Document:

EXHIBIT 10.19

                       CONVERTIBLE NOTE PURCHASE AGREEMENT

                                                              September 16, 1998

Warburg Dillon Read LLC
677 Washington Blvd.
Stamford, CT 06901

Dear Sirs:

     CELGENE  CORPORATION (the "Company") wishes to confirm its arrangement with
you in connection with the issuance to you today, against payment in immediately
available  funds of the purchase price of 100% of the principal  amount thereof,
of a convertible  note in the form attached hereto as Annex I (the  "Convertible
Note") in an aggregate principal amount of $8,750,000 and convertible  initially
into  795,463  fully paid and  non-assessable  shares  (each a  "Share")  of the
Company's Common Stock,  par value $.01 per share (the "Common Stock"),  subject
to adjustment as set forth in the  Convertible  Note. In  consideration  of your
purchase of the  Convertible  Note,  the Company will pay to you, in immediately
available  funds, a fee of 5% of the principal  amount  thereof,  which shall be
netted against the purchase price of the Convertible Note.

     Simultaneously  with the issuance of the Convertible  Note pursuant to this
Agreement,  you  and  the  Company  have  entered  into  a  Registration  Rights
Agreement,  dated as of the date hereof (the "Registration  Rights  Agreement"),
pursuant to which the Company has agreed to register  the Shares  under  certain
circumstances.  All capitalized  terms not defined herein shall have the meaning
ascribed in the Convertible Note.

     1. AGREEMENT TO ISSUE AND ACCEPT. On the basis of the  representations  and
warranties and subject to the terms and conditions set forth herein, the Company
agrees  to  issue  to you,  and you  agree  to  accept  from  the  Company,  the
Convertible Note against payment of the above-specified purchase price therefor,
The closing of the issuance and acceptance of the Convertible  Note against such
payment  shall take place on the date  hereof,  at which time the Company  shall
deliver to you the

                                        1

<PAGE>

Convertible  Note,  against  delivery by you of a wire  transfer of the purchase
price to the Company's  account at PNC Bank New Jersey Trust, ABA No. 031000053,
benefit   Account   No.   8511074024,   for   further   credit  to  Account  No.
42432012020943,  Celgene Corporation, Attn: Lisa Goldhammer, Telephone No. (732)
220-3112.

     2.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby makes
the representations and warranties to you set forth on Annex II hereto.

     3.  AGREEMENTS OF PURCHASER. You covenant and agree with the Company that:

          (a) You  will  not  offer,  sell,  assign,  hypothecate  or  otherwise
     transfer  the  Convertible   Note  except  (i)  pursuant  to  an  effective
     registration  statement under the Securities Act of 1933 (the "Act"),  (ii)
     to a person you reasonably  believe to be an "accredited  investor"  within
     the meaning of Rule 501 under the Act,  pursuant to an available  exemption
     under the Act or (iii) in  offshore  transactions  within the  meaning  and
     meeting the requirements of Rule 903 under the Act.

          (b) You  will  not  offer,  sell,  assign,  hypothecate  or  otherwise
     transfer any Shares issued upon conversion of the  Convertible  Note except
     (i) pursuant to an effective  registration statement under the Act; (ii) to
     a person you reasonably  believe to be an "accredited  investor" within the
     meaning of Rule 501 under the Act, pursuant to an available exemption under
     the Act or (iii) in an offshore  transaction within the meaning and meeting
     the requirements of Rule 903 under the Act.

          (c) You are an  "accredited  investor"  within the meaning of Rule 501
     under the Act.

          (d) You will not, in hedging transactions  effected in connection with
     your purchase and holding of the Convertible  Note,  effect sales of Common
     Stock (other than "blocks" of Common Stock, as defined in Rule 10b-18 under
     the  Securities  Exchange Act of 1934) in an amount that  exceeds,  for any
     trading day, 25% of the "trading volume" of the Common Stock (as defined in
     Rule 10b-18).

     4. CONDITIONS.  Your  obligations  under this Agreement shall be subject to
the condition that all  representations  and warranties and other  statements of
the Company herein are true and correct at and as of the closing of the purchase
and sale of the  Convertible  Note,  the  condition  that the Company shall have
performed all of its obligations hereunder theretofore to be performed,  and the
following additional conditions:

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<PAGE>

          (a) Counsel for the Company  specified  in Annex III hereto shall have
     furnished to you their respective written opinions,  dated the date of such
     closing, in form and substance satisfactory to you, to the effect set forth
     in Annex III hereto.

          (b) On the date of such closing,  the Company shall have  furnished to
     you such appropriate further information, certificates and documents as you
     may reasonably request.

     5. MISCELLANEOUS.

     (a) This  Agreement  shall be binding upon, and inure solely to the benefit
of, you and the Company and the respective  successors and assigns thereof,  and
no other  person  shall  acquire  or have any  right  under or by virtue of this
Agreement.  No  purchaser  of the  Convertible  Note  from you shall be deemed a
successor or assign by reason merely of such purchase.

     (b) Any notice or other  communication  required or  permitted  to be given
hereunder shall be deemed effectively given when personally delivered,  telexed,
transmitted by facsimile or mailed by pre-paid  certified  mail,  return receipt
requested,  or by telephone  when  confirmed in writing by one of the  preceding
methods addressed as follows (as applicable):

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<PAGE>

               If to the Company, to:

               Celgene Corporation
               7 Powder Horn Drive
               Warren, NJ 07059

               Attention: John W. Jackson
               Telephone Number: (732) 271-1001
               Facsimile Transmission Number: (732) 805-3931

               with a copy to:

               Proskauer Rose LLP
               1585 Broadway
               New York, NY 10036

               Attention: Robert A. Cantone, Esq.
               Telephone Number: (212) 969-3000
               Facsimile Transmission Number: (212) 969-2900

               If to Warburg Dillon Read LLC, to:

               Warburg Dillon Read LLC
               677 Washington Blvd.
               Stamford, CT 06901

               Attention: General Counsel
                          Capital Markets '
               Telephone Number: (203) 719-3000
               Facsimile Transmission Number: (201) 719-6097

or to such other  address or number and to the attention of such other person as
either party may designate by written notice to the other party. Notice shall be
effective upon actual receipt.

     (c) THIS  AGREEMENT  SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE  WITH
THE LAWS OF THE STATE OF NEW YORK.

     (d) Time shall be of the essence in the performance of this Agreement.

                                       4

<PAGE>

     (e) This  Agreement may be executed by the parties  hereto in any number of
counterparts,  each of which  shall be  deemed to be an  original,  but all such
respective counterparts shall together constitute one and the same instrument.

                                              Very truly yours,

                                              CELGENE CORPORATION

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

Accepted as of the date hereof:

WARBURG DILLON READ LLC

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

<PAGE>

                                                                        ANNEX II

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     (a) Each of the  Company's  Annual  Report on Form 10-K for the year  ended
December 31, 1997, and each report filed by the Company pursuant to the Exchange
Act  after the  filing of such  Annual  Report on Form 10-K  (collectively,  the
"Exchange Act Reports")  conforms in all material respects with the requirements
of the Exchange Act and the rules and regulations of the Securities and Exchange
Commission  thereunder;  and no such  document,  when it was  filed  (or,  if an
amendment  with respect to any such document was filed,  when such amendment was
filed),  contained any untrue statement of a material fact or omitted to state a
material fact required to be stated  therein or necessary to make the statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading,

     (b) All the  outstanding  shares of capital  stock of the Company have been
duly  authorized and validly issued and are fully paid,  non-assessable  and not
subject to any preemptive or similar rights;  the Shares initially issuable upon
conversion of the  Convertible  Note have been duly and validly  authorized  and
reserved for issuance out of the  Company's  authorized  and unissued  shares of
Common Stock and, when issued and delivered in accordance with the provisions of
the  Convertible  Note  will  be  duly  and  validly  issued,   fully  paid  and
non-assessable and will conform to the description of the Common Stock contained
in the Company's Registration Statement on Form 8-A, File No. 0-16132.

     (c) The  Convertible  Note has been duly  authorized  and,  when issued and
delivered pursuant to this Agreement,  will have been duly executed,  issued and
delivered  and will  constitute a valid and legally  binding  obligation  of the
Company;  and the  Registration  Rights  Agreement has been duly authorized and,
when executed and delivered by the parties thereto,  will constitute a valid and
legally  binding  obligation of the Company,  enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and
other laws of general  applicability  relating to or affecting creditors' rights
and to general equity principles.

     (d)  The  execution,  delivery  and  performance  of  this  Agreement,  the
Registration  Rights  Agreement  and the  Convertible  Note,  compliance  by the
Company  with all  provisions  hereof and  thereof and the  consummation  of the
transactions   contemplated   hereby  and  the  issuance  and  delivery  of  the
Convertible  Note will not  conflict  with or  constitute a breach of any of the
terms or  provisions  of, or a default  under,  the  charter  or  by-laws of the
Company  or any of  its  subsidiaries,  or any  agreement,  indenture  or  other
instrument to which it or any of its  subsidiaries  is a party or by which it or
any of its subsidiaries or their respective  properties are bound, or violate or
conflict with any laws,  administrative  regulations or rulings or court decrees
applicable to the Company, any of its subsidiaries or their respective property;

<PAGE>

and, except (i) as required pursuant to the Registration  Rights  Agreement,  or
(ii) for the disclosure  required to be included in the Company's next Quarterly
Report on Form 10-Q, when filed, pursuant to Item 2(c) of Form 10-Q, no consent,
approval,  authorization  or order of or filing or  registration  with, any such
court or governmental agency or body is required for the execution, delivery and
performance  of  this  Agreement,  the  Registration  Rights  Agreement  and the
Convertible  Note  by the  Company  and  the  consummation  of the  transactions
contemplated hereby and thereby.

     (e) Except as otherwise set forth in the Exchange Act Reports, there are no
material legal or governmental  proceedings  pending to which the Company or any
of its subsidiaries is a party or of which any of their  respective  property is
the subject which, if determined  adversely to the Company or its  subsidiaries,
might have a material  adverse effect on the business,  condition  (financial or
otherwise),  stockholders' equity, properties,  business prospects or results of
operations  of the Company and its  subsidiaries,  taken as a whole (a "Material
Adverse  Effect"),  and,  to  the  best  of the  Company's  knowledge,  no  such
proceedings are threatened or contemplated.

     (f) The Company is not, and the Company covenants that at any time when the
Convertible Note is outstanding it will not be, an open-end  investment company,
unit investment trust or face-amount  certificate company that is or is required
to be registered under Section 8 of the United States Investment  Company Act of
1940, as amended.

     (g) When the  Convertible  Note is issued and  delivered  pursuant  to this
Agreement,  the  Convertible  Note  will not be of the same  class  (within  the
meaning of Rule 144A under the Securities  Act of 1933) as securities  which are
listed on a  national  securities  exchange  registered  under  Section 6 of the
Exchange Act or quoted in a U.S. automated inter-dealer quotation system.

     (h) The Company is, and the Company  covenants  that while the  Convertible
Note is  outstanding  it will  remain,  subject  to  Section  13 or 15(d) of the
Exchange Act.

     (i) Neither the Company nor any person  acting on its behalf has offered or
sold the  Convertible  Note by  means of any  general  solicitation  or  general
advertising within the meaning of Rule 502(c) under the Act.

                                       2

<PAGE>

                                                                       ANNEX III

                           OPINION OF COMPANY COUNSEL

     (a) The  Company  has been duly  incorporated,  is  validly  existing  as a
corporation in good standing under the laws of its jurisdiction of incorporation
and has the corporate  power and authority  required to carry on its business as
described  in the  Exchange  Act  Reports  and to own,  lease  and  operate  its
properties.

     (b) All the  outstanding  shares of Common Stock have been duly  authorized
and  validly  issued and are fully paid,  non-assessable  and not subject to any
preemptive or similar rights.

     (c) The Shares  initially  issuable upon conversion of the Convertible Note
have  been duly  authorized  and  reserved  for  issuance  and when  issued  and
delivered upon  conversion in accordance  with the provisions of the Convertible
Note,  will have been validly issued and will be fully paid and  non-assessable,
and the  issuance  of such Shares is not  subject to any  preemptive  or similar
rights.

     (d) This Agreement has been duly authorized,  executed and delivered by the
Company.

     (e) The Convertible  Note has been duly  authorized,  executed,  issued and
delivered,  and  constitutes  the valid and legally  binding  obligation  of the
Company  enforceable  in  accordance  with its  terms,  subject  to  bankruptcy,
insolvency, fraudulent transfer, reorganization,  moratorium and similar laws of
general applicability  relating to or affecting creditors' rights and to general
equity principles.

     (f) The Registration  Rights  Agreement has been duly authorized,  executed
and  delivered  by the  Company  and  constitutes  a valid and  legally  binding
agreement of the Company,  enforceable in accordance with its terms,  subject to
bankruptcy,  insolvency,  fraudulent  transfer,  reorganization,  moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general  equity  principles;  provided  that such counsel need express no
opinion with respect to Section 6 of such Agreement.

     (g) The  authorized  capital  stock of the  Company,  including  the Common
Stock,  conforms as to legal matters to the description thereof contained in the
Company's Registration Statement on Form 8-A, File No. 0-16132.

     (h) Except (i) as required  pursuant to the Registration  Rights Agreement,
or (ii)  for the  disclosure  required  to be  included  in the  Company's  next
Quarterly  Report on Form 10-Q, when filed,  pursuant to Item 2(c) of Form 10-Q,
no consent, approval,  authorization or order of or filing or registration with,
any court or governmental

<PAGE>

agency or body is required for the execution,  delivery and  performance of this
Agreement,  the  Registration  Rights  Agreement and the Convertible Note by the
Company and the consummation of the transactions  contemplated by this Agreement
and thereby,

     (i)  The  execution,  delivery  and  performance  of  this  Agreement,  the
Registration   Rights  Agreement  and  the  Convertible  Note  by  the  Company,
compliance  by the Company  with all the  provisions  hereof and thereof and the
consummation  of the  transactions  contemplated  hereby  and  thereby  will not
conflict with or constitute a breach of any of the terms or provisions  of, or a
default under, the charter or by-laws of the Company or any agreement, indenture
or other  instrument  to which the Company is a party or by which the Company or
its properties are bound,  or violate or conflict with any laws,  administrative
regulations  or  rulings  or court  decrees  applicable  to the  Company  or its
properties  in any case which is  reasonably  likely to have a Material  Adverse
Effect.

     (j) The  Company is not an open-end  investment  company,  unit  investment
trust or face-amount certificate company that is or is required to be registered
under Section 8 of the United States Investment Company Act of 1940, as amended.

                                       2EXHIBIT 10.20

     THIS SECURITY AND THE COMMON STOCK  ISSUABLE UPON ITS  CONVERSION  HAVE NOT
BEEN  REGISTERED  UNDER  THE  U.S.  SECURITIES  ACT OF  1933,  AS  AMENDED  (THE
"SECURITIES  ACT"),  AND  MAY  NOT  BE  OFFERED,   SOLD,  PLEDGED  OR  OTHERWISE
TRANSFERRED  EXCEPT PURSUANT TO AN AVAILABLE  EXEMPTION FROM REGISTRATION  UNDER
THE SECURITIES ACT AND IN ACCORDANCE WITH ALL APPLICABLE  SECURITIES LAWS OF THE
STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.

                               CELGENE CORPORATION

                 9.25 % CONVERTIBLE NOTE DUE SEPTEMBER 16, 2003

No. R-1                                                               $8,750,000

     CELGENE  CORPORATION,  a corporation  duly organized and existing under the
laws of Delaware (the "Company") for value  received,  hereby promises to pay to
Warburg  Dillon Read LLC, or  registered  assigns,  the  principal  sum of eight
million,  seven hundred and fifty thousand Dollars ($8,750,000) on September 16,
2003 and to pay interest  thereon,  from  September  16, 1998,  or from the most
recent  interest  payment date to which  interest has been paid or duly provided
for,  semiannually on March 16 and September 16 in each year,  commencing  March
16, 1999, at the rate of 9.25% per annum, until the principal hereof is due, and
at the rate of 9.25% per annum on any overdue  principal  and  premium,  if any,
and, to the extent  permitted by law, on any overdue  interest.  The interest so
payable,  and punctually paid or duly provided for, on any interest payment date
will  be  paid  to the  person  in  whose  name  this  Security  (or one or more
predecessor  Securities)  is  registered at the close of business on the regular
record  date for  such  interest,  which  shall be the  March 1 or  September  1
(whether  or not a  business  day),  as the case  may be,  next  preceding  such
interest  payment date.  Payment of the  principal of (and premium,  if any, on)
this Security  shall be made upon the surrender of this Security to the Company,
at its office at 7 Powder Horn  Drive,  Warren,  NJ 07059 (or such other  office
within  the  United  States as shall be  notified  by the  Company to the holder
hereof) (the "Designated Office"), in such coin or currency of the United States
of America as at the time of payment  shall be legal  tender for the  payment of
public and private debts, by transfer to a U.S. dollar account maintained by the
payee with a bank in the United  States of America.  Payment of interest on this
Security shall be made by wire transfer to a U.S.  dollar account  maintained by
the payee  with a bank in the United  States of  America,  provided  that if the
holder shall not have furnished wire  instructions  in writing to the Company no
later than the record date relating to an interest  payment  date,  such payment
may be made by U.S.  dollar check  mailed to the address of the person  entitled
thereto as such  address  shall  appear in the  Company  security  register.  In
respect of any  interest  payment  date,  the Company  may, at its  election but
subject to  fulfillment  of the conditions set forth in Section 6 and subject to
the limitations set forth therein, pay all or a portion of the interest on this

<PAGE>

Security  in shares of Common  Stock  having a fair  market  value  equal to the
amount then payable hereunder, as described in Section 6.

     1. Redemption. This Security is subject to redemption upon not less than 30
nor more than 60 days'  notice by mail,  at any time on or after  September  16,
2000,  as a whole or in part,  (in any amount  that is an  integral  multiple of
$1000)  at the  election  of the  Company,  at a  redemption  price  of 103% the
principal amount thereof, together with accrued interest to the redemption date,
but  interest  installments  whose  stated  maturity  is on  or  prior  to  such
redemption  date will be payable to the holder of this Security,  or one or more
predecessor  Securities,  of  record at the close of  business  on the  relevant
record dates referred to on the face hereof; provided, however, that the Company
may not redeem  this  Security  on or prior to  September  16,  2001  unless the
Closing Price of the Common Stock exceeds 225% of the Conversion  Price for each
Trading Day in a period of 20  Consecutive  Trading Days  commencing not earlier
than  September  16, 2000.  The term  "Conversion  Price" on any day shall equal
$1,000 divided by the Conversion Rate in effect on each such day.

     2.  Conversion.  (a) The holder of this Security is entitled at any time on
or after  September  16, 1999 and before the close of business on September  16,
2003 (or, in case this Security or a portion  hereof is called for redemption or
the holder  hereof has  exercised his right to require the Company to repurchase
this  Security  or a portion  hereof,  then in respect of this  Security or such
portion hereof, as the case may be, until and including, but (unless the Company
defaults in making the payment due upon  redemption or  repurchase,  as the case
may  be)  not  after,  the  close  of  business  on the  redemption  date or the
Repurchase Date, as the case may be) to convert this Security (or any portion of
the principal amount hereof that is an integral multiple of $1,000),  into fully
paid and  nonassessable  1,000 shares  (calculated as to each  conversion to the
nearest  1/100 of a share) of Common  Stock of the  Company at the rate of 90.91
shares of Common Stock for each $1,000  principal  amount of Security (or at the
current  adjusted  rate if an adjustment  has been made as provided  below) (the
"Conversion  Rate") by surrender of this Security,  duly endorsed or assigned to
the Company or in blank to the Company at the Designated Office,  accompanied by
written  notice to the Company  that the holder  hereof  elects to convert  this
Security (or if less than the entire principal amount hereof is to be converted,
specifying the portion hereof to be converted).  Upon surrender of this Security
for conversion,  the holder will be entitled to receive the interest accruing on
the principal  amount of this Security  then being  converted  from the interest
payment  date  next  preceding  the  date of  such  conversion  to such  date of
conversion.  No payment or adjustment is to be made on conversion  for dividends
on the Common Stock issued on conversion hereof. No fractions of shares or scrip
representing  fractions of shares will be issued on  conversion,  but instead of
any fractional  interest,  the Company shall pay a cash adjustment,  computed on
the basis of the Closing  Price of the Common  Stock on the date of  conversion,
or, at its option, the Company shall round up to the next higher whole share.

     Notwithstanding  the  foregoing,  at no time will the holder be entitled to
convert this Security into shares of Common Stock that, together with the number
of shares of Common  Stock owned (or deemed for bank  regulatory  purposes to be
owned)  by  such  holder  and its  affiliates  as set  forth  in the  notice  of
conversion, represent more than 4.9% of the Common Stock then outstanding. If at
any time the  Conversion  Rate and the principal  amount of this Security  would
result in a greater number of shares being issuable upon conversion, then for so
long as such condition  shall exist,  upon exercise of the conversion  right the
holder shall receive (i) up to that number of shares of Common

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<PAGE>

Stock that,  together with the number of shares of Common Stock owned (or deemed
for bank  regulatory  purposes to be owned) by such holder and its affiliates as
set forth in the notice of  conversion,  represent 4.9% of the Common Stock then
outstanding,  and (ii) an amount  (in cash but not less than  zero),  payable in
immediately available funds, determined pursuant to the formula:

               C  = (P/CR - I) x CP

         where C  = the cash amount receivable by the holder;

               P  = the principal amount of this Security being converted;

               CR = the Conversion Rate;

               I  = the number of shares issuable  pursuant to clause (i) above;
                    and

               CP = the  Closing  Price  of the  Common  Stock  on the  date  of
                    conversion.

     (b) The Conversion  Rate shall be subject to adjustments  from time to time
as follows:

          (1) In  case  the  Company  shall  pay or  make a  dividend  or  other
     distribution on any class of capital stock of the Company payable in shares
     of Common Stock,  the Conversion  Rate in effect at the opening of business
     on the day  following  the  Determination  Date for such  dividend or other
     distribution  shall be  increased  by dividing  such  Conversion  Rate by a
     fraction  of which the  numerator  shall be the  number of shares of Common
     Stock outstanding at the close of business on such  Determination  Date and
     the  denominator  shall be the sum of such  number of shares  and the total
     number of shares  constituting  such dividend or other  distribution,  such
     increase to become effective  immediately  after the opening of business on
     the  day  following  such  Determination  Date.  For the  purposes  of this
     paragraph (1), the number of shares of Common Stock at any time outstanding
     shall not  include  shares  held in the  treasury  of the Company but shall
     include shares issuable in respect of scrip certificates  issued in lieu of
     fractions of shares of Common Stock.  The Company will not pay any dividend
     or make any  distribution on shares of Common Stock held in the treasury of
     the Company.

          (2) Subject to the last  sentence  of  paragraph  (7) of this  Section
     2(b), in case the Company  shall issue  rights,  options or warrants to all
     holders of its Common Stock  entitling  them to  subscribe  for or purchase
     shares of Common  Stock at a price per share less than the  current  market
     price per share  (determined  as provided in paragraph  (8) of this Section
     2(b)) of the Common Stock on the Determination  Date for such distribution,
     the  Conversion  Rate in  effect  at the  opening  of  business  on the day
     following  such  Determination  Date shall be  increased  by dividing  such
     Conversion Rate by a fraction of which the numerator shall be the number of
     shares  of  Common  Stock  outstanding  at the  close of  business  on such
     Determination  Date plus the  number of  shares of Common  Stock  which the
     aggregate  of the  offering  price of the total  number of shares of Common
     Stock so offered  for  subscription  or  purchase  would  purchase  at such
     current market price and the  denominator  shall be the number of shares of
     Common  Stock  outstanding  at the close of business on such  Determination
     Date plus the

                                       3

<PAGE>

     number of shares of Common Stock so offered for  subscription  or purchase,
     such increase to become effective immediately after the opening of business
     on the day  following  such  Determination  Date.  For the purposes of this
     paragraph (2), the number of shares of Common Stock at any time outstanding
     shall not  include  shares  held in the  treasury  of the Company but shall
     include shares issuable in respect of scrip certificates  issued in lieu of
     fractions of shares of Common Stock. The Company will not issue any rights,
     options  or  warrants  in  respect  of shares of Common  Stock  held in the
     treasury of the Company.

          (3) In case  outstanding  shares of Common  Stock shall be  subdivided
     into a greater  number of shares of Common Stock,  the  Conversion  Rate in
     effect at the opening of business on the day  following  the day upon which
     such subdivision becomes effective shall be proportionately increased, and,
     conversely,  in case  outstanding  shares of  Common  Stock  shall  each be
     combined into a smaller  number of shares of Common Stock,  the  Conversion
     Rate in effect at the opening of business on the day following the day upon
     which such combination becomes effective shall be proportionately  reduced,
     such  increase  or  reduction,  as the case  may be,  to  become  effective
     immediately after the opening of business on the day following the day upon
     which such subdivision or combination becomes effective.

          (4) Subject to the last  sentence  of  paragraph  (7) of this  Section
     2(b), in case the Company  shall,  by dividend or otherwise,  distribute to
     all holders of its Common Stock  evidences of its  indebtedness,  shares of
     any class of capital stock, or other property  (including  securities,  but
     excluding (i) any rights,  options or warrants referred to in paragraph (2)
     of this Section 2(b) (ii) any dividend or distribution  paid exclusively in
     cash,  (iii) any dividend or  distribution  referred to in paragraph (1) of
     this Section  2(b) and (iv) any merger or  consolidation  to which  Section
     2(h) applies), the Conversion Rate shall be adjusted so that the same shall
     equal  the rate  determined  by  dividing  the  Conversion  Rate in  effect
     immediately  prior to the close of business on the  Determination  Date for
     such distribution by a fraction of which the numerator shall be the current
     market price per share  (determined  as provided in  paragraph  (8) of this
     Section 2(b)) of the Common Stock on such  Determination Date less the then
     fair market value (as determined in good faith by the Board of Directors of
     the  Company)  of the  portion  of  the  assets,  shares  or  evidences  of
     indebtedness so distributed applicable to one share of Common Stock and the
     denominator  shall be such  current  market  price per share of the  Common
     Stock, such adjustment to become effective immediately prior to the opening
     of business on the day following such  Determination  Date. If the Board of
     Directors determines the fair market value of any distribution for purposes
     of this  paragraph  (4) by reference  to the actual or when issued  trading
     market for any securities comprising such distribution, it must in doing so
     consider  the prices in such market over the same period used in  computing
     the  current  market  price per share  pursuant  to  paragraph  (8) of this
     Section 2(b).

          (5) In case the Company shall,  by dividend or otherwise,  make a Cash
     Distribution,  then, and in each such case,  immediately after the close of
     business  on  the  Determination  Date  for  such  Cash  Distribution,  the
     Conversion  Rate shall be  adjusted  so that the same shall  equal the rate
     determined by dividing the Conversion Rate in effect  immediately  prior to
     the close of  business  on such  Determination  Date by a fraction  (a) the
     numerator  of which  shall be equal to the current  market  price per share
     (determined  as  provided in  paragraph  (8) of this  Section  2(b)) of the
     Common  Stock  on such  Determination  Date  less an  amount  equal  to the
     quotient of

                                       4

<PAGE>

     (1) the  amount  of such Cash  Distribution  divided  by (2) the  number of
     shares of Common Stock outstanding on such  Determination  Date and (b) the
     denominator  of which shall be equal to the current  market price per share
     (determined  as  provided in  paragraph  (8) of this  Section  2(b)) of the
     Common Stock on such Determination Date.

          (6) In case  the  Company  or any  Subsidiary  shall  make  an  Excess
     Purchase  Payment,  then, and in each such case,  immediately  prior to the
     opening of business  on the day after the tender  offer in respect of which
     such Excess  Purchase  Payment is to be made expires,  the Conversion  Rate
     shall be  adjusted  so that the same  shall  equal the rate  determined  by
     dividing the Conversion  Rate in effect  immediately  prior to the close of
     business on the Determination  Date for such tender offer by a fraction (a)
     the numerator of which shall be equal to the current market price per share
     (determined  as  provided in  paragraph  (8) of this  Section  2(b)) of the
     Common  Stock  on such  Determination  Date  less an  amount  equal  to the
     quotient of (A) the Excess  Purchase  Payment  divided by (B) the number of
     shares of Common Stock  outstanding  (including any tendered  shares) as of
     the  Determination  Date less the number of all shares validly tendered and
     not withdrawn as of the Determination Date and (b) the denominator of which
     shall be  equal to the  current  market  price  per  share  (determined  as
     provided in paragraph  (8) of this Section  2(b)) of the Common Stock as of
     such Determination Date.

          (7) The  reclassification  of Common Stock into securities  other than
     Common  Stock  (other than any  reclassification  upon a  consolidation  or
     merger to which  Section  2(h)  applies)  shall be deemed to involve  (a) a
     distribution of such  securities  other than Common Stock to all holders of
     Common  Stock (and the  effective  date of such  reclassification  shall be
     deemed to be the Determination Date), and (b) a subdivision or combination,
     as the case may be, of the  number of  shares of Common  Stock  outstanding
     immediately  prior to such  reclassification  into the  number of shares of
     Common Stock outstanding  immediately thereafter (and the effective date of
     such  reclassification  shall be  deemed  to be "the day  upon  which  such
     subdivision  becomes  effective"  or "the day upon which  such  combination
     becomes  effective",  as the case may be,  and  "the  day upon  which  such
     subdivision  or  combination  becomes  effective"'  within  the  meaning of
     paragraph  (3) of this  Section  2(b)).  Rights or  warrants  issued by the
     Company to all holders of its Common Stock entitling the holders thereof to
     subscribe for or purchase shares of Common Stock,  which rights or warrants
     (i) are deemed to be transferred with such shares of Common Stock, (ii) are
     not exercisable and (iii) are also issued in respect,  of future  issuances
     of Common  Stock,  in each case in  clauses  (i)  through  (iii)  until the
     occurrence  of a specified  event or events  ("Trigger  Event"),  shall for
     purposes of this Section 2(b) not be deemed issued until the  occurrence of
     the earliest Trigger Event.

          (8) For the purpose of any computation  under paragraphs (2), (4), (5)
     or (6) of this  Section  2(b) the current  market price per share of Common
     Stock on any date shall be  calculated  by the  Company and be deemed to be
     the average of the daily Closing  Prices for the five  consecutive  Trading
     Days  selected  by the  Company  commencing  not more than 10 Trading  Days
     before,  and ending not later than,  the earlier of the day in question and
     the day before the "ex" date with respect to the  issuance or  distribution
     requiring such  computation.  For purposes of this paragraph,  the term "ex
     date",  when used with respect to any issuance or  distribution,  means the
     first date on which the Common Stock trades  regular way in the  applicable
     securities

                                       5

<PAGE>

     market  or on the  applicable  securities  exchange  without  the  right to
     receive such issuance or distribution.

          (9) No adjustment in the Conversion Rate shall be required unless such
     adjustment  (plus any  adjustments  not  previously  made by reason of this
     paragraph  (9))  would  require an  increase  or  decrease  of at least one
     percent in such rate;  provided,  however,  that any  adjustments  which by
     reason of this  paragraph  (9) are not required to be made shall be carried
     forward  and  taken  into  account  in  any  subsequent   adjustment.   All
     calculations  under this  Section 2 shall be made to the nearest cent or to
     the nearest one-hundredth of a share, as the case may be.

          (10) The Company may make such increases in the  Conversion  Rate, for
     the  remaining  term of the  Securities or any shorter term, in addition to
     those  required by  paragraphs  (1),  (2),  (3),  (4),  (5) and (6) of this
     Section  2(b) as it considers to be advisable in order to avoid or diminish
     any income tax to any holders of shares of Common Stock  resulting from any
     dividend  or  distribution  of stock or  issuance  of rights or warrants to
     purchase  or  subscribe  for  stock or from any event  treated  as such for
     income tax purposes.

     (c) Whenever the  Conversion  Rate is adjusted as provided in Section 2(b),
the Company  shall  compute the  adjusted  Conversion  Rate in  accordance  with
Section  2(b) and shall  prepare  a  certificate  signed by the chief  financial
officer of the Company setting forth the adjusted Conversion Rate and showing in
reasonable  detail  the facts upon which  such  adjustment  is based,  and shall
promptly deliver such certificate to the holder of this Security.

     (d) In case:

          (1) the Company shall declare a dividend or other  distribution on its
     Common  Stock  payable  (i)  otherwise  than  exclusively  in  cash or (ii)
     exclusively in cash in an amount that would require any adjustment pursuant
     to Section 2(b); or

          (2) the Company  shall  authorize  the  granting to the holders of its
     Common Stock of rights,  options or warrants to  subscribe  for or purchase
     any shares of capital stock of any class or of any other rights; or

          (3) of any  reclassification of the Common Stock of the Company, or of
     any consolidation, merger or share exchange to which the Company is a party
     and for which approval of any  shareholders of the Company is required,  or
     of the conveyance,  sale,  transfer or lease of all or substantially all of
     the assets of the Company; or

          (4)  of the  voluntary  or  involuntary  dissolution,  liquidation  or
     winding up of the Company; or

          (5) the Company or any  Subsidiary  shall  commence a tender offer for
     all or a portion of the  Company's  outstanding  shares of Common Stock (or
     shall amend any such tender offer);

                                       6

<PAGE>

then the Company shall cause to be delivered to the holder of this Security,  at
least 20 days (or 10 days in any case  specified  in  clause  (1) or (2)  above)
prior  to the  applicable  record,  expiration  or  effective  date  hereinafter
specified,  a notice  stating  (x) the date on which a record is to be taken for
the purpose of such dividend, distribution,  rights, options or warrants, or, if
a record is not to be taken, the date as of which the holders of Common Stock of
record  to be  entitled  to such  dividend,  distribution,  rights,  options  or
warrants are to be  determined,  (y) the date on which the right to make tenders
under such tender offer expires or (z) the date on which such  reclassification,
consolidation,   merger,   conveyance,   transfer,  sale,  lease,   dissolution,
liquidation  or winding up is expected to become  effective,  and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange  their shares of Common Stock for  securities,  cash or other  property
deliverable  upon  such  reclassification,  consolidation,  merger,  conveyance,
transfer,  sale,  lease,  dissolution,  liquidation  or winding up.  Neither the
failure to give such notice nor any defect  therein shall affect the legality or
validity of the proceedings described in clauses (1) through (5) of this Section
2(d).

     (e) The Company  shall at all times reserve and keep  available,  free from
preemptive  rights,  out of its  authorized but unissued  Common Stock,  for the
purpose of effecting the  conversion of the Security,  the full number of shares
of Common Stock then issuable upon the conversion of this Security.

     (f) Except as provided in the next  sentence,  the Company will pay any and
all taxes and duties  that may be payable in respect of the issue or delivery of
shares of Common Stock on  conversion of this  Security.  The Company shall not,
however,  be  required to pay any tax or duty which may be payable in respect of
any  transfer  involved in the issue and delivery of shares of Common Stock in a
name  other  than that of the  holder  of this  Security,  and no such  issue or
delivery  shall be made  unless and until the person  requesting  such issue has
paid to the Company the amount of any such tax or duty,  or has  established  to
the satisfaction of the Company that such tax or duty has been paid.

     (g) The  Company  agrees  that all  shares  of  Common  Stock  which may be
delivered upon  conversion of the Security,  upon such delivery,  will have been
duly authorized and validly issued and will be fully paid and nonassessable (and
shall be issued out of the Company's  authorized but unissued Common Stock) and,
except as provided in Section  2(f),  the Company will pay all taxes,  liens and
charges with respect to the issue thereof.

     (h) In ease of any consolidation of the Company with any other person,  any
merger of the Company into another  person or of another person into the Company
(other than a merger which does not result in any reclassification,  conversion,
exchange or cancellation  of outstanding  shares of Common Stock of the Company)
or any conveyance,  sale,  transfer or lease of all or substantially  all of the
properties and assets of the Company, the person formed by such consolidation or
resulting from such merger or which acquires such properties and assets,  as the
case may be,  shall  execute  and  deliver  to the  holder  of this  Security  a
supplemental  agreement  providing  that such  holder has the right  thereafter,
during the period this  Security  shall be  convertible  as specified in Section
2(a), to convert this Security only into the kind and amount of securities, cash
and other property receivable upon such consolidation, merger, conveyance, sale,
transfer or lease  (including  any Common Stock  retainable)  by a holder of the
number of shares of Common Stock of the Company into which this  Security  might
have been converted immediately prior to such consolidation, merger, conveyance,
sale, transfer or

                                       7

<PAGE>

lease,  assuming  such holder of Common Stock of the Company (i) is not a person
with which the  Company  consolidated,  into which the  Company  merged or which
merged into the Company or to which such conveyance, sale, transfer or lease was
made,  as the  case  may  be (a  "Constituent  Person"),  or an  Affiliate  of a
Constituent  Person and (ii) failed to exercise his rights of election,  if any,
as to the kind or amount of securities,  cash and other property receivable upon
such consolidation,  merger, conveyance,  sale, transfer or lease (provided that
if the kind or amount of  securities,  cash and other property  receivable  upon
such consolidation, merger, conveyance, sale, transfer, or lease is not the same
for each share of Common  Stock of the Company  held  immediately  prior to such
consolidation,  merger,  conveyance,  sale,  transfer  or lease by others than a
Constituent  Person or an Affiliate  thereof and in respect of which such rights
of election shall not have been exercised  ("Non-electing  Share"), then for the
purpose of this Section 2(h) the kind and amount of  securities,  cash and other
property receivable upon such consolidation,  merger, conveyance, sale, transfer
or lease by the  holders of each  Non-electing  Share  shall be deemed to be the
kind and  amount so  receivable  per share by a  plurality  of the  Non-electing
Shares).  Such supplemental  agreement shall provide for adjustments  which, for
events subsequent to the effective date of such supplemental agreement, shall be
as nearly  equivalent as may be practicable to the  adjustments  provided for in
this Section 2. The above  provisions of this Section 2(h) shall similarly apply
to successive consolidations,  mergers, conveyances, sales, transfers or leases.
In this paragraph,  "securities of the kind receivable" upon such consolidation,
merger,  conveyance,  transfer,  sale or lease by a holder of Common Stock means
securities that, among other things,  are registered and transferable  under the
Securities Act, and listed and approved for quotation in all securities markets,
in each case to the same extent as such  securities so receivable by a holder of
Common Stock.

     (i) The  Company  (i) will effect all  registrations  with,  and obtain all
approvals  by, all  governmental  authorities  that may be  necessary  under any
United States  Federal or state law  (including  the Securities Act of 1933, the
Securities  Exchange Act of 1934 and state securities and Blue Sky laws) for the
shares of Common Stock issuable upon  conversion of this Security to be lawfully
issued and delivered as provided  herein,  and  thereafter  publicly  traded (if
permissible  under such  Securities Act) and qualified or listed as contemplated
by clause (ii) (it being  understood  that the Company  shall not be required to
register the Common Stock  issuable on  conversion  hereof under the  Securities
Act, except pursuant to the Registration  Rights  Agreement  between the Company
and the  initial  holder of this  Security);  and (ii)  will list the  shares of
Common Stock required to be issued and delivered upon  conversion of Securities,
prior to such  issuance or delivery,  on each  national  Securities  exchange on
which outstanding Common Stock is listed or quoted at the time of such delivery,
or if the Common Stock is not then listed on any securities exchange, to qualify
the  Common  Stock for  quotation  on the Nasdaq  National  Market or such other
inter-dealer quotation system, if any, on which the Common Stock is then quoted.

     (j) For purposes hereof:

     "Affiliate"  of any  specified  person means any other  person  directly or
indirectly  controlling  or  controlled  by or under  direct or indirect  common
control  with  such  specified  person.  For the  purposes  of this  definition,
"control",  when used with respect to any specified  person,  means the power to
direct the  management  and  policies of such  person,  directly or  indirectly,
whether  through the ownership of voting  securities,  by contract or otherwise;
and the terms  "controlling" and "controlled"  have meanings  correlative to the
foregoing.

                                       8

<PAGE>

     "Cash Distribution" means the distribution by the Company to all holders of
its Common Stock of cash,  other than any cash that is distributed upon a merger
or  consolidation  to which  Section 2(h)  applies or as part of a  distribution
referred to in paragraph (4) of Section 2(b).

     "Closing Price" means, with respect to the Common Stock of the Company, for
any day, the reported last sale price per share on the Nasdaq  National  Market,
or, if the Common  Stock is not  admitted  to  trading  on the  Nasdaq  National
Market, on the principal national securities exchange or inter-dealer  quotation
system on which the Common  Stock is listed or admitted  to  trading,  or if not
admitted  to trading on the Nasdaq  National  Market,  or listed or  admitted to
trading on any national  securities  exchange or inter-dealer  quotation system,
the   average  of  the   closing   bid  and  asked   prices  per  share  in  the
over-the-counter  market as furnished by any New York Stock Exchange member firm
selected from time to time by the Company for that purpose.

     "Common  Stock" means the Common  Stock,  par value $.01 per share,  of the
Company  authorized  at the  date of this  instrument  as  originally  executed.
Subject to the  provisions  of Section  2(h),  shares  issuable on conversion or
repurchase of this Security  shall include only shares of Common Stock or shares
of any class or classes of common stock resulting from any  reclassification  or
reclassifications thereof; provided, however, that if at any time there shall be
more than one such resulting class, the shares so issuable on conversion of this
Security shall include  shares of all such classes,  and the shares of each such
class then so issuable shall be  substantially in the proportion which the total
number of shares of such class resulting from all such  reclassifications  bears
to the  total  number  of shares  of all such  classes  resulting  from all such
reclassifications.

     "Determination   Date"   means,   in  the  case  of  a  dividend  or  other
distribution,  including  the  issuance  of  rights,  options  or  warrants,  to
shareholders,  the date fixed for the determination of shareholders  entitled to
receive such dividend or other  distribution and, in the case of a tender offer,
the last time that tenders could have been made pursuant to such tender offer.

     "Excess Purchase  Payment" means the product of (A) the excess,  if any, of
(i) the amount of cash plus the fair market value (as  determined  in good faith
by the Company's Board of Directors) of any non-cash  consideration  required to
be paid with respect to one share of Common Stock  acquired or to be acquired in
a tender offer made by the Company or any  subsidiary  of the Company for all or
any portion of the Common Stock over (ii) the current  market price per share as
of the last time that tenders could have been made pursuant to such tender offer
and (B) the  number of  shares  validly  tendered  and not  withdrawn  as of the
Determination Date in respect of such tender offer.

     "Trading  Day" means (i) if the Common  Stock is admitted to trading on the
Nasdaq  National  Market  or any  other  system of  automated  dissemination  of
quotations of securities  prices,  a day on which trades may be effected through
such  system;  (ii) if the Common Stock is listed or admitted for trading on the
New York Stock  Exchange or any other  national  securities  exchange,  a day on
which such  exchange is open for  business;  or (iii) if the Common Stock is not
admitted  to trading on the Nasdaq  National  Market or listed or  admitted  for
trading on any  national  securities  exchange or any other  system of automated
dissemination of quotation of securities prices, a day on which the Common Stock
is traded regular way in the over-the-counter market and for which a closing bid
and a closing asked price for the Common Stock are available.

                                       9

<PAGE>

     3. Right to Require  Repurchase.  (a) In the event that a Change in Control
(as  hereinafter  defined)  shall occur,  then the holder of this Security shall
have the right, at such holder's  option,  to require the Company to repurchase,
and upon the exercise of such right the Company shall repurchase, this Security,
or any  portion of the  principal  amount  hereof that is equal to $1,000 or any
integral multiple thereof,  on the date (the "Repurchase  Date") that is fifteen
Trading  Days after the date on which the Company  gives  notice  thereof to the
holder of this  Security,  at a purchase  price  equal to 100% of the  principal
amount  of  this  Security  to be  repurchased  plus  interest  accrued  to  the
Repurchase Date (the "Repurchase Price");  provided,  however, that installments
of  interest  on this  Security  whose  stated  maturity  is on or  prior to the
Repurchase Date shall be payable to the holder of this Security,  or one or more
predecessor Securities, registered as such on the relevant Record Date according
to their terms. At the option of the Company,  the Repurchase  Price may be paid
in cash or,  subject to the  fulfillment  by the Company of the  conditions  set
forth in Section 6 and subject to the limitations set forth therein, by delivery
of shares of Common  Stock  having a fair market  value equal to the  Repurchase
Price as described  in Section 6. The Company  agrees to give the holder of this
Security notice of any Change in Control, by facsimile transmission confirmed in
writing by  overnight  courier  service,  promptly  and in any event  within two
Trading Days of the occurrence thereof.

     (b) To exercise a repurchase right, the holder shall deliver to the Company
on or before the 10th trading day prior to the  Repurchase  Date,  together with
this  Security,  written  notice of the holder's  exercise of such right,  which
notice  shall set forth the name of the  holder,  the number of shares of Common
Stock then owned by such holder and its affiliates, the principal amount of this
Security to be repurchased  (and, if this Security is to be repurchased in part,
the portion of the principal  amount thereof to be  repurchased  and the name of
the  person in which  the  portion  thereof  to remain  outstanding  after  such
repurchase is to be registered) and a statement that an election to exercise the
repurchase  right is being made thereby,  and, in the event that the  Repurchase
Price  shall  be paid in  shares  of  Common  Stock,  the  name or  names  (with
addresses) in which the certificates for shares of Common Stock shall be issued.
Such written notice shall be irrevocable, except that the right of the holder to
convert  this  Security  (or the  portion  hereof  with  respect  to  which  the
repurchase  right is being exercised) shall continue until the close of business
on the Repurchase Date (or if the Company elects to pay the Repurchase  Price by
delivery of shares of Common  Stock,  until the close of business on the Trading
Day  immediately  preceding  the  first  delivery  of  Common  Stock in  respect
thereof).

     (c) In the event a repurchase  right shall be exercised in accordance  with
the terms  hereof,  the Company  shall pay or cause to be paid to the holder the
Repurchase Price in cash or shares of Common Stock, as provided above,  together
with accrued and unpaid interest to the Repurchase Date; provided, however, that
installments of interest that mature on or prior to the Repurchase Date shall be
payable in cash,  to the holders of this  Security,  or one or more  predecessor
Securities,  registered as such at the close of business on the relevant regular
record date.

     (d) If this Security (or portion thereof) is surrendered for repurchase and
is not so paid on or prior to the Repurchase  Date, the principal amount of this
Security (or such portion  hereof,  as the case may be) shall,  until paid, bear
interest to the extent  permitted by applicable law from the Repurchase  Date at
the rate per annum borne by this  Security,  and shall remain  convertible  into
Common Stock until the  principal of this Security (or portion  thereof,  as the
case may be) shall have been paid or duly provided for.

                                       10

<PAGE>

     (e) If this  Security  is to be  repurchased  only in  part,  it  shall  be
surrendered  to the Company at the  Designated  Office (with,  if the Company so
requires,  due  endorsement  by, or a written  instrument  of  transfer  in form
satisfactory  to the Company duly executed by, the holder hereof or his attorney
duly  authorized in writing),  and the Company shall execute and make  available
for delivery to the holder without service charge, a new Security or Securities,
containing identical terms and conditions, each in an authorized denomination in
aggregate  principal  amount  equal  to and in  exchange  for the  unrepurchased
portion of the principal of the Security so surrendered.

     (f) For purposes of this Section 3.

     (1) the term "beneficial owner" shall be determined in accordance with Rule
13d-3  promulgated  by the Securities  and Exchange  Commission  pursuant to the
Securities Exchange Act of 1934; and

     (2) a "Change in  Control"  shall be deemed to have  occurred  at the time,
after the original issuance of this Security, of:

          (i) the acquisition by any person of beneficial ownership, directly or
     indirectly,  through a purchase, merger or other acquisition transaction or
     series of transactions, of shares of capital stock of the Company entitling
     such person to exercise 50% or more of the total voting power of all shares
     of capital stock of the Company entitled to vote generally in the elections
     of  directors  (any  shares of  voting  stock of which  such  person is the
     beneficial owner that are not then outstanding being deemed outstanding for
     purposes of calculating such percentage) other than any such acquisition by
     the Company or any employee benefit plan of the Company; or

          (ii) any  consolidation  or merger of the  Company  with or into,  any
     other person, any merger of another person with or into the Company, or any
     conveyance,   transfer,   sale,  lease  or  other  disposition  of  all  or
     substantially  all of the assets of the  Company to another  person  (other
     than  (a)  any  such   transaction   (x)  which  does  not  result  in  any
     reclassification,  conversion,  exchange  or  cancellation  of  outstanding
     shares of Common  Stock and (y)  pursuant to which  holders of Common Stock
     immediately  prior to such  transaction  have the  entitlement to exercise,
     directly or indirectly, 50% or more of the total voting power of all shares
     of capital stock entitled to vote generally in the election of directors of
     the continuing or surviving person  immediately  after such transaction and
     (b) any  merger  which is  effected  solely to change the  jurisdiction  of
     incorporation of the Company and results in a reclassification,  conversion
     or exchange of  outstanding  shares of Common  Stock into solely  shares of
     common stock);

provided, however, that a Change in Control shall not be deemed to have occurred
if the  Closing  Price  for any  five  Trading  Days  within  the  period  of 10
consecutive  Trading Days (x) ending  immediately after the later of the date of
the Change in Control  or the date of the public  announcement  of the Change in
Control  (in the case of a Change in  Control  under  Clause  (i)  above) or (y)
ending  immediately prior to the date of the Change in Control (in the case of a
Change in Control  under  Clause (ii)  above)  shall equal or exceed 105% of the
Conversion Price in effect on each such Trading Day.

                                       11

<PAGE>

     4. Events of Default.  (a) "Event of Default",  wherever used herein, means
any one of the following  events  (whatever the reason for such Event of Default
and whether it shall be voluntary or  involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):

          (1) default in the payment of any interest  upon this Security when it
     becomes due and payable, and continuance of such default for a period of 30
     days; or

          (2) default by the Company in the  performance  of its  obligations in
     respect of any  conversion  of this  Security  (or any  portion  hereof) in
     accordance with Section 2; or

          (3)  failure by the  Company to give any notice of a Change of Control
     required to be delivered in accordance with Section 3(a); or

          (4) default in the performance, or breach, of any material covenant or
     warranty of the Company herein (other than a covenant or warranty a default
     in the performance or breach of which is specifically  dealt with elsewhere
     in this  Section  4(a)) and  continuance  of such  default  or breach for a
     period of 30 days after there has been given,  by  registered  or certified
     mail,  to the  Company  by the  holder of this  Security  a written  notice
     specifying  such  default or breach and  requiring  it to be  remedied  and
     stating that such notice is a "Notice of Default" hereunder; or

          (5) a default  under any bond,  debenture,  note or other  evidence of
     indebtedness  for money  borrowed by the Company,  or under any  agreement,
     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  Company,  with a  principal  amount then  outstanding  in excess of
     $1,000,000,  whether  such  indebtedness  now exists or shall  hereafter be
     created,  which default shall  constitute a failure to pay the principal of
     such  indebtedness  (in whole or in any part greater than  $1,000,000) when
     due and payable or shall have resulted in such indebtedness (in whole or in
     any part  greater  than  $1,000,000)  becoming  or being  declared  due and
     payable prior to the date on which it would  otherwise  have become due and
     payable,  without  such  indebtedness  having  been  discharged,   or  such
     acceleration having been rescinded or annulled,  within a period of 15 days
     after there shall have been given,  by registered or certified mail, to the
     Company by the holder of this  Security a written  notice  specifying  such
     default  and  requiring  the  Company  to  cause  such  indebtedness  to be
     discharged  or cause such  acceleration  to be  rescinded  or annulled  and
     stating that such notice is a "Notice of Default" hereunder; or

          (6) the entry by a court having  jurisdiction in the premises of (A) a
     decree or order for relief in respect of the Company in an involuntary case
     or proceeding under any applicable Federal or State bankruptcy, insolvency,
     reorganization  or other similar law or (B) a decree or order adjudging the
     Company a bankrupt or insolvent,  or approving as properly filed a petition
     seeking  reorganization,  arrangement,  adjustment or  composition of or in
     respect of the  Company  under any  applicable  Federal  or State  law,  or
     appointing   a  custodian,   receiver,   liquidator,   assignee,   trustee,
     sequestrator or other similar official of the Company or of any substantial
     part of its  property,  or ordering  the winding up or  liquidation  of its
     affairs, and the

                                       12

<PAGE>

     continuance of any such decree or order for relief or any such other decree
     or order unstayed and in effect for a period of 60 consecutive days; or

          (7) the  commencement by the Company of a voluntary case or proceeding
     under   any   applicable   Federal   or   State   bankruptcy,   insolvency,
     reorganization  or other  similar law or of any other case or proceeding to
     be  adjudicated a bankrupt or insolvent,  or the consent by it to the entry
     of a decree or order for relief in respect of the Company in an involuntary
     case or  proceeding  under  any  applicable  Federal  or State  bankruptcy,
     insolvency,  reorganization  or other similar law or to the commencement of
     any bankruptcy or insolvency  case or proceeding  against it, or the filing
     by it of a petition or answer or consent seeking  reorganization or similar
     relief under any  applicable  Federal or State law, or the consent by it to
     the filing of such petition or to the  appointment of or taking  possession
     by a custodian,  receiver,  liquidator,  assignee, trustee, sequestrator or
     other  similar  official of the Company or of any  substantial  part of its
     property,  or  the  making  by it of  an  assignment  for  the  benefit  of
     creditors,  or the  admission by it in writing of its  inability to pay its
     debts  generally as they become due, or the taking of  corporate  action by
     the Company in furtherance of any such action.

     (b) If an Event of Default  (other  than an Event of Default  specified  in
Section  4(a)(6) or 4(a)(7))  occurs and is continuing,  then in every such case
the holder of this  Security  may  declare  the  principal  hereof to be due and
payable  immediately,  by a notice in writing to the Company,  and upon any such
declaration  such  principal  and all  accrued  interest  thereon  shall  become
immediately due and payable. If an Event of Default specified in Section 4(a)(6)
or 4(a)(7) occurs and is continuing,  the principal of, and accrued interest on,
this Security shall ipso facto become  immediately  due and payable  without any
declaration or other act of the holders.

     5.  Consolidation,  Merger, Etc. (a) The Company shall not consolidate with
or merge into any other person or,  directly or  indirectly,  convey,  transfer,
sell or lease  all or  substantially  all of its  properties  and  assets to any
person, and the Company shall not permit any person to consolidate with or merge
into the Company or, directly or indirectly, convey, transfer, sell or lease all
or substantially all of its properties and assets to the Company, unless:

          (1) in case the Company shall  consolidate  with or merge into another
     person or convey,  transfer,  sell or lease all or substantially all of its
     properties   and  assets  to  any  person,   the  person   formed  by  such
     consolidation  or into  which the  Company  is merged or the  person  which
     acquires  by  conveyance,  transfer  or  sale,  or  which  leases,  all  or
     substantially  all the  properties  and  assets of the  Company  shall be a
     corporation,  limited  liability  company,  partnership or trust,  shall be
     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 agreement supplemental hereto,  executed and delivered to the
     holder of this  Security in form  satisfactory  to the holder,  the due and
     punctual payment of the principal of (and premium,  if any) and interest on
     this Security and the  performance  or observance of every covenant of this
     Security on the part of the Company to be performed or observed,  including
     the conversion  rights  provided herein (which shall  thereafter  relate to
     common stock of such successor,  on a basis reasonably designed to preserve
     the  economic  value to the  holder  of this  Security  of such  conversion
     rights);

                                       13

<PAGE>

          (2) immediately  after giving effect to such  transaction and treating
     any indebtedness which becomes an obligation of the Company or a subsidiary
     of the Company as a result of such  transaction  as having been incurred by
     the  Company  or  such  subsidiary  of the  Company  at the  time  of  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;

          (3) the  Company  has  delivered  to the  holder of this  Security  an
     officers' certificate stating that such consolidation,  merger, conveyance,
     transfer,  sale or lease and, if a  supplemental  agreement  is required in
     connection with such transaction,  such supplemental agreement, comply with
     this Section and that all conditions precedent herein provided for relating
     to such transaction have been complied with; and

          (4)  counsel  for the  Company  has  delivered  to the  holder of this
     Security an opinion of such  counsel  with  respect to such  consolidation,
     merger,  conveyance,  transfer,  sale  or  lease,  and  if  a  supplemental
     agreement  is  required  in   connection   with  such   transaction,   such
     supplemental  agreement,  which  opinion  shall be, in form and  substance,
     reasonably acceptable to such holder and its counsel.

     (b) Upon any  consolidation  of the Company  with, or merger of the Company
into,  any other  person or any  conveyance,  transfer,  sale or lease of all or
substantially all of the properties and assets of the Company in accordance with
Section 5(a), the successor  person formed by such  consolidation  or into which
the Company is merged or to which such  conveyance,  transfer,  sale or lease is
made shall succeed to, and be substituted  for, and may exercise every right and
power of,  the  Company  under  this  Security  with the same  effect as if such
successor person had been named as the Company herein, and thereafter, except in
the case of a lease, the predecessor person shall be relieved of all obligations
and covenants under this Security.

     6.  Payment  in Stock.  (a) The  Company  may elect to pay any  amount  due
hereunder  in respect  of  interest  or  Repurchase  Price in respect  hereof by
delivery of shares of Common Stock if and only if the following  conditions have
been satisfied:

     (1) Any such payment shall be made in five equal  installments,  on each of
the five consecutive  Trading Days ending on and including the third Trading Day
immediately preceding the date when cash payment would otherwise be due, and the
shares of Common Stock  deliverable  in payment of each such  installment  shall
have a fair market value as of the date of such installment of not less than 20%
of the amount of such payment due hereunder. For purposes of this Section 6, the
fair market value of shares of Common Stock shall be equal to 95% of the Closing
Price for the immediately preceding Trading Day;

     (2) In the event any shares of Common Stock to be issued in respect of such
amount due  hereunder  require  registration  under any Federal  securities  law
before  such shares may be freely  transferrable  without  being  subject to any
transfer  restrictions  under the  Securities  Act of 1933 upon  issuance,  such
registration  shall have been completed and shall have become effective prior to
the date of the first such installment;

                                       14

<PAGE>

     (3) In the event any shares of Common Stock to be issued in respect of such
amount due hereunder  require  registration with or approval of any governmental
authority under any State law or any other Federal law before such shares may be
validly  issued or delivered upon issuance,  such  registration  shall have been
completed or have become  effective and such approval  shall have been obtained,
in each case, prior to the date of the first such installment;

     (4) The shares of Common  Stock  deliverable  in payment of such amount due
hereunder  shall have been approved for quotation in the Nasdaq  National Market
immediately prior to the date of the first such installment;

     (5) All shares of Common  Stock  deliverable  in payment of such amount due
hereunder  shall,  upon  issue,  be duly and  validly  issued and fully paid and
non-assessable and free of any preemptive rights; and

     (6) In respect of each such payment date,  the Company shall have given the
holder of this  Security not less than 10 nor more than 15 Trading  Days' notice
of its election to effect payment in respect of such payment date by delivery of
shares of Common  Stock;  provided  that any such  notice in  respect of amounts
payable on a Repurchase Date shall accompany the Company's notice of a Change of
Control relating thereto.

     If all of the  conditions  set forth in this Section 6(a) are not satisfied
in accordance  with the terms  thereof,  any such amount due hereunder  shall be
paid by the Company only in cash.

     Notwithstanding  the foregoing,  at no time will the Company deliver shares
of Common Stock to any holder in  satisfaction  of an obligation to pay interest
or  Repurchase  Price if the number of shares so  delivered,  together  with the
number of shares of Common Stock owned (or deemed for bank  regulatory  purposes
to be owned) by such holder and its  affiliates as  theretofore  notified to the
Company  (in a notice  delivered  not less than five  Trading  Days prior to the
relevant interest payment date, in the case of interest,  or as set forth in the
election  of holder to require  repurchase,  in the case of  Repurchase  Price),
represent more than 4.9% of the Common Stock then outstanding. If the limitation
set forth in the  previous  sentence  would  apply to any payment of interest or
Repurchase  Price,  the Company may elect (by notice to the holder delivered not
less than three Trading Days prior to the relevant interest payment date, in the
case of interest,  or not less than eight  Trading Days prior to the  Repurchase
Date, in the case of  Repurchase  Price) to satisfy a portion of such payment in
shares of Common Stock (up to the maximum number of shares  permitted  under the
limitation set forth in the previous sentence) and the balance in cash.

     (b) Any  issuance of shares of Common  Stock in respect of any  installment
due  hereunder  pursuant to this Section 6 shall be deemed to have been effected
immediately  prior to the  close of  business  on the date of  delivery  of such
installment  and the person or persons in whose name or names any certificate or
certificates  for shares of Common  Stock shall be issuable  upon such  delivery
shall be deemed to have  become on such date the  holder or holders of record of
the shares represented thereby; provided,  however, that in case any installment
shall be due on a date when the stock  transfer  books of the  Company  shall be
closed,  the  person  or  persons  in whose  name or names  the  certificate  or
certificates for such shares are to be issued shall be deemed to have become the
record holder or holders  thereof for all purposes at the opening of business on
the next succeeding day on

                                       15

<PAGE>

which such stock transfer books are open. No payment or adjustment shall be made
for  dividends or  distributions  on any Common  Stock  issued  pursuant to this
Section 6 declared prior to the relevant delivery date.

     (c) No  fractions  of shares shall be issued upon payment made in shares of
Common Stock in respect of this  Security.  Instead of any  fractional  share of
Common Stock which would otherwise be so issuable,  the Company will round up to
the next higher whole share.

     (d) Any issuance and  delivery of  certificates  for shares of Common Stock
pursuant to this  Section 6 shall be made  without  charge to the holder of this
Security for such certificates or for any tax or duty in respect of the issuance
or  delivery  of  such  certificates  or  the  securities  represented  thereby;
provided, however, that the Company shall not be required to pay any tax or duty
which may be payable in respect of any  transfer  involved  in the  issuance  or
delivery of certificates for shares of Common Stock in a name other than that of
the holder of this  Security,  and no such  issuance or  delivery  shall be made
unless and until the person requesting such issuance or delivery has paid to the
Company  the  amount  of  any  such  tax or  duty  or  has  established,  to the
satisfaction of the Company, that such tax or duty has been paid.

     7.  Other.  (a) No  provision  of this  Security  shall alter or impair the
obligation  of the  Company,  which is absolute  and  unconditional,  to pay the
principal  of,  premium,  if any,  and  interest on this  Security at the times,
places and rate,  and in the coin or currency,  herein  prescribed or to convert
this Security as herein provided.

     (b) The Company will give prompt  written  notice to the holder of Security
of any change in the location of the Designated Office.

     (c) The transfer of this Security is registrable  on the Security  Register
of the Company upon surrender of this Security for  registration  of transfer at
the Designated Office,  duly endorsed by, or accompanied by a written instrument
of transfer in form  satisfactory  to the Company  duly  executed by, the holder
hereof or his attorney duly authorized in writing, and thereupon one or more new
Securities,  of authorized  denominations  and for the same aggregate  principal
amount,  will be  issued  to the  designated  transferee  or  transferees.  Such
Securities are issuable only in registered form without coupons in denominations
of $1,000 and any integral multiple thereof. No service charge shall be made for
any such registration of transfer,  but the Company may require payment of a sum
sufficient to recover any tax or other governmental charge payable in connection
therewith.  Prior to due  presentation  of this  Security  for  registration  of
transfer, the Company and any agent of the Company may treat the person in whose
name this Security is registered as the owner thereof for all purposes,  whether
or not this  Security  be  overdue,  and  neither the Company nor any such agent
shall be affected by notice to the contrary.

     Notwithstanding any other provision of this Security, this Security and the
shares of Common Stock issuable upon  conversion  hereof may only be transferred
by the holder of this  Security (a) in the case of the Common  Stock only,  in a
widely  dispersed  registered  public  offering;  (b) to one or more  accredited
investors,  in one or more  transactions,  any one of whom, after such purchase,
would  hold not more than 2 % of the  shares of Common  Stock  then  outstanding
(assuming conversion of any portion of this Security so transferred); (c) to any
person or entity that already controls more

                                       16

<PAGE>

than 50% of the voting securities of the Company prior to such transfer;  or (d)
in a transaction  that complies with the volume and manner of sale  restrictions
of Rule 144 under the Securities  Act of 1933.  The holder of this Security,  by
acceptance thereof,  shall be deemed to have agreed to the foregoing restriction
on transfers.

                                       17

<PAGE>

     (D) THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.

     IN WITNESS  WHEREOF,  the  Company  has  caused  this  Security  to be duly
executed under its corporate seal.

Dated: September __, 1998

                                             CELGENE CORPORATION

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

Attest:

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

<PAGE>

                    ELECTION OF HOLDER TO REQUIRE REPURCHASE

     1. Pursuant to Section 3(a) of this Security, the undersigned hereby elects
to have all or a portion of this Security repurchased by the Company.

     2. The undersigned hereby directs the Company to pay [choose one] (a) it or
(b)  Name:  _______________________;   address:  _____________________;   Social
Security or Other Taxpayer Identification Number, if any: ___________________,in
amount in cash or, at the Company's  election  (subject to the  limitations  set
forth in the Security)  Common Stock valued as set forth in the Security,  equal
to 100 % of the principal  amount to be repurchased  (as set forth below),  plus
interest accrued to the Repurchase Date, as provided herein.

                                            Dated:
                                                  ------------------------------

                                                  ------------------------------
                                                            Signature

Number of shares of Common Stock
owned by the holder and its affiliates:
                                       ------------------------------

Principal amount to be repurchased
(an integral multiple of $1,000):
                                       ------------------------------

Remaining principal amount following such repurchase
(not less than $1,000):
                                       ------------------------------

NOTICE:  The signature to the foregoing  Election must correspond to the name as
written upon the face of this Security in every particular,  without  alteration
or any change whatsoever.

                                CONVERSION NOTICE

     The undersigned  holder of this Security hereby  irrevocably  exercises the
option to convert this Security,  or any portion of the principal  amount hereof
(which is an  integral  multiple  of $1,000)  below  designated,  into shares of
Common Stock  (subject to the  limitation  set forth in the second  paragraph of
Section 2(a) of the Security) in accordance with the terms of this Security, and
directs that such shares,  together  with a check in payment for any  fractional
share and any Security  representing any unconverted principal amount hereof, be
delivered to and be registered in the name of the undersigned unless a different
name has been indicated below. If shares of Common Stock or Securities are to be
registered in the name of a person other than the  undersigned,  the undersigned
will pay all transfer taxes payable with respect thereto. Any amount required to
be paid by the undersigned on account of interest accompanies this Security.

<PAGE>

Dated:
      ------------------------------

                                                  ------------------------------
                                                             Signature

Number of shares of Common Stock
owned by the holder and its affiliates:
                                       ------------------------------

If  shares  or  Securities  are  to be    If only a portion of the Securities is
registered  in the  name  of a  person    to be converted, please indicate:
other than the  holder,  please  print
such person's name and address:

                                          1.   Principal amount to be converted:

                                               $

    ------------------------------
                 Name

                                          2.   Principal amount and denomination
                                               of     Security      representing
                                               unconverted  principal  amount to
                                               be issued:

    ------------------------------
                Address

                                          Amount: $________

                                          Denominations: $________
                                          (any integral multiple of $1,000)
    ------------------------------

Social   Security  or  other  Taxpayer
Identification Number, if any

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