Document:

Exhibit 10.2

                             ARTICLES OF ASSOCIATION

                                       of

                     "SHIJIAZHUANG - UNIGENE PHARMACEUTICAL
                              CORPORATION LIMITED"

                                  June 15, 2000

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                                TABLE OF CONTENTS

Chapter I GENERAL PROVISIONS.............................................3
Chapter II PURPOSE AND SCOPE OF OPERATION................................3
Chapter III TOTAL INVESTMENT AND REGISTERED CAPITAL......................4
Chapter IV BOARD OF DIRECTORS............................................5
Chapter V MANAGEMENT ORGANIZATION........................................7
Chapter VI CONFIDENTIALITY...............................................9
Chapter VII FINANCE AND ACCOUNTING.......................................9
Chapter VIII PROFITS AND LOSSES.........................................10
Chapter IX STAFF AND WORKERS............................................11
Chapter X TRADE UNION...................................................11
Chapter XI TERM, TERMINATION AND LIQUIDATION............................12
Chapter XII RULES AND REGULATIONS.......................................13
Chapter XIII APPENDICES.................................................13
    Exhibit A............................................................i
    Exhibit B...........................................................ii

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                          Chapter I  GENERAL PROVISIONS

Article 1. Pursuant to the Law of the People's  Republic of China (the "PRC") on
Joint Ventures Using Chinese and Foreign  Investment and other relevant  Chinese
laws and regulations  and the Joint Venture  Contract (the  "Contract")  between
Shijiazhuang   Pharmaceutical  Group  Company,  Ltd.  ("Party  A")  and  Unigene
Laboratories,  Inc.  ("Party B") (each of Party A and Party B, a "JV Party") for
the establishment of "Shijiazhuang - Unigene Pharmaceutical Corporation Limited"
(the "JV") signed on the 15th day of June,  2000,  these Articles of Association
for the JV are hereby adopted by Party A and Party B.

Article 2. The name of the JV in Chinese is:

and the name of the JV in English is:

          "Shijiazhuang - Unigene Pharmaceutical Corporation Limited".

Article 3. The JV's  address:  High and New  Technology  Industrial  Development
Zone, Shijiazhuang, Hebei Province.

Article 4. Parties to the JV:

Party A: Shijiazhuang Pharmaceutical Group Company, Ltd.
Legal Address: 276 Zhongshan West Road Shijiazhuang, Hebei Province, PRC
Legal Representative: Mr. Cai Dong Chen, Chairman and President
Telephone: 0086-311-7039508
Fax: 0086-311-7039608

Party B: Unigene Laboratories, Inc.
Legal Address: 110 Little Falls Road, Fairfield, New Jersey, 07004, USA
Legal Representative: Dr. Warren P. Levy, President
Telephone: 001-973-882-0860
Fax: 001-973-227-6088

Article 5. The JV takes the form of a Limited Liability Company.

Article  6. The JV is a legal  person  of the PRC  under  the  jurisdiction  and
protection of the laws of the PRC. All the activities of the JV shall conform to
the pertinent laws, decrees, rules and regulations of the PRC.

                  Chapter II  PURPOSE AND SCOPE OF OPERATION

Article 7. The purpose of the JV is to use advanced  technology  and  scientific
operational   management   expertise   to   carry   out   the   manufacture   of
pharmaceutical-grade recombinant salmon

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*omitted and filed  separately  with the United States  Securities  and Exchange
Commission pursuant to a request for confidential treatment.

calcitonin  (the  "Calcitonin")  in injectable and nasal  formulations  (the "JV
Products")  using the  processes of Party B that include the use of an amidating
enzyme that the JV will  purchase  from Party B (the "AE") and the  distribution
and sale of JV  Products  in the PRC and such  other  regions  as decided by the
Board of Directors of the JV (the "Territory") in order to obtain a satisfactory
return on investment for all parties.

Article 8. The business scope of the JV is (a) to construct, equip, own, manage,
and  operate  a  manufacturing  facility  in the PRC  that has the  capacity  to
manufacture  Calcitonin  in  accordance  with the  terms and  conditions  of the
Contract (the "JV Facility") and prepare, fill, label and package injectable and
nasal  formulations  thereof;  and (b) to  market,  distribute  and  sell the JV
Products in the Territory.

Article 9. Scale of Production:

1. Upon completion of the JV Facility, the JV intends its scale of production to
be an annual  output of * of bulk  Calcitonin  and JV Products in the  following
quantities:

     o    *

     o    *

     o    *

2. Proper adjustment will be made to the intended scale of production to reflect
the development of operations and market changes.

            Chapter III   TOTAL INVESTMENT AND REGISTERED CAPITAL

Article 10. The total investment of the JV is *

Article 11. The registered capital of the JV is * The contributions from Party A
and Party B are as follows:

Party A shall  contribute the Renminbi  equivalent of *, in cash, to the capital
of the JV, for an equity share of 55%.

Party B shall contribute cash and technology valued, in the aggregate,  at * for
an equity share of 45%.

Article 12. Both parties shall make their  respective  contributions at the time
and in the manner described in the Contract. After capital contribution has been
effected by a party,  the amount of such  contribution  shall be recorded in the
JV's accounts and a certificate of capital  contribution shall be issued to such
party by the JV (a "Certificate of Capital Contribution").

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*omitted and filed  separately  with the United States  Securities  and Exchange
Commission pursuant to a request for confidential treatment.

The Certificate of Capital  Contribution  will include the following  items: the
name of the JV, the establishment date of the JV, the names of the joint venture
parties and their  respective  contributions to date, the date of the applicable
contribution,   and  the  date  of  issuance  of  the   Certificate  of  Capital
Contribution.

Article 13. Neither Party may sell, assign,  transfer,  convey, pledge, encumber
or  liquidate,  in whole or in part,  its rights under the  Contract,  except as
provided for in Chapter XIII of the Contract.

Article  14.  Any  change  in the  registered  capital  shall  be  made  only in
accordance with the Contract.

                      Chapter IV   BOARD OF DIRECTORS

Article  15.  The  Board of  Directors  of the JV shall be the  highest  body of
authority of the JV.

Article  16. The Board of  Directors  of the JV shall  decide  all major  issues
concerning the JV. Without  limiting the generality of the foregoing,  the major
authorities  and  responsibilities  of the Board of Directors  shall include the
following:

     1.   Approving on an annual basis the operating plan;

     2.   Investigating and approving any expenditures by the JV in excess of *;

     3.   Investigating  and  approving  the  obtainment  by the JV of all third
          party financing;

     4.   Selecting and approving any foreign country market regions for sale of
          the JV Products and  determining the ratio of export sales to domestic
          sales;

     5.   Examining and approving the fiscal  budget,  financial  statements and
          balance sheets of the JV;

     6.   Approving any change to the profit allocation  procedures set forth in
          Article  58 of  the JV  Contract,  approving  any  failure  to  make a
          distribution  of profits  otherwise  required  by Article 58 of the JV
          Contract,  and  determining and approving the loss offset plan for the
          JV;

     7.   Approving any change in the registered capital for the JV;

     8.   Approving the transfer of the registered  capital of the JV to a third
          party;

     9.   Approving   any   merger,   separation,   acquisition,    dissolution,
          liquidation or alteration of the JV;

     10.  Amending the Articles of Association;

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     11.  Formulating and approving the major rules and regulations of the JV;

     12.  Formulating the management structure of the JV;

     13.  Determining the terms of employment,  termination and treatment of the
          general  manager,  deputy  general  manager,  chief  engineer,   chief
          accountant and chief auditor of the JV;

     14.  Approving the marketing and/or development of products by the JV other
          than the JV  Products,  including  without  limitation  the use of the
          Marks (as defined in the JV Contract) in advertising  and  promotional
          materials;

     15.  Approving the banks at which to open accounts for the JV;

     16.  Approving insurance carriers to provide insurance coverage to the JV;

     17.  Approving the accounting  firm to provide  accounting  services to the
          JV;

     18.  Approving  the  transfer,  sale or  licensing  to a third party of any
          improvements in technology that belong to the JV or contractually  may
          be transferred, sold or licensed by the JV;

     19.  Determining allocations to the Three Funds (as defined below); and

     20.  Other issues of importance so deemed by the Board of Directors.

Article 17. The Board of  Directors  shall be  composed  of five (5)  directors.
Three (3) directors  will be selected by Party A and two (2)  directors  will be
selected by Party B. Each  director  shall be  appointed  for a term of four (4)
years,  subject to  renewal,  but may be replaced at any time during his term by
the party that appointed him, upon prior written notice to the other party.

Article 18. The Board of  Directors  of the JV shall have one (1)  director  who
shall serve as Chairman and one (1)  director who shall serve as  Vice-Chairman.
The  Chairman  shall be  appointed  by Party A, and the  Vice-Chairman  shall be
appointed  by Party B. The  Chairman  of the  Board of  Directors  is the  legal
representative   of  the  JV.  When  the  Chairman  is  unable  to  perform  his
responsibilities, the Vice-Chairman shall be authorized to represent the JV.

Article  19. A Board of  Directors'  meeting is to be  convened  at least once a
year. Four (4) directors present in person or by proxy shall constitute a quorum
for the transaction of business.  No business shall be transacted in the absence
of a quorum. The Chairman of the Board shall convene interim Board meetings upon
proposal by two or more directors.

Article 20. Board  meetings  shall be called and presided  over by the Chairman.
The Vice-Chairman will call and preside over the board meeting in the absence of
the Chairman.  Each director  (chairman and deputy chairman included) shall only
have one vote.

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Article  21.   Written   notice  shall  be  provided  by  the  Chairman  or  the
Vice-Chairman,  as appropriate,  to all Directors  forty-five (45) days prior to
the date of each Board  meeting,  which notice shall state the time and place of
the meeting and the topics for discussion at such meeting. No topic that has not
been  included  in such  notice  shall be acted  upon at a meeting  without  the
unanimous  consent of all  Directors.  Board  meetings may be conducted with the
assistance of modern communication facilities, including, without limitation, by
means of telephone conference or similar  communications  equipment by which all
persons  participating  in the meeting can hear, and make himself heard,  to the
other participants, or in such other manner as unanimously agreed by the Board.

Article 22. When a director is unable to attend a Board of Directors meeting, he
may issue a proxy in writing  entrusting another to represent him in attendance.
Without  being  present  or  issuing a duly  appointed  proxy for a  meeting,  a
director will be regarded as absent from the meeting.

Article 23. All Board  meetings  shall be conducted both in Chinese and English.
All topics for Board meeting  discussion and all minutes and  resolutions by the
Board shall be written in both  English and Chinese  which  versions  shall each
have equal force. Minutes of all decisions or other actions taken at any meeting
of the Board shall be circulated to all directors as soon as  practicable  after
such  meeting.  The minutes of each  meeting  shall be submitted  for  approval,
subject  to  appropriate  amendment,  at the next  meeting  of the  Board.  Once
approved,  the  minutes  of any  meeting  shall be  signed by the  Chairman  and
Vice-Chairman  and  entered  into a  minute-book  that shall be kept at the JV's
principal  place of  business  and shall be  conclusive  of the  proceedings  in
question.  Such minute-book shall be available for inspection by any director or
his  authorized  representative  at any  reasonable  time.  A copy of the signed
minutes of each meeting shall be sent to each director.

ARTICLE 24. Any action  required or  permitted to be taken at any meeting of the
Board of Directors may be taken without a meeting if all members of the Board of
Directors  consent  thereto in writing and if such writing or writings are filed
with the minutes of  proceedings  of the Board of Directors.  Such consent shall
have the same effect as a unanimous vote of the Board for all purposes.

ARTICLE 25. The vote of four of the five members of the Board of  Directors  (or
their duly appointed  proxies)  shall be sufficient to constitute  action of the
Board on all matters except the matters set forth in sections 1-10, 14 and 18 of
Article 16, as to which the Board may take action only by unanimous  decision of
the five (5) members (or their duly appointed proxies).

                     Chapter V   MANAGEMENT ORGANIZATION

ARTICLE  26. The Board of  Directors  of the JV shall  establish  operation  and
management  organs  for the JV,  to be  responsible  for daily  operational  and
managerial  work.  Each organ shall have a department  manager  reporting to the
general  manager.  The structure of organization and  responsibilities  for each
position  shall be proposed by the general  manager and approved by the Board of
Directors.

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ARTICLE 27. The JV shall establish an Advisory Board that will provide  business
development, marketing and technological assistance to the JV in accordance with
Exhibit A attached hereto.

ARTICLE  28. The JV shall have one  general  manager,  who shall be  selected by
Party B, and one deputy general manager, who shall be selected by Party A.

Article  29. The term of service of each of the  general  manager and the deputy
general  manager  is four (4)  years,  which term may be renewed by the Board of
Directors. The general manager and the deputy general manager may be removed for
cause by the vote of the  Board of  Directors  and  otherwise  by the  selecting
party.  Upon  removal of the general  manager or the deputy  general  manager or
expiration of their respective  terms without  renewal,  the party that selected
the general  manager or deputy general  manager,  as the case may be, shall have
the right to select the replacement  general manager or deputy general  manager,
as the case may be.

Article 30. The qualifications of the general manager are described in Exhibit B
attached hereto. The qualifications and  responsibilities  of the deputy general
manager shall be established by the general manager and approved by the Board.

Article 31. The general  manager  shall  report to the Board of  Directors,  and
shall be responsible  for the daily  management of the JV. Without  limiting the
generality  of the  foregoing,  the  general  manager  shall be vested  with the
following authorities and responsibilities:

          1.   Carrying out various  resolutions  of the Board of Directors  and
               organizing and leading the daily  operation and management of the
               JV;

          2.   Preparing the JV annual Business Plan;

          3.   Developing  and  proposing to the Board of Directors for approval
               the internal management structure of the JV;

          4.   Developing the management systems of the JV;

          5.   Proposing  the  nomination  and  dismissal of the deputy  general
               manager and persons in charge of finance and  accounting  for the
               JV;

          6.   Hiring and dismissing  other managers or working staff not within
               the  retaining  and  dismissal  responsibility  of the  Board  of
               Directors;

          7.   Implementing a confidentiality and security policy;

          8.   Performing Human Resource Management functions; and

          9.   Other  responsibilities  assigned to the  general  manager by the
               Board of Directors.

Article 32. The Chairman,  Vice-Chairman and directors of the Board of Directors
may not act concurrently in the capacity of the general manager,  deputy general
manager or other high-level managerial positions of the JV.

Article  33.  The  general  manager  or the  deputy  general  managers  may  not
concurrently  act as general  managers or deputy  general  managers of any other
economic  organizations,  and may not  participate  in activities in competition
with the JV.

Article 34. The JV shall establish the position of one chief  accountant and one
chief auditor, each to be selected by the Board of Directors.

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Article  35.  Both  Parties  agree that the JV shall  operate as an  independent
entity from the parent  companies.  Relationships  between the JV and its parent
companies outside the responsibilities described by the Contract and the Article
of Association  shall be conducted on an arms-length basis and shall be regarded
as normal business relationships.

                         Chapter VI  CONFIDENTIALITY

Article 36. In order to keep confidentiality of the trade secrets of the JV, the
JV shall  establish  a  Confidentiality  Policy,  which  shall be  substantially
similar to the Confidentiality Agreement entered into by and between Party A and
Party B on October 29,1998 and shall comply with Article 74 of the Contract.

Article 37. The JV shall  require all  directors,  managers,  employees,  staff,
workers, independent contractors,  agents and representatives of the JV to agree
to be subject to such Confidentiality  Policy in writing, in accordance with the
terms of Article 74 of the Contract.

                      Chapter VII  FINANCE AND ACCOUNTING

Article 38. The  financial and  accounting  system of the JV shall be formulated
according to, and consistent with, the relevant laws and regulations of the PRC.

Article  39. The fiscal  year of the JV shall be January 1 through  December  31
(the Gregorian calendar year).

Article  40.  All  vouchers,   accounts,  books,  and  financial  and  reporting
statements shall be written in Chinese.  All monthly and annual statements,  and
quarterly  reports  shall be  prepared  both in Chinese  and  English  with both
versions having equal force and effect.  The JV shall render  assistance to each
party for review of such documents by such party.

Article 41. The JV shall adopt Renminbi as the standard currency for the keeping
of accounts.  Except as otherwise  expressly  provided  herein,  the  conversion
between  Renminbi and other foreign  currencies  shall be computed at the posted
exchange rate announced by the PRC  Administration  for Foreign Exchange Control
for the purchase of such currencies on the day payment is made.

Article 42. The JV shall open Renminbi and foreign exchange accounts with a bank
or banks  approved  to handle  foreign  currency  business  by the PRC  national
administrative agencies for foreign exchange control, as determined by the Board
of Directors.

Article 43. The JV shall adopt the internationally used accrual system and debit
and credit method for the keeping of accounts.

Article  44. The JV shall keep full and  accurate  books of account  showing all
revenues and  disbursements  and all assets and  liabilities  of the JV. Without
limiting the  generality of the  foregoing,  such books of account shall include
the following items:

1.   All cash receipts and expenses of the JV;

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*omitted and filed  separately  with the United States  Securities  and Exchange
Commission pursuant to a request for confidential treatment.

2.   All records of sales, losses and purchases by the JV;

3.   The registered capital and liability of the JV;

4.   The timing of registered capital contributions,  distributions, changes and
     assignment.

Article 45. The JV shall provide  accounting reports in both English and Chinese
to the Board of  Directors  and each of Party A and Party B on a  quarterly  and
annual basis, and shall include such information in the reports to each of Party
A and Party B. The JV's management  shall provide the annual report of the JV to
the Board of Directors for approval  within two (2) months  following the end of
each fiscal year.

Article  46. An annual  audit of the JV's  accounts  shall be carried  out by an
internationally  known and recognized  accounting  firm  (registered in the PRC)
appointed by the Board of  Directors.  The auditor  shall submit  reports to the
Board of Directors and to the general manager.  All costs and expenses  incurred
in connection with such annual audit shall be borne by the JV. Party A and Party
B shall  each have the right to  procure a special  audit of the JV's  books and
records, provided that the external auditor is from an internationally known and
recognized  accounting  firm,  whose reports shall  likewise be submitted to the
Board of Directors and the general manager.  The costs and expenses  incurred in
connection  with such additional  audit shall be borne by the requesting  party,
unless  such  audit  shall  disclose  one or more  errors in the  regular  audit
totaling at least one percent (1%) of the aggregate  expenses of the JV for such
year, in which case the JV shall bear such costs and expenses. Party A and Party
B may designate duly  authorized  personnel to inspect,  at reasonable  business
hours, the books and records of the JV at the expense of such party.

Article 47. The period of the capital assets depreciation shall be determined by
the Board of Directors in accordance  with the relevant laws and  regulations of
PRC.

Article 48. All matters  concerning  foreign exchange of the JV shall be handled
in accordance with the "Provisional Regulations for Foreign Exchange of the PRC"
and other relevant regulations.

                     Chapter VIII   PROFITS AND LOSSES

Article 49. The Board of Directors  shall  determine the amounts to be allocated
to the reserve fund,  the enterprise  expansion  fund, and the staff and workers
welfare  and  incentive  fund  (collectively,  the  "Three  Funds")  before  any
distribution  of  profits  is made to  Party A and  Party B. The JV may not make
allocations to such funds (or any similar funds) if such allocations  exceed, in
the aggregate * of the after-tax  profits of the JV, without the unanimous prior
consent of the Board of Directors.

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Article 50.  Profits of the JV  (calculated  after (a) repayment of any loans to
third parties  (other than Party A or Party B); (b) payment of any and all taxes
owing by the JV; (c)  satisfaction  of losses for any  previous  years;  and (d)
allocations to the Three Funds in accordance  with Article  49)(the "JV Profit")
shall be distributed to Party A and Party B annually in accordance  with Chapter
XV of the Contract, unless the Board of Directors unanimously determines that no
such  distribution  should be made. The  distribution  of the JV Profit shall be
made within three (3) months of the end of each fiscal year.  All  distributions
to Party B shall be made in US dollars and all distributions to Party A shall be
made in Renminbi.

Article 51. Neither Party A nor Party B shall have any liability of any sort for
the  debts or  obligations  of the JV  beyond  their  contributions  to  capital
pursuant  to the  Contract,  except to the extent of any  third-party  financing
guaranteed by such party pursuant to Article 16 of the Contract.

                      Chapter IX   STAFF AND WORKERS

Article  52.  Matters  relating  to the  staff  and  workers  of the JV  such as
recruitment, employment, dismissal, resignation, wages, labor insurance, welfare
benefits,  incentive and penalty systems,  and labor disciplines are to be dealt
with in accordance with "The PRC Labor Law" and other relevant regulations.

Article 53. All staff and workers for the JV shall be recruited  through an open
and competitive process from the general public. Employment is to be on merit.

Article 54. The JV has the right to issue warnings,  record demerits, and reduce
wages to those staff and workers who violate the rules, policies and disciplines
of the JV. The JV may  dismiss  those  staff and  workers who violate the rules,
policies  and  disciplines  of the JV. Such  dismissal  shall be reported to the
local labor administrative department.

Article 55. The wage system for the staff and workers of the JV shall be decided
by the Board of Directors in accordance  with the relevant PRC  regulations  and
the specific conditions of the JV, and shall be specified in the labor contract.
Matters relating to the recruitment,  wage treatment, social insurance,  welfare
benefits  and  standard of travel  expenses of high level  managerial  personnel
shall be subject to approval of the Board of Directors.

Article  56.  Matters  relating  to  the  welfare  benefits,  incentives,  labor
protection  and  labor  insurance  shall  be  stipulated  by the  JV in  clearly
specified  internal  policies in order to ensure production and work carried out
under normal conditions by the staff and workers.

                          Chapter X   TRADE UNION

Article 57. Staff and workers of the JV have the right to establish trade unions
and conduct trade union  activities  in accordance  with the "Trade Union Law of
the PRC."

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Article  58. The trade  union of the JV, if any,  is the  representative  of the
interests  of the  staff  and  workers.  Its  mission  will  be to  protect  the
democratic rights and material interests of the staff and workers, to assist the
JV with the  arrangement  and reasonable use of welfare and incentive  funds, to
organize  the staff and  workers  in the study of  political,  professional  and
scientific  and technical  knowledge,  and develop  literary,  recreational  and
sports  activities,  and to  educate  the staff and  workers  to  observe  labor
discipline and strive to fulfill various economic tasks of the JV.

Article 59. No trade union activities shall intervene in the regular  production
and business  activities of the JV. All trade union members must  participate in
regular production  activities and perform their professional  responsibilities.
By the decision of the general manager,  the heads of trade union may be engaged
in other job responsibilities.

Article 60.  Trade union  representatives  have the right to attend as nonvoting
delegates,  making known the  opinions and demands of the staff and workers,  at
meetings of the Board of  Directors at which such major  matters as  development
plans and production and operational activities of the JV are under discussion.

Article 61. The trade union of the JV shall participate in the meditation of the
disputes between staff and workers and the JV.

Article 62. In the event of the establishment of a trade union and to the extent
required by applicable law in the PRC, the JV shall each month allot two percent
(2%) out of the total amount of the real wages of the JV's staff and workers for
payment into the trade union fund, for the trade union to use in accordance with
the Regulations of the Trade Union Funds promulgated by the All-China Federation
of Trade Unions of the PRC.

                 Chapter XI  TERM, TERMINATION AND LIQUIDATION

Article 63. These Articles of Association shall come into force and effect,  and
the JV shall be deemed to have been established,  as of the date of the issuance
of the JV's business  license in accordance with the laws of the PRC. Subject to
Article  64,  the term of the JV shall  be  thirty  (30)  years  unless  earlier
dissolved in accordance with these Articles of Association.

Article 64. Upon the proposal of one party and  unanimous  approval by the Board
of Directors,  the JV may extend the term of the JV by filing an application for
extension of the JV term with the original  examination  and approval  organ six
(6) months before the date of expiration of the JV term. The JV shall  undertake
appropriate  registration procedures with the original Administrative Bureau for
Industry and Commerce.

Article 65. The JV shall be  dissolved  (a) upon  expiration  of the term of the
Contract,  unless extended by the parties  thereto,  and (b) upon termination of
the Contract, in accordance  therewith.

Article  66.  Upon the  dissolution  of the JV,  the  Board of  Directors  shall
formulate the procedures and  principles  for  liquidation

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and shall select the members of the liquidation  committee,  which shall include
at least one representative from Party A and one representative from Party B.

Article  67.  The  tasks of the  liquidation  committee  shall be to  conduct  a
complete  check of the JV's  property and its  creditors'  rights and debts,  to
prepare a  statement  of assets and  liabilities  and a list of  properties,  to
submit a valuation of the property and the basis of calculation,  to formulate a
liquidation plan, and to submit these to a meeting of the Board of Directors and
implement them after adoption by the Board of Directors.

Article 68. During the period of liquidation,  the  liquidation  committee shall
represent the JV in suing and being sued. The  liquidation  expenses  (which the
liquidation  committee  shall ensure are  reasonable)  and the  remuneration  of
members of the liquidation  committee shall be paid from the existing  resources
of the JV and shall be given  priority  over  other  obligations  of the JV. The
remuneration  of  members  of the  liquidation  committee  shall be  subject  to
approval by the Board.

Article 69. The property  remaining  after  discharge of all the debts of the JV
(including, without limitation, the payment of any liquidation expense) shall be
distributed in accordance with the respective Distribution Ratios (as defined in
the Contract) of Party A and Party B.

Article 70. Upon completion of the liquidation,  the JV is to submit a report to
the  original  examination  and approval  organ.  Cancellation  of  registration
procedures are to be undertaken with the Administrative  Bureau for Industry and
Commerce  and  the  business   license  handed  in  for   cancellation.   Public
announcement shall be made thereafter.

                     Chapter XII   RULES AND REGULATIONS

Article 71. Regulations and rules to be adopted by the Board of Directors are as
follows:

1.   Operation and management rules;
2.   Policy for staff and workers;
3.   Labor and wages system;
4.   Welfare system for staff and workers;
5.   Financial and accounting systems;
6.   Internal confidentiality and security system;
7.   Other necessary rules and regulations.

                         Chapter XIII   APPENDICES

Article 72.  Amendments to this Articles of Association  shall be adopted by the
unanimous  agreement  by the Board of  Directors  and  reported to the  original
examination and approval organ for approval.

Article 73.  These  Articles  of  Association  are  written in both  Chinese and
English,  which  versions  shall each have equal force.  The original is made in
eight copies.

                                       13
<PAGE>

These Articles of Association are signed by representatives of Party A and Party
B in Parsippany, New Jersey, United States of America, on June (month) 15 (day),
2000.

/s/ Cai Dong Chen
-----------------
Legal Representative

SHIJIAZHUANG PHARMACEUTICAL GROUP COMPANY, LTD

/s/ Dr. Warren P. Levy
----------------------
Legal Representative

UNIGENE LABORATORIES, INC.

                                       14
<PAGE>

Exhibit A.

Advisory Board

The Mission:  The  Advisory  Board  shall  be a  non-standing  body  of the JV,
              established to assist the JV and the General  Manager in bringing
              advanced   business   expertise  (e.g.   marketing,   management,
              information  technology,  medical,  etc) to the JV. The  Advisory
              Board shall operate in accordance  with the following  procedures
              and such other procedures as may be established from time to time
              by the  General  Manager  or the  Board.  The  membership  of the
              Advisory Board shall change on an as-needed basis.

1.    The Advisory  Board shall  provide  recommendations  at the request of the
      General Manager with respect to the operation of the JV, including without
      limitation with respect to marketing,  management,  information technology
      and medical issues. The General Manager shall determine  whether,  and the
      manner in which,  to implement any such  recommendations.  In the event of
      any dispute  regarding such matters between a Permanent Member (as defined
      below)  and the  General  Manager,  such  Permanent  Member may bring such
      dispute to the attention of the Board of  Directors.  Neither the Advisory
      Board  nor  any of its  members  in  their  capacity  as such  shall  have
      authority to act for or represent the JV.

2.   The General Manager may nominate members of the Advisory Board to the Board
     of  Directors,  who shall have the right to approve or dismiss such members
     (the "Permanent Members").  Each Permanent Member shall serve as such for a
     term of two (2) years,  unless  earlier  removed by the Board of Directors.
     The General  Manager may select,  or a Permanent  Member may  nominate  for
     approval  by the  General  Manager,  additional  members  to  serve  on the
     Advisory Board (in either case, a "Temporary Member").  The General Manager
     may, in his  discretion,  dismiss any  Temporary  Member  unless  otherwise
     provided by the Board of Directors or may recommend that a Permanent Member
     be  dismissed by the Board of  Directors.  The  membership  of the Advisory
     Board  may  include  third  parties  as well as  employees  of a JV  Party;
     provided,  however,  that no more than three (3)  Permanent  Members may be
     employees of a JV Party and  provided,  further,  that in no event shall an
     employee of a JV Party be  obligated  to serve as a member of the  Advisory
     Board.

3.   Members of the Advisory Board who are also employed by a JV Party shall not
     receive additional compensation from the JV for their service as members of
     the Advisory Board unless otherwise agreed by the Board of Directors. Other
     members of the  Advisory  Board may be  compensated  for their  services as
     required by Chinese law and as otherwise agreed by the Board of Directors.

4.   Any expenses  resulting  from or related to duties  performed by members of
     the  Advisory  Board,  including  but not limited to  expenses  for travel,
     lodging and meals, will be paid by the JV as required by Chinese law and as
     otherwise agreed by the Board of Directors, to the extent such expenses are
     pre-approved by the General Manager.

                                       i
<PAGE>

Exhibit B.

Qualifications of the General Manager

Statement of Purpose:  The General  Manager shall be responsible for meeting all
     responsibilities and obligations of the JV as specified in the JV Contract

To  ensure  the  above,   the  General   Manager   should  have  the   following
qualifications:

1.   Fluent knowledge of both Chinese and English,  strong communication skills,
     and considerable level of computer literacy.

2.   Minimum 3 years experience in an upper management  position in a foreign JV
     in the PRC.

3.   A Masters Degree from a reputable university (MBA highly preferred.)

4.   Appropriate and proven educational and practical  background  providing for
     knowledge and experience in both Chinese and Western (preferably  American)
     business practices.

5.   Proven record of integrity  (with a minimum of four  references  from upper
     management required.)

                                       iiExhibit 10.1

                              EMPLOYMENT AGREEMENT
                              --------------------

               This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into
as of this 1st day of April, 2000, by and between Catskill Savings Bank, a stock
savings bank organized and operating under the laws of the United States and
having its executive office at 341 Main Street, Catskill, New York 12414
(hereinafter referred to as the "Bank"), and Wilbur J. Cross, residing at 45
Prospect Avenue, Catskill, New York 12414.

               WHEREAS, Mr. Cross is currently serving as Chairman, President
and Chief Executive Officer of the Bank pursuant to an Employment Agreement
dated April 1, 1998;

               WHEREAS, certain deficiencies have been identified in such 1998
Employment Agreement which the parties agree are inequitable; and

               WHEREAS, the Board of Directors of the Bank (the "Board")
believes it is in the best interests of the Bank to enter into this Agreement
with Mr. Cross in order to correct such deficiencies, assure continuity and
reinforce and encourage the continued attention and dedication of Mr. Cross to
his assigned duties without distraction; and

               WHEREAS, the Board has approved and authorized the execution of
this Agreement and Mr. Cross is agreeable thereto.

               NOW, THEREFORE, in consideration of the mutual covenants and
obligations of the parties hereto hereinafter set forth, it is agreed as
follows:

1.             Definitions.
               ------------

               (a) The term "Change in Control" means: (1) an event of a nature
that (i) results in a change in control of the Bank or of Catskill Financial
Corporation, the Delaware corporation which owns all of the Bank's stock (the
"Holding Company"), within the meaning of the Home Owners' Loan Act and 12 C. F.
R. Part 574 as in effect on the date hereof; or (ii) would be required to be
reported in response to Item 1 of the current report on Form 8-K, as in effect
on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (the "Exchange Act"); (2) any person (as the term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the beneficial owner
(as defined in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly of securities of the Bank or the Holding Company representing 25% or
more of the Bank's or the Holding Company's then outstanding securities; (3)
individuals who are members of the board of directors of the Bank or the Holding
Company on the date hereof (each the "Incumbent Board") cease, for any reason,
to constitute at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was approved by a vote of
at least three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Holding Company's stockholders was approved
by the nominating committee serving under an Incumbent Board, shall be
considered a member of the Incumbent Board; or (4) a reorganization, merger,
consolidation, sale of all or substantially all of the assets of the Bank or the
Holding Company or a similar transaction in which the Bank or the Holding
Company is not the resulting entity. The term "Change in Control" shall not
include an acquisition of securities by: (1) the trustee of an employee benefit
plan of the Bank or the Holding Company; (2) a corporation owned, directly or
indirectly, by the stockholders of the Holding Company in substantially the same
proportions as their ownership of stock of the Holding Company; or (3) Mr.
Cross, or any group otherwise constituting a person in which Mr. Cross is a
member.

               (b) The term "Commencement Date" means April 1, 2000.

               (c) The term "Date of Termination" means the date upon which Mr.
Cross ceases to serve as Chairman, President and Chief Executive Officer of the
Bank.

               (d) The term "Voluntary Termination" means termination of the
employment by Mr. Cross by resignation upon 90 days written notice but shall not
include resignation following a Change in Control (see subparagraph 1(e) below),
or material breach of this Agreement (see subparagraph 1(e) below) or
disability.

               (e) The term "Involuntary Termination" means termination of the
employment of Mr. Cross by the Bank for any reason other than those reasons
which constitute Termination for Cause (see subparagraph 1(f),(below).
Involuntary Termination shall also include termination of the employment by Mr.
Cross as a result of his resignation, upon 30 days written notice, following a
Change in Control or material breach of this Agreement such as a material
diminution or interference with his duties, responsibilities and benefits as
Chairman, President and Chief Executive Officer of the Bank, including (without
limitation) any of the following actions unless consented to in writing by Mr.
Cross: (i) a change in the principal workplace of Mr. Cross to a location (i)
outside of a 30 mile radius from 341 Main Street, Catskill, New York or (ii)
other than the Bank's executive office; (2) a material demotion of Mr. Cross;
(3) a material reduction in the number or seniority of other Bank personnel
reporting to Mr. Cross or a material reduction in the number or frequency with
which, or in the nature of the matters with respect to which, such personnel are
to report to Mr. Cross, other than as part of a Bank- or Holding Company-wide
reduction in staff; (4) a material adverse change in Mr. Cross's salary,
perquisites, benefits, contingent benefits or vacation; (5) a material permanent
increase in the required hours of work or the workload of Mr. Cross; and (6) a
material reduction in the support services and facilities available to Mr. Cross
in connection with his performance of his duties and responsibilities.

               (f) The term "Termination for Cause" means termination of the
employment of Mr. Cross because of his personal dishonesty, incompetence,
willful misconduct, breach of a fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law,
rule, or regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of this Agreement.
Mr. Cross shall not be deemed to have been Terminated for Cause unless and until
there shall have been delivered to him a copy of a resolution, duly adopted by
the affirmative vote of not less than a majority of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice to Mr. Cross and an opportunity for him, together with his
counsel, to be heard before the Board), stating that, in the good faith opinion
of the Board, Mr. Cross has engaged in conduct described in this subparagraph
1(f), and specifying the particulars thereof in detail.

2.             Term.
               ----

               The  term  of  this  Agreement  shall  be a  period  of  3  years
commencing on the Commencement Date, subject to earlier  termination as provided
herein. Beginning on the first anniversary of the Commencement Date, and on each
anniversary  thereafter,  the term of this  Agreement  shall be  extended  for a
period of one year in addition to the then-remaining term, provided that (i) the
Bank has not given notice in writing to Mr. Cross at least 90 days prior to such
anniversary that the term of this Agreement shall not be extended  further;  and
(ii) prior to such  anniversary,  the Board of the Bank  explicitly  reviews and
approves the extension.  Reference  herein to the term of this  Agreement  shall
refer to both such initial term and such extended terms.

3.             Employment.
               ----------

               (a) Mr. Cross is employed as Chairman, President and Chief
Executive Officer of the Bank and, except to the extent allowed under
subparagraph 3(b), below, shall devote his full business time and attention to
the business and affairs of the Bank and the Holding Company and use his best
efforts to advance their interests. He shall render such administrative and
management services as are customarily performed by persons situated in similar
executive capacities, and shall have such other powers and duties, not
inconsistent with his title and office, as the Board may prescribe from time to
time. Mr. Cross shall have such authority as is necessary or appropriate to
carry out his assigned duties and shall report directly to the Board.

               (b) Mr. Cross may engage in personal business and investment
activities for his own account and serve as a member of the board of directors
of such business, community and charitable organizations as he may disclose, in
advance, to the Board from time to time so long as such activities and services
do not materially interfere with the performance of his duties under this
Agreement or involve entities which either compete with the Bank or may be
reasonably expected to negatively impact on the Bank's standing and reputation
in the community it serves.

4.             Compensation.
               ------------

               (a)           Salary.
                             ------

               The Bank agrees to pay Mr. Cross during the term of this
Agreement, not less frequently than monthly, the salary established by the
Board, which shall be at least equal to Mr. Cross's salary in effect as of the
Commencement Date. The amount of Mr. Cross's salary shall be reviewed by the
Board, at least annually beginning not later than the first anniversary of the
Commencement Date. Adjustments in salary or other compensation shall not limit
or reduce any other obligation of the Bank under this Agreement. Mr. Cross's
salary in effect from time to time during the term of this Agreement shall not
thereafter be reduced. At each anniversary of the commencement date following a
Change in Control, Mr. Cross's salary shall be increased at least by multiplying
it by the greater of: (1) the quotient of (i) the U.S. Department of Labor
Consumer Price Index for all Urban Consumers (N.Y.-Northeastern N.J.) for
January of the then current calendar year divided by (ii) the U.S. Department of
Labor Consumer Price Index for all Urban Consumers (N.Y.-Northeastern N.J.) for
January of the immediately preceding calendar year; and (2) the quotient of (i)
the average annual rate of salary, determined as of the first business day of
such calendar year, of the officers of the Bank (other than Mr. Cross) who are
assistant vice president or more senior officers, divided by (ii) the average
annual rate of salary, determined as of the first business day of the
immediately preceding calendar year, of the officers of the Bank (other than Mr.
Cross) who are assistant vice presidents or more senior officers.

               (b)       Discretionary Bonuses.
                         ---------------------

               Mr. Cross shall be entitled to participate in an equitable manner
with all other executive officers of the Bank in such discretionary bonuses as
are authorized and declared by the Board to its executive employees. No other
compensation provided for in this Agreement shall be deemed to substitute for
Mr. Cross's right to participate in such bonuses when and as declared by the
Board.

               (c)       Expenses.
                         --------

               Mr. Cross shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by him in performing services under this
Agreement in accordance with the policies and procedures applicable to executive
officers of the Bank, provided that he accounts for such expenses as required
under such policies and procedures.

5.             Benefits.
               --------

               (a)       Participation in Retirement and Employee Benefit Plans.
                         ------------------------------------------------------

               Mr. Cross shall be entitled to participate in all plans relating
to pension, thrift, profit-sharing, group life and disability insurance, medical
and dental coverage, education, cash bonuses, and other retirement or employee
benefits or combinations thereof, in which the Bank's executive officers
participate.

              (b)       Fringe Benefits.
                        ---------------

               Mr. Cross shall be eligible to participate in, and receive
benefits under, any fringe benefit plans which are or may become applicable to
the Bank's executive officers.

               (c)      Vacations, Personal Days.
                        ------------------------

               Mr. Cross shall be entitled to no less than 5 weeks of annual
paid vacation and 20 annual paid personal days.

6.             Termination of Employment.
               -------------------------

               (a)      Involuntary Termination.
                        -----------------------

               The Board may terminate Mr. Cross's employment at any time. In
the event of Involuntary Termination other than in connection with a Change in
Control, the Bank shall:

               (1) at Mr. Cross's election, pay to Mr. Cross or his estate,
either: i) his salary for the remaining term of this Agreement at the rate in
effect immediately prior to the Date of Termination, payable in such manner and
at such times as such salary would have been payable under Section 4 if Mr.
Cross had continued to be employed by the Bank, or ii) a lump sum payment, made
within 30 days of the Date of Termination, in an amount equal to the present
value of the salary that Mr. Cross would have earned had he continued to be
employed by the Bank for the remaining term of his Agreement, where such present
value is to be computed using a discount rate equal to the applicable short-term
federal rate prescribed under section 1274(d) of the Internal Revenue Code of
1986, as amended (the "Code") compounded using the compounding periods
corresponding to the Bank's regular payroll periods for its officers;

               (2) pay to Mr. Cross or his estate, a lump sum payment, made
within 30 days of the Date of Termination, in an amount equal to the present
value of the annual bonuses Mr. Cross would have received had he continued to be
employed for the remaining term of this Agreement, it being assumed for the
purposes of such calculation that on account of each calendar year of the
remaining term, Mr. Cross would have received an annual bonus in an amount no
less than the amount of the last annual bonus he received prior to the Date of
Termination or the average of the amounts of the last three annual bonuses he
received prior to the Date of Termination, whichever is greater, where such
present value is to be computed using a discount rate equal to the applicable
short-term federal rate prescribed under section 1274(d) of the Code;

               (3) pay to Mr. Cross or his estate, a lump sum payment, made
within 30 days of the Date of Termination, in an amount equal to the present
value of the additional Bank or Holding Company contributions to which Mr. Cross
would have been entitled under the Bank's 401(k) Plan, the Holding Company's
Employee Stock Ownership Plan, and any other qualified and non-qualified defined
contribution plans maintained by, or covering employees of, the Bank or the
Holding Company, as if Mr. Cross were 100% vested thereunder and had continued
to be employed for the remaining term of this Agreement at the highest rate of
salary achieved hereunder and had made the maximum amount of employee
contribution, if any, required or permitted under such plans, where such present
value is to be computed on the basis of a discount rate equal to the applicable
Pension Benefit Guarantee Corporation rate, compounded using a compounding
period that corresponds to the frequency with which employer contributions are
made to the relevant plan;

               (4) pay to Mr. Cross or his estate, a lump sum payment, made
within 30 days of the Date of Termination, in an amount equal to the excess, if
any, of: (ii) the present value of the benefits to which he would be entitled
under the Bank's defined benefit pension plan if he had the additional years of
service that he would have had if he were 100% vested thereunder and had
continued to be employed for the remaining term of this Agreement at the highest
rate of salary hereunder, determined as if the plan had continued in effect
without change in accordance with its terms as of the day prior to the Date of
Termination and as if such benefits were payable beginning on the first day of
the month coincident with or next following the Date of Termination, over (ii)
the present value of the benefits to which Mr. Cross is actually entitled under
the Bank's defined benefit pension plan as of the Date of Termination, where
such present value is to be determined using a discount rate equal to the
applicable short-term federal rate prescribed under Section 1274(d) of the Code
and the mortality tables prescribed under Section 72 of the Code;

               (5) at the election of the Bank made within 30 days following the
Date of Termination, upon the surrender of options or appreciation rights issued
to Mr. Cross under any stock option or appreciation rights plan or program
maintained by, or covering the employees of the Bank or the Holding Company, a
lump sum payment in an amount equal to the product of : (i) the excess of (A)
the fair market value of a share of stock of the same class as the stock subject
to the option or appreciation right, determined as of the Date of Termination,
over (B) the exercise price per share for such option or appreciation right, as
specified in such plan or program, multiplied by (ii) the number of shares with
respect to which the options or appreciation rights are being surrendered.

               For the purposes of this paragraph 6(a)(5), Mr. Cross shall be
deemed vested in all options and appreciation rights awarded under such plan or
program, even if he is not vested under the terms of such plan or program.

               (6) at the election of the Bank made within 30 days following the
Date of Termination, upon the surrender of any shares awarded to Mr. Cross under
any restricted stock plan maintained by, or covering employees of, the Bank or
the Holding Company, a lump sum payment in an amount equal to the product of:

               i) the fair market value of a share of stock of the same class of
stock granted under such plan, determined as of the Date of Termination,
multiplied by ii) the number of shares that are being surrendered.

               For the purposes of this paragraph 6(a)(6), Mr. Cross shall be
deemed fully vested in all shares awarded under such plan, even if he is not
vested under the terms of such plan.

               (7) provide to Mr. Cross and his dependents for the remaining
term of this Agreement, the same life, health and disability insurance benefits,
including post-retirement benefits, as the Bank maintained for its executive
officers on the Effective Date, reduced by the amount of any such insurance
benefits provided to Mr. Cross by a subsequent employer. This paragraph 6 (a)(7)
shall be construed so that, if Mr. Cross retires during the remaining term of
this Agreement, the Bank shall provide to him and his dependents during such
remaining term and thereafter during his retirement, the same post-retirement
benefits maintained by the Bank for its executive officers on the Effective
Date;

               (8) provide to Mr. Cross and his dependents such other benefits,
if any, to which he and his dependents would have been entitled under the
employee benefit plans and programs maintained for the benefit of the Bank's
officers in accordance with the terms of such plans and programs in effect
immediately prior to the Date of Termination. The Bank and Mr. Cross acknowledge
and agree that: (i) the damages that Mr. Cross may incur following such
Involuntary Termination cannot be accurately measured as of the Commencement
Date and would be difficult or impossible to establish or prove after the Date
of Termination; and (ii) the payments and benefits provided in this paragraph
6(a) are reasonable damages under the circumstances and shall be payable without
any requirement that Mr. Cross prove actual damages or try to mitigate damages.

               (b)           Termination for Cause.
                             ---------------------

               In the event of Termination for Cause, the Bank shall (1) pay Mr.
Cross his salary and benefits through the Date of Termination, (2) pay him for
unused vacation days, and (3) have no further obligations to him under this
Agreement.

               (c)           Voluntary Termination.
                             ---------------------

               Mr. Cross's employment may be voluntarily terminated by him at
any time by resignation. In the event of such Voluntary Termination, the Bank
shall be obligated to (1) pay to Mr. Cross his salary and benefits through the
Date of Termination, (2) pay him for unused vacation days, and (3) have no
further obligations to him under this Agreement.

               (d)           Change in Control.
                             -----------------

               In the event of Involuntary Termination in connection with or
within 12 months after a Change in Control, the Bank shall, subject to paragraph
7 of this Agreement, (1) pay to Mr. Cross an amount equal to 299% of his "base
amount" as defined in 26 U.S.C. Section 28OG, which payment shall be made in
three equal installments, the first within 10 days after the Date of
Termination, the second on the fifth business day of January of the next
succeeding calendar year and the third on the fifth business day of January of
the second succeeding calendar year, (2) provide to Mr. Cross during the
remaining term of this Agreement substantially the same life, health and
disability insurance benefits as the Bank maintained for its executive officers
immediately prior to the Date of Termination, and (3) provide to Mr. Cross such
other benefits, if any, to which he and his family and dependents would have
been entitled as a former officer or the family or dependents of a former
officer under the employee benefit plans and programs maintained for the benefit
of the Bank's officers in accordance with the terms of such plans and programs
in effect immediately prior to the Date of Termination.

               (e)           Death, Disability.
                             -----------------

               In the event of the death of the Mr. Cross during the term of
this Agreement, within 60 days following such death his estate, or such
person(s) as he may have designated in writing, shall be entitled to receive
from the Bank a death benefit, payable through life insurance or otherwise,
which is equal to two times Mr. Cross's then current salary. If Mr. Cross
becomes disabled as defined in the Bank's then current disability plan, if any,
or if he is otherwise unable to serve as Chairman, President and Chief Executive
Officer, this Agreement shall continue in full force and effect, except that the
salary paid to Mr. Cross shall be reduced by any disability insurance payments
made to him on policies of insurance maintained by the Bank at its expense. In
addition, in the event of the death or disability of Mr. Cross during the term
of this Agreement, Mr. Cross and his family and dependents (in the event of
disability) and his family and dependents (in the event of death) shall be
provided with such benefits as they would have been entitled to receive as a
former officer or the family or dependents of a former officer under the
employee benefit plans and programs maintained for the benefit of the Bank's
officers in accordance with the terms of such plans and programs in effect
immediately prior to the death or disability.

               (f)           Temporary Suspension or Prohibition.
                             -----------------------------------

               If Mr. Cross is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the FDIA, 12 U.S.C. Section 1818(e)(3) and (g)(1),
the Bank's obligations under this Agreement, other than those which have vested,
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Bank may in its
discretion (1) pay Mr. Cross all or part of the compensation withheld while its
obligations under this Agreement were suspended and (2) reinstate in whole or in
part any of its obligations which were suspended.

               (g)           Permanent Suspension or Prohibition.
                             -----------------------------------

               If Mr. Cross is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA, 12 U.S.C. Section 1818(e)(4) and (g)(1),
all obligations of the Bank under this Agreement shall terminate as of the
effective date of the order, but vested rights of the contracting parties shall
not be affected.

               (h)           Default of the Bank.
                             -------------------

               If the Bank is in default (as defined in Section 3(x)(1) of the
FDIA), all obligations under this Agreement shall terminate as of the date of
default, but this provision shall not affect any vested rights of the
contracting parties.

               (i)           Termination by Regulators.
                             -------------------------

All obligations  under this Agreement shall be terminated,  except to the extent
determined  that  continuation  of this Agreement is necessary for the continued
operation of the Bank by the Director of the Office of Thrift  Supervision  (the
"Director")  or his or her  designee,  at the  time:  (1)  the  Federal  Deposit
Insurance  Corporation  enters into an agreement to provide  assistance to or on
behalf of the Bank under the  authority  contained in Section 13(c) of the FDIA;
or (2) the  Director or his or her  designee  approves a  supervisory  merger to
resolve problems related to operation of the Bank; or (3) the Director or his or
her designee  determines the Bank to be in an unsafe or unsound  condition.  Any
rights of the parties that have already vested,  however,  shall not be affected
by any such action.

7.             Certain Reduction of Payments by the Bank.
               -----------------------------------------

               Notwithstanding any other provision of this Agreement, if
payments under this Agreement, together with any other payments received or to
be received by Mr. Cross in connection with a Change in Control would cause any
amount to be nondeductible by the Bank for federal income tax purposes pursuant
to 26 U.S.C. Section 28OG, then benefits under this Agreement shall be reduced
(not less than zero) to the extent necessary so as to maximize payments to Mr.
Cross without causing any amount to become nondeductible by the Bank. Mr. Cross
shall determine the allocation of such reduction among payments to him.

8.             No Mitigation.
               -------------

               Mr. Cross shall not be required to mitigate the amount of any
salary or other payment or benefit provided for in this Agreement by seeking
other employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Agreement be reduced by any compensation earned by Mr.
Cross as the result of employment by another employer unless explicitly stated
herein, by retirement benefits after the Date of Termination or otherwise.

9.             Indemnification and Insurance.
               -----------------------------

               The Bank shall, at its sole expense, continue in effect for the
benefit of Mr. Cross, all policies of directors and officers liability insurance
and charter, bylaw or other provisions for indemnification, defense or hold
harmless of officers or directors of the Bank that were in effect on the Date of
Termination, with respect to all of Mr. Cross's acts and omissions while an
officer or director of the Bank, as fully as if the termination of employment
had not occurred, and until the final expiration of all periods of limitation
against action applicable to such acts or omissions.

10.            Attorneys Fees.
               --------------

               In the event the Bank exercises its right of Termination for
Cause, but it is determined by a court of competent jurisdiction or by an
arbitrator pursuant to Paragraph 18 that cause did not exist for such
termination, or if it is determined by a court or arbitrator that the Bank has
failed to meet any of its obligations or abide by any of the terms of this
Agreement, Mr. Cross shall be entitled to reimbursement for all reasonable
costs, including attorneys' fees, incurred in challenging such termination or
enforcing such obligations or terms. Such reimbursement shall be in addition to
all rights to which Mr. Cross is otherwise entitled under this Agreement.

11.            No Assignments.
               --------------

               (a) This Agreement is personal to each of the parties hereto, and
neither party may assign or delegate any of its rights or obligations hereunder
without first obtaining the written consent of the other party; provided,
however, that the Bank shall require any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Bank, by an assumption
agreement in form and substance satisfactory to Mr. Cross, to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that the Bank would be required to perform it if no such succession or
assignment had taken place. Failure of the Bank to obtain such an assumption
agreement prior to the effectiveness of any such succession or assignment shall
be a breach of this Agreement and shall entitle Mr. Cross to compensation from
the Bank in the same amount and on the same terms as the compensation pursuant
to Paragraph 7(d) hereof. For purposes of implementing the provisions of this
Paragraph 11(a), the date on which any such succession becomes effective shall
be deemed the Date of Termination.

               (b) This Agreement and all rights of Mr. Cross hereunder shall
inure to the benefit of and be enforceable by his personal and legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Mr. Cross should die while any amounts would still
be payable to him hereunder if he had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to his devisee, legatee or other designee or if there is no such
designee, to his estate.

12.            Notice.
               ------

               For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, if to the Bank at its executive
office, to the attention of the Board with a copy to the Secretary of the Bank,
or, if to Mr. Cross, to his home at the address stated above, unless notice of a
change of address has been given pursuant hereto.

13.            Amendments.
               ----------

               No amendments or additions to this Agreement shall be binding
unless in writing and signed by both parties, except as herein otherwise
provided.

14.            Headings.
               --------

               The headings used in this Agreement are included solely for
convenience and shall not affect, or be used in connection with, the
interpretation of this Agreement.

15.            Severability.
               ------------

               The  provisions of this Agreement  shall be deemed  severable and
the  invalidity  or  unenforceability  of any  provision  shall not  affect  the
validity or enforceability of the other provisions hereof.

16.            Waiver.
               ------

               Failure, by either party, to insist on strict compliance with any
of the terms or conditions hereof shall not be deemed a waiver of such term or
condition.

17.            Governing Law.
               -------------

               This Agreement shall be governed by the laws of the United States
to the extent applicable and otherwise by the laws of the State of New York.

18.            Arbitration.
               -----------

                Any dispute or controversy  arising under or in connection  with
this Agreement shall be settled  exclusively by arbitration in Albany,  New York
in accordance  with the rules of the American  Arbitration  Association  then in
effect.  Judgment may be entered on the  arbitrator's  award in any court having
jurisdiction.

<PAGE>

               IN WITNESS  WHEREOF,  the parties have executed this Agreement as
of the day and year first above written.

Catskill Savings Bank

By:  /s/ Allan Oren                              /s/ Wilbur J. Cross
     --------------                              -------------------
     Director                                    Wilbur J. Cross

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