential  Private Placement Memorandum dated September 27, 1996, as
         supplemented by a Supplement thereto dated October 9, 1996.

                  (d) As used in this Section 8, the term  "Common  Stock" shall
mean  the  Common  Stock  as  designated  in  the   Company's   Certificate   of
Incorporation on the date hereof and shall also include any capital stock of any
class of the Company  hereafter  authorized that shall not be limited to a fixed
sum or percentage in respect of the rights of the holders thereof to participate
in dividends and in the  distribution of assets upon the voluntary  liquidation,
dissolution  or winding up of the Company;  provided,  however,  that the shares
issuable  upon  exercise of the Warrants  shall be the shares so  designated  as
Common  Stock on the  date  hereof  or (i) in the case of any  reclassification,
change,  consolidation,  merger, sale or conveyance of the character referred to
in Section 8(e), the stock, securities or property provided for in such section,
or (ii) in the case of any  reclassification or change in the outstanding shares
of Common Stock issuable upon exercise of the Warrants consisting of a change in
par value, or from par value to no par value, or from no par value to par value,
such shares of Common Stock as so reclassified or changed.

                  (e) In case of any reclassification, capital reorganization or
other change in the Common Stock, or in case of any  consolidation  or merger of
the Company  with or into another  corporation  (other than a  consolidation  or
merger in which the  Company is the  continuing  corporation  and which does not
result in any  reclassification,  capital  reorganization or other change in the
Common  Stock),  or in case of any sale or conveyance to another  corporation of
the property of the Company as, or  substantially  as, an entirety,  the Company
shall cause effective  provision to be made so that each registered  holder of a
Warrant then  outstanding  shall have the right  thereafter,  by exercising such
Warrant,  to purchase the kind and number of shares of stock or other securities
or property  (including  cash)  receivable upon such  reclassification,  capital
reorganization or other change,  consolidation,  merger, sale or conveyance by a
holder of the number of shares of Common  Stock  that could have been  purchased
upon the exercise of such Warrant  immediately  prior to such  reclassification,
capital  reorganization  or  other  change,   consolidation,   merger,  sale  or
conveyance,  and in any such case appropriate  adjustments  shall be made in the
application  of the  provisions  of this  Section 8 with  respect  to rights and
interests  thereafter  of the  holder  to the end  that the  provisions  of this
Section 8 shall thereafter be applicable, as near as reasonably practicable,  in
relation  to any  shares  or  other  property  thereafter  purchasable  upon the
exercise  of a Warrant.  The  Company  shall not effect any such  consolidation,
merger or sale unless prior to, or simultaneously with, the consummation thereof
the successor (if other than the Company)  resulting from such  consolidation or
merger or the  corporation  purchasing the property of the Company shall assume,
by written instrument  executed and delivered to the Company,  the obligation to
deliver  to the  holder of each  Warrant  such  shares of stock,  securities  or
property as, in accordance with the foregoing  provisions,  such holder shall be
entitled  to  purchase  (and the other  obligations  of the  Company  under this
Agreement).  The  foregoing  provisions  shall  similarly  apply  to  successive
reclassifications, capital reorganizations and other changes in the Common Stock
and to successive consolidations, mergers, sales or conveyances.
<PAGE>
                  (f) After each  adjustment of the Exercise  Price  pursuant to
this Section 8, the Company promptly will prepare a statement,  certified by its
Chairman or  President  and by its  Treasurer or  Assistant  Treasurer,  setting
forth:  (i) in reasonable  detail the  computation of the Exercise  Price, as so
adjusted,  and  the  computation  of  the  number  of  shares  of  Common  Stock
purchasable  upon  exercise of each  Warrant,  as so adjusted,  and (ii) a brief
description  of the  circumstances  giving rise to the  adjustment.  The Company
shall  deliver a copy of such  statement  to each  Warrant  Holder by  overnight
courier or by facsimile,  with a confirmation  copy sent by either  overnight or
two-day courier. The Company will allow any Warrant Holder or its representative
to inspect  the books and  records of the  Company  to the extent  necessary  to
verify any such computation.

                  (g)  Irrespective  of any adjustments in the Exercise Price or
the number of shares of Common Stock  purchasable upon exercise of the Warrants,
the Warrant  certificates  theretofore and thereafter  issued shall,  unless the
Company  in  its  sole   discretion   shall   determine  to  issue  new  Warrant
certificates, continue to express the Exercise Price per share and the number of
shares purchasable thereunder as were expressed in the Warrant certificates when
the same were originally issued.

                  (h) The Company will not, by amendment of its  Certificate  of
Incorporation or through any consolidation, merger, reorganization,  transfer of
assets, dissolution,  issue or sale of securities or any other voluntary action,
avoid or seek to avoid the  observance or performance of any of the terms of the
Warrants,  but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as  reasonably  may be necessary
or  appropriate  (including,  if  necessary  or  appropriate,  making  equitable
adjustments  to the kind and amount of securities  issuable upon the exercise of
the  Warrants  and the  Exercise  Price) in order to  protect  the rights of the
holders of the Warrants against dilution or other impairment.

                  (i) In case the Company  shall take a record of the holders of
its Common Stock for the purpose of (i) entitling  them to receive a dividend or
any other  distribution  in respect of the Common Stock payable in cash or other
property,  (ii)  entitling them to subscribe for or purchase any shares of stock
of  any  class  or to  receive  any  other  rights,  (iii)  any  classification,
reclassification  or other  reorganization  of the capital stock of the Company,
any consolidation or merger of the Company with or into another corporation,  or
any conveyance of all or substantially all of the assets of the Company, or (iv)
the  voluntary  or  involuntary  dissolution,  liquidation  or winding up of the
Company,  then,  and in any such case,  the Company  shall mail to each  Warrant
Holder, at least 15 days prior to such record date, a notice stating the date or
expected date on which a record is to be taken for the purpose of such dividend,
distribution   of   rights,   or  the   date  on  which   such   classification,
reclassification,    reorganization,    consolidation,    merger,    conveyance,
dissolution,  liquidation  or winding  up, as the case may be, is to take place.
Such notice shall also specify the date or expected date, if any is to be fixed,
on which said  dividend,  distribution  of rights,  or an  exchange of shares of
Common  Stock  for   securities  or  other   property   deliverable   upon  such
classification,   reclassification,   reorganization,   consolidation,   merger,
conveyance,  dissolution,  liquidation  or  winding  up,  as the case may be, is
expected to occur, provided, however, that the failure to give such notice shall
not affect the validity of any such proceeding or transaction.
<PAGE>
         9.       Obtaining of Governmental Approvals
                  and Stock Exchange Listings.

                  The Company  will use its best  efforts  (a),  except that the
Company is not obligated to register the Warrant  Shares for sale by the Company
under the  Securities  Act, to obtain and keep  effective  any and all  permits,
consents and approvals of  governmental  agencies and  authorities  and make any
necessary filings under federal or state securities laws, which may be or become
requisite  in  connection  with the  issuance,  sale and delivery of the Warrant
certificates,  the exercise of the Warrants and the issuance, sale, transfer and
delivery of the Warrant  Shares and (b) to cause the  Warrant  Shares,  prior to
their sale pursuant to any  registration  statement filed in accordance with the
Registration  Rights  Agreement or other transfer which is not restricted  under
the federal  securities  laws, to be listed on the NASDAQ National Market or the
principal  securities  exchange or market within the United States of America on
which the Common Stock is then listed.

         10.     Notices.

                  All notices, demands, elections, opinions or requests (however
characterized or described) required or authorized hereunder shall be in writing
and shall be delivered by hand or sent by registered or certified  mail,  return
receipt requested and postage prepaid,  or by facsimile  transmission to, in the
case of the Company:

                           Unigene Laboratories, Inc.
                           110 Little Falls Road
                           Fairfield, NJ  07004
                           Telecopier: (201) 227-6088
                           Attention: Ronald S. Levy

and if to the  Warrant  Holder at the address of such holder as set forth on the
transfer books maintained by or on behalf of the Company.

                  All such  notices and  communications  shall be deemed to have
been duly given when delivered by hand, if personally  delivered;  five business
days after being deposited in the mail, postage prepaid;  upon receipt,  if sent
by  facsimile  (followed  by a  confirmation  copy sent by either  overnight  or
two-day courier).

         11.    Third Party Beneficiaries.

                  Each  registered  holder  of a  Warrant,  whether  or not such
holder  is a  party  to  this  Agreement,  is an  intended  beneficiary  of this
Agreement, and this Agreement may be enforced by such registered holder. Nothing
in this  Agreement  shall be construed to give any person or entity,  other than
the Company and the registered  holders of the Warrants,  any legal or equitable
right, remedy or claim under this Agreement.

         12.    Further Instruments.

                  The parties  shall  execute and deliver any and all such other
instruments and take any and all other actions as may be reasonably necessary to
carry out the intention of this Agreement.
<PAGE>
         13.      No Inconsistent Agreements.

                  The Company has not,  as of the date  hereof,  and the Company
shall  not,  after the date of this  Agreement,  enter into any  agreement  with
respect to any of its securities that is inconsistent with the rights granted to
the Warrant Holders in this Agreement or otherwise conflicts with the provisions
hereof.  The Company will not enter into any agreement which will grant any such
rights that are in conflict with the rights afforded by this Agreement.

         14.      Amendments and Waivers.

                  The Company  may,  without the consent or  concurrence  of the
holders of the Warrants,  make any changes or corrections in this Agreement that
are  necessary or desirable  to cure any  ambiguity or to correct any  defective
provision,  mistake or  manifest  error  herein  contained;  provided  that such
changes do not  adversely  affect the rights or  interests of the holders of the
Warrants.  Otherwise,  the  provisions  of this  Agreement  may not be  amended,
modified  or  supplemented,  and  waivers or  consents  to  departures  from the
provisions hereof may not be given, except with the prior written consent of the
Company  and  the  registered  holders  of  not  less  than  a  majority  of the
then-outstanding  Warrants (or, in the case of a change that affects only one of
the two classes of  Warrants,  then only with the prior  written  consent of the
holders of not less than a majority of the  Warrants of that  class);  provided,
however, that no change in the number of the Warrant Shares purchasable upon the
exercise of any Warrant,  no increase in the Exercise Price and no  acceleration
of the Warrant  Expiration  Date shall be made without the consent in writing of
each Warrant Holder.

         15.      Successors and Assigns.

                  This  Agreement  shall  inure to the benefit of and be binding
upon the successors and permitted assigns of each of the parties hereto.

         16.      Counterparts.

                  This Agreement may be executed in any number of  counterparts,
each of which  when so  executed  shall be deemed to be an  original  and all of
which taken together shall constitute one and the same agreement.

         17.      Headings.

                  The  headings  in  this  Agreement  are  for   convenience  of
reference only and shall not limit or otherwise affect the meaning hereof.

         18.      GOVERNING LAW.

                  THIS   AGREEMENT   SHALL  BE  GOVERNED  BY  AND  CONSTRUED  IN
ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK,  WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW. EACH OF THE PARTIES  HERETO  AGREES,  AND EACH  BENEFICIARY
HEREOF  SHALL BE BOUND,  TO SUBMIT TO THE  JURISDICTION  OF ANY STATE OR FEDERAL
COURT LOCATED IN THE SOUTHERN DISTRICT OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
<PAGE>
         19.      Severability.

                  If any  term,  provision,  covenant  or  restriction  of  this
Agreement is held by a court of competent  jurisdiction to be invalid,  illegal,
void or  unenforceable,  the remainder of the terms,  provisions,  covenants and
restrictions  set forth herein shall, to the extent  permitted by law, remain in
full force and effect and shall in no way be affected,  impaired or invalidated,
and the  parties  hereto  shall use their  best  efforts  to find and  employ an
alternative  means to achieve the same or substantially  the same result as that
contemplated by such invalid,  illegal,  void or unenforceable term,  provision,
covenant  or  restriction.  It is  hereby  stipulated  and  declared  to be  the
intention of the parties  that they would have  executed  the  remaining  terms,
provisions,  covenants and restrictions  without including any term,  provision,
covenant or restriction that may be hereafter declared invalid, illegal, void or
unenforceable.

         20.      Entire Agreement.

                  This  Agreement,   together  with  the   Registration   Rights
Agreement,  the Subscription Agreements executed in connection with the Offering
(the  "Subscription  Agreements")  and, with respect to the Placement Agent, the
Placement  Agency  Agreement  executed  in  connection  with the  Offering  (the
"Placement  Agency  Agreement"),  is intended  by the parties  hereto as a final
expression  of their  agreement  and  intended  to be a complete  and  exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained  herein.  This Agreement,  the Registration  Rights
Agreement,  the  Subscription  Agreements,  and,  with respect to the  Placement
Agent, the Placement Agency Agreement supersede all prior agreements between the
parties  with  respect to such  subject  matter.  There are no  representations,
promises,  warranties or undertakings between the parties hereto with respect to
the subject matter hereof,  other than those set forth or referred to herein and
therein and in the Confidential Private Placement Memorandum dated September 27,
1996, as it may be amended or supplemented  to the date hereof,  relating to the
Offering.

                                              [signature pages follow]



<PAGE>
         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the date first set forth above.


                                                     UNIGENE LABORATORIES, INC.


                                               By:   /s/Ronald S. Levy
                                                     ------------------
                                                        Ronald S. Levy
                                                        Vice President


                                                     BT SECURITIES CORPORATION


                                               By:   /s/Peter R. Barry
                                                     -----------------
                                                        Peter R. Barry
                                                        Vice President



                       [additional signature pages follow] 
<PAGE>
                                WARRANT AGREEMENT

                                 SIGNATURE PAGE
                            FOR INDIVIDUAL PURCHASERS




Jeffrey Dobbs
Name of Purchaser #1                                Name of Purchaser #2
(Please print or type)                              (Please print or type)


/s/Jeffrey Dobbs
----------------                                              
Signature                                                  Signature




<PAGE>
                                WARRANT AGREEMENT

                                 SIGNATURE PAGE
                            FOR INDIVIDUAL PURCHASERS



William J. Jacobs                           
Name of Purchaser #1                                Name of Purchaser #2
(Please print or type)                              (Please print or type)


/s/William J. Jacobs
--------------------                                                            
Signature                                                  Signature


<PAGE>
                                WARRANT AGREEMENT

                                 SIGNATURE PAGE
                            FOR INDIVIDUAL PURCHASERS




Stephen J. Mazur
Name of Purchaser #1                                Name of Purchaser #2
(Please print or type)                              (Please print or type)


/s/Stephen J. Mazur
-------------------                                                        
Signature                                                 Signature


<PAGE>
                                WARRANT AGREEMENT

                                 SIGNATURE PAGE
                            FOR INDIVIDUAL PURCHASERS



Vincent A. Rossi, Jr.                                          
Name of Purchaser #1                                Name of Purchaser #2
(Please print or type)                              (Please print or type)


/s/Vincent A. Rossi, Jr.
------------------------    
Signature                                                 Signature


<PAGE>
                                WARRANT AGREEMENT

                                 SIGNATURE PAGE
                           FOR PARTNERSHIP PURCHASERS


Annapurna Partners, L.P.
Name of Partnership (Please print or type)


By /s/Hope Taitz
   -------------
     Signature of a General Partner
     Name: Hope Taitz
     Title:  President
     Ely Capital Advisors, LLC (authorized representative)

By ------------------------------------------------
     Signature of Additional General Partner
     (if required by partnership agreement)



By ________________________________________________
     Signature of Additional General Partner
     (if required by partnership agreement)



<PAGE>
                                WARRANT AGREEMENT

                                 SIGNATURE PAGE
                           FOR PARTNERSHIP PURCHASERS


Catalyst Partners, L.P.
Name of Partnership (Please print or type)


By /s/Allison J. Rosen
   -------------------
     Signature of a General Partner
     Name: Allison J. Rosen

By /s/Hope Taitz
   -------------
     Signature of Additional General Partner
     Name: Hope Taitz

By ________________________________________________
     Signature of Additional General Partner
     (if required by partnership agreement)



<PAGE>
                                WARRANT AGREEMENT

                                 SIGNATURE PAGE
                           FOR PARTNERSHIP PURCHASERS


CL Investment Partnership II, L.P.
Name of Partnership (Please print or type)


By /s/Ted Ammon
   ------------
     Signature of a General Partner
     Name: Ted Ammon

By ________________________________________________
     Signature of Additional General Partner
     (if required by partnership agreement)


By ________________________________________________
     Signature of Additional General Partner
     (if required by partnership agreement)

<PAGE>
                                WARRANT AGREEMENT

                                 SIGNATURE PAGE
                           FOR PARTNERSHIP PURCHASERS


Turnberry Capital Partners, L.P.
Name of Partnership (Please print or type)


By /s/
     Name: Turnberry Capital Management, L.P.
     Its General Partner


By /s/Vincent A. Rossi, Jr.
   ------------------------
     Signature of Additional General Partner
     Name: Vincent A. Rossi, Jr.
     Title: Managing Director


By ________________________________________________
     Signature of Additional General Partner
     (if required by partnership agreement)



<PAGE>
                                WARRANT AGREEMENT

                                 SIGNATURE PAGE
                           FOR PARTNERSHIP PURCHASERS


Woodstead Associates II, L.P.
Name of Partnership (Please print or type)
By: RDS Woodstead, Inc., its General Partner


By /s/David A. Persing
   -------------------
   Signature of General Partner
   Name: David A. Persing
   Title: Senior Vice President


By ________________________________________________
     Signature of Additional General Partner
     (if required by partnership agreement)


<PAGE>
                                WARRANT AGREEMENT

                                 SIGNATURE PAGE
                           FOR PARTNERSHIP PURCHASERS


Nelson Partners
Name of Partnership (Please print or type)


By /s/Cre Dupuy
   ------------
     Signature of General Partner
     Name: Cre Dupuy
     Title: Officer

By ________________________________________________
     Signature of Additional General Partner
     (if required by partnership agreement)

By ________________________________________________
     Signature of Additional General Partner
     (if required by partnership agreement)



<PAGE>
                                WARRANT AGREEMENT

                                 SIGNATURE PAGE
                            FOR CORPORATE PURCHASERS



Continental Casualty Company
Name of Corporation (Please print or type)


By /s/Richard Dubberke
   -------------------
     Signature of Authorized Agent
     Name:  Richard Dubberke
     Title: Vice President



<PAGE>
                                WARRANT AGREEMENT

                                 SIGNATURE PAGE
                            FOR CORPORATE PURCHASERS



Legg Mason High Yield Fund
Name of Corporation (Please print or type)


By /s/Trudie Whitehead
   -------------------
     Signature of Authorized Agent
     Name:  Trudie Whitehead
     Title: Portfolio Manager/Principal



<PAGE>
                                WARRANT AGREEMENT

                                 SIGNATURE PAGE
                            FOR CORPORATE PURCHASERS



Olympus Securities, Ltd.
Name of Corporation (Please print or type)


By /s/Cre Dupuy
   ------------
     Signature of Authorized Agent
     Name:  Cre Dupuy
     Title: Alternate Director


<PAGE>

                                    EXHIBIT A


     THE  SECURITIES  REPRESENTED  HEREBY  HAVE NOT BEEN  REGISTERED  UNDER  THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE
SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,  TRANSFERRED,  PLEDGED
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE  REGISTRATION STATEMENT
UNDER SUCH ACT AND SUCH LAWS OR AN EXEMPTION  FROM  REGISTRATION  UNDER SUCH ACT
AND SUCH LAWS.

                           CLASS C WARRANT CERTIFICATE

                           UNIGENE LABORATORIES, INC.


Warrant No. WC-________                        No. of Class C Warrants: ________

     This  certifies  that,  for value  received  and  subject  to the terms and
conditions set forth herein,  _______________________________  or its registered
assign  (the  "Warrant  Holder"),  is the  registered  holder  of _____  Class C
Warrants.  This Class C Warrant has been issued  pursuant  to, and is subject to
the terms and  conditions  set forth in, a Warrant  Agreement  dated October __,
1996, by and among Unigene  Laboratories,  Inc. (the  "Company"),  BT Securities
Corporation,  and the other initial purchasers of Class C Warrants (the "Warrant
Agreement").

         1. Exercise. Each whole Class C Warrant evidenced hereby is exercisable
by the Warrant Holder at any time on or prior to the Warrant Expiration Date (as
defined in Section 2) to  purchase,  at an  exercise  price of $3.00 per Class C
Warrant (the  "Exercise  Price"),  one (1) share of the common stock,  par value
$.01 per share (the "Common Stock"), of the Company. (The shares of Common Stock
acquirable  upon  exercise  hereof are referred to herein as "Warrant  Shares.")
Notwithstanding  the  foregoing,  no Warrant  may be  exercised  by the  Warrant
Holder, nor may any Warrant Shares be issued or delivered by the Company, unless
on the Exercise Date (i) there is an effective  registration  statement covering
the offer and sale of the applicable  Warrant Shares under the Securities Act of
1933, as amended (the "Act") and the Warrant  Shares are registered or qualified
for  sale  under  applicable  securities  or  "Blue  Sky"  statutes;  or (ii) an
exemption from  registration  or  qualification  thereunder is  applicable.  The
Company may  require,  as a condition  of allowing  the exercise of this Class C
Warrant, that the Warrant Holder furnish to the Company a written representation
from the  Warrant  Holder to the effect  that (i) the  holder is an  "accredited
investor"  as  defined  by Rule  501  under  the Act (or such  other  reasonable
representations  as shall be necessary for the Company to conclude that the sale
of the Warrant Shares to the Warrant Holder is an exempt  transaction  under the
Act),  (ii) the Warrant Shares being acquired upon exercise are being  purchased
for  investment  and  not  for  distribution  in  violation  of the  Act,  (iii)
acknowledging  that such Warrant Shares have not been  registered  under the Act
and (iv) agreeing that such Warrant Shares may not be sold or transferred unless
there is an effective registration statement relating thereto under the Act, or,
such sale or transfer is not in violation of the Act. No  fractional  shares may
be acquired upon exercise hereof.
<PAGE>
         2. Term of Warrant.  The Class C Warrants evidenced by this certificate
may be exercised at any time,  and from time to time,  in whole or in part prior
to 5:00 P.M. on  _______________  (the  "Warrant  Expiration  Date");  provided,
however,  that if the  Company  exercises  its right under  Section  2(b) of the
Warrant  Agreement to reduce the exercise  price of the Class C Warrants and the
Class D Warrants,  then this Class C Warrant shall expire on the date that is 30
trading  days  after the Notice  Date (as  defined  in the  Warrant  Agreement),
subject to extension  under  certain  circumstances  as described in the Warrant
Agreement (or, if such 30th trading day is not a Business Day (as defined in the
Warrant Agreement),  then on the next Business Day); and provided further,  that
if the Warrant Shares are not, within 90 days after the Closing Date (as defined
in the Warrant Agreement),  covered by an effective registration statement under
the Act for the resale of such  Warrant  Shares or such  registration  statement
does not remain effective through the Warrant  Expiration Date, then the Warrant
Expiration  Date shall be  extended  for,  respectively,  (A) the number of days
elapsed  from the 90th day after the  closing of the  Offering  through the date
that such  registration  statement becomes effective and (B) such number of days
as is necessary to provide that the Warrants are exercisable for the same number
of trading days for which they would have been exercisable had such registration
statement not ceased to be effective.

         3.  Adjustments.  The Exercise Price and the number of shares of Common
Stock  issuable  upon  the  exercise  of the  Class C  Warrants  is  subject  to
adjustment under certain  circumstances as set forth in Section 8 of the Warrant
Agreement,  including  upon the issuance of a stock  dividend,  a subdivision or
combination of the Common Stock, and the issuance of Common Stock at a price per
share that is less than the Closing Price (as defined in the Warrant  Agreement)
of the Common  Stock.  The Exercise  Price of the Class C Warrants is subject to
reduction if a  registration  statement has not become  effective on or prior to
the 90th day after the Closing  Date or if holders of shares  issued or issuable
upon exercise of the Warrant are required to discontinue disposition thereof for
more  than an  aggregate  of 120  days  after  the date  that  the  registration
statement is initially declared  effective,  to the extent and as more fully set
forth  in  the  Registration   Rights  Agreement  (as  defined  in  the  Warrant
Agreement).

         4. Manner of  Exercise.  The Class C Warrants  evidenced  hereby may be
exercised  by delivery to the Company at its  corporate  offices  located at 110
Little Falls Road, Fairfield,  N.J. 07004, or such other office or agency as the
Company  may  designate,  of (i)  this  Class C  Warrant  certificate,  with the
attached Election to Purchase Certificate duly executed and (ii) payment in full
of the  aggregate  Exercise  Price  for the  number  of Class C  Warrants  being
exercised by official bank or certified  check,  money order or wire transfer in
lawful money of the United States of America.

         5. Issuance of Common Stock upon Exercise. Within two Business Days (as
defined in the Warrant  Agreement) after the exercise date of a Class C Warrant,
the  Company,  at its own  expense,  shall  cause to be issued and sent for next
Business Day delivery,  a certificate  or  certificates  for the whole number of
Warrant Shares to which the Warrant Holder is entitled upon such exercise.  Cash
will be issued  in lieu of any  fractional  share of  Common  Stock to which the
Warrant Holder  otherwise would be entitled.  The Warrant Shares  delivered upon
the  exercise of the Class C Warrants  shall be validly  issued,  fully paid and
nonassessable.  Irrespective of the date of issuance and delivery of any Warrant
Shares,  upon the  exercise of a Class C Warrant,  each person in whose name any
such  certificate is to be issued will for all purposes be deemed to have become
the holder of record of the  Warrant  Shares  acquired  on the date on which the
Class C Warrant has been duly exercised.
<PAGE>
         6. Registration  Rights.  The Company has agreed to file a registration
statement  with  respect  to the  resale of the  Warrant  Shares  issuable  upon
exercise  of the Class C  Warrants  and to use its best  efforts  to cause  such
registration statement to be declared effective,  as more fully set forth in the
Registration Rights Agreement.

         7. No Right as Shareholder. The Warrant Holder is not, by virtue of the
ownership  of this  Class C Warrant,  entitled  to any  rights  whatsoever  as a
shareholder of the Company.

         8. Transfer or Assignment.  A Class C Warrant may not be transferred or
assigned  unless  the  Warrant  Holder  provides  to the  Company  an opinion of
counsel,  reasonably  satisfactory  in form and  substance  to  counsel  for the
Company,  that an  exemption  from  registration  under the Act for the transfer
exists and the transferee provides a written representation that (i) the Class C
Warrant is being acquired for investment and not for distribution otherwise than
in compliance with the Act, (ii)  acknowledging that the Class C Warrant has not
been registered under the Act for sale to the transferee and (iii) agreeing that
the  Class C  Warrant  may  not be  transferred  unless  there  is an  effective
registration  statement with respect thereto under the Act, or in the opinion of
its counsel  delivered to the Company,  which opinion shall be  satisfactory  in
form and  substance  to counsel  for the  Company,  such  transfer  is an exempt
transaction under the Act.

         9.       State Legends.

         Residents of Florida are advised of the following:

                  THE SECURITIES  OFFERED HEREBY HAVE NOT BEEN REGISTERED  UNDER
                  THE FLORIDA  SECURITIES  ACT, WHICH ACT PROVIDES,  IN RELEVANT
                  PART,  THAT  "ANY SALE IN THIS  STATE  MADE  PURSUANT  TO THIS
                  SUBSECTION  IS VOIDABLE BY THE  PURCHASER  IN SUCH SALE EITHER
                  WITHIN THREE DAYS AFTER THE FIRST TENDER OF  CONSIDERATION  IS
                  MADE BY SUCH  PURCHASER TO THE ISSUER,  AN AGENT OF THE ISSUER
                  OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER THE AVAILABILITY
                  OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER
                  OCCURS LATER."

                  THIS NOTICE SERVES AS SUCH COMMUNICATION.  THE VOIDING OF
                  A SALE IS WITHOUT PENALTY.

         10. Warrant Agreement. The terms and conditions of this Class C Warrant
are set forth in the  Warrant  Agreement  which is  incorporated  herein by this
reference as if fully set forth herein and made a part hereof,  and to which the
Warrant Holder,  by the acceptance of this  certificate,  agrees to be bound. To
the extent of any conflict between this  certificate and the Warrant  Agreement,
the terms and conditions of the Warrant Agreement shall control.
<PAGE>
         IN WITNESS WHEREOF,  the Company has caused this Warrant certificate to
be signed on its behalf by its President, his signature to be attested to by its
Secretary,  and its  corporate  seal to be hereunto  affixed this  __________day
of____________, 199__.


[SEAL]                                               UNIGENE LABORATORIES, INC.
                                                     on behalf of the Company
                                                     and as Warrant Agent



                                                     By:_______________________ 


Attest:  _________________________________
                  Name: ___________________________
                  Title: ____________________________



<PAGE>
                   [Form of Election to Purchase Certificate]

                    (To Be Executed Upon Exercise of Warrant)

                  The  undersigned  hereby  irrevocably  elects to exercise  the
right,  represented by this Warrant  certificate,  to purchase _______ shares of
Common Stock of Unigene Laboratories,  Inc. (the "Company") and herewith tenders
payment  for such shares to the order of the Company in the amount of $______ in
cash or by official bank or certified check, money order or wire transfer.

                  The undersigned requests that a certificate for such shares be
registered in the name of  ___________________,  which person, if other than the
undersigned,  is the __________ (e.g., nominee or affiliate) of the undersigned,
and  whose  address  is  __________________________  and  that  such  shares  be
delivered to ___________________________ whose address is ________________.

                  If said  number of  shares  is less than all of the  shares of
Common Stock purchasable hereunder,  the undersigned requests that a new Warrant
certificate  representing the remaining  balance of such shares be registered in
the name of  ________________,  which person, if other than the undersigned,  is
the  _____________  (e.g.,  nominee or affiliate) of the undersigned,  and whose
address is ____________________,  and that such Warrant certificate be delivered
to ________________, whose address is ______________________.

                  In  connection   with  this  exercise,   the  undersigned  (i)
represents  and warrants to the Company that the shares are being  purchased for
investment and not for  distribution in violation of the Securities Act of 1933,
as  amended  (the  "Act"),  (ii)  acknowledges  that such  shares  have not been
registered for sale to the undersigned under the Act, and (iii) agrees that such
shares may not be sold or transferred unless there is an effective  registration
statement  relating  thereto  under the Act or, in the opinion of counsel to the
Company, such sale or transfer is an exempt transaction under the Act.

/s/
----------------------------
         Signature

Date: 

----------------------------- 
     Signature Guaranteed

<PAGE>
                              [Form of Assignment]

                    (To Be Executed by the Registered Holder
                          in Order to Assign Warrants)


FOR VALUE RECEIVED, _________________________________________________ hereby
sells, assigns and transfers unto

            PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER 


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


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

                -------------------------------------------------
                     (please print or type name and address)


         _________________________________________________   of   the   Warrants
represented by this Warrant Certificate,  and hereby irrevocably constitutes and
appoints_______________________ Attorney to transfer this Warrant Certificate on
the books of the Company, with full power of substitution in the premises.


Dated:                                      /s/ 
                                            --------------------------
                                                      Signature


THE SIGNATURE TO THE ASSIGNMENT FORM MUST CORRESPOND TO THE NAME AS WRITTEN UPON
THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,  WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.


<PAGE>
                                    EXHIBIT B

         THE SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN REGISTERED  UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE
SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,  TRANSFERRED,  PLEDGED
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE  REGISTRATION STATEMENT
UNDER SUCH ACT AND SUCH LAWS OR AN EXEMPTION  FROM  REGISTRATION  UNDER SUCH ACT
AND SUCH LAWS.

                           CLASS D WARRANT CERTIFICATE

                           UNIGENE LABORATORIES, INC.


Warrant No. WD-________                        No. of Class D Warrants: ________

         This  certifies  that,  for value received and subject to the terms and
conditions set forth herein,  _______________________________  or its registered
assign  (the  "Warrant  Holder"),  is the  registered  holder  of _____  Class D
Warrants.  This Class D Warrant has been issued  pursuant  to, and is subject to
the terms and  conditions  set forth in, a Warrant  Agreement  dated October __,
1996, by and among Unigene  Laboratories,  Inc. (the  "Company"),  BT Securities
Corporation,  and the other initial purchasers of Class D Warrants (the "Warrant
Agreement").

         1. Exercise. Each whole Class D Warrant evidenced hereby is exercisable
by the Warrant Holder at any time on or prior to the Warrant Expiration Date (as
defined in Section 2) to  purchase,  at an  exercise  price of $3.00 per Class D
Warrant (the  "Exercise  Price"),  one (1) share of the common stock,  par value
$.01 per share (the "Common Stock"), of the Company. (The shares of Common Stock
acquirable  upon  exercise  hereof are referred to herein as "Warrant  Shares.")
Notwithstanding  the  foregoing,  no Warrant  may be  exercised  by the  Warrant
Holder, nor may any Warrant Shares be issued or delivered by the Company, unless
on the Exercise Date (i) there is an effective  registration  statement covering
the offer and sale of the applicable  Warrant Shares under the Securities Act of
1933, as amended (the "Act") and the Warrant  Shares are registered or qualified
for  sale  under  applicable  securities  or  "Blue  Sky"  statutes;  or (ii) an
exemption from  registration  or  qualification  thereunder is  applicable.  The
Company may  require,  as a condition  of allowing  the exercise of this Class D
Warrant, that the Warrant Holder furnish to the Company a written representation
from the  Warrant  Holder to the effect  that (i) the  holder is an  "accredited
investor"  as  defined  by Rule  501  under  the Act (or such  other  reasonable
representations  as shall be necessary for the Company to conclude that the sale
of the Warrant Shares to the Warrant Holder is an exempt  transaction  under the
Act),  (ii) the Warrant Shares being acquired upon exercise are being  purchased
for  investment  and  not  for  distribution  in  violation  of the  Act,  (iii)
acknowledging  that such Warrant Shares have not been  registered  under the Act
and (iv) agreeing that such Warrant Shares may not be sold or transferred unless
there is an effective  registration statement relating thereto under the Act, or
such sale or transfer is not in violation of the Act. No  fractional  shares may
be acquired upon exercise hereof.
<PAGE>
         2. Term of Warrant.  The Class D Warrants evidenced by this certificate
may be exercised at any time,  and from time to time,  in whole or in part prior
to 5:00 P.M. on  _________________  (the "Warrant  Expiration Date");  provided,
however,  that if the Warrant  Shares are not,  within 90 days after the Closing
Date (as defined in the Warrant Agreement), covered by an effective registration
statement  under  the  Act  for  the  resale  of  such  Warrant  Shares  or such
registration  statement does not remain effective through the Warrant Expiration
Date, then the Warrant Expiration Date shall be extended for, respectively,  (A)
the number of days  elapsed  from the 90th day after the closing of the Offering
through the date that such registration statement becomes effective and (B) such
number of days as is necessary to provide that the Warrants are  exercisable for
the same number of trading days for which they would have been  exercisable  had
such registration statement not ceased to be effective.

         3.  Adjustments.  The Exercise Price and the number of shares of Common
Stock  issuable  upon  the  exercise  of the  Class D  Warrants  is  subject  to
adjustment under certain  circumstances as set forth in Section 8 of the Warrant
Agreement,  including  upon the issuance of a stock  dividend,  a subdivision or
combination of the Common Stock, and the issuance of Common Stock at a price per
share that is less than the Closing Price (as defined in the Warrant  Agreement)
of the Common  Stock.  The Exercise  Price of the Class D Warrants is subject to
reduction if a  registration  statement has not become  effective on or prior to
the 90th day after the Closing  Date or if holders of shares  issued or issuable
upon exercise of the Warrants are required to  discontinue  disposition  thereof
for more than an  aggregate  of 120 days  after  the date that the  registration
statement is initially declared  effective,  to the extent and as more fully set
forth  in  the  Registration   Rights  Agreement  (as  defined  in  the  Warrant
Agreement).

         4. Manner of  Exercise.  The Class D Warrants  evidenced  hereby may be
exercised  by delivery to the Company at its  corporate  offices  located at 110
Little Falls Road, Fairfield,  N.J. 07004, or such other office or agency as the
Company  may  designate,  of (i)  this  Class D  Warrant  certificate,  with the
attached Election to Purchase Certificate duly executed and (ii) payment in full
of the  aggregate  Exercise  Price  for the  number  of Class D  Warrants  being
exercised by official bank or certified  check,  money order or wire transfer in
lawful money of the United States of America.

         5. Issuance of Common Stock upon Exercise. Within two Business Days (as
defined in the  Warrant  Agreement)  days after the  exercise  date of a Class C
Warrant, the Company, at its own expense,  shall cause to be issued and sent for
next Business Day delivery,  a certificate or certificates  for the whole number
of Warrant  Shares to which the Warrant  Holder is entitled upon such  exercise.
Cash will be issued in lieu of any fractional share of Common Stock to which the
Warrant Holder  otherwise would be entitled.  The Warrant Shares  delivered upon
the  exercise of the Class D Warrants  shall be validly  issued,  fully paid and
nonassessable.  Irrespective of the date of issuance and delivery of any Warrant
Shares,  upon the  exercise of a Class D Warrant,  each person in whose name any
such  certificate is to be issued will for all purposes be deemed to have become
the holder of record of the  Warrant  Shares  acquired  on the date on which the
Class D Warrant has been duly exercised.

         6. Registration  Rights.  The Company has agreed to file a registration
statement  with  respect  to the  resale of the  Warrant  Shares  issuable  upon
exercise  of the Class D  Warrants  and to use its best  efforts  to cause  such
registration statement to be declared effective,  as more fully set forth in the
Registration Rights Agreement.
<PAGE>
         7. No Right as Shareholder. The Warrant Holder is not, by virtue of the
ownership  of this  Class D Warrant,  entitled  to any  rights  whatsoever  as a
shareholder of the Company.

         8. Transfer or Assignment.  A Class D Warrant may not be transferred or
assigned  unless  the  Warrant  Holder  provides  to the  Company  an opinion of
counsel,  reasonably  satisfactory  in form and  substance  to  counsel  for the
Company,  that an  exemption  from  registration  under the Act for the transfer
exists and the transferee provides a written representation that (i) the Class D
Warrant is being acquired for investment and not for distribution otherwise than
in compliance with the Act, (ii)  acknowledging that the Class D Warrant has not
been registered under the Act for sale to the transferee and (iii) agreeing that
the  Class D  Warrant  may  not be  transferred  unless  there  is an  effective
registration  statement with respect thereto under the Act, or in the opinion of
its counsel  delivered to the Company,  which opinion shall be  satisfactory  in
form and  substance  to counsel  for the  Company,  such  transfer  is an exempt
transaction under the Act.

         9.       State Legends.

         Residents of Florida are advised of the following:

                  THE SECURITIES  OFFERED HEREBY HAVE NOT BEEN REGISTERED  UNDER
                  THE FLORIDA  SECURITIES  ACT, WHICH ACT PROVIDES,  IN RELEVANT
                  PART,  THAT  "ANY SALE IN THIS  STATE  MADE  PURSUANT  TO THIS
                  SUBSECTION  IS VOIDABLE BY THE  PURCHASER  IN SUCH SALE EITHER
                  WITHIN THREE DAYS AFTER THE FIRST TENDER OF  CONSIDERATION  IS
                  MADE BY SUCH  PURCHASER TO THE ISSUER,  AN AGENT OF THE ISSUER
                  OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER THE AVAILABILITY
                  OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER
                  OCCURS LATER."

                  THIS  NOTICE  SERVES AS SUCH  COMMUNICATION.  THE VOIDING OF A
                  SALE IS WITHOUT PENALTY.

         10. Warrant Agreement. The terms and conditions of this Class D Warrant
are set forth in the  Warrant  Agreement  which is  incorporated  herein by this
reference as if fully set forth herein and made a part hereof,  and to which the
Warrant Holder,  by the acceptance of this  certificate,  agrees to be bound. To
the extent of any conflict between this  certificate and the Warrant  Agreement,
the terms and conditions of the Warrant Agreement shall control.
<PAGE>

         IN WITNESS WHEREOF,  the Company has caused this Warrant certificate to
be signed on its behalf by its President, his signature to be attested to by its
Secretary,  and its  corporate  seal to be hereunto  affixed this  __________day
of____________, 199__.


[SEAL]                                               UNIGENE LABORATORIES, INC.
                                                     on behalf of the Company
                                                     and as Warrant Agent



                                                     By:_______________________ 


Attest:  _________________________________
                  Name: ___________________________
                  Title: ____________________________



<PAGE>
                   [Form of Election to Purchase Certificate]

                    (To Be Executed Upon Exercise of Warrant)

                  The  undersigned  hereby  irrevocably  elects to exercise  the
right,  represented by this Warrant  certificate,  to purchase _______ shares of
Common Stock of Unigene Laboratories,  Inc. (the "Company") and herewith tenders
payment  for such shares to the order of the Company in the amount of $______ in
cash or by official bank or certified check, money order or wire transfer.

                  The undersigned requests that a certificate for such shares be
registered in the name of  ___________________,  which person, if other than the
undersigned,  is the __________ (e.g., nominee or affiliate) of the undersigned,
and  whose  address  is  __________________________  and  that  such  shares  be
delivered to ___________________________ whose address is ________________.

                  If said  number of  shares  is less than all of the  shares of
Common Stock purchasable hereunder,  the undersigned requests that a new Warrant
certificate  representing the remaining  balance of such shares be registered in
the name of  ________________,  which person, if other than the undersigned,  is
the  _____________  (e.g.,  nominee or affiliate) of the undersigned,  and whose
address is ____________________,  and that such Warrant certificate be delivered
to ________________, whose address is ______________________.

                  In  connection   with  this  exercise,   the  undersigned  (i)
represents  and warrants to the Company that the shares are being  purchased for
investment and not for  distribution in violation of the Securities Act of 1933,
as  amended  (the  "Act"),  (ii)  acknowledges  that such  shares  have not been
registered for sale to the undersigned under the Act, and (iii) agrees that such
shares may not be sold or transferred unless there is an effective  registration
statement  relating  thereto under the Act or such sale or transfer is an exempt
transaction under the Act.

/s/
------------------------------ 
               Signature

Date: 

-------------------------------------------
           Signature Guaranteed

<PAGE>
                              [Form of Assignment]

                    (To Be Executed by the Registered Holder
                          in Order to Assign Warrants)


FOR VALUE RECEIVED, _________________________________________________ hereby
sells, assigns and transfers unto

            PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER 


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


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

                -------------------------------------------------
                     (please print or type name and address)


         _________________________________________________   of   the   Warrants
represented by this Warrant Certificate,  and hereby irrevocably constitutes and
appoints _____________________- Attorney to transfer this Warrant Certificate on
the books of the Company, with full power of substitution in the premises.


Dated:                                      /s/  
                                            -----------------------------
                                                        Signature


THE SIGNATURE TO THE ASSIGNMENT FORM MUST CORRESPOND TO THE NAME AS WRITTEN UPON
THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,  WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.