Document:

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                                                                     EXHIBIT 4.7

THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAW, AND MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER THE ACT OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO PHARMION CORPORATION, QUALIFIES AS AN EXEMPT
TRANSACTION UNDER THE ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.

                              PHARMION CORPORATION

                          COMMON STOCK PURCHASE WARRANT

                  PHARMION CORPORATION, a Delaware corporation (the "Company"),
hereby certifies that, for value received, CELGENE CORPORATION, a Delaware
corporation, or its assigns (the "Holder") is entitled, subject to the terms set
forth below, to purchase from the Company, at any time and from time to time
during the period beginning on April 8, 2003 and ending on April 8, 2008 (the
"Expiration Date"), in whole or in part, an aggregate of 1,454,545 fully paid
and non-assessable shares of the common stock, $0.001 par value per share, of
the Company (the "Common Stock") at a purchase price, subject to the provisions
of Paragraph 3 hereof, of $2.75 per share (the "Purchase Price"). The Purchase
Price and the number and character of such shares are subject to adjustment as
provided below, and the term "Common Stock" shall mean, unless the context
otherwise requires, the stock or other securities or property at the time
deliverable upon the exercise of this Warrant. This Warrant is herein called the
"Warrant."

         1.       EXERCISE OF WARRANT. The purchase rights evidenced by this
Warrant shall be exercised by the Holder surrendering this Warrant, with the
form of Exercise Notice at the end hereof duly executed by the Holder, to the
Company at its office in Boulder, Colorado, accompanied by payment, of an amount
(the "Exercise Payment") equal to the Purchase Price multiplied by the number of
shares being purchased pursuant to such exercise, to the Company in cash, by
certified or official bank check, or by wire transfer of the Exercise Payment to
an account specified by the Company; provided, however, that the Holder may
satisfy its obligation to make the Exercise Payment through a "cashless
exercise," in which event the Company shall issue to the Holder the number of
shares of Common Stock determined as follows:

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                                   X = Y [(A-B)/A]
                  where:
                                   X = the number of shares to be issued to the
                                   Holder.

                                   Y = the number of shares with respect to
                                   which this Warrant is being exercised.

                                   A = if the Common Stock is not then publicly
                                   traded, the fair market value of one share of
                                   Common Stock, as determined by the Board of
                                   Directors of the Company in good faith, or,
                                   if the Common Stock is then publicly traded,
                                   the average of the closing prices of the
                                   Common Stock on the securities exchange or
                                   national market system on which the Common
                                   Stock is then traded for the five trading
                                   days immediately prior to (but not including)
                                   the date of exercise.

                                   B = the Purchase Price.

         For purposes of Rule 144 promulgated under the Act, it is intended,
understood and acknowledged that the shares issued in a cashless exercise
transaction shall be deemed to have been acquired by the Holder, and the holding
period for such shares shall be deemed to have commenced, on the date this
Warrant was originally issued.

This Warrant may be exercised for less than the full number of shares of Common
Stock, in which case the number of shares receivable upon the exercise of this
Warrant as a whole, and the sum payable upon the exercise of this Warrant as a
whole, shall be proportionately reduced. Upon any such partial exercise, the
Company at its expense will forthwith issue to the Holder a new Warrant or
Warrants of like tenor calling for the number of shares of Common Stock as to
which rights have not been exercised, such Warrant or Warrants to be issued in
the name of the Holder hereof or his or its nominee (upon payment by the Holder
of any applicable transfer taxes).

         2.       DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as
practicable after the exercise of this Warrant and payment of the applicable
Purchase Price by any of the aforementioned methods, and in any event within
five (5) Business Days thereafter, the Company, at its expense, will cause to be
issued in the name of and delivered to the Holder a certificate or certificates
for the number of fully paid and non-assessable shares to which the Holder shall
be entitled upon such exercise, together with cash in lieu of any fraction of a
share, as hereafter provided. The Company agrees that the shares so purchased
shall be deemed to be issued to the Holder as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. The Company shall pay
any and all issue and other taxes (other than income taxes of the Holder) that
may be payable in respect of the issuance of this Warrant or any issuance or
delivery of shares upon exercise of this Warrant.

         3.       ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The
Purchase Price and the number and type of shares acquirable upon exercise of
this Warrant shall

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be subject to adjustment from time to time upon the occurrence of any of the
events described in this Paragraph 3. Upon each adjustment of the Purchase Price
pursuant to Paragraph 3.1, the registered Holder of this Warrant shall
thereafter be entitled to acquire upon exercise, at the Purchase Price resulting
from such adjustment, the number of shares of Common Stock obtainable by
multiplying the Purchase Price in effect immediately prior to such adjustment by
the number of shares of Common Stock acquirable hereunder immediately prior to
such adjustment and dividing the product thereof by the Purchase Price resulting
from such adjustment.

                  3.1.     Subdivision or Combination of Stock. If the Company
at any time or from time to time subdivides its outstanding shares of Common
Stock into a greater number of shares, the Purchase Price in effect immediately
prior to such subdivision shall be proportionately reduced, and conversely, if
the outstanding shares of Common Stock of the Company are combined into a
smaller number of shares, the Purchase Price in effect immediately prior to such
combination shall be proportionately increased.

                  3.2.     Dividends in Common Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the holders of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) receive or become entitled to receive, without
payment therefor:

                           (a)      Common Stock or any shares of stock or other
securities that are at any time directly or indirectly convertible into or
exchangeable for Common Stock, or any rights, warrants or options to subscribe
for, purchase or otherwise acquire any of the foregoing by way of dividend or
other distribution;

                           (b)      any cash paid or payable otherwise than as a
cash dividend, evidences of the Company's indebtedness or any other asset; or

                           (c)      Common Stock or additional stock or other
securities or property (including cash) by way of distribution, spinoff,
split-up, reclassification, combination of shares or similar corporate
rearrangement or otherwise (other than shares of Common Stock issued as a stock
split, which are covered by the terms of Paragraph 3.1),

then, and in each such case, the Holder shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Common
Stock receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (b) and (c) above) that the Holder would
have received or been entitled to receive had it been the holder of record of
such number of shares of Common Stock as of the date on which holders of Common
Stock received or became entitled to receive such shares or all other additional
stock and other securities and property.

                  3.3.     Reorganization, Reclassification, Consolidation,
Merger or Sale. If any recapitalization, reclassification or reorganization of
the capital stock of the Company, or any consolidation or merger of the Company
with another entity, or the sale of all or substantially all of its assets in
one or a series of transactions, or other transaction, is effected and, in
connection

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therewith, holders of Common Stock are entitled to receive stock, securities, or
other assets or property (an "Organic Change"), then, as a condition of such
Organic Change, lawful and adequate provisions shall be made by the Company
whereby the Holder shall thereafter have the right to purchase and receive (in
lieu of the shares of the Common Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby)
upon exercise of this Warrant such shares of stock, securities or other assets
or property as may be issued or payable with respect to or in exchange for a
number of outstanding shares of such Common Stock equal to the number of shares
of such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby. In the event of any Organic Change,
appropriate provision shall be made by the Company with respect to the rights
and interests of the Holder of this Warrant to the end that the provisions
hereof (including, without limitation, provisions for adjustments of the
Purchase Price and of the number and type of shares and other securities and
property purchasable and receivable upon the exercise of this Warrant) shall
thereafter be applicable, in relation to any shares of stock, securities or
other assets or property thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger or sale unless, prior to
the consummation thereof, the successor entity (if other than the Company)
resulting from such consolidation or merger or the entity purchasing such assets
shall assume by written instrument delivered to the Company and to the Holder
the obligation to deliver to the Holder such shares of stock, securities or
other assets or property as, in accordance with the foregoing provisions, the
Holder may be entitled to purchase, as well as the obligations of the Company
set forth in the immediately preceding sentence. The above provisions shall
similarly apply with respect to successive recapitalizations, reclassifications,
reorganizations, consolidations, mergers, sales or other transactions.

                  3.4.     Adjustments to Purchase Price for Certain Diluting
Issues. In the event that after the date hereof any transaction or event, other
than those described in Paragraphs 3.1 through 3.3 above, occurs which, pursuant
to the provisions of the Company's Third Restated Certificate of Incorporation
(as the same may be amended or restated, the "Certificate of Incorporation"),
results in a change in the conversion price of the Company's Series C Preferred
Stock, par value $0.001 per share (the "Series C Preferred Stock"), whether by
reason of the full-ratchet or weighted average antidilution calculations
pertaining to the Series C Preferred Stock, then simultaneously with such change
in the conversion price of the Series C Preferred Stock, the Purchase Price
shall be reset to equal 1.316 times the new conversion price of the Series C
Preferred Stock. In respect of any such adjustment, the adjusted Purchase Price
will be determined by reference to the provisions of the Company's Certificate
of Incorporation as they shall be in effect at the time of any such transaction
or event, and nothing herein contained shall be deemed to limit the Company's
right, upon receipt of the appropriate consent of the holders of the Series C
Preferred Stock, to modify the antidilution provisions applicable to the Series
C Preferred Stock or to require the consent of the Holder to any such
modification.

                  3.5.     Certain Events. If any change in the outstanding
Common Stock of the Company or any other event occurs as to which the other
provisions of this Paragraph 3 are not strictly applicable or if strictly
applicable would not fairly protect the rights of the Holder in accordance with
such provisions, then the Board of Directors of the Company shall make an
adjustment in the number, class and kind of shares available under this Warrant,
the Purchase Price or the application of such provisions, so as to give the
Holder upon exercise of this Warrant the total number, class and kind of shares
as it would have owned had this Warrant been

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exercised prior to the event and had it continued to hold such shares until
after the event requiring adjustment.

                  3.6.     Notices of Adjustments.

                           (a)      Immediately upon any adjustment in the
number or type of shares subject to this Warrant or the Purchase Price, the
Company shall give written notice thereof to the Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment, the
adjusted Purchase Price and the adjusted number or type of shares of Common
Stock or other securities or property issuable upon exercise hereof (as
applicable) and describing the transactions giving rise to such adjustment.

                  3.7.     Notices of Corporate Events. If the Company (i)
declares a dividend or any other distribution of cash, securities or other
property in respect of its Common Stock, (ii) authorizes or approves, enters
into any agreement contemplating or solicits stockholder approval for any
Organic Change or (iii) authorizes the voluntary dissolution, liquidation or
winding up of the affairs of the Company, then the Company shall deliver to the
Holder a notice describing the material terms and conditions of such transaction
at least 20 Business Days prior to the applicable record or effective date on
which a person would need to hold Common Stock in order to participate in or
vote with respect to such transaction, and the Company will take all steps
reasonably necessary in order to ensure that the Holder is given the practical
opportunity to exercise this Warrant prior to such time so as to participate in
or vote with respect to such transaction. For purposes of this Warrant,
"Business Day" shall mean any day (except Saturday or Sunday) on which banks are
scheduled to be open to conduct business in the City of New York.

                  3.8.     No Fractional Shares. No fractional shares shall be
issued upon the exercise of this Warrant, and the number of shares of Common
Stock to be issued shall be rounded to the nearest whole share (including a
fraction equating to .5000 being rounded up to the next whole number). The
number of shares issuable upon exercise shall be determined on the basis of the
amount of the Exercise Payment paid by the Holder and the number of shares of
Common Stock issuable upon such exercise of this Warrant.

                  3.9.     Reservation of Stock Issuable Upon Exercise. The
Company shall at all times reserve and keep available, free from preemptive
rights, out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the exercise of this Warrant, such number of its shares
of Common Stock as shall from time to time be sufficient to effect the exercise
of this Warrant for the maximum number of shares of Common Stock issuable upon
exercise of this Warrant; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the exercise
of this Warrant for the maximum number of shares of Common Stock issuable upon
exercise of this Warrant, in addition to such other remedies as shall be
available to the Holder, the Company will take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes, including, without limitation, engaging in best efforts to obtain the
requisite stockholder approval of any necessary amendment to the Certificate of
Incorporation.

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                  3.10.    Fully Paid Shares. All shares of capital stock issued
upon the exercise of this Warrant shall be validly issued, fully paid and
non-assessable

         4.       REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) reasonably satisfactory
in form and amount to it, or (in the case of mutilation) upon surrender and
cancellation thereof, the Company will issue, in lieu thereof, to the Holder a
new Warrant of like tenor.

         5.       REMEDIES. The Company stipulates that the remedies at law of
the Holder in the event of any default or threatened default by the Company in
the performance of or compliance with any of the terms of this Warrant are not
and will not be adequate, and that the same may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation or threatened violation of any of the terms
hereof or otherwise, without the need to post a bond or other security.

         6.       NEGOTIABILITY, ETC. This Warrant is issued upon the following
terms, to all of which each taker or owner hereof consents and agrees:

                  6.1.     Title. Subject to the legend appearing on the first
page hereof, title to this Warrant may be transferred by endorsement (by the
Holder executing the form of assignment at the end hereof) and delivery in the
same manner as in the case of a negotiable instrument transferable by
endorsement and delivery.

                  6.2.     Possession. Any person in possession of this Warrant
properly endorsed is authorized to represent himself as absolute owner hereof
and is granted power to transfer absolute title hereto by endorsement and
delivery hereof to a bona fide purchaser hereof for value; each prior taker or
owner waives and renounces all of his equities or rights in this Warrant in
favor of every such bona fide purchaser, and every such bona fide purchaser
shall acquire title hereto and to all rights represented hereby.

                  6.3.     Registered Holder. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered Holder as the
absolute owner hereof for all purposes without being affected by any notice to
the contrary.

                  6.4.     No Voting Rights Prior to Exercise. Prior to the
exercise of this Warrant, the Holder shall not be entitled to any rights of a
shareholder of the Company with respect to shares for which this Warrant shall
be exercisable, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided herein.

                  6.5.     Transfer Taxes. The Company shall not be required to
pay any Federal or state transfer tax or charge that may be payable in respect
of any transfer involved in the transfer or delivery of this Warrant or the
issuance or delivery of certificates for Common Stock in a name other than that
of the registered Holder or to issue or deliver any certificates for Common
Stock upon the exercise of this Warrant until any and all such taxes and charges
shall have been

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paid by the Holder or until it has been established to the Company's reasonable
satisfaction that no such tax or charge is due.

         7.       SUBDIVISION OF RIGHTS. This Warrant (as well as any new
warrants issued pursuant to the provisions of this paragraph) is exchangeable,
upon the surrender hereof by the Holder, at the principal office of the Company
for any number of new warrants of like tenor and date representing in the
aggregate the right to subscribe for and purchase the number of shares of Common
Stock which may be subscribed for and purchased hereunder.

         8.       MAILING OF NOTICES, ETC. So long as this Warrant remains
outstanding, the Company shall maintain an office or agency (which shall
initially be the principal place of business of the Company, located at 2525
28th Street, Boulder, Colorado 80301) where notices, presentations and demands
to or upon the Company in respect of this Warrant may be given. All such
notices, presentations and demands shall be delivered (personally, by overnight
courier or by telecopier) or mailed to such address and shall be effective on
the date so delivered or three Business Days after the date so mailed.

         All notices to be given by the Company to the Holder in respect of this
Warrant shall be delivered (personally, by overnight courier or by telecopier)
or mailed to the address of the Holder set forth on the records of the Company
or such other address as shall be designated in writing by the Holder to the
Company and shall be effective on the date so delivered or three Business Days
after the date so mailed.

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         9.       HEADINGS, ETC. The headings in this Warrant are for purposes
of reference only, and shall not limit or otherwise affect the meaning hereof.

         10.      CHANGE, WAIVER, ETC. Neither this Warrant nor any term hereof
may be changed, waived, discharged or terminated orally but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.

         11.      SEVERABILITY. Any provision of this Warrant that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Warrant or affecting the validity
or enforceability of such provision in any other jurisdiction

         12.      BINDING EFFECT. This Warrant shall be binding upon the Company
and its successors and permitted assigns, and shall insure to the benefit of the
Holder and its successors and permitted assigns.

         13.      GOVERNING LAW; JURISDICTION. THIS WARRANT SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. The Company
hereby submits to the jurisdiction of the federal or state courts located within
the City of New York, State of New York for the conduct of any suit, action or
proceeding arising out of or relating to this Warrant. The Company hereby agrees
that the Holder may effect service of process upon the Company by delivery
(other than facsimile) in the manner provided for the giving of notices under
Paragraph 8.

                                                     PHARMION CORPORATION

                                                     By: /s/ Patrick J. Mahaffy
                                                         ----------------------
                                                     Name: Patrick J. Mahaffy
                                                     Title: President and CEO

Dated: April 8, 2003

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                  [TO BE SIGNED ONLY UPON EXERCISE OF WARRANT]

                                 EXERCISE NOTICE

Pharmion Corporation
2525 28th Street
Boulder, Colorado 80301
Attention: Chief Financial Officer

The undersigned hereby elects to purchase, pursuant to the provisions of the
Warrant issued by Pharmion Corporation and held by the undersigned, the original
of which is attached hereto, _______________ shares of Common Stock issuable
upon the exercise of such Warrant and (check the applicable box):

[ ]      Tenders herewith payment of the Exercise Payment (as defined in the
         Warrant) in full in the form of cash, certified check or official bank
         check in the amount of $__________________.

[ ]      Confirms that payment of the Exercise Payment (as defined in the
         Warrant) in full by means of a wire transfer in the amount of
         $__________________ has been made to the Company.

[ ]      Elects to effect a "cashless exercise" of the Warrant as described in
         Section 1 of the Warrant with respect to the number of shares indicated
         above as to which this Warrant is being exercised.

The undersigned requests that the certificates for such shares be issued in the
name of, and be delivered to ______________________, whose address is
________________________ [and that a new Warrant for the remaining shares be
issued in the name of, and be delivered to ______________________, whose address
is__________________ ].

Dated:

________________________
                                                        ________________________

(Signature must conform in all respects to name of Holder as specified on the
face of the Warrant)

                                                     ___________________________
                                                                Address

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                  [TO BE SIGNED ONLY UPON TRANSFER OF WARRANT]

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ____________________________ the right represented by the within Warrant to
purchase __________________ shares of Common Stock of Pharmion Corporation to
which the within Warrant relates, and appoints ____________________ attorney to
transfer said right on the books of Pharmion Corporation, with full power of
substitution in the premises.

Dated:

_________________________________

                                               _________________________________

(Signature must conform in all respects to name of Holder as specified on the
face of the Warrant)

                                                   _____________________________
                                                               Address

IN THE PRESENCE OF:

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                                                                     EXHIBIT 4.8

THIS NOTE AND THE SECURITIES ISSUABLE UPON ITS CONVERSION HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND MAY NOT BE TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT FOR THE NOTE AND
THE UNDERLYING SECURITIES UNDER THE SECURITIES ACT IS IN EFFECT OR (II) THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL, WHICH OPINION IS SATISFACTORY TO THE
COMPANY, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT, OR (III) SUCH OFFER OR TRANSFER IS MADE IN ACCORDANCE WITH THE
PROVISIONS OF REGULATION S UNDER THE SECURITIES ACT. HEDGING TRANSACTIONS
INVOLVING THIS NOTE AND THE UNDERLYING SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT.

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

                              PHARMION CORPORATION
                    CONVERTIBLE SUBORDINATED PROMISSORY NOTE

$2,000,000                                                        April 11, 2003

                  PHARMION CORPORATION, a Delaware corporation (the "Company"),
for value received, hereby promises to pay to PENN PHARMACEUTICALS HOLDINGS
LIMITED (the "Purchaser"), or its registered assigns, the principal amount of
TWO MILLION dollars ($2,000,000). The Purchaser and any registered assigns
thereof are referred to as the "Holder." This Note is originally being issued
pursuant to the Securities Purchase Agreement dated the date hereof (the
"Securities Purchase Agreement"), by and between the Company and the Purchaser,
and the Holder is entitled to all of the benefits of the Securities Purchase
Agreement, and may enforce the agreements contained herein and therein and
exercise the remedies provided for hereby and thereby or otherwise available in
respect hereof and thereof, all in accordance with the terms hereof and thereof.
Capitalized terms used and not defined herein shall have the meanings ascribed
to them in the Securities Purchase Agreement. The following terms shall apply to
this Note:

         1.       Principal and Interest Payments.

                  The principal amount of this Note shall be due and payable in
full upon April 11, 2008 (the "Maturity Date"). Interest (a) shall accrue on the
unpaid principal amount of this Note from the date hereof at the rate of 6% per
annum, (b) shall be compounded semi-annually on October 11 and April 11 of each
year and (c) shall be due and payable in cash (i) on each April 11, commencing
on April 11, 2004, (ii) on the Maturity Date of this Note, and (iii) after such
Maturity Date, on demand. Any principal and interest not paid when due (whether
at maturity or at a date fixed for prepayment or repurchase or otherwise) shall
bear interest from

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and including the date due to but excluding the date paid in full at the rate of
10% per annum. Interest shall be calculated on the basis of the actual number of
days elapsed in a 365-day year and shall in no event exceed the maximum rate
permitted under applicable law.

         2.       Optional Prepayment.

                  The principal amount of this Note may be prepaid without
penalty in whole or in part, together with accrued and unpaid interest thereon,
at the option of the Company upon delivery of written notice to the Holder
("Prepayment Notice") specifying a prepayment date (the "Prepayment Date") no
earlier than twenty (20) days nor later than thirty (30) days subsequent to the
delivery of such notice, provided, however, that no such Prepayment Notice shall
be issued unless the average closing price of a share of the Company's common
stock, $0.001 par value per share (the "Common Stock"), on the principal
securities market on which such shares shall then be traded for a twenty (20)
consecutive trading-day period ending within five (5) days of the issuance of
the Prepayment Notice shall have equaled or exceeded $3.75 per share
(appropriately adjusted for any stock split or combination or any stock dividend
or other recapitalization affecting such shares after the date hereof). The term
"Common Stock" shall include, unless the context otherwise requires, the stock
or other securities or property at the time deliverable upon conversion of this
Note.

         3.       Conversion.

                  3.1.     Conversion.

                  (a)      The Holder shall have the right at any time prior to
the Maturity Date or a Prepayment Date to convert in whole or in part the unpaid
principal of this Note, and accrued and unpaid interest thereon, into such
number of fully-paid and nonassessable shares of Common Stock as is determined
by dividing the aggregate amount of principal and interest to be converted by
the conversion price in effect on the date this Note is surrendered for
conversion (the "Conversion Price"); provided, that, following any Prepayment
Date, a Holder shall continue to have the right to convert any principal of this
Note that remains unpaid, together with accrued and unpaid interest thereon. The
initial Conversion Price shall be $2.75 per share of Common Stock. Such initial
Conversion Price shall be subject to adjustment as set forth in Paragraph 4.

                  (b)      The Holder shall notify the Company of its intention
to convert all or a portion of this Note pursuant to this Paragraph 3.1. Within
five (5) Business Days after the date of such notice of intention, the Company
shall deliver to the Holder a certificate, signed by the Company's Chief
Executive Officer and Chief Financial Officer, to the effect that: (i) since the
end of the Company's most recently completed fiscal year, there has been no
material adverse change in the business, assets, properties, liabilities,
condition (financial or otherwise) or results of operations of the Company or
any of its subsidiaries; (ii) there is no material action, suit or proceeding,
or governmental inquiry or investigation, pending, or, to the best of the
Company's knowledge, threatened, against the Company or any of its subsidiaries;
and (iii) neither the Company nor, to the best of the Company's knowledge, any
other party thereto is in default in any material respect of any of its
obligations under any material agreement or contract of the Company. If, for any
reason, the Company is unable to certify as to any of the above matters, it
shall so notify the Holder, and shall deliver a certificate as to the remaining
matters, within such

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five (5) Business Day period. The delivery of any certificate by the Company to
the Holder pursuant to this Paragraph 3.1(b) shall not obligate the Holder to
convert this Note.

                  3.2.     Automatic Conversion. The principal amount of this
Note, together with accrued and unpaid interest thereon, shall be automatically
converted into shares of Common Stock at the Conversion Price then in effect,
immediately upon the closing of a sale of the Common Stock in a firm commitment
underwritten public offering pursuant to a registration statement under the
Securities Act, the public offering price of which is not less than $3.75 per
share (appropriately adjusted for any stock split, dividend, combination or
other recapitalization affecting such shares after the date hereof) and which
results in aggregate cash proceeds to the Company of no less than $50,000,000
(net of underwriting discounts and commissions) (a "Qualifying IPO").

                  3.3.     Mechanics of Conversion. Before any Holder of this
Note shall be entitled to receive the Common Stock into which this Note has been
converted, such Holder shall surrender this Note duly endorsed at the Company's
principal corporate office and, if such conversion is being made pursuant to
Paragraph 3.1, shall give written notice to the Company, at its principal
corporate office, of the election to convert this Note, further stating therein
the amount of the principal and interest to be converted and the name or names
in which the certificate or certificates for the Common Stock are to be issued.
The Company shall, as soon as practicable after such surrender of this Note,
issue and deliver to such Holder at the address specified by such Holder, or to
the nominee or nominees of such Holder, a certificate or certificates for the
Common Stock, together with any other securities and property, to which such
person or persons shall be entitled as aforesaid. Except as otherwise provided
in Paragraph 3.2, such conversion shall be deemed to have been made immediately
prior to the close of business on the date on which this Note shall have been
surrendered for conversion and the person or persons entitled to receive the
Common Stock shall be treated for all purposes as the record holder or holders
of such Common Stock as of such date. If the conversion pursuant to Paragraph
3.1 is in connection with an underwritten offering of securities registered
pursuant to the Securities Act, the conversion may, at the option of the Holder
of this Note, be conditioned upon the closing with the underwriters of the sale
of securities pursuant to such offering, in which event the Holder shall not be
deemed to have converted this Note until immediately prior to the closing of
such sale of securities. Upon any partial conversion of this Note, the Company,
at its expense, will forthwith issue and deliver to the Holder a new Note in a
principal amount equal to the unconverted principal amount of the surrendered
Note, such new Note to be dated and to bear interest from the date to which
interest has been paid on the surrendered Note.

         4.       Adjustments.

                  4.1.     Subdivision or Combination of Stock. In the event the
Company should at any time or from time to time after the date hereof subdivide
its outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision shall be
proportionately reduced, and conversely, if the outstanding shares of Common
Stock of the Company are combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.

                  4.2.     Dividends in Common Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the holders of Common
Stock (or any shares of stock or other

                                       3

<PAGE>

securities at the time receivable upon the conversion of this Note) receive or
become entitled to receive, without payment therefor:

                  (a)      Common Stock or any shares of stock or other
securities that are at any time directly or indirectly convertible into or
exchangeable for Common Stock, or any rights, warrants or options to subscribe
for, purchase or otherwise acquire any of the foregoing by way of dividend or
other distribution;

                  (b)      any cash paid or payable otherwise than as a cash
dividend, evidences of the Company's indebtedness or any other asset; or

                  (c)      Common Stock or additional stock or other securities
or property (including cash) by way of distribution, spinoff, split-up,
reclassification, combination of shares or similar corporate rearrangement or
otherwise (other than shares of Common Stock issued as a stock split, which are
covered by the terms of Paragraph 4.1),

then, and in each such case, the Holder shall, upon the conversion of this Note,
be entitled to receive, in addition to the number of shares of Common Stock
receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (b) and (c) above) that the Holder would
have received or been entitled to receive had it been the holder of record of
such number of shares of Common Stock as of the date on which holders of Common
Stock received or became entitled to receive such shares or all other additional
stock and other securities and property.

                  4.3.     Reorganization, Reclassification, Consolidation,
Merger or Sale. If any recapitalization, reclassification or reorganization of
the capital stock of the Company, or any consolidation or merger of the Company
with another entity, or the sale of all or substantially all of its assets in
one or a series of transactions, or other transaction, is effected and, in
connection therewith, holders of Common Stock are entitled to receive stock,
securities, or other assets or property (an "Organic Change"), then, as a
condition of such Organic Change, lawful and adequate provisions shall be made
by the Company whereby the Holder shall thereafter have the right to receive (in
lieu of the shares of the Common Stock of the Company immediately theretofore
receivable upon the conversion of this Note) upon conversion of this Note such
shares of stock, securities or other assets or property as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such stock immediately
theretofore receivable upon the conversion of this Note. In the event of any
Organic Change, appropriate provision shall be made by the Company with respect
to the rights and interests of the Holder of this Note to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the Conversion Price and of the number and type of shares and other securities
and property receivable upon the conversion of this Note) shall thereafter be
applicable, in relation to any shares of stock, securities or other assets or
property thereafter deliverable upon the conversion hereof. The Company shall
not effect any such consolidation, merger or sale unless, prior to the
consummation thereof, the successor entity (if other than the Company) resulting
from such consolidation or merger or the entity purchasing such assets shall
assume by written instrument delivered to the Company and to the Holder the
obligation to deliver to the Holder such shares of stock, securities or other
assets or property as, in accordance with the foregoing provisions, the Holder
may be entitled to

                                       4

<PAGE>

receive, as well as the obligations of the Company set forth in the immediately
preceding sentence. The above provisions shall similarly apply with respect to
successive recapitalizations, reclassifications, reorganizations,
consolidations, mergers, sales or other transactions.

                  4.4.     Adjustments to Conversion Price for Certain Diluting
Issues. In the event that after the date hereof any transaction or event, other
than those described in Paragraphs 4.1 through 4.3 above, occurs which, pursuant
to the provisions of the Company's Third Restated Certificate of Incorporation
(as the same may be amended or restated, the "Certificate of Incorporation"),
results in a change in the conversion price of the Company's Series C Preferred
Stock, par value $0.001 per share (the "Series C Preferred Stock"), whether by
reason of the full-ratchet or weighted average antidilution calculations
pertaining to the Series C Preferred Stock, then simultaneously with each such
change in the conversion price of the Series C Preferred Stock, the Conversion
Price shall be reset to equal 1.316 times the new conversion price of the Series
C Preferred Stock. In respect of any such adjustment, the adjusted Conversion
Price will be determined by reference to the provisions of the Company's
Certificate of Incorporation as they shall be in effect at the time of any such
transaction or event, and nothing herein contained shall be deemed to limit the
Company's right, upon receipt of the appropriate consent of the holders of the
Series C Preferred Stock, to modify the antidilution provisions applicable to
the Series C Preferred Stock or to require the consent of the Purchaser to any
such modification.

                  4.5.     Certain Events. If any change in the outstanding
Common Stock of the Company or any other event occurs as to which the other
provisions of this Paragraph 4 are not strictly applicable or if strictly
applicable would not fairly protect the rights of the Holder in accordance with
such provisions, then the Board of Directors of the Company shall make an
adjustment in the number, class and kind of shares available under the Note, the
Conversion Price or the application of such provisions, so as to give the Holder
upon conversion of the Note the total number, class and kind of shares as it
would have owned had the Note been converted prior to the event and had it
continued to hold such shares until after the event requiring adjustment.

                  4.6.     Notices of Adjustments. Immediately upon any
adjustment under this Paragraph 4, the Company shall give written notice thereof
to the Holder, setting forth in reasonable detail and certifying the calculation
of such adjustment, the adjusted Conversion Price and the adjusted number or
type of shares of Common Stock or other securities or property issuable upon
conversion hereof (as applicable) and describing the transactions giving rise to
such adjustment.

                  4.7.     Notices of Corporate Events. If the Company (i)
declares a dividend or any other distribution of cash, securities or other
property in respect of its Common Stock, (ii) authorizes or approves, enters
into any agreement contemplating or solicits stockholder approval for any
Organic Change or (iii) authorizes the voluntary dissolution, liquidation or
winding up of the affairs of the Company, then the Company shall deliver to the
Holder a notice describing the material terms and conditions of such transaction
at least 20 Business Days prior to the applicable record or effective date on
which a person would need to hold Common Stock in order to participate in or
vote with respect to such transaction, and the Company will take all steps
reasonably necessary in order to ensure that the Holder is given the practical
opportunity to convert this Note prior to such time so as to participate in or
vote with respect to such

                                       5

<PAGE>

transaction. For purposes of this Note, "Business Day" shall mean any day
(except Saturday or Sunday) on which banks are scheduled to be open to conduct
business in the City of New York.

                  4.8.     No Fractional Shares. No fractional shares shall be
issued upon the conversion of this Note, and the number of shares of Common
Stock to be issued shall be rounded to the nearest whole share (including a
fraction equating to .5000 being rounded up to the next whole number). The
number of shares issuable upon such conversion shall be determined on the basis
of the unpaid principal and interest of this Note, as the case may be, the
Holder is at the time converting into Common Stock and the number of shares of
Common Stock issuable upon such aggregate conversion.

                  4.9.     Reservation of Stock Issuable Upon Conversion. The
Company shall at all times reserve and keep available, free from preemptive
rights, out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of this Note, such number of its shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of this Note for the maximum number of shares of Common Stock
issuable upon conversion of this Note; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of this Note for the maximum number of shares of Common Stock
then issuable upon conversion hereof, in addition to such other remedies as
shall be available to the Holder, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes, including, without limitation, engaging in best efforts to
obtain the requisite stockholder approval of any necessary amendment to the
Certificate of Incorporation.

                  4.10.    Fully Paid Shares. All shares of capital stock issued
upon the conversion of this Note shall be validly issued, fully paid and
non-assessable.

         5.       Repurchase Upon Change of Control.

                  5.1.     Repurchase Right. In the event of a Change of Control
(as hereinafter defined), the Company will make an offer to repurchase (the
"Change of Control Offer") this Note at a purchase price in cash equal to the
unpaid principal amount hereof, plus accrued and unpaid interest hereon to the
date of repurchase. Within five days following the occurrence of any Change of
Control, the Company shall give written notice of such Change of Control to the
Holder, which notice shall state: (i) that a Change of Control has occurred and
that the Holder has the right to require the Company to repurchase all or a
portion of the Note at a purchase price in cash equal to the unpaid principal
amount thereof, plus accrued and unpaid interest thereon (the "Repurchase
Price") to the date of repurchase (the "Repurchase Date"), which shall be a
Business Day, specified in such notice, that is not earlier than 20 days or
later than 30 days after the date such notice is given; (ii) the then effective
Conversion Price; and (iii) that payment will be made upon presentation and
surrender of the Note. To exercise its repurchase right, the Holder shall give
to the Company, within 10 days after its receipt of the Company's notice,
written notice of its election to accept the Change of Control Offer (the
"Election Notice"), which Election Notice shall set forth the principal amount
of this Note to be repurchased and, if this Note is to be repurchased in part,
the name and address of the person in which the portion thereof to remain
outstanding after such repurchase is to be registered. Notwithstanding the
Holder's election to accept the Change of Control Offer and delivery of the
Election Notice to

                                       6

<PAGE>

the Company, the right of the Holder to convert this Note pursuant to Paragraph
3 shall continue until the close of business on the day immediately preceding
the Repurchase Date. If the Holder has elected to accept the Change of Control
Offer, then, on the Repurchase Date, the Holder shall surrender this Note to the
Company at the office or agency of the Company maintained pursuant to Paragraph
11.1 and shall thereupon be entitled to receive payment of the Repurchase Price
therefor. If the Holder elects to have repurchased less than the entire
principal amount of this Note, the Company shall issue, at its expense, a new
Note representing the portion of the principal amount not so repurchased, which
new Note shall be dated as of the date (prior to the Repurchase Date) to which
interest has been paid on the Note so surrendered.

                  5.2.     Definition of Change of Control. "Change of Control"
means the occurrence of any of the following events:

                  (a)      any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, as amended), directly or indirectly, of more
than 50% of the total voting power represented by the outstanding capital stock
of the Company pursuant to which the holders thereof have the general voting
power under ordinary circumstances to elect at least a majority of the Board of
Directors of the Company (irrespective of whether or not at the time the stock
of any other class shall or might have voting power by reason of the happening
of any contingency) ("Voting Stock");

                  (b)      the Company consolidates with, or merges with or
into, another entity or conveys, transfers, leases or otherwise disposes of all
or substantially all of its assets to any person or entity, or any entity
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the Company
is converted into or exchanged for cash, securities or other property, other
than in each case any such transaction (x) that does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Voting Stock of the Company (except to the extent necessary to reflect a change
in the jurisdiction of incorporation of the Company) or (y) pursuant to which
holders of Voting Stock of the Company immediately prior to such transaction
have the entitlement to exercise, directly or indirectly, more than 50% of the
total voting power represented by the outstanding capital stock of the surviving
or transferee corporation pursuant to which the holders thereof have the general
voting power under ordinary circumstances to elect at least a majority of the
Board of Directors of the surviving or transferee corporation (irrespective of
whether or not at the time the stock of any other class shall or might have
voting power by reason of the happening of any contingency);

                  (c)      during any consecutive two-year period, individuals
who at the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by the Board of
Directors or whose nomination for election by the stockholders of the Company
was approved by a vote of at least a majority of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors then in office; or

                  (d)      the Company is liquidated or dissolved or adopts a
plan of liquidation or dissolution.

                                       7

<PAGE>

         6.       Form of Payments.

                  All payments of principal of and interest on this Note shall
be made in such coin or currency of the United States of America as at the time
of payment shall be legal tender therein for the payment of public and private
debts and shall be payable by wire transfer of immediately available funds to
the account of the Holder at such banking institution as the Holder designates,
or, if requested by the Holder, by certified or official bank check mailed to
the Holder at the address of the Holder set forth on the records of the Company
or such other address as shall be designated in writing by the Holder to the
Company.

         7.       Events of Default.

                  If any of the following events (herein called "Events of
Default") shall happen (for any reason whatsoever and whether such happening
shall be voluntary or involuntary or come about or be effected by operation of
law or pursuant to or in compliance with any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body) and be continuing:

                  7.1.     Payment of Principal. The Company shall fail to pay
the principal sum of this Note when and as the same shall become due and
payable, whether at maturity or at a date fixed for prepayment or repurchase or
by acceleration or otherwise;

                  7.2.     Payment of Interest. The Company shall fail to pay
any installment of interest on this Note according to its tenor when and as the
same shall become due and payable and such default shall continue for more than
ten (10) calendar days;

                  7.3.     Representations and Warranties. Any representation or
warranty made by the Company in the Securities Purchase Agreement or any
document delivered pursuant thereto that is qualified by reference to
materiality or material adverse effect shall prove to have been incorrect in any
respect, or any such representation or warranty that is not so qualified shall
prove to have been incorrect in any material respect, in each case when made;

                  7.4.     Covenants. The Company or any of its subsidiaries
shall default in any material respect in the performance or observance of any
term, covenant, condition or agreement contained in any agreement between or
among the Holder, on the one hand, and the Company and/or any of its
subsidiaries, on the other hand (including, without limitation, the Securities
Purchase Agreement, this Note and the Warrant), and such default shall continue
unremedied for a period of ten (10) calendar days after notice thereof shall
have been given by the Holder to the Company;

                  7.5.     Intellectual Property Licenses. Any material
intellectual property license agreement or arrangement under which the Company
or any of its subsidiaries is a licensee shall have been terminated prior to its
normal expiration date other than by the Company or any of its subsidiaries;

                  7.6.     Other Indebtedness. The holder of any other
indebtedness of the Company or any of its subsidiaries for borrowed money shall
have declared any of such indebtedness to be due and payable prior to its stated
maturity as a result of the occurrence of an event of default under the
instruments evidencing such indebtedness;

                                       8

<PAGE>

                  7.7.     Judgments. A final judgment or judgments for the
payment of money shall be rendered against one or more of the Company and its
subsidiaries which, after application of any insurance coverage relating to such
judgment or judgments, aggregates an amount that exceeds twenty percent (20%) of
the cash and readily marketable securities of the Company as reflected on the
balance sheet included in its then most recently issued quarterly or annual
consolidated financial statements, which judgments are not, within 60 days after
entry thereof, bonded, discharged or stayed pending appeal, or are not
discharged within 60 days after the expiration of such stay;

                  7.8.     Voluntary Reorganization. The Company or any of its
subsidiaries shall (i) apply for or consent to the appointment of a custodian,
receiver, trustee or liquidator of the Company or such subsidiary or any of
their respective properties or assets, (ii) be unable to, or admit in writing
its inability to, pay its debts as they mature, (iii) make a general assignment
for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent or (v)
file a voluntary petition in bankruptcy, or a petition or an answer seeking
reorganization or an arrangement with creditors or to take advantage of any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law or statute, or any answer admitting the material
allegations of a petition filed against it in any proceeding under any such law,
or if corporate action shall be taken by the Company or any such subsidiary for
the purpose of effecting any of the foregoing; or

                  7.9.     Involuntary Reorganization. An order, judgment or
decree shall be entered, without the application, approval or consent of the
Company or any subsidiary, by any court of competent jurisdiction, approving a
petition seeking reorganization of the Company or any of its subsidiaries or of
all or a substantial part of the respective properties or assets of the Company
or any of its subsidiaries, or appointing a custodian, receiver, trustee or
liquidator of the Company or any of its subsidiaries, and such order, judgment
or decree shall continue unstayed and in effect for any period of 60 consecutive
days,

then, and in any such event (other than an Event of Default specified in
Paragraph 7.8 or 7.9), the Holder may declare the principal of, and all accrued
and unpaid interest on, this Note to be due and payable immediately, by a notice
in writing to the Company, whereupon such principal and interest shall become
immediately due and payable; provided, that, in the case of an Event of Default
specified in Paragraph 7.8 or 7.9, the principal of, and all accrued and unpaid
interest on, this Note ipso facto shall become immediately due and payable
without any declaration or other act of the Holder.

         8.       Subordination.

                  8.1.     Subordination to Senior Debt. The Company (for itself
and its successors and assigns) and the Holder agree that the indebtedness
evidenced by this Note ("Subordinated Debt") is subordinated in right of
payment, to the extent and in the manner provided herein, to the prior payment
in full of all Senior Debt (including interest accruing both before and after
any Insolvency or Liquidation Proceedings, whether or not such interest is
allowed in such a Proceeding), and that the subordination is for the benefit of
the holder of Senior Debt.

                  So long as the Senior Debt has not been paid in full in cash,
the Company shall not make any payment on account of the Subordinated Debt,
except required payments of

                                       9

<PAGE>

principal thereof or interest thereon made in accordance with the terms of this
Note and not otherwise prohibited from being made hereunder. These provisions of
subordination are made for the benefit of the holders of Senior Debt from time
to time, and each such holder is hereby made an obligee hereunder the same as if
its name were written herein as such and is entitled to enforce the provisions
hereof without any act or notice of acceptance hereof or reliance hereon.

                  8.2.     Insolvency or Liquidation Proceeding. Upon any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to creditors in any Insolvency or
Liquidation Proceeding with respect to the Company, all amounts due or to become
due under or with respect to all Senior Debt shall first be paid indefeasibly in
full in cash before any payment is made on account of this Note. Upon any such
Insolvency or Liquidation Proceeding, any payment or distribution of assets of
the Company of any kind or character, whether in cash, property or securities,
to which the Holder would be entitled, shall be paid by the Company 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 holder of Senior Debt or its Representative, for application to
the payment of the Senior Debt remaining unpaid until all such Senior Debt has
been paid indefeasibly in full in cash, after giving effect to any concurrent
payment, distribution or provision therefor to or for the holder of Senior Debt.

                  8.3.     No Payment Upon Occurrence of Senior Debt Event of
Default.

                  (a)      (i) In the event of and during the continuation of
any default in the payment of principal of, interest or premium, if any, on any
Senior Debt, or (ii) in the event that any event of default (other than a
payment default) with respect to any Senior Debt shall have occurred and be
continuing and shall have resulted in such Senior Debt becoming or being
declared due and payable prior to the date on which it would otherwise have
become due and payable, or

                  (b)      if any event of default other than as described in
clause (a)(ii) above with respect to any Senior Debt shall have occurred and be
continuing permitting the holder of such Senior Debt (or its Representative) to
declare such Senior Debt due and payable prior to the date on which it would
otherwise have become due and payable,

then no payment shall be made by or on behalf of the Company on account of this
Note, and the Holder shall not be entitled to receive any amount in payment of
this Note, unless and until such default shall have been cured or waived in
writing in accordance with the instruments governing such Senior Debt or the
Senior Debt shall have been indefeasibly paid in full or such acceleration shall
have been rescinded or annulled.

                  So long as the Company shall be prohibited from making any
payment on account of the Subordinated Debt, the Holder of this Note shall not
take any action to (i) collect, demand payment of or accelerate this Note, (ii)
foreclose or otherwise realize upon any security therefor, (iii) initiate any
Insolvency or Liquidation Proceeding or (iv) exercise any other rights or
remedies against the Company under this Note, provided that, in any event, the
Subordinated Debt may only be accelerated after at least ten days' prior written
notice shall have been given to the Representative of the intent of the Holder
of this Note to effect such acceleration.

                                       10

<PAGE>

                  In the event that the Holder receives any payment with respect
to this Note at a time when such payment is prohibited by the provisions hereof,
such payment shall be held by the Holder, in trust for the benefit of, and shall
be paid forthwith over and delivered, upon written request, to, the holder of
Senior Debt as its interest may appear or its Representative under the
agreements pursuant to which Senior Debt has been issued, for application to the
payment of all Senior Debt remaining unpaid to the extent necessary to pay such
Senior Debt in full in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holder of Senior Debt.

                  8.4.     Subrogation. After all of the Senior Debt is
indefeasibly paid in full and until this Note is paid in full, the Holder shall
be subrogated (equally and ratably with all other Pari Passu Debt) to the rights
of holders of Senior Debt to receive distributions applicable to Senior Debt to
the extent that distributions otherwise payable to the Holder have been applied
to the payment of Senior Debt. No payment over by the holders of Subordinated
Debt to the holders of Senior Debt shall, as among the Company, the holders of
Subordinated Debt and the other creditors of the Company (other than the holders
of Senior Debt) be deemed to be a payment or distribution by the Company to or
on account of the Senior Debt.

         8.5.     No Impairment of Note.

                  (a)      Paragraph 8 of this Note defines the relative rights
of the Holder and holder of Senior Debt. Nothing in this Note shall impair, as
among the Company, the Holder and other creditors of the Company (other than
holders of Senior Debt), the obligations of the Company, which are absolute and
unconditional, to pay principal of and interest on this Note in accordance with
its terms or affect the relative rights of the Holder and creditors of the
Company other than their rights in relation to holder of Senior Debt.

                  (b)      No right of the holder of Senior Debt to enforce the
subordination of the indebtedness evidenced by this Note shall be impaired by
any act or failure to act by the Company or the Holder or by the failure of the
Company or the Holder to comply with this Note.

                  (c)      If the holders of Subordinated Debt do not file a
proper claim or proof of debt or other document or amendment thereof in the form
required in any Insolvency or Liquidation Proceeding prior to 30 days before the
expiration of the time to file such claim or proof or other document or
amendment thereof, then each holder of Senior Debt has the right (but not the
obligation) in such Proceeding to, and is hereby irrevocably appointed the
lawful attorney of the holders of Subordinated Debt for the purpose of enabling
the holders of Senior Debt to, demand, sue for, collect, receive and give
receipt for the payments and distributions in respect of Subordinated Debt that
are made in such Proceeding and that are required to be paid or delivered to the
holders of Senior Debt as provided herein, and to file and prove all claims
therefor and to execute and deliver all documents in such Proceeding in the name
of holders of Subordinated Debt or otherwise in respect of such claims, as any
such holder of Senior Debt may reasonably determine to be necessary or
appropriate for the enforcement of the provisions hererof.

                  (d)      Without in any way limiting the generality of the
foregoing provisions, the holder of Senior Debt, may, at any time and from time
to time, without the consent of or notice to the Holder, and in its absolute
discretion, without incurring any liabilities to the Holder and without

                                       11

<PAGE>

impairing or releasing the subordination and other benefits provided in this
Note or the obligations of the Holder to the holder of the Senior Debt, even if
any right of reimbursement or subrogation or other right or remedy of the Holder
is affected, impaired or extinguished thereby, take any action with respect to
the Senior Debt, including, without limitation, any one or more of the
following:

                  (i)      change the manner, place or terms of payment or
change or extend the time of payment of, or renew, exchange, amend, increase or
alter, the terms of any Senior Debt, any security therefor or guaranty thereof
or any liability of any obligor thereon (including any guarantor) to such
holder, or any liability incurred directly or indirectly in respect thereof or
otherwise amend, renew, exchange, extend, modify, increase or supplement in any
manner any Senior Debt or any instrument evidencing or guaranteeing or securing
the same or any agreement under which Senior Debt is outstanding;

                  (ii)     sell, exchange, release, surrender, realize upon,
enforce or otherwise deal with in any manner and in any order any property
pledged, mortgaged or otherwise securing Senior Debt or any liability of any
obligor thereon, to such holder, or any liability incurred directly or
indirectly in respect thereof;

                  (iii)    settle or compromise any Senior Debt or any other
liability of any obligor of the Senior Debt to such holder or any security
therefor or any liability incurred directly or indirectly in respect thereof and
apply any sums by whomsoever paid and however realized to any liability
(including, without limitation, Senior Debt) in any manner or order; and

                  (iv)     fail to take or to record or to otherwise perfect,
for any reason or for no reason, any lien or security interest securing Senior
Debt by whomsoever granted, exercise or delay in or refrain from exercising any
right or remedy against any obligor or any guarantor or any other person, elect
any remedy and otherwise deal freely with any obligor and any security for the
Senior Debt or any liability of any obligor to such holder or any liability
incurred directly or indirectly in respect thereof.

                  (e)      If at any time any payment in respect of Senior Debt
is rescinded or must otherwise be restored or returned by the holder of such
Senior Debt in connection with any Insolvency or Liquidation Proceeding or
otherwise, the obligations of the holders of Subordinated Debt hereunder shall
continue to be effective, or be reinstated as of the time such payment in
respect of Senior Debt is so rescinded or must otherwise be restored, as the
case may be, all as though such payment has not then been made.

                  8.6.     Determination of Senior Debt Representative. Whenever
a distribution is to be made or a notice given to holder of Senior Debt, the
distribution may be made and the notice given to its Representative. Upon any
payment or distribution of assets of the Company referred to in Paragraph 8 of
this Note, the Holder shall be entitled to rely upon any order or decree made by
any court of competent jurisdiction or upon any certificate of such
Representative or of the liquidating trustee or agent or other person making any
distribution to the Holder for the purpose of ascertaining the persons entitled
to participate in such distribution, the holder of the Senior Debt and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to Paragraph 8 of this Note.

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                  8.7.     Amendment and Waiver. The Holder of this Note agrees
that it shall not, without the prior consent of the Representative, agree or
consent to any amendment, waiver or other modification of any provision or any
document relating to Subordinated Debt.

                  8.8.     No Assignment. Holders of Subordinated Debt shall not
assign or transfer the Subordinated Debt without the prior written consent of
the Representative. Notwithstanding the foregoing, the Holder may assign or
transfer the Subordinated Debt to the Purchaser, Penn T Limited ("Penn T"), a
company under common ownership with the Purchaser, any subsidiary or holding
company of the Purchaser or Penn T or any such subsidiary of any such holding
company; provided that the Holder and such assignee provide prompt written
notice of such assignment to the Company and the Representative. At all times,
the Note shall be legended to reflect the subordination provisions hereof.

                  8.9.     Notification. Each holder of Subordinated Debt shall
notify the Representative upon the occurrence of a default or event of default
in respect of the Note, acceleration of the Note, any amendment, waiver or
modification to any document in respect of Subordinated Debt and any proposed
transfer of the Note.

                  8.10.    Definitions. Capitalized terms used in this Paragraph
8 shall have the following meanings:

                  (a)      "Insolvency or Liquidation Proceedings" means (i) any
voluntary or involuntary insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding,
relative to the Company or to the creditors of the Company, as such, or to the
assets of the Company, or (ii) any liquidation, dissolution, reorganization or
winding up of the Company, whether voluntary or involuntary and involving
insolvency or bankruptcy, (iii) any assignment for the benefit of creditors or
any other marshaling of assets and liabilities of the Company, or (iv) the sale
of all or substantially all of the assets of the Company pursuant to
dissolution, liquidation or any other marshalling of assets and liabilities.

                  (b)      "Pari Passu Debt" means any indebtedness of the
Company which by its terms is pari passu in right of payment to this Note.

                  (c)      "Representative" means the trustee, agent or
representative for the Senior Debt.

                  (d)      "Senior Debt" shall mean the $12,000,000 Senior
Convertible Promissory Note of the Company issued on April 8, 2003 to Celgene
Corporation and any subsequent continuations, extensions, modifications,
refinancings, replacements and renewals thereof.

         9.       Exchange or Replacement of Note.

                  9.1.     The Holder, at its option, may in person or by duly
authorized attorney surrender this Note for exchange, at the office or agency of
the Company maintained pursuant to Paragraph 11.1, and receive in exchange
therefor a new Note in the same aggregate principal amount as the unpaid
principal amount of the Note so surrendered, each such new Note to be dated as
of the date to which interest has been paid on the Note so surrendered and
payable to the Holder.

                                       13

<PAGE>

                  9.2.     Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction, or mutilation of this Note,
and in case of loss, theft or destruction of indemnity reasonably satisfactory
to it, and upon surrender and cancellation of this Note, if mutilated, the
Company shall make and deliver to the Holder a new Note of like tenor in lieu of
this Note. Any Note made and delivered in accordance with this paragraph shall
be dated the date hereof.

         10.      Amendments.

                  This Note may not be amended or modified in any respect unless
the Company and the Holder consent and such amendment or modification is set
forth in writing and signed by the Company and the Holder. Any such amendment or
modification shall be binding upon the Holder and future assigns of this Note.

         11.      Office or Agency.

                  11.1.    So long as this Note remains outstanding, the Company
shall maintain an office or agency (which shall initially be the principal place
of business of the Company, located at 2525 28th Street, Boulder, Colorado
80301) where notices, presentations and demands to or upon the Company in
respect of this Note may be given. All such notices, presentations and demands
shall be delivered (personally, by overnight courier or by telecopier) or mailed
to such address and shall be effective on the date so delivered or three
Business Days after the date so mailed.

                  11.2.    All notices to be given by the Company to the Holder
in respect of this Note shall be delivered (personally, by overnight courier or
by telecopier) or mailed to the address of the Holder set forth on the records
of the Company or such other address as shall be designated in writing by the
Holder to the Company and shall be effective on the date so delivered or three
Business Days after the date so mailed.

         12.      Extension of Maturity.

                  If any payment of principal of or interest on this Note shall
become due on a Saturday, Sunday or a public holiday under the laws of the State
of New York or the United States of America, such payment shall be made on the
next succeeding Business Day and such extension of time shall in such case be
included in computing interest in connection with such payment.

         13.      Costs and Expenses.

                  The Company shall pay all reasonable costs and expenses,
including reasonable attorneys' fees, incurred by the Holder in collecting or
enforcing this Note during the continuance of any Event of Default.

         14.      Waivers.

                  14.1.    The Company and all endorsers, sureties and
guarantors of this Note hereby jointly and severally waive presentment, demand
for payment, notice of dishonor, notice

                                       14

<PAGE>

of protest, and protest in connection with the delivery, acceptance,
performance, default, endorsement, enforcement or guaranty of this Note.

                  14.2.    No failure or delay by the Holder in exercising any
power or right hereunder shall operate as a waiver of any power or right, nor
shall any single or partial exercise of any power or right preclude other or
further exercise thereof, or the exercise of any other power or right hereunder
or otherwise. No waiver or modification of the terms hereof shall be valid
unless set forth in writing by the Company and Holder, and then such waiver or
modification shall be effective only in the specific instance and for the
specific purpose for which given. The remedies provided for herein are
cumulative and not exclusive of any remedies provided by law.

         15.      Transfer of Note.

                  Subject to the restrictions on transfer set forth herein and
in the Securities Purchase Agreement, this Note and all rights hereunder are
transferable by the Holder, in whole or in part, at any time and from time to
time. Any transfer shall be effected by the Holder in person or by duly
authorized attorney by surrendering this Note, properly endorsed, at the agency
or office of the Company referred to in Paragraph 11.1. Each taker and holder of
this Note, by taking or holding the same, consents and agrees that this Note,
when endorsed, in blank, shall be deemed negotiable, and, when so endorsed the
holder hereof may be treated by the Company and all other persons dealing with
this Note as the absolute owner hereof for any purposes and as the person
entitled to exercise the rights represented by this Note, or to the transfer
hereof on the books of the Company, any notice to the contrary notwithstanding;
but until such transfer on such books, the Company may treat the registered
holder hereof as the owner hereof for all purposes.

         16.      Governing Law; Jurisdiction. THIS NOTE SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. The Company
hereby submits to the jurisdiction of the federal or state courts located within
the City of New York, State of New York for the conduct of any suit, action or
proceeding arising out of or relating to this Note. The Company hereby agrees
that the Holder may effect service of process upon the Company by delivery
(other than facsimile) in the manner provided for the giving of notices under
Paragraph 11.1.

         17.      Binding Effect. This Note shall be binding upon the Company
and its successors and permitted assigns, and shall insure to the benefit of the
Holder and its successors and permitted assigns.

                                       15

<PAGE>

         18.      Severability. Any provision of this Note that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Note or affecting the validity or enforceability of
such provision in any other jurisdiction.

                  IN WITNESS WHEREOF, PHARMION CORPORATION has caused this Note
to be signed in its corporate name by its officer thereunto duly authorized, and
to be dated as of the day first above written.

                                             PHARMION CORPORATION

                                             By: /s/ Patrick J. Mahaffy
                                                 -------------------------------
                                                 Name:  Patrick J. Mahaffy
                                                 Title: President and CEO

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