Exhibit 4.11


 


 


THE SECURITIES REPRESENTED BY THIS NOTE AND THE SECURITIES
ISSUABLE UPON ITS CONVERSION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “ACT”), OR SECURITIES LAWS OF ANY STATE AND MAY NOT BE
OFFERED, SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION
UNDER THE ACT AND SUCH LAWS AND, IF REQUESTED BY THE MAKER, UPON DELIVERY OF AN
OPINION OF COUNSEL SATISFACTORY TO THE MAKER THAT THE PROPOSED TRANSFER IS
EXEMPT FROM THE ACT OR SUCH LAWS.   THE
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
CERTAIN TRANSFER RESTRICTIONS CONTAINED IN THAT CERTAIN SECURITIES PURCHASE
AGREEMENT, DATED AS OF OCTOBER 15, 2003, BETWEEN THE MAKER AND THE HOLDER.


 


CONVERTIBLE SUBORDINATED PROMISSORY NOTE


 


	
  U.S.
  $50,000,000

  	
   

  	
  February 19, 2004

  
	
   

  	
   

  	
  New York, New York

  



 


 


FOR VALUE RECEIVED, Abgenix, Inc., a Delaware
corporation (the “Maker”), hereby unconditionally promises to pay to the order
of AstraZeneca UK Limited (the “Holder”), or its permitted assigns, the
original aggregate principal sum of FIFTY MILLION United States Dollars (U.S.
$50,000,000) on the Maturity Date, subject to prior prepayment in accordance
with the provisions hereof.


 


Upon the occurrence and during the continuation
uncured of any Event of Default described in Section 7.1(a), such principal
amount of this Note as from time to time remains unpaid shall bear interest at
the Default Rate.  Such interest shall
be payable in arrears on the last day of each March, June, September and
December and at the time of the final payment of the principal amount
hereof.  Interest shall be calculated on
the basis of a three hundred sixty-five (365)-day year for the number of days
elapsed.


 


For purposes of determining the person entitled to
payment of the principal of and interest on this Note, the Maker is entitled to
pay the person in whose name this Note is registered at the close of business
on the fifteenth day (whether or not a Business Day) next preceding the date
for such payment.  All payments of
principal and interest on this Note shall be payable at the principal executive
office of such registered holder or at such other place as such registered
holder may from time to time in writing appoint at least fifteen (15) days
before the date such payment is due. 
All payments required to be made by the Maker under this Note shall be
made in cash in immediately available funds.


 

















 


Subject to the Holder’s compliance with Section 7 of
the Purchase Agreement and with applicable law, this Note is transferable on
the note register of the Maker upon surrender of this Note for transfer at the
principal executive offices of the Maker duly endorsed by or accompanied by a
written instrument of transfer in form satisfactory to the Maker and duly
executed by the registered holder and thereupon a new note in the outstanding
principal amount of the Note so surrendered will be issued to the designated
transferee or transferees.  No service
charge will be made for any such transfer or exchange, but the Maker may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. 
This Note is issuable only in registered form.


 


1.                                       Definitions.


 


1.1                                 General.  Terms used herein and not otherwise defined
are used herein with the same meanings given to them in the Purchase
Agreement.  Unless otherwise specified,
references in this Note to any section are references to such section of this
Note and, unless otherwise specified, references in any section or definition
to any clause are references to such clause of such section or definition.  Terms for which meanings are defined in this
Note shall apply equally to the singular and plural forms of the terms
defined.  Whenever the context may
permit or require, any pronoun shall include the corresponding masculine,
feminine and neuter forms.  The term
“including” means including, without limiting the generality of any description
preceding such term.  Each reference
herein to any Person shall include a reference to such Person’s successors and
permitted assigns.  Unless otherwise
specified, references to any agreement, instrument or other document in this
Note refer to such agreement, instrument or other document as originally
executed or, if subsequently varied, replaced or supplemented from time to
time, as so varied, replaced or supplemented and in effect at the relevant time
of reference thereto.


 


1.2                                 Defined
Terms.  Unless the context otherwise
requires, when used herein the following terms shall have the meaning
indicated:


 


“Affiliate” means with respect to any Person,
any other Person directly, or indirectly through one or more intermediaries,
controlling, controlled by or under common control with such Person.  For purposes of this definition, the term
“control” (and correlative terms “controlling,” “controlled by” and “under
common control with”) means possession of the power, whether by contract,
equity ownership or otherwise, to direct the policies or management of a
Person.


 


“Approved Market” means the NNM, the New York
Stock Exchange, or the American Stock Exchange.


 


“Average Market Price for Maker’s
Conversion Option” means, with respect to shares of Common Stock, the
arithmetic mean of the daily Market Prices of shares of Common Stock for the
ten (10) consecutive Trading Days commencing on the eleventh (11th) Trading Day
preceding the Conversion Date and ending on the Trading Day next preceding the
Conversion Date; provided, however, that in no event shall the
Average Market Price for Maker’s Conversion Option be more than one hundred one
percent (101%) of the Market Price of shares of Common Stock for the last
Trading Day preceding the Conversion Date.


 


2

















 


“Bankruptcy Law” has the meaning set forth in
Section 7.1.


 


“Beneficially Own” or “Beneficial Ownership”
are used herein with the same meanings given to such terms in Rules 13d-3 and
13d-5 of the Securities Exchange Act of 1934, as amended.


 


“Board of Directors” means the board of
directors of Maker.


 


“Capital Stock” of any Person means any and all
shares, interests, rights to purchase, warrants, options, participations or
other equivalents of or interests in (however designated) equity of such
Person, but excluding any debt securities convertible into such equity.


 


“Certificate(s) of Designation” means the
Series A-1 Certificate of Designation and/or the Series A-3/A-4 Certificate of
Designation.


 


“Collaboration Agreement” means the
Collaboration Agreement, dated as of October 15, 2003, between the Maker and
AstraZeneca UK Limited.


 


“Common Stock” means the common stock, par
value $0.0001 per share, of Maker.


 


“Conversion Date” has the meaning set forth in
Section 4.2.


 


“Conversion Price” has the meaning set forth in
Section 4.1.


 


“Current Average Market Price” means, with
respect to shares of the Common Stock as of a given day, the arithmetic mean of
the daily Market Prices of shares of the Common Stock for the thirty (30)
consecutive Trading Days commencing forty-five (45) Trading Days before the
date of determination or, for purposes of all computations under Section 4.3(b)
and (c), (i) the Determination Date or the Expiration Date, as the case may be,
with respect to distributions or tender offers under Section 4.3(c) or (ii) the
record date with respect to distributions, issuances or other events requiring
such computation under Section 4.3(b) and (c), calculated in any case by taking
the sum of the Market Prices for shares of the Common Stock for each of the
thirty (30) days in the specified period and dividing the foregoing sum by
thirty (30).


 


“Custodian” has the meaning set forth in
Section 7.1.


 


“Default Rate” means (i) during the period
commencing on the date hereof and ending on the fifth anniversary of such date,
an interest rate equal to the 10-Year United States Treasury Bond yield rate as
reported in The Wall Street Journal Western edition on the date hereof,
plus an additional three percent (3%) compounded annually, and (ii) during the
period commencing on the date following the fifth anniversary of the date
hereof and continuing until the last date on which the entire principal amount
of this Note has been converted or repaid and any interest owing hereon has
been paid, an interest rate equal to the 10-Year United States Treasury Bond
yield rate as reported in The Wall Street Journal Western edition on the
first day of such period, plus an additional three percent (3%) compounded
annually; provided, however, that if The Wall Street Journal ceases to
be published, then the 10-Year United States Treasury


 


3

















 


Bond yield rate to be used shall be that reported in
such other business publication of national circulation in the United States as
the Maker and the Holder reasonably agree.


 


“Designated Prepayment Event Amount” means the
Designated Type I Prepayment Event Amount or the Designated Type II Prepayment
Event Amount, as the case may be.


 


“Designated Senior Indebtedness” means any
particular Senior Indebtedness of the Maker in which the instrument creating or
evidencing the same or the assumption or guarantee thereof (or any related
agreements or documents to which the Maker is a party) expressly provides that
such Senior Indebtedness shall be “Designated Senior Indebtedness” for purposes
of this Note (provided that such instrument, agreement or other document
creating or evidencing the Indebtedness may place limitations and conditions on
the right of such Senior Indebtedness to exercise the rights of Designated
Senior Indebtedness).  If any payment
made to any holder of any Designated Senior Indebtedness or its Representative
with respect to such Designated Senior Indebtedness is rescinded or must
otherwise be returned by such holder or Representative upon the insolvency,
bankruptcy or reorganization of the Maker or otherwise, the reinstated
Indebtedness of the Maker arising as a result of such rescission or return shall
constitute Designated Senior Indebtedness effective as of the date of such
rescission or return.


 


“Designated Type I Prepayment Event Amount” has
the meaning set forth in Section 3.2(a)(i).


 


“Designated Type II Prepayment Event Amount”
has the meaning set forth in Section 3.2(a)(ii).


 


“Determination Date” has the meaning set forth
in Section 4.3.


 


“Discovery Period” means the period
commencing on the effective date of the Collaboration Agreement and ending on
the later to occur of (a) the date of expiration or termination of the Antigen
Designation Term (as such term is defined in the Collaboration Agreement) and
(b) the date of expiration or termination of the Research Program Term (as such
term is defined in the Collaboration Agreement) with respect to the Research
Program (as such term is defined in the Collaboration Agreement) that is the
last such program to terminate or expire pursuant to the Collaboration
Agreement.


 


“Event of Default” has the meaning set forth in
Section 7.1.


 


“Exchange Act” means the United States
Securities Exchange Act of 1934, as amended.


 


“Expiration Date” has the meaning set forth in
Section 4.3.


 


“Expiration Time” has the meaning set forth in
Section 4.3.


 


“GAAP” means generally accepted accounting
principles in the United States of America as in effect as of the date of this
Note, including those set forth in (i) the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public


 


4

















 


Accountants, (ii) the statements and pronouncements of
the Financial Accounting Standards Board, (iii) such other statements by such
other entity as approved by a significant segment of the accounting profession
and (iv) the rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements) in registration
statements filed under the Securities Act and periodic reports required to be
filed pursuant to Section 13 of the Exchange Act, including opinions and
pronouncements in staff accounting bulletins and similar written statements
from the accounting staff of the SEC.


 


“Holder” has the meaning set forth in the first
paragraph hereof.


 


“Indebtedness” means, with respect to any
Person, without duplication, (i) all indebtedness, obligations and other
liabilities (contingent or otherwise) of such Person (A) for borrowed money
(including obligations of such Person in respect of overdrafts, foreign
exchange contracts, currency exchange agreements, interest rate protection
agreements, and any loans or advances from banks, whether or not evidenced by
notes or similar instruments) or (B) evidenced by credit or loan agreements,
bonds, debentures, notes or similar instruments (whether or not the recourse of
the lender is to the whole of the assets of such Person or to only a portion
thereof) (other than any accounts payable or other accrued current liability or
obligation incurred in the ordinary course of business in connection with the
obtaining of materials or services), (ii) all reimbursement obligations and
other liabilities (contingent or otherwise) of such Person with respect to
letters of credit, bank guarantees or bankers’ acceptances, (iii) all
obligations and liabilities (contingent or otherwise) of such Person (A) in
respect of (1) leases of such Person required, in conformity with GAAP, to be
accounted for as capitalized lease obligations on the balance sheet of such
Person (as determined by the Maker), and (2) ground leases the Maker may enter
into in the future with respect to the Maker’s facilities in Fremont,
California, or (B) under any lease or related document (including a purchase
agreement, conditional sale or other title retention agreement) in connection
with the lease of real property or improvement thereon (or any personal
property included as part of any such lease) which provides that such Person is
contractually obligated to purchase or cause a third party to purchase the
leased property or pay an agreed upon residual value of the leased property to
the lessor (whether or not such lease transaction is characterized as an
operating lease or a capitalized lease in accordance with GAAP), (iv) all
obligations (contingent or otherwise) of such Person with respect to any
interest rate or other swap, cap, floor or collar agreement, hedge agreement,
forward contract, or other similar instrument or agreement or foreign currency
hedge, exchange, purchase or similar instrument or agreement; (v) all direct or
indirect guarantees, agreements to be jointly liable or similar agreements by
such Person in respect of, and obligations or liabilities of such Person to
purchase or otherwise acquire or otherwise assure a creditor against loss in
respect of, indebtedness, obligations or liabilities of another Person of the
kind described in clauses (i) through (iv), and (vi) any and all deferrals,
renewals, extensions, refinancings and refundings of, or amendments,
modifications or supplements to, any indebtedness, obligation or liability of
the kind described in clauses (i) through (v).


 


“Initial Conversion Price” has the meaning set
forth in Section 4.1.


 


“Instrument” has the meaning set forth in
Section 7.1.


 


“Maker” has the meaning set forth in the first
paragraph hereof.


 


5

















 


“Maker Conversion Price” has the meaning set
forth in Section 4.1.


 


“Maker’s Election Notice” has the meaning set
forth in Section 4.2.


 


“Market Price” means, with respect to a
particular security, on any given day, the last reported sales price or, in
case no such reported sale takes place on such date, the average of the
reported closing bid and asked prices in either case on the NNM or, if the
security is not listed or admitted to trading on the NNM, on the principal
national securities exchange on which the security is listed or admitted to
trading or, if not listed or admitted to trading on the NNM or any national
securities exchange, the last reported sales price of the security as quoted on
NASDAQ or, in case no reported sales takes place, the average of the closing
bid and asked prices as quoted on NASDAQ or any comparable system or, if the
security is not quoted on NASDAQ or any comparable system, the closing sales
price or, in case no reported sale takes place, the average of the closing bid
and asked prices, as furnished by any two members of the National Association
of Securities Dealers, Inc. selected from time to time by the Maker for that
purpose.  If the Common Stock is not
listed and traded in a manner that the quotations referred to above are
available for the period required hereunder, the Market Price per share of
Common Stock shall be deemed to be the fair value per share of such security as
determined in good faith by the Board of Directors.


 


“Maturity Date” means the tenth (10th)
anniversary of the date of the Initial Closing (as such term is defined in the
Purchase Agreement).


 


“Maximum Prepayment Event Amount” means the
Maximum Type I Prepayment Event Amount or the Maximum Type II Prepayment Event
Amount, as the case may be.


 


“Maximum Type I Prepayment Event Amount” means
the total principal amount of this Note outstanding as of a Type I Prepayment
Event Date.


 


“Maximum Type II Prepayment Event Amount” means
the amount that equals the lesser of the Type II Allocated Prepayment Amount
and the Type II Remaining Prepayment Amount.


 


“NNM” means the Nasdaq National Market.


 


“Note” has the meaning set forth in Section 2.


 


“Officer” means the chairman or any co-chairman
of the board, any vice chairman of the board, the chief executive officer, the
president, any vice president, the chief financial officer, the controller, the
secretary or any assistant controller or assistant secretary of the Maker.


 


“Officers’ Certificate” means a certificate
signed by two Officers.


 


“Opinion of Counsel” means a written opinion
from legal counsel, which counsel may be an employee of or counsel to the
Maker.


 


“Outstanding” means, at any time, the number of
shares of Common Stock then outstanding calculated on a fully diluted basis,
assuming the exercise, exchange or conversion


 


6

















 


into Common Stock of all outstanding securities
exercisable, exchangeable or convertible into shares of Common Stock (whether
or not then exercisable, exchangeable or convertible).


 


“Ownership Threshold” has the meaning set forth
in Section 9.


 


 “Payment
Blockage Notice” has the meaning set forth in Section 5.2.


 


“Person” means an individual, corporation,
partnership, other entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act).


 


“Prepayment Election Amount” has the meaning
set forth in Section 3.1.


 


“Prepayment Election Date” has the meaning set
forth in Section 3.1.


 


“Prepayment Election Notice” has the meaning
set forth in Section 3.1.


 


“Prepayment Event” means a Type I Prepayment
Event or a Type II Prepayment event, as the case may be.


 


“Prepayment Event Date” means the Type I
Prepayment Event Date or the Type II Prepayment Event Date, as the case may be.


 


“Prepayment Event Notice” has the meaning set
forth in Section 3.2.


 


“Promissory Note” has the meaning set forth in
Section 7.1(b).


 


“Purchase Agreement” means the
Securities Purchase Agreement, dated as of October 15, 2003, between the Maker
and AstraZeneca UK Limited.


 


“Purchased Shares” has the meaning set forth in
Section 4.3.


 


“Representative” means the (i) trustee under
any indenture to which Maker is a party or other holder, agent or
representative for any Senior Indebtedness or (ii) with respect to any Senior
Indebtedness that does not have any such trustee, holder, agent or other
representative, (a) in the case of such Senior Indebtedness issued pursuant to
an agreement providing for voting arrangements as amount the holders or owner
of such Senior Indebtedness, any holder or owner of such Senior Indebtedness
acting with the consent of the required persons necessary to bind such holders
or owners of such Senior Indebtedness and (b) in the case of all other such
Senior Indebtedness, the holder or owner of such Senior Indebtedness.


 


“Restricted Conversion Period” has the meaning
set forth in Section 4.1(b)(ii).


 


“Rights Plan” has the meaning set forth in
Section 4.3.


 


“SEC” means the United States Securities and
Exchange Commission.


 


“Securities Act” means the United States
Securities Act of 1933, as amended.


 


7

















 


“Senior Indebtedness” means the principal of,
premium, if any, interest (including all interest accruing subsequent to the
commencement of any bankruptcy or similar proceeding, whether or not a claim
for post-petition interest is allowed as a claim in any such proceeding) and
rent, if any, payable on or in connection with, and all fees, costs, expenses
and other amounts accrued or due on or in connection with, the Maker’s 3.5%
Convertible Subordinated Notes due March 15, 2007, or any other Indebtedness of
the Maker, whether outstanding on the date of this Note or thereafter created,
incurred, assumed, guaranteed or in effect guaranteed by the Maker (including
all deferrals, renewals, extensions or refundings of, or amendments,
modifications or supplements to, the foregoing), unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or the
assumption or guarantee thereof expressly provides that such Indebtedness shall
not be senior in right of payment to this Note or expressly provides that such
Indebtedness is “pari passu” or “junior” to this Note.  Notwithstanding the foregoing, the term
Senior Indebtedness shall not include (i) any Indebtedness of the Maker to any
Subsidiary of the Maker (other than Indebtedness of the Maker to such
Subsidiary arising by reason of guarantees by the Maker of Indebtedness of such
Subsidiary to a Person that is not a Subsidiary of the Maker); (ii) this Note;
or (iii) Indebtedness of or amounts owed by the Maker for compensation to
employees, or for goods or materials purchased in the ordinary course of
business, or for services.  If any
payment made to any holder of any Senior Indebtedness or its Representative
with respect to such Senior Indebtedness is rescinded or must otherwise be
returned by such holder or Representative upon the insolvency, bankruptcy or
reorganization of the Maker or otherwise, the reinstated Indebtedness of the
Maker arising as a result of such rescission or return shall constitute Senior
Indebtedness effective as of the date of such rescission or return.


 


“Series A-1 Certificate of Designation” has the
meaning set forth in Purchase Agreement.


 


“Series A-3/A-4 Certificate of Designation” has
the meaning set forth in the Purchase Agreement.


 


“Significant Subsidiary” means, in respect of
any Person, a Subsidiary of such Person that would constitute a “significant
subsidiary” as such term is defined under Rule 1-02 of Regulation S-X under the
Securities Act and the Exchange Act.


 


“Subordinated Promissory Note” has the meaning
set forth in Section 9.


 


“Subsidiary” means, in respect of any Person,
any corporation, association, partnership, or other business entity of which
more than fifty percent (50%) of the total voting power of shares of Capital
Stock or other interests (including partnership interests) entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers, general partners or holders thereof is at the time owned
or controlled, directly or indirectly, by (i) such Person; (ii) such Person and
one or more Subsidiaries of such Person; or (iii) one or more Subsidiaries of
such Person.


 


“Trading Day” means, with respect to any
security, each Monday, Tuesday, Wednesday, Thursday and Friday, other than any
day on which securities are generally not traded on the principal exchange or
market in which such security is traded.


 


8

















 


“Trigger Event” has the meaning set forth in
Section 4.3.


 


“Triggering Distribution” has the meaning set
forth in Section 4.3.


 


“Type I Prepayment Event” means a Change in
Control (as such term is defined in the Collaboration Agreement) that occurs at
any time after the last day of the Discovery Period.


 


“Type I Prepayment Event Date” has the meaning
set forth in Section 3.2(a)(i).


 


“Type II Allocated Prepayment Amount” means the
amount, if positive, that is derived when the Series A-1 Remaining Redemption
Amount (as such term is defined in the Series A-1 Certificate of Designation)
is subtracted from the Series A-1 Allocated Redemption Amount (as such term is
defined in the Series A-1 Certificate of Designation) and means zero (0) in the
event that such amount is zero (0) or negative.


 


“Type II Prepayment Event” means the
termination by AstraZeneca UK Limited (or any of its Affiliates) of all
outstanding Research Programs and, in the event that the Antigen Designation
Term has not expired, the Antigen Designation Term, pursuant to Section 16.2 or
Section 16.3.1 of the Collaboration Agreement, which termination occurs at any
time prior to or on the last day of the Discovery Period.


 


“Type II Prepayment Event Date” means the date
that is thirty (30) Business Days after the date of the applicable Type II
Prepayment Event (or if such day is not a Business Day, then the next Business
Day thereafter).


 


“Type II Remaining Prepayment Amount” means the
principal amount of this Note outstanding as of the Type II Redemption Event
Date.


 


2.                                       Securities
Purchase Agreement.  This
Convertible Subordinated Promissory Note (this “Note”) is the Convertible
Subordinated Promissory Note of the Maker referred to in the Purchase
Agreement.


 


3.                                       Prepayment.


 


3.1                                 Maker’s
Right to Prepay.


 


(a) Conditions to Prepayment Election.  The principal amount of this Note may be
prepaid (without premium or penalty) from time to time at the election of the
Maker (each such election, a “Prepayment Election”), as a whole or in part (in
increments of $1,000 or multiples thereof), upon at least twenty (20) and not
more than sixty (60) days’ prior notice to the Holder if (i) a shelf
registration statement covering resales of the Common Stock issuable upon
conversion of the principal amount of this Note is effective and available for use
in accordance with Section 8.1 of the Purchase Agreement and is expected to
remain effective and available for use for the thirty (30) days following the
date of the Prepayment Election Notice unless registration is no longer
required pursuant to the terms and conditions of the Purchase Agreement and
(ii) the Common Stock issuable upon conversion of the principal amount of this
Note is listed or admitted for trading on an Approved Market and is expected to
remain so listed or


 


9

















 


admitted for trading for the thirty (30) days following the date of the
Prepayment Election Notice.  Except as
set forth in this Section 3.1, the Maker shall not have the option to prepay
the principal amount of this Note.


 


(b) Notice of Prepayment.  At least twenty (20) days but not more than
sixty (60) days before the date (the “Prepayment Election Date”) of a proposed
prepayment of the principal amount of this Note pursuant to this Section 3.1,
the Maker shall give notice of prepayment (a “Prepayment Election Notice”) to
the Holder.  The Prepayment Election
Notice shall state:


 


(i)                                     the
Prepayment Election Date;


 


(ii)                                  the
amount of the prepayment (the “Prepayment Election Amount”);


 


(iii)                               the
then-current Conversion Price;


 


(iv)                              that
if the Holder wishes to convert any portion of the principal amount of this
Note that is the subject of the Prepayment Election Notice, the Holder must
give notice of such conversion no later than the close of business on the
Business Day immediately preceding the Prepayment Election Date; and


 


(v)                                 that,
unless the Maker defaults in paying the Prepayment Election Amount on the
Prepayment Election Date, the only remaining right of the Holder in respect of
the Prepayment Election Amount shall be to receive payment of the Prepayment
Election Amount.


 


(c) Effect of Notice of Prepayment Election.  Once a Prepayment Election Notice is given,
the principal amount of this Note that is the subject of the Prepayment
Election Notice shall not thereafter be convertible pursuant to Section 4.1(b)
and the Prepayment Election Amount shall become due and payable on the
Prepayment Election Date, except to the extent that all or any portion of the
Prepayment Election Amount is converted in accordance with the provisions of Section
4.1(a).


 


3.2                                 Prepayment
upon Prepayment Event.


 


(a) Prepayments at Option of Holder.


 


(i)                                     If
at any time that any portion of the principal amount this Note remains unpaid
there shall occur a Type I Prepayment Event, then on the date that is thirty (30)
Business Days after the date of such Prepayment Event (or, if such day is not a
Business Day, then the next Business Day thereafter) (the “Type I Prepayment
Event Date”), the Maker shall either, as it may elect,


 


(A) prepay in full so much of the Maximum
Type I Prepayment Event Amount as the Holder may specify in a Prepayment Event
Notice (the “Designated Type I Prepayment Event Amount”), or


 


10

















 


(B) exercise its rights to, and subject to
all of the terms and provisions of, Section 4.1(b) to require the Holder to
convert the Designated Type I Prepayment Event Amount; provided, however,
that if and to the extent, as of the Type I Prepayment Event Date, the Maker is
prevented by the terms of Section 4.1(b)(ii) from requiring the Holder to
convert any principal amount of this Note pursuant to Section 4.1(b)(i), then
the Maker shall notwithstanding any election that it may otherwise have made
pursuant to this Section 3.2(a)(i), prepay to the Holder on the Type I
Prepayment Event Date in accordance with clause (A) above such of the
Designated Type I Prepayment Event Amount as the Maker is prevented by the
terms of Section 4.1(b)(ii) from requiring the Holder to convert as of such
date.


 


(ii)                                  If
at any time that any portion of the principal amount this Note remains unpaid
there shall occur a Type II Prepayment Event, then on the Type II Prepayment
Event Date, the Maker shall either, as it may elect,


 


(A) prepay in full so much of the principal
amount of this Note then remaining unpaid, not to exceed an amount equal to the
Maximum Type II Prepayment Event Amount as the Holder may specify in a
Prepayment Event Notice (the “Designated Type II Prepayment Event Amount”), or


 


(B) exercise its rights to, and subject to
all of the terms and provisions of, Section 4.1(b) (without giving effect to
clause (D) of Section 4.1(b)(ii)) to require the Holder to convert some or all
of the Designated Type II Prepayment Event Amount; provided, however,
that in the event that the Maker elects to convert less than all of such
Designated Type II Prepayment Event Amount, the Maker shall prepay to the
Holder on the Type II Prepayment Event Date in accordance with clause (A) above
such of the Designated Type II Prepayment Event Amount as the Maker has elected
not to convert; provided, further, that if and to the extent, as
of the Type II Prepayment Event Date, the Maker is prevented by the terms of
Section 4.1(b)(ii) (without giving effect to clause (D) of Section 4.1(b)(ii))
from requiring the Holder to convert any principal amount of this Note pursuant
to Section 4.1(b)(i), then the Maker shall notwithstanding any election that it
may otherwise have made pursuant to this Section 3.2(a)(ii), prepay to the
Holder on the Type II Prepayment Event Date in accordance with clause (A) above
such of the Designated Type II Prepayment Event Amount as the Maker is
prevented by the terms of Section 4.1(b)(ii) (without giving effect to clause
(D) of Section 4.1(d)(ii)) from requiring the Holder to convert as of such
date.


 


(b) Notice to Holder.  Within ten (10) Business Days after the occurrence of a
Prepayment Event, the Maker shall provide Holder with notice of the Prepayment
Event. The notice shall state:


 


11

















 


(i)                                     the
date of such Prepayment Event, whether the Prepayment Event is a Type I
Prepayment Event or a Type II Prepayment Event, and, briefly, the events
causing such Prepayment Event;


 


(ii)                                  the
date by which the Prepayment Event Notice pursuant to Section 3.2(c) must be
given;


 


(iii)                               the
Prepayment Event Date;


 


(iv)                              the
Maximum Prepayment Event Amount;


 


(v)                                 the
Holder’s right to require the Maker (A) in the case of a Type I Prepayment
Event, to prepay or convert (at the Maker’s election) an amount up to the
Maximum Prepayment Event Amount, or (B) in the case of a Type II Prepayment
Event, to prepay or convert (at the Maker’s election) an amount up to the
Maximum Prepayment Event Amount;


 


(vi)                              in
the case of (x) a Type I Prepayment Event, whether the Maker is electing to
prepay or exercise its rights to convert the Designated Type I Prepayment Event
Amount specified by the Holder, and (y) a Type II Prepayment Event, whether the
Maker is electing to prepay or exercise its rights to convert the Designated Type
II Prepayment Event Amount specified by the Holder (and, in either case, in the
event that the Maker is electing to exercise its rights to convert any such
amount, the principal amount that the Maker is electing to convert, and the
place or places where this Note is to be surrendered for issuance of
certificates representing shares of Common Stock);


 


(vii)                           the
then-current Conversion Price and the then-current Maker Conversion Price;


 


(viii)                        that the
principal amount of this Note that is the subject of prepayment  pursuant to a Prepayment Event Notice may be
converted into Common Stock pursuant to Section 4.1 only to the extent that the
Prepayment Event Notice has been withdrawn in accordance with the terms of this
Note;


 


(ix)                                the
procedures that the Holder must follow to exercise rights under this Section
3.2; and


 


(x)                                   the
procedures for withdrawing a Prepayment Event Notice.


 


(c) Exercise by Holder of Right to Receive
Prepayment.  The Holder may exercise
its rights specified in this Section 3.2 by delivery of a written notice (a
“Prepayment Event Notice”) to the Maker at any time prior to the close of
business on the Business Day next preceding the Prepayment Event Date
specifying the Designated Prepayment Event Amount.  The Holder may specify a Designated Prepayment Event Amount that
is less than the Maximum Prepayment Event Amount only if the amount so
designated is $1,000 or an integral multiple thereof.  Provisions of this Note that apply to the prepayment of the
Maximum Prepayment Event Amount also apply to the prepayment of a Designated
Prepayment Event Amount that is


 


12

















 


less than the Maximum Prepayment Event Amount.  Notwithstanding anything herein to the
contrary, the Holder shall have the right to withdraw any Prepayment Event
Notice in whole or in a portion thereof, so long as the remaining Designated
Prepayment Event Amount, if any, is $1,000 or in an integral multiple thereof,
at any time prior to the close of business on the Business Day next preceding
the Prepayment Event Date by written notice of withdrawal given to the Maker.


 


(d) Effect of Prepayment Event Notice.  Upon receipt by the Maker of the Prepayment
Event Notice specified in Section 3.2(c), the Holder shall (unless such
Prepayment Event Notice is withdrawn as specified in Section 3.2(c)) thereafter
be entitled to receive on the Prepayment Event Date (i) in the case of a Type I
Prepayment Event, either the Designated Type I Prepayment Event Amount with
respect to this Note or the certificates and payment amount (if any) to which
it is entitled upon conversion as provided in Section 4.2(b), as applicable, or
(ii) in the case of a Type II Prepayment Event, the Designated Type II
Prepayment Event Amount with respect to this Note.  Any principal amount of this Note in respect of which a
Prepayment Event Notice has been given by the Holder thereof may not be
converted into shares of Common Stock pursuant to Section 4.1 on or after the
date of the delivery of such Prepayment Event Notice unless such Prepayment
Event Notice has first been validly withdrawn.


 


(e) Conversion Terms.  In the event that the Maker elects, pursuant to clause (B) of
Section 3.2(a)(i) or clause (B) of Section 3.2(a)(ii), to exercise its rights
to require the Holder to convert the principal amount of this Note pursuant to
Section 4.1(b)(i) with respect to any portion or all of the Designated
Prepayment Event Amount specified by the Holder, the terms of Section 4 shall
govern the conversion of such shares, except that the notice provisions of
Section 3.2(b) shall apply in lieu of the notice requirements of Section
4.2(a)(ii) such that, upon the Maker’s giving of the notice required pursuant
to Section 3.2(b), the Maker shall be deemed to have exercised its conversion
rights pursuant to Section 4.1(b)(i) with respect to the designated portion or
all the Designated Prepayment Event Amount, as the case may be, and the Maker
shall not be required to provide any additional notice under Section 4.2(a)(ii)
in order to exercise such rights with respect to such amount.


 


4.                                       Conversion.


 


4.1                                 Right
to Convert; Right of Maker to Require Conversion.


 


(a) Voluntary
Conversion at the Option of the Holder. 
Subject to the provisions of Section 3 and this Section 4, the Holder
shall have the right, at any time and from time to time, at the Holder’s
option, to convert any or all of the principal amount of this Note (provided
that any partial conversion shall be in whole increments of $1,000) into fully
paid and non-assessable shares of Common Stock at the conversion price equal to
the Initial Conversion Price per share of Common Stock, subject to adjustment
as described in Section 4.3 (as adjusted, the “Conversion Price”).  The number of shares of Common Stock into
which this Note shall be convertible pursuant to this Section 4.1(a)
(calculated as to each conversion to the nearest 1/100th of a share) shall be
determined by dividing the principal amount being converted by the Conversion
Price in effect at the time of conversion. 
The “Initial Conversion Price” shall be Thirty United States Dollars
(U.S. $30.00) per share. 
Notwithstanding the foregoing provisions of this Section 4.1(a), if all
or any part of the principal amount of this Note is to be prepaid


 


13

















 


pursuant to Section 3, the conversion right specified in this Section
4.1(a) shall terminate as to the principal amount to be prepaid at the close of
business on the Business Day immediately preceding the Prepayment Election Date
or the Prepayment Event Date, as the case may be (unless the Maker shall
default in paying the Prepayment Election Amount or the Designated Prepayment
Event Amount, as the case may be, when due, in which case the conversion right
shall terminate at the close of business on the date such default is cured).


 


(b) Mandatory
Conversion at the Option of the Maker.


 


(i)                                     Subject
to the provisions of Section 3 and this Section 4, including Sections
4.1(b)(ii) and (iii), the Maker shall have the right to require the Holder of
this Note, at the Maker’s option, to convert any or all of the principal amount
of this Note into fully paid non-assessable shares of Common Stock at a
conversion price equal to the lower of (i) the Average Market Price for Maker’s
Conversion Option or (ii) the Conversion Price determined in accordance with
Section 4.1(a) (the lower of (i) or (ii), the “Maker Conversion Price”).  The number of shares of Common Stock into
which this Note shall be convertible pursuant to this Section 4.1(b)(i)
(calculated as to each conversion to the nearest 1/100th of a share) shall be
determined by dividing the principal amount being converted by the Maker
Conversion Price.


 


(ii)                                  Notwithstanding
anything contained herein to the contrary, in no event shall the Maker have the
right to require the Holder of this Note to convert any or all of the principal
amount of this Note into shares of Common Stock pursuant to Section
4.1(b)(i):  (A) at any time during the
period commencing on the date of the Initial Closing (as such term is defined
in the Purchase Agreement) and ending on the third anniversary thereof (the
“Restricted Conversion Period”), except to the extent permitted by the terms
and conditions of Section 4.1(b)(iii); (B) unless (1) a shelf registration
statement covering resales of the Common Stock issuable upon conversion of the
principal amount of this Note is effective and available for use in accordance
with Section 8.1 of the Purchase Agreement and is expected to remain effective
and available for use for the thirty (30) days following the Conversion Date
unless registration is no longer required pursuant to the terms and conditions
of the Purchase Agreement and (2) the Common Stock issuable upon conversion of
the principal amount of this Note is listed or admitted for trading on an
Approved Market and is expected to remain so listed or admitted for trading for
the thirty (30) days following the Conversion Date; (C) if there exists and is
continuing an Event of Default; (D) if any member of Maker’s senior management
is, to the knowledge of Maker, at the time of the giving of Maker’s Election
Notice (or, in the event of a conversion by the Maker pursuant to an election
under clause (B) of Section 3.2(a)(i), at the time of the Maker’s giving of the
notice required pursuant to Section 3.2(b)), prohibited or restricted from
trading in shares of Common Stock under Maker’s internal rules and procedures
relating to insider trading in Maker’s securities; or (E) if any Preferred
Stock issued by the Maker pursuant to the terms of the Purchase Agreement
remains outstanding and has not been converted in full into Common Stock or
redeemed by the Maker pursuant to the terms of the applicable Certificate of


 


14

















 


Designation (unless such
shares of Preferred Stock shall be converted by the Maker in full into Common
Stock, or redeemed, concurrently with the conversion of this Note).


 


(iii)                               During
the Restricted Conversion Period, the Maker shall have no right to require the
Holder to convert in any three month period any principal amount of this Note
that yields shares of Common Stock exceeding the greater of (A) one percent of
the shares of Common Stock outstanding as of the beginning of such three month
period and (B) the average weekly trading volume on the NNM for shares of
Common Stock during the four weeks ending on the first day of such three month
period, in each case as such amounts are determined pursuant to Rule 144 of the
Securities Act.


 


4.2                                 Mechanics
of Conversion.


 


(a) Procedures
to Exercise Conversion Rights.  The
Holder of this Note or the Maker, as the case may be, that elects to exercise
its conversion rights pursuant to Section 4.1 shall provide notice to the other
party as follows:


 


(i)                                     Holder’s
Notice and Surrender.  To exercise
its conversion right pursuant to Section 4.1(a), the Holder shall surrender
this Note at the office of the Maker (or any transfer agent of the Maker
previously designated by the Maker to the Holder for this purpose) with a
written notice of election to convert, completed and signed, specifying the
principal amount to be converted.


 


(ii)                                  Maker’s
Notice.  Subject to Section 3.2(e),
to exercise its conversion right pursuant to Section 4.1(b), the Maker shall
deliver written notice to the Holder (a “Maker’s Election Notice”), at least
twenty (20) days and no more than forty-five (45) days prior to the Conversion
Date (as defined below), specifying: (A) the principal amount to be converted;
(B) the Conversion Date; and (C) the place or places where this Note is to be
surrendered for issuance of certificates representing shares of Common Stock.


 


(b) Surrender and Delivery of Note.  Unless the shares issuable upon conversion
are to be issued in the same name as the name in which this Note is registered,
this Note shall be accompanied by instruments of transfer, in form reasonably
satisfactory to the Maker, duly executed by the Holder or the Holder’s duly
authorized attorney and an amount sufficient to pay any transfer or similar tax
in accordance with Section 4.2(f).  As
promptly as practicable after the surrender by the Holder of this Note as
aforesaid, the Maker shall issue and shall deliver to the Holder, or on the
Holder’s written order to the Holder’s transferee, a certificate or
certificates for the whole number of shares of Common Stock issuable upon the
conversion of this Note and a check payable in an amount corresponding to any
fractional interest in a share of Common Stock as provided in Section 4.2(g),
and, in the case of a conversion pursuant to Section 4.1(b), a certificate of
an executive officer of the Maker setting forth the Maker Conversion Price and,
in reasonable detail, the determination thereof and the number of shares of
Common Stock issued in respect of the converted principal amount of this Note.


 


15

















 


(c) Effective Date of Conversion.  Each conversion shall be deemed to have been
effected immediately prior to the close of business on (i) in the case of
conversion pursuant to Section 4.1(a), the first Business Day on which this
Note shall have been surrendered and such notice received by the Maker as
aforesaid or (ii) in the case of conversion pursuant to Section 4.1(b), the
date specified as the Conversion Date in the Maker’s notice of conversion delivered
to each holder pursuant to Section 4.2(a)(ii) (in each case, the “Conversion
Date”); provided, however, that in the event of a conversion by
the Maker under Section 4.1(b) pursuant to an election made by the Maker under
clause (B) of Section 3.2(a)(i) or clause (B) of Section 3.2(a)(ii), the
“Conversion Date” shall be the Prepayment Event Date.  At such time on the Conversion Date:  (A) the person in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder of record of the shares of Common
Stock represented thereby at such time; and (B) the principal amount of this
Note so converted shall no longer be deemed to be outstanding, and all rights
of the Holder with respect to this Note, in the event of conversion pursuant to
Section 4.1(a), surrendered for conversion and, in the event of conversion
pursuant to Section 4.1(b), covered by the Maker’s notice of conversion, shall
immediately terminate except the right to receive the Common Stock and other
amounts payable pursuant to this Section 4.


 


(d) Duly Issued Shares.  All shares of Common Stock delivered upon
conversion of this Note shall, upon delivery, be duly and validly authorized
and issued, fully paid and nonassessable, free from all preemptive rights and
free from all taxes, liens, security interests and charges (other than liens or
charges created by or imposed upon the holder or taxes in respect of any
transfer occurring contemporaneously therewith).


 


(e) Reservation
and Listing of Shares.  The Maker
shall at all times reserve and keep available, free from preemptive rights, out
of its authorized but unissued Common Stock, solely for the purpose of
effecting conversions of the principal amount of this Note, the aggregate
number of shares of Common Stock issuable upon conversion of the then unpaid
principal amount of this Note pursuant to Section 4.1(a).  The Maker shall, promptly following the
issuance of this Note, take such action to cause the shares of Common Stock
initially issuable upon conversion of this Note to be listed on the NNM as
promptly as possible but no later than the effective date of the Registration
Statement providing for the resale by the Holder of shares of Common Stock issuable
upon conversion hereof as contemplated by Section 8 of the Purchase
Agreement.  The Maker further agrees
that if it applies to have its Common Stock or other securities traded on any
other stock exchange or market it will include in such application all shares
of Common Stock to be issued upon the conversion of this Note and will take all
such other actions as may be necessary to cause such shares of Common Stock to
be so listed.  During the period
beginning on the date hereof and ending on the Final Date (as such term is
defined in the Purchase Agreement), the Maker shall take all actions necessary
to continue the listing and trading of its Common Stock on an Approved Market
and will comply in all material respects with the Maker’s reporting, filing and
other obligations under the bylaws and rules of each such exchange or market on
which shares of the Common Stock may from time to time be listed to the extent
necessary to ensure the continued eligibility for trading of shares of Common
Stock.  The Maker shall take all
commercially reasonable action as may be necessary to ensure that the shares of
Common Stock may be issued without violation of any applicable law or
regulation or of any requirement of any securities exchange or inter-dealer
quotation system on which the shares of Common Stock are listed or traded.


 


16

















 


(f) Fees
and Taxes.  Issuances of
certificates for shares of Common Stock upon conversion of the principal amount
of this Note shall be made without charge to the Holder for any issue or
transfer tax (other than taxes in respect of any transfer occurring
contemporaneously therewith or as a result of the Holder being a non-U.S.
person) or other incidental expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Maker; provided,
however, that the Maker shall not be required to pay any tax which may
be payable in respect of any transfer involved in the issuance or delivery of
shares of Common Stock in a name other than that of the Holder, and no such
issuance or delivery shall be made unless and until the person requesting such
issuance or delivery has paid to the Maker the amount of any such tax or has
established, to the satisfaction of the Maker, that such tax has been paid.


 


(g) Fractions
of Shares.  In connection with the
conversion of the principal amount of this Note, no fractions of shares of
Common Stock shall be issued, but in lieu thereof the Maker shall pay a cash
adjustment in respect of such fractional interest in an amount equal to such
fractional interest multiplied by the Market Price per share of Common Stock on
the Conversion Date.


 


(h) Requisite
Antitrust Approvals For Conversion. 
In no event shall any conversion be effected pursuant to this Section 4
unless and until the waiting period applicable to any HSR (as such term is
defined in the Purchase Agreement) filing necessary in order to effect such
conversion has terminated or expired.


 


4.3                                 Adjustments
to Conversion Price.  The Conversion
Price shall be adjusted from time to time pursuant to the following provisions.


 


(a) Stock Splits, Etc.  In case the Maker shall (i) pay a dividend
on its Common Stock in shares of Common Stock, (ii) make a distribution on its
Common Stock in shares of Common Stock, (iii) subdivide its outstanding Common
Stock into a greater number of shares, or (iv) combine its outstanding Common
Stock into a smaller number of shares, the Conversion Price in effect
immediately prior thereto shall be adjusted so that the Holder shall upon
conversion of the unpaid principal amount of this Note be entitled to receive
that number of shares of Common Stock which it would have owned had the unpaid
principal amount been converted immediately prior to the happening of such
event. An adjustment made pursuant to this subsection (a) shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of subdivision or combination.


 


(b) Rights to Purchase Common Stock.  In case the Maker shall issue rights or
warrants to all or substantially all holders of its Common Stock entitling them
(for a period commencing no earlier than the record date described below and
expiring not more than sixty (60) days after such record date) to subscribe for
or purchase shares of Common Stock (or securities convertible into Common
Stock) at a price per share (or having a conversion price per share) less than
the Current Average Market Price per share of Common Stock on the record date
for the determination of stockholders entitled to receive such rights or
warrants, the Conversion Price in effect immediately prior thereto shall be
adjusted so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to such record date


 


17

















 


by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding on such record date plus the number of shares which
the aggregate offering price of the total number of shares of Common Stock so
offered (or the aggregate conversion price of the convertible securities so
offered, which shall be determined by multiplying the number of shares of Common
Stock issuable upon conversion of such convertible securities by the conversion
price per share of Common Stock pursuant to the terms of such convertible
securities) would purchase at the Current Average Market Price per share of
Common Stock on such record date, and of which the denominator shall be the
number of shares of Common Stock outstanding on such record date plus the
number of additional shares of Common Stock offered (or into which the
convertible securities so offered are convertible).  Such adjustment shall be made successively whenever any such
rights or warrants are issued, and shall become effective immediately after
such record date. If at the end of the period during which such rights or
warrants are exercisable not all rights or warrants shall have been exercised,
the adjusted Conversion Price shall be immediately readjusted to what it would
have been based upon the number of additional shares of Common Stock actually
issued (or the number of shares of Common Stock issuable upon conversion of
convertible securities actually issued).


 


(c) Distributions to Holders of Common Stock.


 


(i)                                     In
case the Maker shall distribute to all or substantially all holders of its
Common Stock any shares of Capital Stock of the Maker (other than Common Stock),
evidences of indebtedness or other non-cash assets (including securities of any
person other than the Maker but excluding (A) dividends or distributions paid
exclusively in cash or (B) dividends or distributions referred to in Section
4.3(a)), or shall distribute to all or substantially all holders of its Common
Stock rights or warrants to subscribe for or purchase any of its securities
(excluding those rights and warrants referred to in Section 4.3(b) and also
excluding the distribution of rights to all holders of Common Stock pursuant to
the adoption of a stockholders rights plan or the detachment of such rights
under the terms of such stockholder rights plan), then in each such case the
Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the current Conversion Price by a fraction of which
the numerator shall be the Current Average Market Price per share of the Common
Stock on the record date mentioned below less the fair market value on such
record date (as reasonably determined by the Board of Directors, whose
determination shall be conclusive evidence of such fair market value and which
shall be evidenced by an Officers’ Certificate delivered to the Holder) of the
portion of the Capital Stock, evidences of indebtedness or other non-cash
assets so distributed or of such rights or warrants applicable to one share of
Common Stock (determined on the basis of the number of shares of Common Stock
outstanding on the record date), and of which the denominator shall be the
Current Average Market Price per share of the Common Stock on such record date.
Such adjustment shall be made successively whenever any such distribution is
made and shall become effective immediately after the record date for the
determination of shareholders entitled to receive such distribution.


 


18

















 


(ii)                                  In
the event the then fair market value (as so determined) of the portion of the
Capital Stock, evidences of indebtedness or other non-cash assets so
distributed or of such rights or warrants applicable to one share of Common
Stock is equal to or greater than the Current Average Market Price per share of
the Common Stock on such record date, in lieu of the foregoing adjustment,
adequate provision shall be made so that the Holder has the right to receive
upon conversion the amount of Capital Stock, evidences of indebtedness or other
non-cash assets so distributed or of such rights or warrants the Holder would
have received had the Holder converted the then-unpaid principal amount of this
Note on such record date.  In the event
that such dividend or distribution is not so paid or made, the Conversion Price
shall again be adjusted to be the Conversion Price which would then be in
effect if such dividend or distribution had not been declared. If the Board of
Directors determines the fair market value of any distribution for purposes of
this Section 4.3(c) by reference to the actual or when issued trading market
for any securities, it must in doing so consider the prices in such market over
the same period used in computing the Current Average Market Price of the
Common Stock.


 


(iii)                               In
the event that the Maker has implemented or implements a preferred shares
rights plan (“Rights Plan”), upon conversion of the unpaid principal amount of
this Note into Common Stock, to the extent that the Rights Plan has been
implemented and is still in effect upon such conversion, the Holder shall
receive, in addition to the Common Stock, the rights described therein (whether
or not the rights have separated from the Common Stock at the time of
conversion), subject to the limitations set forth in the Rights Plan. Any
distribution of rights or warrants pursuant to a Rights Plan complying with the
requirements set forth in the immediately preceding sentence of this paragraph
shall not constitute a distribution of rights or warrants pursuant to this
Section 4.3(c).


 


(iv)                              Rights
or warrants distributed by the Maker to all holders of Common Stock entitling
the holders thereof to subscribe for or purchase shares of the Maker’s Capital
Stock (either initially or under certain circumstances), which rights or
warrants, until the occurrence of a specified event or events (“Trigger
Event”): (A) are deemed to be transferred with such shares of Common Stock; (B)
are not exercisable; and (C) are also issued in respect of future issuances of
Common Stock, shall be deemed not to have been distributed for purposes of this
Section 4.3 (and no adjustment to the Conversion Price under this Section 4.3
will be required) until the occurrence of the earliest Trigger Event, whereupon
such rights and warrants shall be deemed to have been distributed and an
appropriate adjustment (if any is required) to the Conversion Price shall be
made under this Section 4.3(c). If any such right or warrant, including any
such existing rights or warrants distributed prior to the date of this Note,
are subject to events upon the occurrence of which such rights or warrants
become exercisable to purchase different securities, evidences of indebtedness
or other assets, then the date of the occurrence of any and each such event
shall be deemed to be the date of distribution and record date with respect to
new rights or warrants with such


 


19

















 


rights (and a termination
or expiration of the existing rights or warrants without exercise by any of the
holders thereof). In addition, in the event of any distribution (or deemed
distribution) of rights or warrants, or any Trigger Event or other event (of
the type described in the preceding sentence) with respect thereto that was
counted for purposes of calculating a distribution amount for which an
adjustment to the Conversion Price under this Section 4.3 was made, (1) in the
case of any such rights or warrants which shall all have been redeemed or
repurchased without exercise by any holders thereof, the Conversion Price shall
be readjusted upon such final redemption or repurchase to give effect to such
distribution or Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase price received by
a holder or holders of Common Stock with respect to such rights or warrants
(assuming such holder had retained such rights or warrants), made to all
holders of Common Stock as of the date of such redemption or repurchase, and
(2) in the case of such rights or warrants which shall have expired or been
terminated without exercise by any holders thereof, the Conversion Price shall
be readjusted as if such rights and warrants had not been issued.


 


(v)                                 In
case the Maker shall, by dividend or otherwise, at any time distribute (a
“Triggering Distribution”) to all or substantially all holders of its Common
Stock cash in an aggregate amount that, together with the aggregate amount of
(A) any cash and the fair market value (as reasonably determined by the Board
of Directors, whose determination shall be conclusive evidence thereof and
which shall be evidenced by an Officers’ Certificate delivered to the Holder)
of any other consideration payable in respect of any tender offer by the Maker
or a Subsidiary of the Maker for Common Stock consummated within the twelve
(12) months preceding the date of payment of the Triggering Distribution and in
respect of which no Conversion Price adjustment pursuant to this Section 4.3
has been made and (B) all other cash distributions to all or substantially all
holders of its Common Stock made within the twelve (12) months preceding the
date of payment of the Triggering Distribution and in respect of which no
Conversion Price adjustment pursuant to this Section 4.3 has been made, exceeds
an amount equal to ten percent (10%) of the product of the Current Average
Market Price per share of Common Stock on the Business Day (the “Determination
Date”) immediately preceding the day on which such Triggering Distribution is
declared by the Maker multiplied by the number of shares of Common Stock
outstanding on the Determination Date (excluding shares held in the treasury of
the Maker), the Conversion Price shall be reduced so that the same shall equal
the price determined by multiplying such Conversion Price in effect immediately
prior to the Determination Date by a fraction of which the numerator shall be
the Current Average Market Price per share of the Common Stock on the
Determination Date less the sum of the aggregate amount of cash and the
aggregate fair market value (determined as aforesaid in this Section 4.3(c)) of
any such other consideration so distributed, paid or payable within such twelve
(12) months (including the Triggering Distribution) applicable to one share of
Common Stock (determined on the basis of the number of shares of Common Stock
outstanding on the Determination Date) and the denominator shall be such Current
Average Market


 


20

















 


Price per share of the
Common Stock on the Determination Date, such reduction to become effective
immediately prior to the opening of business on the day following the date on
which the Triggering Distribution is paid.


 


(vi)                              In
case any tender offer made by the Maker or any of its Subsidiaries for Common
Stock shall expire and such tender offer (as amended upon the expiration
thereof) shall involve the payment of aggregate consideration in an amount
(determined as the sum of the aggregate amount of cash consideration and the
aggregate fair market value (as reasonably determined by the Board of
Directors, whose determination shall be conclusive evidence thereof and which
shall be evidenced by an Officers’ Certificate delivered to the Holder) of any
other consideration) that, together with the aggregate amount of (A) any cash
and the fair market value (as reasonably determined by the Board of Directors,
whose determination shall be conclusive evidence thereof and which shall be
evidenced by an Officers’ Certificate delivered to the Holder) of any other
consideration payable in respect of any other tender offers by the Maker or any
Subsidiary of the Maker for Common Stock consummated within the twelve (12)
months preceding the date of the Expiration Date (as defined below) and in
respect of which no Conversion Price adjustment pursuant to this Section 4.3
has been made and (B) all cash distributions to all or substantially all
holders of its Common Stock made within the twelve (12) months preceding the
Expiration Date and in respect of which no Conversion Price adjustment pursuant
to this Section 4.3 has been made, exceeds an amount equal to ten percent (10%)
of the product of the Current Average Market Price per share of Common Stock as
of the last date (the “Expiration Date”) tenders could have been made pursuant
to such tender offer (as it may be amended) (the last time at which such
tenders could have been made on the Expiration Date is hereinafter sometimes
called the “Expiration Time”) multiplied by the number of shares of Common
Stock outstanding (including tendered shares but excluding any shares held in
the treasury of the Maker) at the Expiration Time, then, immediately prior to
the opening of business on the day after the Expiration Date, the Conversion
Price shall be reduced so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the close of
business on the Expiration Date by a fraction of which the numerator shall be
the product of the number of shares of Common Stock outstanding (including
tendered shares but excluding any shares held in the treasury of the Maker) at
the Expiration Time multiplied by the Current Average Market Price per share of
the Common Stock on the Trading Day next succeeding the Expiration Date and the
denominator shall be the sum of (x) the aggregate consideration (determined as
aforesaid) payable to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender offer) of all shares validly tendered and
not withdrawn as of the Expiration Time (the shares deemed so accepted, up to
any such maximum, being referred to as the “Purchased Shares”) and (y) the
product of the number of shares of Common Stock outstanding (less any Purchased
Shares and excluding any shares held in the treasury of the Maker) at the
Expiration Time and the Current Average Market Price per share of Common Stock
on the Trading Day next succeeding the Expiration Date, such reduction to
become effective


 


21

















 


immediately prior to the
opening of business on the day following the Expiration Date. In the event that
the Maker is obligated to purchase shares pursuant to any such tender offer,
but the Maker is permanently prevented by applicable law from effecting any or
all such purchases or any or all such purchases are rescinded, the Conversion
Price shall again be adjusted to be the Conversion Price which would have been
in effect based upon the number of shares actually purchased. If the
application of this Section 4.3(c)(vi) to any tender offer would result in an
increase in the Conversion Price, no adjustment shall be made for such tender
offer under this Section 4.3(c)(vi).


 


(vii)                           For
purposes of this Section 4.3(c), the term “tender offer” shall mean and include
both tender offers and exchange offers, all references to “purchases” of shares
in tender offers (and all similar references) shall mean and include both the
purchase of shares in tender offers and the acquisition of shares pursuant to
exchange offers, and all references to “tendered shares” (and all similar
references) shall mean and include shares tendered in both tender offers and
exchange offers.


 


(d) Deferral. 
In any case in which this Section 4.3 shall require that an adjustment
be made following a record date or a Determination Date or Expiration Date, as
the case may be, established for purposes of this Section 4.3, the Maker may
elect to defer (but only until five Business Days following the giving by the
Maker to the Holder the certificate described in Section 4.3(g)) issuing to the
Holder, with respect to any principal amount converted after such record date
or Determination Date or Expiration Date, the shares of Common Stock and other
Capital Stock of the Maker issuable upon such conversion over and above the
shares of Common Stock and other Capital Stock of the Maker issuable upon such
conversion only on the basis of the Conversion Price prior to adjustment; and,
in lieu of the shares the issuance of which is so deferred, the Maker shall
issue or cause its transfer agents to issue due bills or other appropriate
evidence prepared by the Maker of the right to receive such shares. If any
distribution in respect of which an adjustment to the Conversion Price is
required to be made as of the record date or Determination Date or Expiration
Date therefor is not thereafter made or paid by the Maker for any reason, the
Conversion Price shall be readjusted to the Conversion Price which would then
be in effect if such record date had not been fixed or such effective date or
Determination Date or Expiration Date had not occurred.


 


(e) No Adjustment.  No adjustment in the Conversion Price shall be required unless
the adjustment would require an increase or decrease of at least one half of
one percent (.5%) in the Conversion Price as last adjusted; provided, however,
that any adjustments which by reason of this Section 4.3(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 4 shall be made to the nearest
cent or to the nearest one-hundredth (1/100th) of a share, as the case may
be.  No adjustment need be made for
issuances of Common Stock pursuant to a Maker plan for reinvestment of
dividends or interest or for a change in the par value or a change to no par
value of the Common Stock.  To the
extent that this Note becomes convertible into the right to receive cash, no
adjustment need be made thereafter as to the cash.


 


22

















 


(f) Adjustment for Tax Purposes.  The Maker shall be entitled to make such
reductions in the Conversion Price, in addition to those required by the preceding
sections of this Section 4.3, as it in its discretion shall determine to be
advisable in order that any stock dividends, subdivisions of shares,
distributions of rights to purchase stock or securities or distributions of
securities convertible into or exchangeable for stock hereafter made by the
Maker to its stockholders shall not be taxable.


 


(g) Notice of Adjustment.  Whenever the Conversion Price or conversion
privilege is adjusted, the Maker shall promptly notify the Holder of the
adjustment and provide the Holder with an Officers’ Certificate briefly stating
the facts requiring the adjustment and the manner of computing it.


 


(h) Notice of Certain Transactions.  In the event that:


 


(i)                                     the Maker takes
any action which would require an adjustment in the Conversion Price;


 


(ii)                                  the
Maker consolidates or merges with, or transfers all or substantially all of its
property and assets to, another corporation and shareholders of the Maker must
approve the transaction; or


 


(iii)                               there
is a dissolution or liquidation of the Maker,


 


then
the Maker shall notify the Holder of the proposed transaction and the related
record or effective date, as the case may be. 
The Maker shall give the notice at least ten (10) days before such date.  Failure to give such notice or any defect
therein shall not affect the validity of any transaction referred to in clause
(i), (ii) or (iii) of this Section 4.3(h).


 


(i) Provisions to be Given Effect from Initial
Closing Date.  Notwithstanding
anything contained in this Note to the contrary, the provisions of this Section
4.3 shall be given effect as though this Note had been issued by the Maker to
the Holder on the Initial Closing Date (as such term is defined in the Purchase
Agreement), such that upon issue of this Note the Conversion Price shall,
immediately upon issue and without any further action by the Holder, be
adjusted to take account of all events occurring from the Initial Closing Date
until the date of issue of this Note as though the entire principal amount of
this Note had been outstanding continuously during such period.


 


4.4                                 Effect
of Reclassification, Consolidation, Merger or Sale on Conversion Privilege.  If any of the following shall occur, namely:


 


(a) any reclassification or change of shares of Common
Stock issuable upon conversion of this Note (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination, or any other change for which an
adjustment is provided in Section 4.3);


 


(b) any consolidation or merger or combination to
which the Maker is a party other than a merger in which the Maker is the
continuing corporation and which does not result in any reclassification of, or
change (other than in par value, or from par value to no par value, or


 


23

















 


from no par value to par value, or as a result of a subdivision or
combination) in, outstanding shares of Common Stock; or


 


(c) any sale or conveyance as an entirety or
substantially as an entirety of the property and assets of the Maker, directly
or indirectly, to any person;


 


then
the Maker, or such successor, purchasing or transferee corporation, as the case
may be, shall, as a condition precedent to such reclassification, change, combination,
consolidation, merger, sale or conveyance, execute and deliver to the Holder a
supplemental instrument providing that (i) the Holder shall have the right to
convert this Note into the kind and amount of shares of stock and other
securities and property (including cash) receivable upon such reclassification,
change, combination, consolidation, merger, sale or conveyance by a holder of
the number of shares of Common Stock deliverable upon conversion of this Note,
at a conversion price equal to the Conversion Price specified in Section
4.1(a), immediately prior to such reclassification, change, combination,
consolidation, merger, sale or conveyance, and (ii) in the event of any
exercise by the Maker of its right to convert any principal amount of this Note
pursuant to Section 4.1(b), such principal amount shall be convertible into the
kind and amount of shares of stock and other securities and property (including
cash) receivable upon such reclassification, change, combination,
consolidation, merger, sale or conveyance by a holder of the number of shares
of Common Stock deliverable upon conversion of such principal amount, at a
conversion price equal to the Maker Conversion Price determined pursuant to
Section 4.1(b), immediately prior to such reclassification, change,
combination, consolidation, merger, sale or conveyance.  Any such supplemental instrument shall
provide for adjustments of the Conversion Price which shall be as nearly
equivalent as may be practicable to the adjustments of the Conversion Price
provided for in Section 4.3. If, in the case of any such consolidation, merger,
combination, sale or conveyance, the stock or other securities and property
(including cash) receivable thereupon by a holder of Common Stock include
shares of stock or other securities and property of a person other than the
successor, purchasing or transferee corporation, as the case may be, in such
consolidation, merger, combination, sale or conveyance, then such supplemental
instrument shall also be executed by such other person and shall contain such
additional provisions to protect the interests of the Holder as the Board of
Directors shall reasonably consider necessary by reason of the foregoing. The
provisions of this Section 4.4 shall similarly apply to successive reclassifications,
changes, combinations, consolidations, mergers, sales or conveyances.  In the event the Maker shall execute a
supplemental instrument pursuant to this Section 4.4, the Maker shall promptly
file with the Holder (A) an Officers’ Certificate briefly stating the reasons
therefor, the kind or amount of shares of stock or other securities or property
(including cash) receivable by Holder upon the conversion of this Note after
any such reclassification, change, combination, consolidation, merger, sale or
conveyance, any adjustment to be made with respect thereto and that all
conditions precedent have been complied with and (B) an Opinion of Counsel that
all conditions precedent have been complied with.  Notwithstanding anything contained in this Note to the contrary,
the provisions of this Section 4.4 shall be given effect as though this Note
had been issued by the Maker to the Holder on the Initial Closing Date (as such
term is defined in the Purchase Agreement), such that upon issue of this Note
the Holder shall, immediately upon issue and without any further action by the
Holder, be entitled to the benefit of all provisions of this Section 4.4 with
respect to any and all events occurring from the Initial Closing Date until the
date of issue of this Note as though the entire principal amount had been
outstanding continuously during such period.


 


24

















 


4.5                                 Voluntary
Reduction.  The Maker from time to
time may reduce the Conversion Price by any amount for any period of time if
the period is at least twenty (20) days and if the reduction is irrevocable
during the period if the Board of Directors determines that such reduction
would be in the best interest of the Maker or to avoid or diminish income tax to
holders of shares of the Common Stock in connection with a dividend or
distribution of stock or similar event, and the Maker provides fifteen (15)
days’ prior notice of any reduction in the Conversion Price; provided, however,
that in no event may the Maker reduce the Conversion Price to be less than the
par value of a share of Common Stock.


 


4.6                                 Miscellaneous.


 


(a) Except
as otherwise explicitly contemplated by this Section 4, no adjustment in
respect of any dividends or other payments or distributions made to Holder in
respect of this Note or securities issuable upon the conversion of this Note
will be made during the term of this Note or upon the conversion of this
Note.  The provisions of this clause (a)
are without prejudice to the right of the Holder to receive interest at the
Default Rate in the event that the principal sum of this Note is not paid in
full by the Maturity Date.


 


(b) If
any event occurs of the type contemplated by the provisions of Section 4.3,
4.4, or 4.5 but not expressly provided for by such provisions (including the
granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Board of Directors shall make any appropriate
adjustment in the Conversion Price necessary to protect the rights of the
Holder as and to the extent contemplated by Sections 4.3, 4.4 and 4.5; provided,
that no such adjustment shall increase the Conversion Price as otherwise
determined pursuant to this Section 4 or decrease the number of shares of
Common Stock issuable upon any conversion of this Note.


 


(c) If
the Maker shall enter into any transaction for the purpose of avoiding the
application of the provisions of Sections 4.3, 4.4 or 4.5 or this Section 4.6,
the benefits of such provisions shall nevertheless apply and be preserved.


 


(d) Any
dividend or distribution that was paid or distributed to, or otherwise made
available to or set aside for, the holders of this Note (pursuant to Section
4.3 or otherwise) shall not also result in an adjustment to the Conversion Price
pursuant to Section 4.


 


5.                                       Subordination.


 


5.1                                 Agreement
of Subordination.


 


(a) Note Subject to Section 5.  The Maker covenants and agrees, and the
Holder by its acceptance of this Note likewise covenants and agrees, that this
Note shall be issued subject to the provisions of this Article 5; and each
transferee of this Note accepts and agrees to be bound by such provisions.


 


(b) Subordination.  The payment of the principal of, premium, if any, and interest on
this Note (including any Prepayment Election Amount or Designated Prepayment
Event Amount) shall, to the extent and in the manner hereinafter set forth, be
subordinated and subject in right of payment to the prior payment in full in
cash or payment satisfactory to the holders of


 


25

















 


Senior Indebtedness of all Senior Indebtedness, whether outstanding at
the date of this Note or thereafter incurred.


 


(c) No Effect on Default.  No provision of this Article 5 shall prevent
the occurrence of any default or Event of Default hereunder.


 


5.2                                 Payments
to Holder.


 


(a) Payment Blockage.  No payment shall be made with respect to the principal of, or
premium, if any, or interest on this Note (including any Prepayment Election
Amount or Designated Prepayment Event Amount), if:


 


(i)                                     a
default in the payment of principal, premium, interest, rent or other
obligations due on any Designated Senior Indebtedness occurs and is continuing
(or, in the case of Designated Senior Indebtedness for which there is a period
of grace, in the event of such a default that continues beyond the period of
grace, if any, specified in the instrument or lease evidencing such Designated
Senior Indebtedness), unless and until such default shall have been cured or
waived or shall have ceased to exist; or


 


(ii)                                  a
default, other than a payment default, on Designated Senior Indebtedness occurs
and is continuing that then permits holders of such Designated Senior
Indebtedness to accelerate its maturity and the Holder receives a notice of the
default (a “Payment Blockage Notice”) from a Representative or holder of
Designated Senior Indebtedness or the Maker.


 


(b) Limit on Payment Blockage.  If the Holder receives any Payment Blockage
Notice pursuant to clause (a)(ii) above, no subsequent Payment Blockage Notice
shall be effective for purposes of this Section unless and until (i) at least
three hundred sixty-five (365) days shall have elapsed since the initial
effectiveness of the immediately prior Payment Blockage Notice; and (ii) all
scheduled payments on this Note that have come due have been paid in full in
cash. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Holder (unless such default was
waived, cured or otherwise ceased to exist and thereafter subsequently
reoccurred) shall be, or be made, the basis for a subsequent Payment Blockage
Notice.


 


(c) Resumption of Payments.  The Maker may and shall resume payments on
and distributions in respect of this Note upon the earlier of:


 


(i)                                     in
the case of a default referred to in clause (a)(i) above, the date upon which
the default is cured or waived or ceases to exist, or


 


(ii)                                  in
the case of a default referred to in clause (a)(ii) above, the earlier of the
date on which such default is cured or waived or ceases to exist or one hundred
seventy-nine (179) days pass after the date on which the applicable Payment
Blockage Notice is received, if the maturity of such Designated Senior
Indebtedness has not been accelerated, unless this Section 5 otherwise
prohibits the payment or distribution at the time of such payment or
distribution.


 


26

















 


(d) Payments Upon Dissolution.  Upon any payment by the Maker, or
distribution of assets of the Maker of any kind or character, whether in cash,
property or securities, to creditors upon any dissolution or winding-up or
liquidation or reorganization of the Maker (whether voluntary or involuntary)
or in bankruptcy, insolvency, receivership or similar proceedings, all amounts
due or to become due upon all Senior Indebtedness shall first be paid in full
in cash, or other payments satisfactory to the holders of Senior Indebtedness
before any payment is made on account of the principal of, premium, if any, or
interest on this Note; and upon any such dissolution or winding-up or
liquidation or reorganization of the Maker or bankruptcy, insolvency,
receivership or other proceeding, any payment by the Maker, or distribution of
assets of the Maker of any kind or character, whether in cash, property or
securities, to which the Holder would be entitled, except for the provisions of
this Section 5, shall (except as aforesaid) be paid by the Maker or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making
such payment or distribution, or by the Holder if received by it, directly to
the holders of Senior Indebtedness (pro rata to such holders on the basis of
the respective amounts of Senior Indebtedness held by such holders, or as
otherwise required by law or a court order) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Indebtedness may have been issued,
as their respective interests may appear, to the extent necessary to pay all
Senior Indebtedness in full in cash, or other payment satisfactory to the
holders of Senior Indebtedness, after giving effect to any concurrent payment
or distribution to or for the holders of Senior Indebtedness, before any payment
or distribution is made to the Holder in respect of this Note.


 


(e) Certain Distributions Excluded.  For purposes of this Section 5, the words,
“cash, property or securities” shall not be deemed to include shares of stock
of the Maker as reorganized or readjusted, or securities of the Maker or any
other corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this
Section 5 with respect to this Note to the payment of all Senior Indebtedness
which may at the time be outstanding; provided that (i) the Senior Indebtedness
is assumed by the new corporation, if any, resulting from any reorganization or
readjustment, and (ii) the rights of the holders of Senior Indebtedness (other
than leases which are not assumed by the Maker or the new corporation, as the
case may be) are not, without the consent of such holders, altered by such
reorganization or readjustment. The consolidation of the Maker with, or the
merger of the Maker into, another corporation or the liquidation or dissolution
of the Maker following the conveyance, transfer or lease of its property as an
entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided for in Section 6 shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section 5.2 if such other corporation shall, as a part of such consolidation,
merger, conveyance, transfer or lease, comply with the conditions stated in
Section 6.


 


(f) Acceleration.  In the event of the acceleration of this Note because of an Event
of Default, no payment or distribution shall be made to the Holder in respect
of the principal of, premium, if any, or interest on this Note by the Maker (including
any Prepayment Election Amount or Designated Prepayment Event Amount) until all
Senior Indebtedness has been paid in full in cash or other payment satisfactory
to the holders of Senior Indebtedness or such acceleration is rescinded in
accordance with the terms of this Note. If payment of this Note is accelerated
because of an Event of Default, the Maker shall promptly notify holders of
Senior


 


27

















 


Indebtedness of such acceleration. 
In the event that, notwithstanding the foregoing provisions, any payment
or distribution of assets of the Maker of any kind or character, whether in
cash, property or securities (including by way of setoff or otherwise),
prohibited by the foregoing, shall be received by the Holder before all Senior
Indebtedness is paid in full, in cash or other payment satisfactory to the
holders of Senior Indebtedness, or provision is made for such payment thereof
in accordance with its terms in cash or other payment satisfactory to the holders
of Senior Indebtedness, such payment or distribution shall be held in trust for
the benefit of and shall be paid over or delivered to the holders of Senior
Indebtedness or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing any
Senior Indebtedness may have been issued, as their respective interests may
appear, as calculated by the Maker, for application to the payment of all
Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior
Indebtedness in full, in cash or other payment satisfactory to the holders of
Senior Indebtedness, after giving effect to any concurrent payment or
distribution to or for the holders of such Senior Indebtedness.


 


5.3                                 Subrogation.  Subject to the payment in full, in cash or
other payment satisfactory to the holders of Senior Indebtedness, of all Senior
Indebtedness, the rights of the Holder under this Note shall be subrogated to
the extent of the payments or distributions made to the holders of such Senior
Indebtedness pursuant to the provisions of this Section 5 (equally and ratably
with the holders of all indebtedness of the Maker which by its express terms is
subordinated to other indebtedness of the Maker to substantially the same
extent as this Note is subordinated and is entitled to like rights of
subrogation) to the rights of the holders of Senior Indebtedness to receive
payments or distributions of cash, property or securities of the Maker
applicable to the Senior Indebtedness until the principal, premium, if any, and
interest on this Note shall be paid in full in cash or other payment
satisfactory to the holders of Senior Indebtedness; and, for the purposes of
such subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the Holder would be
entitled except for the provisions of this Section 5, and no payment over
pursuant to the provisions of this Section 5, to or for the benefit of the
holders of Senior Indebtedness by the Holder, shall, as between the Maker, its
creditors other than holders of Senior Indebtedness, and the Holder, be deemed
to be a payment by the Maker to or on account of the Senior Indebtedness; and
no payments or distributions of cash, property or securities to or for the
benefit of the Holder pursuant to the subrogation provisions of this Section 5,
which would otherwise have been paid to the holders of Senior Indebtedness
shall be deemed to be a payment by the Maker to or for the account of this
Note. It is understood that the provisions of this Section 5 are and are
intended solely for the purposes of defining the relative rights of the Holder,
on the one hand, and the holders of the Senior Indebtedness, on the other hand.


 


5.4                                 No
Impairment of Obligations.  Nothing
contained in this Section 5 or elsewhere in this Note is intended to or shall
impair, as among the Maker, its creditors other than the holders of Senior
Indebtedness, and the Holder, the obligation of the Maker, which is absolute
and unconditional, to pay to the Holder the principal of (and premium, if any)
and interest on this Note as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holder and creditors of the Maker other than the holders of the
Senior Indebtedness, nor shall anything herein or therein prevent the Holder
from exercising all remedies otherwise permitted by applicable law upon default
under this Note, subject to the rights, if any, under this Section 5 of the
holders of Senior


 


28

















 


Indebtedness in respect of cash, property or
securities of the Maker received upon the exercise of any such remedy.


 


5.5                                 Reliance
on Order of Court.  Upon any payment
or distribution of assets of the Maker referred to in this Section 5, the
Holder shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which such bankruptcy, dissolution, winding-up,
liquidation or reorganization proceedings are pending, or a certificate of the
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the Holder, for the purpose
of ascertaining the persons entitled to participate in such distribution, the
holders of the Senior Indebtedness and other indebtedness of the Maker, the
amount thereof or payable thereon and all other facts pertinent thereto or to
this Section 5.


 


5.6                                 No
Impairment of Subordination.  No
right of any present or future holder of any Senior Indebtedness to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Maker or by any act or
failure to act, in good faith, by any such holder, or by any noncompliance by
the Maker with the terms, provisions and covenants of this Note, regardless of
any knowledge thereof which any such holder may have or otherwise be charged
with.


 


5.7                                 Payments
and Deliveries Upon Conversion.  For
the purposes of this Section 5 only, (a) the issuance and delivery of junior
securities upon conversion of this Note in accordance with Section 4 shall not
be deemed to constitute a payment or distribution on account of the principal
of (or premium, if any) or interest on this Note, and (b) the payment, issuance
or delivery of cash (except in satisfaction of fractional shares pursuant to
Section 4.2(g)), property or securities (other than junior securities) upon
conversion of this Note shall be deemed to constitute payment on account of the
principal of this Note. For the purposes of this Section 5.7, the term “junior
securities” means (i) shares of any stock of any class of the Maker, or (ii)
securities of the Maker which are subordinated in right of payment to all
Senior Indebtedness which may be outstanding at the time of issuance or
delivery of such securities to substantially the same extent as, or to a
greater extent than, the Securities are so subordinated as provided in this Section
5. Nothing contained in this Section 5 or elsewhere in this Note is intended to
or shall impair, as among the Maker, its creditors other than holders of Senior
Indebtedness and the Holder, the right, which is absolute and unconditional, of
the Holder to convert this Note in accordance with Section 4.


 


5.8                                 Senior
Indebtedness Entitled to Rely.  The
holders of Senior Indebtedness (including Designated Senior Indebtedness) shall
have the right to rely upon this Section 5, and no amendment or modification of
the provisions contained herein shall diminish the rights of such holders
unless such holders shall have agreed in writing thereto.


 


5.9                                 Holder’s
Agreement to Effectuate Subordination of Note.  The Holder by its
acceptance of this Note agrees to take such actions as may be necessary or
appropriate to effectuate, as between the holders of Senior Indebtedness and
the Holder, the subordination provided in this Section 5.


 


29

















 


6.                                       Consolidation,
Merger, Conveyance, Transfer or Lease.


 


6.1                                 Maker
May Consolidate, Etc., Only On Certain Terms.  The Maker shall not consolidate with or merge into any other
Person (in a transaction in which the Maker is not the surviving corporation)
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, unless:


 


(a) in case the Maker shall consolidate with or merge
into another Person (in a transaction in which the Maker is not the surviving
corporation) or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation or into which the Maker is merged or the Person which acquires by
conveyance or transfer, or which leases, the properties and assets of the Maker
substantially as an entirety shall be a corporation organized and validly
existing under the laws of the United States of America, any state thereof or
the District of Columbia and shall expressly assume, by an instrument
supplemental hereto, executed and delivered to the Holder, in form reasonably
satisfactory to the Holder, the due and punctual payment of the principal of
and any premium and interest on this Note and the performance or observance of
every covenant of this Note on the part of the Maker to be performed or
observed and the conversion rights shall be provided for in accordance with
Section 4, by supplemental instrument satisfactory in form to the Holder,
executed and delivered to the Holder by the Person (if other than the Maker)
formed by such consolidation or into which the Maker shall have been merged or
by the Person which shall have acquired the Maker’s assets;


 


(b) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing; and


 


(c) the Maker has delivered to the Holder an Officers’
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and, if a supplement instrument is
required in connection with such transaction, such supplemental instrument
comply with this Section 6 and that all conditions precedent herein provided
for relating to such transaction have been complied with.


 


6.2                                 Successor
Substituted.  Upon any consolidation
of the Maker with, or merger of the Maker into, any Person or any conveyance,
transfer or lease of the properties and assets of the Maker substantially as an
entirety in accordance with Section 6.1, the successor Person formed by such
consolidation or into which the Maker is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Maker under this Note with the same
effect as if such successor Person had been named as the Maker herein, and
thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under this Note.


 


7.                                       Default
and Remedies.


 


7.1                                 Events
of Default.  Subject to Section 7.2,
an “Event of Default” shall occur if:


 


30

















 


(a) the Maker (i) defaults in the payment of any
principal of (including any premium, if any, on) (A) this Note when the same
becomes due and payable (whether at maturity, on a Prepayment Election Date, on
a Prepayment Event Date, or otherwise), whether or not such payment shall be
prohibited by the provisions of Section 5, or (B) any Promissory Note (as such
term is defined in the Purchase Agreement) held by the Holder or any of its
Affiliates; or (ii) fails to redeem, and to pay to any holder of Preferred
Stock the Redemption Price (as such term is defined in the applicable
Certificate of Designation) for, each share of Preferred Stock that the Maker is
required to redeem from such holder on the date specified for such redemption
under the terms of the applicable Certificate of Designation;


 


(b) the Maker fails to comply with any of its
obligations under (i) this Note, (ii) any Promissory Note held by the Holder or
any of its Affiliates or (iii) Section 5.6(a) or Section 5.8 of the Purchase
Agreement, in each case other than any obligation specified in Section 7.1(a);


 


(c) the Maker fails to provide notice of a Prepayment
Event to the Holder when required by Section 3.2(b) for a period of thirty (30)
days after notice of failure to do so;


 


(d) any indebtedness under any bond, debenture, note
or other evidence of indebtedness for money borrowed by the Maker or any
Significant Subsidiary (all or substantially all of the outstanding voting
securities of which are owned, directly or indirectly, by the Maker) or under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any indebtedness for money borrowed by
the Maker or any Significant Subsidiary (all or substantially all of the
outstanding voting securities of which are owned, directly or indirectly, by
the Maker) (excluding, however, this Note and any Subordinated Promissory Note)
(an “Instrument”) with an aggregate outstanding principal amount then
outstanding in excess of Twenty-Five Million United States Dollars (U.S.
$25,000,000), whether such indebtedness now exists or shall hereafter be
created, is not paid at final maturity of the Instrument (either at its stated
maturity or upon acceleration thereof), and such indebtedness is not
discharged, or such acceleration is not rescinded or annulled, within a period
of thirty (30) days after there shall have been given to the Maker by the
Holder a written notice specifying such default and requiring the Maker to
cause such indebtedness to be discharged or cause such default to be cured or
waived or such acceleration to be rescinded or annulled and stating that such
notice is a “Notice of Default” hereunder;


 


(e) the Maker shall default in respect of any of its
obligations under the Preferred Stock other than any obligation specified in
Section 7.1(a) and the default continues for the period and after the notice
specified in Section 7.2;


 


(f) this Note, the Purchase Agreement, or any other
agreement or instrument contemplated by the Purchase Agreement shall be
asserted by the Maker not to be a legal, valid and binding obligation of the
Maker, enforceable against the Maker in accordance with its terms;


 


(g) the Maker or any Significant Subsidiary, pursuant
to or within the meaning of any Bankruptcy Law:


 


(i)                                     commences
a voluntary case or proceeding;


 


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(ii)                                  consents
to the entry of an order for relief against it in an involuntary case or
proceeding;


 


(iii)                               consents
to the appointment of a Custodian of it or for all or substantially all of its
property; or


 


(iv)                              makes
a general assignment for the benefit of its creditors; or


 


(h) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that:


 


(i)                                     is
for relief against the Maker or any Significant Subsidiary in an involuntary
case or proceeding;


 


(ii)                                  appoints
a Custodian of the Maker or any Significant Subsidiary or for all or substantially
all of the property of the Maker or any Significant Subsidiary; or


 


(iii)                               orders
the liquidation of the Maker or any Significant Subsidiary;


 


and in
each case the order or decree remains unstayed and in effect for sixty (60)
consecutive days.


 


The term “Bankruptcy Law” means Title 11 of the United
States Code (or any successor thereto) or any similar federal or state law for
the relief of debtors. The term “Custodian” means any receiver, holder,
assignee, liquidator, sequestrator or similar official under any Bankruptcy
Law.


 


7.2                                 Notice
and Cure.


 


(a) A default under Section 7.1(b) or (e) above is not an Event of
Default until the Holder notifies the Maker in writing of the default and the
Maker does not cure the default within sixty (60) days after receipt of such
notice.  The notice given pursuant to
this Section 7.2 must specify the default, demand that it be remedied and state
that the notice is a “Notice Of Default.”


 


(b) When any Event of Default under Section 7.1 is
cured, it ceases.


 


(c) The Maker shall immediately notify Holder upon
becoming aware of the existence of any condition or event which constitutes a
default or an Event of Default hereunder by written notice which specifies the
nature and period of existence of such default or Event of Default and what
action the Maker is taking or proposes to take with respect thereto.  The Holder shall not be charged with
knowledge of any Event of Default unless written notice thereof shall have been
given to the Holder or any agent of the Holder.


 


7.3                                 Acceleration.  If an Event of Default (other than an Event
of Default specified in Section 7.1(g) or (h)) occurs and is continuing, the
Holder may, by notice to the Maker, declare all unpaid principal to the date of
acceleration on this Note then outstanding (if


 


32

















 


not then due and payable), together with unpaid
interest, if any, to the date of acceleration, to be due and payable upon any
such declaration, and the same shall become and be immediately due and
payable.  If an Event of Default
specified in Section 7.1(g) or (h) occurs, all unpaid principal of this Note
then outstanding, together with unpaid interest, shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Holder.  The Holder may at any time,
by notice to the Maker, rescind an acceleration and its consequences.  No such rescission shall affect any subsequent
default or impair any right consequent thereto.


 


7.4                                 Other
Remedies.


 


(a) Available Remedies.  If an Event of Default occurs and is
continuing, the Holder may, but shall not be obligated to, pursue any available
remedy by proceeding at law or in equity to collect the payment of the
principal of or interest on this Note or to enforce the performance of any
provision of the Purchase Agreement or this Note.


 


(b) Remedies Not Exclusive.  The Holder may maintain a proceeding even if
it does not possess this Note or does not produce it in the proceeding.  A delay or omission by the Holder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default.  No remedy is
exclusive of any other remedy.  All
available remedies are cumulative to the extent permitted by law.


 


7.5                                 Collection
Suit By Holder.  If an Event of
Default in the payment of principal specified in Section 7.1(a) occurs and is
continuing or if any interest due and payable hereunder is not paid when due
and thereafter remains unpaid, the Holder may recover judgment against the
Maker for the whole amount of principal and accrued interest remaining unpaid,
together with, to the extent that payment of such interest is lawful, interest
on overdue principal and on overdue installments of interest, in each case at
the Default Rate and such further amount as shall be sufficient to cover the
costs and expenses of collection, including reasonable attorneys’ fees and
disbursements.


 


8.                                       Voting
Rights.  The Holder of this Note
shall have no voting rights with respect to Maker.


 


9.                                       Aggregate
Ownership Limitation.  If upon any
proposed conversion of this Note pursuant to Section 4.1, the Holder would
be entitled to receive Common Stock that, taken together with all other shares
of Common Stock Beneficially Owned by such holder and its Affiliates, would
result in the Holder and its Affiliates acquiring Beneficial Ownership of more
than 19.9% of the Common Stock then outstanding immediately following such
conversion (the “Ownership Threshold”), then:


 


(a) the Holder shall instead receive upon conversion a
number of shares of Common Stock up to the Ownership Threshold; and


 


(b) to the extent the Holder would have otherwise
received shares of Common Stock in excess of the Ownership Threshold, the
Holder shall instead receive from the Maker (i) in the case of any such
proposed conversion other than a proposed conversion resulting from an election
by the Maker pursuant to clause (B) of Section 3.2(a)(i) or clause (B) of
3.2(a)(ii), a


 


33

















 


two-year, interest free Subordinated Promissory Note in the form
attached to this Note as Exhibit A (a “Subordinated Promissory Note”) (and, in the event that multiple Subordinated
Promissory Notes shall be made pursuant hereto, mutatis mutandis as necessary to provide for any prepayment
due in respect of a Type II Prepayment Event among the successive Subordinated
Promissory Notes sequentially in the order in which such Subordinated
Promissory Notes were made), in the amount equal to the product of (x)
such number of shares of Common Stock in excess of the Ownership Threshold times
(y) the Current Average Market Price on the relevant Conversion Date, and (ii)
in the case of any such proposed conversion resulting from an election by the
Maker pursuant to clause (B) of Section 3.2(a)(i) or clause (B) of 3.2(a)(ii),
a payment in immediately available funds in the amount equal to the product of
(x) such number of shares of Common Stock in excess of the Ownership Threshold times
(y) the Current Average Market Price on the relevant Conversion Date.


 


10.                                 Waiver.  No delay or omission on the part of the
Holder in exercising any right under this Note shall operate as a waiver of
such right or of any other right of the Holder, nor shall any delay, omission
or waiver on any one occasion be deemed a bar to or waiver of the same or any
other right on any future occasion.  The
Maker hereby forever waives presentment, demand, presentment for payment,
protest, notice of protest, notice of dishonor of this Note and all other
demands and notices in connection with the delivery, acceptance, performance
and enforcement of this Note.


 


11.                                 Miscellaneous.


 


11.1                           Amendment.  None of the terms or provisions of this Note
may be excluded, modified or amended except by a written instrument duly
executed by the Holder and the Maker expressly referring to this Note and
setting forth the provision so excluded, modified or amended.


 


11.2                           Costs.  If action is successfully instituted to
collect on this Note, the Maker promises to pay all costs and expenses,
including reasonable attorneys’ fees, incurred in connection with such action.


 


11.3                           Headings.  The headings of the sections of this Note
have been inserted for convenience of reference only, are not intended to be
considered part hereof, and shall in no way modify or restrict any of the terms
or provisions hereof.


 


11.4                           Governing
Law.  This Note shall be governed
by, and construed in accordance with, the laws of the State of New York.


 


11.5                           Service
of Process; Consent to Jurisdiction; Venue.


 


(a) The Maker agrees that service of any process,
summons, notice or document by registered mail to its address set forth in
Section 11.4 of the Purchase Agreement, or any other lawful means, shall
be effective service of process for any action, suit or proceeding brought
against it with respect to this Note in any court identified in clause (b)
below.


 


(b) The Maker hereby irrevocably and unconditionally
consents to the exclusive jurisdiction of the courts of the State of New York
and the United States District Court for the


 


34

















 


Southern District of New York for any action, suit or proceeding (other
than appeals therefrom) arising out of or relating to this Agreement, and
agrees not to commence any action, suit or proceeding (other than appeals
therefrom) related thereto except in such courts.  The Maker further hereby irrevocably and unconditionally waives
any objection to the laying of venue of any action, suit or proceeding (other
than appeals therefrom) arising out of or relating to this Note in the courts
of the State of New York or the United States District Court for the Southern
District of New York, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such action, suit
or proceeding brought in any such court has been brought in an inconvenient
forum.


 


11.6                           Notices.  All notices hereunder shall be given by a
party in writing and shall be deemed received by the other party hereto, in
each case in accordance with the terms of Section 11.4 of the Purchase
Agreement as if any such notice were a notice thereunder.


 


11.7                           Transferability.  This Note may not be transferred or assigned
by the Holder except as permitted by Section 7 of the Purchase Agreement.  For the avoidance of doubt, the parties
acknowledge and agree that, in the event that the Holder merges into or
consolidates with any other Person, or that any other Person acquires
securities of the Holder, such merger, consolidation or acquisition (as the
case may be) shall not be deemed for purposes of this Section 11.7 to be, or to
trigger, a transfer or assignment of the Holder’s rights and obligations
hereunder.


 


11.8                           Maximum
Rate.  Any provisions contained in
this Note to the contrary notwithstanding, Holder shall not be entitled to
receive, collect or apply, as interest on the obligations evidenced hereunder,
any amount in excess of the maximum rate of interest permitted to be charged by
applicable law, and, in the event any amount is ever received, collected, or
applied as interest in excess of this maximum allowable rate by Holder, any
such amount which would be excessive interest shall be applied to the reduction
of the principal amount owed by the Maker. 
If such principal amount is paid in full, any such excess shall be
promptly paid over to the Maker.  In
determining whether or not the interest paid or payable under any specific
circumstances exceeds the maximum rate allowed by law, Holder may, to the
maximum extent allowed by law, characterize any nonprincipal payment as an
expense, fee or premium rather than interest; exclude voluntary prepayments and
the effects of them; and apportion the total amount of interest throughout the
entire contemplated term of the this Note so that the interest rate is uniform
throughout.


 


11.9                           Binding
Effect.  This Note shall be binding
upon the successors or assigns of the Maker and shall inure to the benefit of
the successors and assigns of the Holder.


 


[The remainder of this page was left blank
intentionally.]


 


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IN WITNESS WHEREOF, the Maker has caused this Note to be executed by
its duly authorized officer as of the date first set forth above.


 


	
   

  	
  ABGENIX, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /s/ Raymond Withy

  	
   

  
	
   

  	
  Name:

  	
     Raymond Withy

  	
   

  
	
   

  	
  Title:

  	
     President and CEO

  	
   

  
						



 


36

















 


EXHIBIT A


 


FORM OF SUBORDINATED PROMISSORY NOTE ISSUABLE TO
HOLDER ON

ACCOUNT OF THE OWNERSHIP THRESHOLD