Document:

ex10_26.htm

    
      

    

    Exhibit 10.26

    PETROLEUM
DEVELOPMENT CORPORATION

     

    

     

    2004
LONG-TERM EQUITY COMPENSATION PLAN

     

    

     

    AMENDED
AND RESTATED AS OF MARCH 8, 2008

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    TABLE
OF CONTENTS

     

     

    

      
        	 
      	 
      	 
      
	
                ARTICLE
      1.

              	
                ESTABLISHMENT,
      OBJECTIVES AND DURATION

              	
                1

              
	 
      	 
      	 
      
	
                ARTICLE
      2.

              	
                DEFINITIONS

              	
                1

              
	 
      	 
      	 
      
	
                ARTICLE
      3.

              	
                ADMINISTRATION

              	
                4

              
	 
      	 
      	 
      
	
                ARTICLE
      3.

              	
                SHARES
      SUBJECT TO THE PLAN AND MAXIMUM AWARDS

              	
                4

              
	 
      	 
      	 
      
	
                ARTICLE
      4.

              	
                ELIGIBILITY
      AND PARTICIPATION

              	
                5

              
	 
      	 
      	 
      
	
                ARTICLE
      5.

              	
                STOCK
      OPTIONS

              	
                6

              
	 
      	 
      	 
      
	
                ARTICLE
      6.

              	
                STOCK
      APPRECIATION RIGHTS

              	
                6

              
	 
      	 
      	 
      
	
                ARTICLE
      7.

              	
                RESTRICTED
      STOCK

              	
                8

              
	 
      	 
      	 
      
	
                ARTICLE
      8.

              	
                PERFORMANCE
      UNITS AND PERFORMANCE SHARES

              	
                9

              
	 
      	 
      	 
      
	
                ARTICLE
      9.

              	
                PERFORMANCE
      MEASURES

              	
                11

              
	 
      	 
      	 
      
	
                ARTICLE
      10.

              	
                BENEFICIARY
      DESIGNATION

              	
                12

              
	 
      	 
      	 
      
	
                ARTICLE
      11.

              	
                DEFERRALS

              	
                13

              
	 
      	 
      	 
      
	
                ARTICLE
      12.

              	
                RIGHTS
      OF EMPLOYEES

              	
                13

              
	 
      	 
      	 
      
	
                ARTICLE
      13.

              	
                AMENDMENT,
      MODIFICATION, TERMINATION AND ADJUSTMENTS

              	
                13

              
	 
      	 
      	 
      
	
                ARTICLE
      14.

              	
                PAYMENT
      OF PLAN AWARDS AND CONDITIONS THEREON

              	
                13

              
	 
      	 
      	 
      
	
                ARTICLE
      15.

              	
                CHANGE
      IN CONTROL

              	
                14

              
	 
      	 
      	 
      
	
                ARTICLE
      16.

              	
                TAX
      PROVISIONS

              	
                15

              
	 
      	 
      	 
      
	
                ARTICLE
      17.

              	
                INDEMNIFICATION

              	
                17

              
	 
      	 
      	 
      
	
                ARTICLE
      18.

              	
                SUCCESSORS

              	
                18

              
	 
      	 
      	 
      
	
                ARTICLE
      19.

              	
                LEGAL
      CONSTRUCTION

              	
                18

              
	 
      	 
      	 
      
	
                ARTICLE
      20.

              	 
      	 
      

      

      
        
           

        

        
          i 

          
            

          

        

        
           

        

      

    PETROLEUM
DEVELOPMENT CORPORATION

     

    2004
LONG-TERM EQUITY COMPENSATION PLAN

     

    AMENDED
AND RESTATED AS OF MARCH 8, 2008

     

    
      	
              ARTICLE
      1.  

            	
              ESTABLISHMENT,
      OBJECTIVES AND DURATION

            

    

     

    1.1 ESTABLISHMENT
OF THE PLAN.  Petroleum Development Corporation, a Nevada corporation
(hereinafter referred to as the "Company"), hereby amends and restates its
incentive compensation plan known as the “2004 Petroleum Development Corporation
Long-Term Equity Compensation Plan" (hereinafter referred to as the "Plan"), as
set forth in this document.  The Plan permits the grant of
Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights,  Restricted Stock, Performance Shares and Performance
Units.

     

    Subject
to approval by the Company's stockholders, the Plan as amended and restated
shall become effective as of March 8, 2008 (the "Restatement Effective
Date").  The Plan was originally effective as of April 26, 2004 (the
"Effective Date").  The Plan shall remain in effect as provided in
Section 1.3 hereof.

     

    1.2 OBJECTIVES
OF THE PLAN.  The objectives of the Plan are to optimize the
profitability and growth of the Company through incentives which are consistent
with the Company's goals and which link the personal interests of Participants
to those of the Company's stockholders; to provide Participants with an
incentive for excellence in individual performance; and to promote teamwork
among Participants.

     

    1.3 DURATION
OF THE PLAN.  The Plan shall commence on the Effective Date, as
described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 14 hereof, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions.  However, in
no event may an Award be granted under the Plan on or after April 25,
2014.

     

    
      	
              ARTICLE
      2.  

            	
              DEFINITIONS

            

    

     

    Whenever
used in the Plan, the following terms shall have the meanings set forth below,
and when the meaning is intended, the initial letter of the word shall be
capitalized:

     

    2.1 "AFFILIATE"
shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules
and Regulations of the Exchange Act.

     

    2.2 "AWARD"
means, individually or collectively, a grant under this Plan of Nonqualified
Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted
Stock, Performance Shares or Performance Units.

     

    2.3 "AWARD
AGREEMENT" means an agreement entered into by the Company and each Participant
setting forth the terms and provisions applicable to Awards granted under this
Plan.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.4 "BENEFICIAL
OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning ascribed to such term in
Rule 13d-3 of the General Rules and Regulations under the Exchange
Act.

     

    2.5 "BOARD"
or "BOARD OF DIRECTORS" means the Board of Directors of the
Company.

     

    2.6 "CODE"
means the Internal Revenue Code of 1986, as amended from time to
time.

     

    2.7 "COMMITTEE"
means any committee appointed by the Board to administer the Plan, as specified
in Article 3 herein.

     

    2.8 "COMPANY"
means Petroleum Development Corporation, a Nevada corporation, including any and
all Subsidiaries and Affiliates, and any successor thereto as provided in
Article 19 herein.

     

    2.9 "COVERED
EMPLOYEE" means a Participant who, as of the date of vesting and/or payout of an
Award, as applicable, is one of the group of "covered employees," as defined in
the regulations promulgated under Code Section 162(m), or any successor
statute.

     

    2.10 "DIRECTOR"
means any individual who is a member of the Board of Directors of the Company or
any Subsidiary or Affiliates.

     

    2.11 "DISABILITY"
shall have the meaning ascribed to such term in the Participant's governing
long-term disability plan, or if no such plan exists, at the discretion of the
Committee.

     

    Notwithstanding
the preceding, with respect  to any Award subject to Code Section
409A, a Participant shall be considered Disabled if the Participant
—

     

    
      	
              (i)  

            	
              is
      unable to engage in any substantial gainful activity by reason of any
      medically determinable physical or mental impairment which can be expected
      to result in death or can be expected to last for a continuous period of
      not less than twelve (12) months,
or

            

    

     

    
      	
              (ii)  

            	
              is,
      by reason of any medically determinable physical or mental impairment
      which can be expected to result in death or can be expected to last for a
      continuous period of not less than twelve (12) months, receiving income
      replacement benefits for a period of not less than three (3) months under
      an accident and health plan covering Employees of the
    Company.

            

    

     

    2.12 "EFFECTIVE
DATE" shall have the meaning ascribed to such term in Section 1.1
hereof.

     

    2.13 "EMPLOYEE"
means any full-time, active employee of the Company or its Subsidiaries or
Affiliates.  Directors who are not employed by the Company shall not
be considered Employees under this Plan.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    2.14 "EXCHANGE
ACT" means the Securities Exchange Act of 1934, as amended from time to time, or
any successor act thereto.

     

    2.15 "FAIR
MARKET VALUE" shall be determined on the basis of the closing sale price at
which Shares have been sold regular way on the principal securities exchange on
which the Shares are traded or, if there is no such sale on the relevant date,
then on the last previous day on which there was such a sale.

     

    2.16 "FREESTANDING
SAR" means an SAR that is granted independently of any Options, as described in
Article 7 herein.

     

    2.17 "INCENTIVE
STOCK OPTION" or "ISO" means an option to purchase Shares granted under Article
6 herein and which is designated as an Incentive Stock Option and which is
intended to meet the requirements of Code Section 422.

     

    2.18 "INSIDER"
shall mean an individual who is, on the relevant date, an officer, director or
ten percent (10%) beneficial owner of any class of the Company's equity
securities that is registered pursuant to Section 12 of the Exchange Act, all as
defined under Section 16 of the Exchange Act.

     

    2.19 "NON-EMPLOYEE
DIRECTOR" shall mean a Director who is not also an Employee.

     

    2.20 "NON-QUALIFIED
STOCK OPTION" or "NQSO" means an option to purchase Shares granted under Article
6 herein and which is not intended to meet the requirements of Code Section
422.

     

    2.21 "OPTION"
means an Incentive Stock Option or a Nonqualified Stock Option, as described in
Article 6 herein.

     

    2.22 "OPTION
PRICE" means the price at which a Share may be purchased by a Participant
pursuant to an Option.

     

    2.23 "PARTICIPANT"
means an Employee who has been selected to receive an Award or who has
outstanding an Award granted under the Plan.

     

    2.24 "PERFORMANCE-BASED
EXCEPTION" means the performance-based exception from the tax deductibility
limitations of Code Section 162(m).

     

    2.25 "PERFORMANCE
SHARE" means an Award granted to a Participant, as described in Article 9
herein.

     

    2.26 "PERFORMANCE
UNIT" means an Award granted to a Participant, as described in Article 9
herein.

     

    2.27 "PERIOD
OF RESTRICTION" means the period during which the transfer of Shares of
Restricted Stock is limited in some way  (based on the passage of
time, the achievement of performance goals or upon the occurrence of other
events as determined by the

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    Committee,
at its discretion), and the Shares  are subject to a substantial risk
of forfeiture, as provided in Article 8 herein.

     

    2.28 "PERSON"
shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange
Act and used in Sections 13(d)  and 14(d) thereof, including a "group"
as defined in Section 13(d)  thereof.

     

    2.29 "RESTATEMENT
EFFECTIVE DATE" shall have the meaning ascribed to such term in Section
1.1.

     

    2.30 "RESTRICTED
STOCK" means an Award granted to a Participant pursuant to Article 8
herein.

     

    2.31 "RETIREMENT"
shall have the meaning ascribed to such term in the Company's tax-qualified
profit sharing plan.

     

    2.32 "SHARES"
means the shares of common stock of the Company.

     

    2.33 "SPECIFIED
EMPLOYEE"                                                                means,
with respect to the Company or any of its Subsidiaries, and determined as of the
date of an individual's separation from service from the Company (1) any officer
during the prior twelve (12) month period with annual compensation in excess of
$145,000 (as adjusted from time to time under the Code), (2) a 5-percent owner
of the Company's outstanding equity stock during the prior twelve (12) month
period or (3) a 1-percent owner of the Company's outstanding equity stock during
the prior (12) month period with annual compensation in excess of $150,000 (as
adjusted from time under Code), provided that the Company or any of its
Subsidiaries is publicly-traded within the meaning of Section 409A of the Code
on the date of determination.

     

    2.34 "STOCK
APPRECIATION RIGHT" or "SAR" means an Award, granted alone or, in connection
with a related Option, designated as an SAR, pursuant to the terms of Article 7
herein.

     

    2.35 "SUBSIDIARY"
means any corporation, partnership, joint venture or other entity in which the
Company has a majority voting interest (including all divisions, affiliates and
related entities).

     

    2.36 "TANDEM
SAR" means an SAR that is granted in connection with a related Option pursuant
to Article 7 herein, the exercise of which shall require forfeiture of the right
to purchase a Share under the related Option (and when a Share is purchased
under the Option, the Tandem SAR shall similarly be canceled).

     

    
      	
              ARTICLE
      3.  

            	
              ADMINISTRATION

            

    

     

    3.1 THE
COMMITTEE.  The Plan shall be administered by the Compensation
Committee of the Board consisting of not less than two Directors who meet the
"Non-Employee Director" requirements of Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Exchange Act, the "Independent Director"
requirements of Nasdaq Marketplace Rule

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

     4350(c),
and the requirements of Code Section 162(m), or by any other committee appointed
by the Board, provided the members of such committee meet such
requirements.

     

    3.2 AUTHORITY
OF THE COMMITTEE.  Except as limited by law or by the Articles of
Incorporation or Bylaws of the Company, and subject to the provisions herein,
the Committee shall have full power to select Employees who shall participate in
the Plan;  determine the sizes and types of Awards; determine the
terms and conditions of Awards in a manner consistent with the
Plan;  construe and interpret the Plan and any agreement or instrument
entered into under the Plan; establish, amend or waive rules and regulations for
the Plan's administration; and (subject to the provisions of Article 14 herein)
amend the terms and conditions of any outstanding Award to the extent such terms
and conditions are within the discretion of the Committee as provided in the
Plan.  Further, the Committee shall make all other determinations
which may be necessary or advisable for the administration of the Plan. As
permitted by law, the Committee may delegate its authority as identified
herein.

     

    3.3 DECISIONS
BINDING. All determinations and decisions made by the Committee pursuant to the
provisions of the Plan and all related orders and resolutions of the Board shall
be final, conclusive and binding on all persons, including the Company, its
stockholders, Employees, Participants and their estates and
beneficiaries.

     

    
      	
              ARTICLE
      4.  

            	
              SHARES
      SUBJECT TO THE PLAN AND MAXIMUM
AWARDS

            

    

     

    4.1 NUMBER OF
SHARES AVAILABLE FOR GRANTS.  Subject to Sections 4.2 and 4.3 herein,
the maximum number of Shares with respect to which Awards may be granted to
Participants under the Plan shall be seven hundred fifty thousand
(750,000).  Shares issued under the Plan may be either authorized but
unissued Shares (subject to a maximum of seven hundred fifty thousand (750,000)
Shares), treasury Shares or any combination thereof.

     

    Unless
and until the Committee determines that an Award to a Covered Employee shall not
be designed to comply with the Performance-Based Exception, the following rules
shall apply to grants of such Awards under the Plan, subject to Sections 4.2 and
4.3.

     

    
      	
              (a)  

            	
              STOCK
      OPTIONS AND SARS:  The maximum aggregate number of Shares that
      may be subject to Stock Options, with or without Tandem SARs, or
      Freestanding SARs, granted in any one fiscal year to any one Participant
      shall be one hundred thousand
(100,000).

            

    

     

    
      	
              (b)  

            	
              RESTRICTED
      STOCK:  The maximum aggregate grant with respect to Awards of
      Restricted Stock which are intended to qualify for the Performance-Based
      Exception, and which are granted in any one fiscal year to any one
      Participant shall be fifty thousand (50,000)
  Shares.

            

    

     

    
      	
              (c)  

            	
              PERFORMANCE
      SHARES/PERFORMANCE UNITS:  The maximum aggregate payout
      (determined as of the end of the applicable performance period) with
      respect to Awards of Performance Shares or Performance Units which are
      intended to comply with the Performance-Based Exception, and which are
      granted in any one fiscal year to any
one 

            

    

     

    
      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      
        	
                 

              	
                Participant
      shall be equal to the Fair Market Value of fifty thousand (50,000)
      Shares.

              

      

       

       

    

    4.2 LAPSED
AWARDS.  If any Award granted under this Plan is canceled, terminates,
expires or lapses for any reason (with the exception of the termination of a
Tandem SAR upon exercise of the related Option, or the termination of a related
Option upon exercise of the corresponding Tandem SAR), any Shares subject to
such Award again shall be available for the grant of an Award under the
Plan.

     

    4.3 ADJUSTMENTS.  In
the event of any change in corporate capitalization such as a stock split or
stock dividend, or a corporate transaction such as any merger, consolidation,
separation, including a spin-off, or other distribution of stock or property of
the Company, any reorganization  (whether or not such reorganization
comes within the definition of such term in Code Section 368 or any partial or
complete liquidation of the Company, such adjustment shall be made in the number
and class of Shares which are reserved and may be delivered under Section 4.1,
in the number and class of and/or price of Shares subject to outstanding Awards
granted under the Plan, and in the Award limits set forth in subsections 4.1(a),
4.l(b) and 4.l(c), as may be determined to be appropriate and equitable by the
Committee, in its sole discretion, to prevent dilution or enlargement of rights;
provided, however, that the number of Shares subject to any Award shall always
be a whole number.

     

    
      	
              ARTICLE
      5.  

            	
              ELIGIBILITY
      AND PARTICIPATION

            

    

     

    5.1 ELIGIBILITY.  Persons
eligible to participate in this Plan include officers and certain key salaried
Employees of the Company with potential to contribute to the success of the
Company or its Subsidiaries, including Employees who are members of the
Board.

     

    5.2 ACTUAL
PARTICIPATION.  Subject to the provisions of the Plan, the Committee
may, from time to time, select from all eligible Employees those to whom Awards
shall be granted, and shall determine the nature and amount of each
Award.

     

    
      	
              ARTICLE
      6.  

            	
              STOCK
      OPTIONS

            

    

     

    6.1 GRANT OF
OPTIONS.  Subject to the terms and provisions of the Plan, Options may
be granted to Participants in such number, and upon such terms, and at any time
and from time to time as shall be determined by the Committee.

     

    6.2 AWARD
AGREEMENT.  Each Option grant shall be evidenced by an Award Agreement
that shall specify the Option Price, the duration of the Option, the number of
Shares to which the Option pertains, and such other provisions as the Committee
shall determine.  The Award Agreement also shall specify whether the
Option is intended to be an ISO within the meaning of Code Section 422, or an
NQSO, whose grant is intended not to fall under the provisions of Code Section
422.

     

    6.3 OPTION
PRICE.  The Option Price for each grant of an Option under this Plan
shall be at least equal to one hundred percent (100%) of the Fair Market Value
of a Share on the date the Option is granted.  Notwithstanding the
foregoing, no ISO shall be granted to any person who, immediately prior to the
grant, owns stock possessing more than ten percent (10%) of the 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

       

      total
combined voting power of all classes of stock of the Company, unless the Option
Price is at least one hundred ten percent (110%) of the Fair Market Value of a
Share on the date of grant of the Option.

    

     

    6.4 DURATION
OF OPTIONS.  Each Option granted to a Participant shall expire at such
time as  the Committee shall determine at the time of grant; provided,
however, that no Option shall be exercisable later than the tenth anniversary
following the date of its grant and provided further that no Option shall be
exercisable later than the fifth anniversary following the date of its grant for
an ISO granted to a Participant, who at the time of such grant owns stock
possessing more than 10% of the total
combined voting power of all classes of stock of the Company.

     

    6.5 EXERCISE
OF OPTIONS.  Options granted under this Article 6 shall be exercisable
at such times and be subject to such restrictions and conditions as the
Committee shall in each instance approve, which need not be the same for each
grant or for each Participant.

     

    6.6 PAYMENT.  Options
granted under this Article 6 shall be exercised by the delivery of a written
notice of exercise to the Company, setting forth the number of Shares with
respect to which the Option is to be exercised, accompanied by full payment for
the Shares.

     

    The
Option Price upon exercise of any Option shall be payable to the Company in full
either:  (a) in cash or its equivalent; or  (b) by tendering
previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price (provided that the Shares which are
tendered must have been held by the Participant for at least six months prior to
their tender to satisfy the Option Price); or (c) by a combination of (a) and
(b).

     

    The
Committee may also allow cashless exercise as permitted under Federal Reserve
Board's Regulation T, subject to applicable securities law restrictions, or by
any other means which the Committee determines to be consistent with the Plan's
purpose and applicable law.

     

    Subject
to any governing rules or regulations, as soon as practicable after receipt of a
written notification of exercise and full payment, the Company shall deliver to
the Participant, in the Participant's name, Share certificates in an appropriate
amount based upon the number of Shares purchased under the
Option(s).

     

    6.7 RESTRICTIONS
ON SHARE TRANSFERABILITY.  The Committee may impose such restrictions
on any Shares acquired pursuant to the exercise of an Option granted under this
Article 6 as it may deem advisable, including, without limitation, restrictions
under applicable federal securities laws, under the requirements of any stock
exchange or market upon which such Shares are then listed and/or traded, and
under any blue sky or state securities laws applicable to such
Shares.

     

    6.8 TERMINATION
OF EMPLOYMENT.  Each Participant's Option Award Agreement shall set
forth the extent to which the Participant shall have the right to exercise the
Option following termination of the Participant's employment with the
Company.  Such provisions shall be determined in the sole discretion
of the Committee but shall conform to the limitations established in Section
6.4, shall be included in the Award Agreement entered into 

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

       

      with each
Participant, need not be uniform among all Options issued pursuant to this
Article 6, and may reflect distinctions based on the reasons for termination of
employment.

    

     

    6.9 NONTRANSFERABILITY
OF OPTIONS.

     

    
      	
              (a)  

            	
              INCENTIVE
      STOCK OPTIONS.  No ISO granted under the Plan may be sold,
      transferred, pledged, assigned or otherwise alienated or hypothecated,
      other than by will or by the laws of descent and
      distribution.  Further, all ISOs granted to a Participant under
      the Plan shall be exercisable during his or her lifetime only by such
      Participant or the Participant's legal representative (to the extent
      permitted under Code Section 422).

            

    

     

    
      	
              (b)  

            	
              NONQUALIFIED
      STOCK OPTIONS.  Except as otherwise provided in a Participant's
      Award Agreement, no NQSO granted under this Article 6 may be sold,
      transferred, pledged, assigned or otherwise alienated or hypothecated,
      other than by will or by the laws of descent and
      distribution.  Further, except as otherwise provided in a
      Participant's Award Agreement, all NQSOs granted to a Participant under
      this Article 6 shall be exercisable during his or her lifetime only by
      such Participant or the Participant's legal
  representative.

            

    

     

    
      	
              ARTICLE
      7.  

            	
              STOCK
      APPRECIATION RIGHTS

            

    

     

    7.1 GRANT OF
SARS.  Subject to the terms and conditions of the Plan, SARs may be
granted to Participants at any time and from time to time as shall be determined
by the Committee.  The Committee may grant Freestanding SARs, Tandem
SARs or any combination of these forms of SAR.

     

    The
Committee shall have complete discretion in determining the number of SARs
granted to each Participant (subject to Article 4 herein) and, consistent with
the provisions of the Plan, in determining the terms and conditions pertaining
to such SARs.

     

    The grant
price of a Freestanding SAR shall equal the Fair Market Value of a Share on the
date of grant of the SAR.  The grant price of Tandem SARs shall equal
the Option Price of the related Option.

     

    7.2 EXERCISE
OF TANDEM SARS.  Tandem SARs may be exercised for all or part of the
Shares subject to the related Option upon the surrender of the right to exercise
the equivalent portion of the related Option.  A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.

     

    Notwithstanding
any other provision of this Plan to the contrary, with respect to a Tandem SAR
granted in connection with an ISO:  (i) the Tandem SAR will expire no
later than the expiration of the underlying ISO; (ii) the value of the payout
with respect to the Tandem SAR may be for no more than 100% of the difference
between the Option Price of the underlying ISO and the Fair Market Value of the
Shares subject to the underlying ISO at the time 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

      the
Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only when the
Fair Market Value of the Shares subject to the ISO exceeds the Option Price of
the ISO.

    

     

    7.3 EXERCISE
OF FREESTANDING SARS.  Freestanding SARs may be exercised upon
whatever terms and conditions the Committee, in its sole discretion, imposes
upon them.

     

    7.4 SAR
AGREEMENT.  Each SAR grant shall be evidenced by an Award Agreement
that shall specify the grant price, the term of the SAR, and such other
provisions as the Committee shall determine.

     

    7.5 TERM OF
SARS.  The term of an SAR granted under the Plan shall be determined
by the Committee, in its sole discretion; provided, however, that such term
shall not exceed ten years.

     

    7.6 PAYMENT
OF SAR AMOUNT.  Upon exercise of an SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:

     

    
      	
              (a)  

            	
              the
      difference between the Fair Market Value of a Share on the date of
      exercise over the grant price; by

            

    

     

    
      	
              (b)  

            	
              the
      number of Shares with respect to which the SAR is
    exercised.

            

    

     

    At the
discretion of the Committee, the payment upon SAR exercise may be in cash, in
Shares of equivalent value or in some combination thereof.  The
Committee's determination regarding the form of SAR payout shall be set forth in
the Award Agreement pertaining to the grant of the SAR.

     

    7.7 TERMINATION
OF EMPLOYMENT.  Each SAR Award Agreement shall set forth the extent to
which the Participant shall have the right to exercise the SAR following
termination of the Participant's employment with the Company and/or its
Subsidiaries.  Such provisions shall be determined in the sole
discretion of the Committee, shall be included in the Award Agreement entered
into with Participants, need not be uniform among all SARs issued pursuant to
the Plan and may reflect distinctions based on the reasons for termination of
employment.

     

    7.8 NONTRANSFERABILITY
OF SARS.  Except as otherwise provided in a Participant's Award
Agreement, no SAR granted under the Plan may be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution.  Further, except as otherwise
provided in a Participant's Award Agreement, all SARs granted to a Participant
under the Plan shall be exercisable during his or her lifetime only by such
Participant or the Participant's legal representative.

     

    
      	
              ARTICLE
      8.  

            	
              RESTRICTED
      STOCK

            

    

     

    8.1 GRANT OF
RESTRICTED STOCK.  Subject to the terms and provisions of the Plan,
the Committee, at any time and from time to time, may grant Shares of Restricted
Stock to Participants in such amounts as the Committee shall
determine.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    8.2 RESTRICTED
STOCK AGREEMENT.  Each Restricted Stock grant shall be evidenced by a
Restricted Stock Award Agreement that shall specify the Period(s) of
Restriction, the number of Shares of Restricted Stock granted and such other
provisions as the Committee shall determine.

     

    8.3 TRANSFERABILITY.  Except
as provided in this Article 8, the Shares of Restricted Stock granted under the
Plan may not be sold, transferred, pledged, assigned or otherwise alienated or
hypothecated until the end of the applicable Period of Restriction established
by the Committee and specified in the Restricted Stock Award Agreement, or upon
earlier satisfaction of any other conditions, as specified by the Committee in
its sole discretion and as set forth in the Restricted Stock Award Agreement.
All rights with respect to the Restricted Stock granted to a Participant under
the Plan shall be available during his or her lifetime only to such Participant
or the Participant's legal representative.

     

    8.4 OTHER
RESTRICTIONS.  Subject to Article 10 herein, the Committee shall
impose such other conditions and/or restrictions on any Shares of Restricted
Stock granted pursuant to the Plan as it may deem advisable including, without
limitation, a requirement that Participants pay a stipulated purchase price for
each Share of Restricted Stock, restrictions based upon the achievement of
specific performance goals (Company-wide, divisional and/or individual),
time-based restrictions on vesting following the attainment of the performance
goals and/or restrictions under applicable federal or state securities
laws.

     

    The
Company may retain the certificates representing Shares of Restricted Stock in
the Company's possession until such time as all conditions and/or restrictions
applicable to such Shares have been satisfied.

     

    Except as
otherwise provided in this Article 8, Shares of Restricted Stock covered by each
Restricted Stock grant made under the Plan shall become freely transferable by
the Participant after the last day of the applicable Period of
Restriction.

     

    8.5 VOTING
RIGHTS.  Participants holding Shares of Restricted Stock granted
hereunder may be granted the right to exercise full voting rights with respect
to those Shares during the Period of Restriction.

     

    8.6 DIVIDENDS
AND OTHER DISTRIBUTIONS.  During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may be
credited with regular cash dividends paid with respect to the underlying Shares
while they are so held.  The Committee may apply any restrictions to
the dividends that the Committee deems appropriate.  Without limiting
the generality of the preceding sentence, if the grant or vesting of Restricted
Shares granted to a Covered Employee is designed to comply with the requirements
of the Performance-Based Exception, the Committee may apply any restrictions it
deems appropriate to the payment of dividends declared with respect to such
Restricted Shares, such that the dividends and/or the Restricted Shares maintain
eligibility for the Performance-Based Exception.  Notwithstanding the
foregoing, for any Award that is governed by Code Section 409A regarding
non-qualified deferred compensation, the Committee  shall establish
the schedule of any payments of dividends in accordance with the requirements of
Code Section 409A or any guidance promulgated thereunder.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    8.7 TERMINATION
OF EMPLOYMENT.  Each Restricted Stock Award Agreement shall set forth
the extent to which the Participant shall have the right to receive unvested
Restricted Shares following termination of the Participant's employment with the
Company.  Such provisions shall be determined in the sole discretion
of the Committee, shall be included in the Award Agreement entered into with
each Participant, need not be uniform among all Shares of Restricted Stock
issued pursuant to the Plan and may reflect distinctions based on the reasons
for termination of employment; provided, however, that except in the cases of
terminations by reason of death or Disability, the vesting of Shares of
Restricted Stock which qualify for the Performance-Based Exception and which are
held by Covered Employees shall occur at the time they otherwise would have
vested, but for the employment termination.

     

    
      	
              ARTICLE
      9.  

            	
              PERFORMANCE
      UNITS AND PERFORMANCE SHARES

            

    

     

    9.1 GRANT OF
PERFORMANCE UNITS/SHARES.  Subject to the terms of the Plan,
Performance Units and/or Performance Shares may be granted to Participants in
such amounts and upon such terms, and at any time and from time to time, as
shall be determined by the Committee.

     

    9.2 VALUE OF
PERFORMANCE UNITS/SHARES.  Each Performance Unit shall have an initial
value that is established by the Committee at the time of grant.  Each
Performance Share shall have an initial value equal to the Fair Market Value of
a Share on the date of grant.  The Committee shall set performance
goals in its discretion which, depending on the extent to which they are met,
will determine the number and/or value of Performance Units/Shares that will be
paid out to the Participant.  For purposes of this Article 9, the time
period during which the performance goals must be met shall be called a
"Performance Period."

     

    9.3 EARNING
OF PERFORMANCE UNITS/SHARES.  Subject to the terms of this Plan, after
the applicable Performance Period has ended, the holder of Performance
Units/Shares shall be entitled to receive payout on the number and value of
Performance Units/Shares earned by the Participant over the Performance Period,
to be determined as a function of the extent to which the corresponding
performance goals have been achieved.

     

    9.4 FORM AND
TIMING OF PAYMENT OF PERFORMANCE UNITS/SHARES.  Payment of earned
Performance Units/Shares shall be made in a single lump sum following the close
of the applicable Performance Period.  Subject to the terms of this
Plan, the Committee, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash or in Shares (or in a combination thereof)
which have an aggregate Fair Market Value equal to the value of the earned
Performance Units/Shares at the close of the applicable Performance
Period.  Such Shares may be granted subject to any restrictions deemed
appropriate by the Committee.  The determination of the Committee with
respect to the form of payout of such Awards shall be set forth in the Award
Agreement pertaining to the grant of the Award.

     

    At the
discretion of the Committee, Participants may be entitled to receive any
dividends declared with respect to Shares which have been earned in connection
with grants of Performance Units and/or Performance Shares, but not yet
distributed to Participants (such dividends shall be subject to the same
accrual, forfeiture and payout restrictions as apply to dividends earned with
respect to Shares of Restricted Stock, as set forth in Section 8.6
herein). 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

       In
addition, Participants may, at the discretion of the Committee, be entitled to
exercise their voting rights with respect to such Shares.

    

     

    9.5 TERMINATION
OF EMPLOYMENT DUE TO DEATH, DISABILITY OR RETIREMENT.  Unless
determined otherwise by the Committee and set forth in the Participant's Award
Agreement, in the event the employment of a Participant is terminated by reason
of death, Disability or Retirement during a Performance Period, the Participant
shall receive a payout of the Performance Units/Shares which is prorated, as
specified by the Committee in its discretion.

     

    Payment
of earned Performance Units/Shares shall be made at a time specified by the
Committee in its sole discretion and set forth in the Participant's Award
Agreement.  Notwithstanding the foregoing, with respect to Covered
Employees who retire during a Performance Period, payments shall be made at the
same time as payments are made to Participants who did not terminate employment
during the applicable Performance Period.

     

    9.6 TERMINATION
OF EMPLOYMENT FOR OTHER REASONS.  In the event  that a
Participant's employment terminates for any reason other than those reasons set
forth in Section 9.5 herein, all Performance Units/Shares shall be forfeited by
the Participant to the Company unless determined otherwise by the Committee, as
set forth in the Participant's Award Agreement.

     

    9.7 NONTRANSFERABILITY.  Except
as otherwise provided in a Participant's Award Agreement, Performance
Units/Shares may not be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated, other than by will or by the laws of descent and
distribution.  Further, except as otherwise provided in a
Participant's Award Agreement, a Participant's rights under the Plan shall be
exercisable during the Participant's lifetime only by the Participant or the
Participant's legal representative.

     

    
      	
              ARTICLE
      10.  

            	
              PERFORMANCE
      MEASURES

            

    

     

    Unless
and until the Committee proposes for stockholder vote and the Company’s
stockholders approve a change in the general performance measures set forth in
this Article 10, the attainment of which may determine the degree of payout
and/or vesting with respect to Awards to Covered Employees which are designed to
qualify for the Performance-Based Exception, the performance measure(s) to be
used for purposes of such grants shall be chosen from among net income either
before or after taxes, market share, profits, share price, earnings per share,
total stockholder return, return on assets, return on equity, operating income,
return on capital or investment, or economic value added (including, but not
limited to, any or all of such measures in comparison to the Company's
competitors, the industry or some other comparator group).

     

    The
Committee shall have the discretion to adjust the determinations of the degree
of attainment of the preestablished performance goals; provided, however, that
Awards which are designed to qualify for the Performance-Based Exception, and
which are held by Covered Employees, may not be adjusted upward (the Committee
shall retain the discretion to adjust such Awards downward).

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

        In the event
that applicable tax and/or securities laws change to permit Committee discretion
to alter the governing performance measures without obtaining stockholder
approval of such changes, the Committee shall have sole discretion to make such
changes without obtaining stockholder approval.  In addition, in the
event that the Committee determines that it is advisable to grant Awards which
shall not qualify for the Performance-Based Exception, the Committee may make
such grants without satisfying the requirements of Code Section
162(m).

     

    
      	
              ARTICLE
      11.  

            	
              BENEFICIARY
      DESIGNATION

            

    

     

    Each
Participant under the Plan may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his or her death before he or
she receives any or all of such benefit.  Each such designation shall
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Company during the Participant's
lifetime.  In the absence of any such designation, the Participant's
beneficiary shall be paid to the Participant's estate.

     

    
      	
              ARTICLE
      12.  

            	
              DEFERRALS

            

    

     

    The
Committee may permit or require a Participant to defer such Participant's
receipt of the payment of cash or the delivery of Shares that would otherwise be
due to such Participant by virtue of the exercise of an Option or SAR, the lapse
or waiver of restrictions with respect to Restricted Stock, or the satisfaction
of any requirements or goals with respect to Performance
Units/Shares.  If any such deferral election is required or permitted,
the Committee shall, in its sole discretion, establish rules and procedures for
such payment deferrals, provided, however, all deferrals shall be made in
accordance with all applicable requirements of Code Section 409A or any guidance
promulgated thereunder.

     

    
      	
              ARTICLE
      13.  

            	
              RIGHTS
      OF EMPLOYEES

            

    

     

    13.1 EMPLOYMENT.  Nothing
in the Plan shall interfere with or limit in any way the right of the Company to
terminate any Participant's employment at any time, nor confer upon any
Participant any right to continue in the employ of the Company.

     

    13.2 PARTICIPATION.  No
Employee shall have the right to be selected to receive an Award under this Plan
or, having been so selected, to be selected to receive a future
Award.

     

    
      	
              ARTICLE
      14.  

            	
              AMENDMENT,
      MODIFICATION, TERMINATION AND
ADJUSTMENTS

            

    

     

    14.1 AMENDMENT,
MODIFICATION, AND TERMINATION.  Subject to the terms of the Plan, the
Board, upon recommendation of the Committee, may at any time and from time to
time, alter, amend, suspend or terminate the Plan in whole or in
part.

     

    14.2 ADJUSTMENT
OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR NONRECURRING
EVENTS.  The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.3 hereof) 

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

       

      affecting
the Company or the financial statements of the Company or of changes in
applicable laws, regulations or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan; provided that unless the Committee determines otherwise, no such
adjustment shall be authorized to the extent that such authority would be
inconsistent with the Plan or Awards meeting the requirements of Code Section
162(m), as from time to time amended.

    

     

    14.3 AWARDS
PREVIOUSLY GRANTED.  Notwithstanding any other provision of the Plan
to the contrary (but subject to Section 14.2 hereof), no termination, amendment
or modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan without the written consent of the Participant
holding such Award.

     

    14.4 COMPLIANCE
WITH CODE SECTION 162(m). At all times when Code Section 162(m) is applicable,
all Awards granted under this  Plan shall comply with the requirements
of Code Section 162(m); provided, however, that in the event the Committee
determines that such compliance is not desired with respect to any Award or
Awards available for grant under the Plan, then compliance with Code Section
162(m) will not be required.  In addition, in the event that changes
are made to Code Section 162(m) to permit greater flexibility with respect to
any Award or Awards available under the Plan, the Committee may, subject to this
Article 14, make any adjustments it deems appropriate.

     

    
      	
              ARTICLE
      15.  

            	
              PAYMENT
      OF PLAN AWARDS AND CONDITIONS
THEREON

            

    

     

    15.1 EFFECT OF
COMPETITIVE ACTIVITY. Anything contained in the Plan to the contrary
notwithstanding, if the employment of any Participant shall terminate, for any
reason other than death, while any Award to such Participant is outstanding
hereunder, and such Participant has not yet received the Shares covered by such
Award or otherwise received the full benefit of such Award, such Participant, if
otherwise entitled thereto, shall receive such Shares or benefit only if, during
the entire period from the date of such Participant's termination to the date of
such receipt, such Participant shall have earned out such Award
by:  (i) making himself or herself available, upon request, at
reasonable times and upon a reasonable basis, to consult with, supply
information to, and otherwise cooperate with the Company or any Subsidiary or
Affiliate thereof with respect to any matter that shall have been handled by him
or her or under his or her supervision while he or she was in the employ of the
Company or of any Subsidiary or Affiliate thereof; and (ii) refraining from
engaging in any activity that is directly or indirectly in competition with any
activity of the Company or any Subsidiary or Affiliate thereof.

     

    15.2 NONFULFILLMENT
OF COMPETITIVE ACTIVITY CONDITIONS; WAIVERS UNDER THE PLAN.  In the
event of a Participant's nonfulfillment of any condition set forth in Section
15.1 hereof, such Participant's rights under any Award shall be forfeited and
canceled forthwith; provided, however, that the nonfulfillment of such condition
may at any time (whether before, at the time of, or subsequent to termination of
employment) be waived by the Committee upon its determination that in its sole
judgment there shall not have been and will not be any substantial adverse
effect upon the Company or any Subsidiary or Affiliate thereof by reason of the
nonfulfillment of such condition.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    15.3 EFFECT OF
INIMICAL CONDUCT.  Anything contained in the Plan to the contrary
notwithstanding, all rights of a Participant under any Award shall cease on and
as of the date on which it has been determined by the Committee that such
Participant at any time (whether before or subsequent to termination of such
Participant's employment) acted in manner inimical to the best interests of the
Company or any Subsidiary or Affiliate thereof.

     

    
      	
              ARTICLE
      16.  

            	
              CHANGE
      IN CONTROL

            

    

     

    16.1 DEFINITION.  For
purposes of this Plan, a "Change in Control" of the Company is deemed to have
occurred as of the first day that any one or more of the following conditions
shall have been satisfied:

     

    
      	
              (a)  

            	
              the
      "Beneficial Ownership" of securities representing more than thirty-three
      percent (33%) of the combined voting power of the Company is acquired by
      any "person" as defined in Section 13(d) and 14(d) of the Exchange Act
      (other than the Company, any trustee or other fiduciary holding securities
      under an employee benefit plan of the Company, or any corporation owned,
      directly or indirectly, by the stockholders of the Company in
      substantially the same proportions as their ownership of stock of the
      Company); or

            

    

     

    
      	
              (b)  

            	
              the
      stockholders of the Company approve a definitive agreement to merge or
      consolidate the Company with or into another corporation or to sell or
      otherwise dispose of all or substantially all of its assets, or adopt a
      plan of liquidation; or

            

    

     

    
      	
              (c)  

            	
              during
      any period of three consecutive years, individuals who at the beginning of
      such period were members of the Board cease for any reason to constitute
      at least a majority thereof (unless the election, or the nomination for
      election by the Company's stockholders, of each new director was approved
      by a vote of at least a majority of the directors then still in office who
      were directors at the beginning of such period or whose election or
      nomination was previously so
approved).

            

    

     

    Notwithstanding
the foregoing, with respect to any Award subject to Code Section 409A, a "Change
in Control" of the Company is deemed to have occurred as of the first day that
any one or more of the following conditions shall have been
satisfied:

     

    
      	
              (d)  

            	
              Change
      in Ownership:  A change in ownership of the Company occurs on
      the date that any one person, or more than one person acting as a group,
      acquires ownership of stock of the Company that, together with stock held
      by such person or group, constitutes more than fifty percent (50%) of the
      total fair market value or total voting power of the stock of the Company,
      excluding the acquisition of additional stock by a person or more than one
      person acting as a group who is considered  to own more than
      fifty percent (50%) of the total fair market value or total voting power
      of the stock of the Company.

            

    

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    
      	
              (e)  

            	
              Change
      in Effective Control:  A change in effective control of the
      Company occurs only on either of the following
  dates:

            

    

     

    
      	
              (1)  

            	
              The
      date any one person, or more than one person acting as a group, acquires
      (or has acquired during the twelve (12) month period ending in the date of
      the most recent acquisition by such person or persons) ownership of stock
      of the Company possessing 30% or more of the total voting power of the
      stock of the Company; or

            

    

     

    
      	
              (2)  

            	
              The
      date a majority of the members of the Board is replaced during any (12)
      month period by directors whose appointment or election is not endorsed by
      a majority of the members of the board of directors before the date of the
      appointment or election; provided that this paragraph (e) shall apply only
      to the company for which no other corporation is a majority
      shareholder.

            

    

     

    
      	
              (f)  

            	
              Change
      in Ownership of Substantial Assets:  A change in the ownership
      of a substantial portion of the Company's assets occurs on the date that
      any one person, or more than one person acting as a group, acquires (or
      has acquired during the twelve (12) month period ending on the date of the
      most recent acquisition by such person or persons) assets from the Company
      that have a total gross fair market value equal to or more than forty
      percent (40%) of the total gross fair market value of the assets of the
      Company, or the value of the assets being disposed of, determined without
      regard to any liabilities associated with such
  assets.

            

    

     

    It is the
intent that this definition be construed consistent with the definition of
"Change of Control" as defined under Internal Revenue Code Section 409A and the
applicable Treasury Regulations, as amended from time to time.

     

    16.2 TREATMENT
OF OUTSTANDING AWARDS.  Subject to Section 16.3 herein, upon the
occurrence of a Change in Control:

     

    
      	
              (a)  

            	
              any
      and all Options and SARs granted hereunder shall become immediately
      exercisable and shall remain exercisable throughout their entire
      term;

            

    

     

    
      	
              (b)  

            	
              any
      restriction periods and restrictions imposed on Restricted Stock which are
      not performance-based shall lapse;

            

    

     

    
      	
              (c)  

            	
              the
      target payout opportunities attainable under all outstanding Awards of
      performance-based Restricted Stock, Performance Units and Performance
      Shares shall be deemed to have been fully earned for the entire
      Performance Period(s) as of the effective date of the Change in
      Control.  The vesting of all Awards denominated in Shares shall
      be accelerated as of the effective date of the Change in Control, and
      there shall be paid out to 

            

    

     

    
      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      
        	
                 

              	
                Participants
      within 30 days following the effective date of the Change in Control a pro
      rata number of Shares (or their cash equivalents) based upon an assumed
      achievement of all relevant targeted performance goals and upon the length
      of time within the Performance Period which has elapsed prior to the
      Change in Control.  Awards denominated in cash shall be paid pro
      rata to participants in cash within 30 days following the effective date
      of the Change in Control, with the proration determined as a function of
      the length of time within the Performance Period which has elapsed prior
      to the Change in Control, and based on an assumed achievement of all
      relevant targeted performance
goals.

              

      

       

       

    

    16.3 TERMINATION,
AMENDMENT AND MODIFICATIONS OF CHANGE-IN-CONTROL
PROVISIONS.  Notwithstanding any other provision of the Plan or any
Award Agreement provision, the provisions of this Article 16 may not be
terminated, amended or modified on or after the date of an event which is likely
to give rise to a Change in Control to affect adversely any Award theretofore
granted under the Plan without the prior written consent of the Participant with
respect to said Participant's outstanding Awards.

     

    
      	
              ARTICLE
      17.  

            	
              TAX
      PROVISIONS

            

    

     

    17.1 TAX
WITHHOLDING.  The Company shall have the power and the right to deduct
or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of this Plan.

     

    17.2 SHARE
WITHHOLDING.  With respect to withholding required upon the exercise
of Options or SARs, upon the lapse of restrictions on Restricted Stock, or upon
any other taxable event arising as a result of Awards granted hereunder,
Participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares having a Fair Market Value on the date the tax is to be determined equal
to the minimum statutory total tax which could be imposed on the
transaction.  All such elections shall be irrevocable, made in
writing, and signed by the Participant, and shall be subject to any restrictions
or limitations that the Committee, in its sole discretion, deems
appropriate.

     

    17.3 REQUIREMENT
OF NOTIFICATION OF CODE SECTION 83(b) ELECTION.  If any Participants
shall make an election under Section 83(b) of the Code (to include in gross
income in the year of transfer the amounts specified in Code Section 83(b)) or
under a similar provisions of the laws of a jurisdiction outside the United
States, such Participant shall notify the Company of such election within ten
(10) days of filing notice of the election with the Internal Revenue Service or
other government authority, in addition to any filing and notification required
pursuant to regulations issued under Code Section 83(b) or other applicable
provision.

     

    17.4 REQUIREMENT
OF NOTIFICATION UPON DISQUALIFYING DISPOSITION UNDER CODE SECTION
421(b).  If any Participant shall make any disposition of shares of
stock delivered pursuant to the exercise of an Incentive Stock Option under
the

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        
circumstances
described in Code Section 421(b) (relating to certain disqualifying
dispositions), such Participant shall notify the Company of such disposition
within ten (10) days thereof.

    

     

    
      	
              ARTICLE
      18.  

            	
              INDEMNIFICATION

            

    

     

    Each
person who is or shall have been a member of the Committee, or of the Board,
shall be indemnified and held harmless by the Company against and from any loss,
cost, liability or expense that may be imposed upon or reasonably incurred by
him or her in connection with or resulting from any claim, action, suit or
proceeding to which he or she may be a party or in which he or she may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgment in any such action, suit or proceeding against him or her, provided he
or she shall give the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf.  The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Articles  of Incorporation or Bylaws, as
a matter of law or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.

     

    
      	
              ARTICLE
      19.  

            	
              SUCCESSORS

            

    

     

    All
obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation or otherwise, of all or substantially all of the business
or assets of the Company.

     

    
      	
              ARTICLE
      20.  

            	
              LEGAL
      CONSTRUCTION

            

    

     

    20.1 GENDER
AND NUMBER.  Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.

     

    20.2 SEVERABILITY.  In
the event any provision of the Plan shall be held illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining parts of the
Plan, and the Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.

     

    20.3 REQUIREMENTS
OF LAW.  The granting of Awards and the issuance of Shares under the
Plan shall be subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies or national securities exchanges as may
be required.

     

    20.4 SECURITIES
LAW COMPLIANCE.  With respect to Insiders, transactions under this
Plan are intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the Exchange Act.  To the extent any provision of the
Plan or action by the Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the
Committee.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    20.5 SECTION
409A COMPLIANCE.  Notwithstanding any other provision of this Plan to
the contrary, all Awards under this Plan that are subject to Code Section 409A
shall be designed and administered in a manner that does not result in the
imposition of tax or penalties under Section 409A of the
Code.  Accordingly, Awards under this Plan that are subject to Code
Section 409A shall comply with the following requirements, as
applicable.

     

    
      	
              (a)  

            	
              Distribution
      to Specified Employees Upon Separation from Service.  To the
      extent that payment under an Award which is subject to Code Section 409A
      is due to a Specified Employee on account of the Specified Employee's
      separation from service from the Company or its Affiliate or Subsidiary,
      such payment shall be delayed until the first day of the seventh month
      following such separation from service (or as soon as practicable
      thereafter).  The Committee, in its discretion, may provide in
      the Award document for the payment of interest at a rate set by the
      Committee for such six-month
period.

            

    

     

    
      	
              (b)  

            	
              No
      Acceleration of Payment.  To the extent that an Award is subject
      to Code Section 409A, payment under such Award shall not be accelerated
      from the date(s) specified in the Award documents as of the date of
      grant.

            

    

     

    
      	
              (c)  

            	
              Subsequent
      Delay in Payment.  To the extent that an Award is subject to
      Code Section 409A, payment under such Award shall not be deferred beyond
      the dates specified in the Award document as of the date of grant, unless
      the Committee makes the decision to delay payment at least one year prior
      to the scheduled payment date, and payment is delayed at least five
      years.

            

    

     

    20.6 GOVERNING
LAW.  To the extent not preempted by federal law, the Plan, and all
agreements hereunder, shall be construed in accordance with and governed by the
laws of the State of West Virginia.

     

     

    19ex4_1.htm

    
      

    

    Exhibit
4.1

     

     

    CONVERTIBLE
NOTE

     

    NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.  ANY TRANSFEREE OF THIS NOTE
SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTION 4(c)(iii)
AND SECTION 15(a)
HEREOF.  THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND,
ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE
AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 4(c)(iii)
OF THIS NOTE.

     

    CLINICAL
DATA, INC.

     

    Convertible
Note

     

    
      
        	
                Issuance
      Date:  February 25, 2009

              	
                Original
      Principal Amount: U.S.
$25,000,000

              

      

    

    

    FOR VALUE RECEIVED, Clinical
Data, Inc., a Delaware corporation (the “Company”), hereby promises to
pay to ______________________ or registered assigns (“Holder”) the amount set out
above as the Original Principal Amount (as reduced pursuant to the terms hereof
pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether
upon the Maturity Date (as defined below), acceleration, redemption or otherwise
(in each case in accordance with the terms hereof) and to pay interest (“Interest”) on any outstanding
Principal at the applicable Interest Rate from the date set out above as the
Issuance Date (the “Issuance Date”) until the same becomes
due and payable, whether upon an Interest Date (as defined below) or the
Maturity Date, acceleration, conversion, redemption or otherwise (in each case
in accordance with the terms hereof).  This Convertible Note
(including all Convertible Notes issued in exchange, transfer or replacement
hereof, this “Note”) is
one of an issue of Convertible Notes issued pursuant to the Securities Purchase
Agreement on the Closing Date (collectively, the “Notes” and such other
Convertible Notes, the “Other Notes”).  Certain
capitalized terms used herein are defined in Section 24.

     

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

     

    1.             
PAYMENTS OF
PRINCIPAL.  On the Maturity Date, the Company shall pay to the
Holder an amount in cash representing all outstanding Principal and accrued and
unpaid Interest on such Principal.  The “Maturity Date” shall be February 25,
2017.  Other than as specifically permitted by this Note, the Company
may not prepay any portion of the outstanding Principal or accrued and unpaid
Interest.

     

    2.             
PREPAYMENT OF
PRINCIPAL.  At any time (a) on or before the second anniversary
of the Issuance Date upon receipt of the written consent of the Required Holders
(which consent may be withheld, conditioned or delayed at the sole discretion of
the Required Holders), or (b) after the second anniversary of the Issuance Date
upon not less than 90 days’ prior written notice to the Holder (which notice may
by given by the Company not more than 89 days prior to the second anniversary)
and all of the other holders of the Notes, in either such case, the Company
shall have the right to prepay, without penalty or premium, all or any portion
(in multiples of not less than $100,000 or the amount outstanding under this
Note) of this Note and the Other Notes; provided, however, the Holder
shall retain conversion rights in respect of this Note during such notice
period; provided further
that any such prepayment of the Notes shall be pro rata with respect to the
then-outstanding principal balances of the Notes.  If, after providing
the 90-day notice to the Holder, the Holder notifies the Company during such
90-day period that the Holder intends to convert all or a portion of this Note
to Conversion Shares, the Company shall not thereafter be permitted to prepay
the portion of the Note to be so converted, regardless of whether there is a
delay in the conversion of such portion of this Note as a result of any filing
required under the HSR Act (as defined herein).

     

    3.            
 INTEREST;
INTEREST RATE.

     

    (a)           Payment of
Interest.  Interest on this Note shall commence accruing on the
Issuance Date and shall be computed on the basis of a 365-day year and the
actual number of days elapsed and shall be payable in arrears on each yearly
anniversary of the Issuance Date, including the Maturity Date (each, an “Interest Date”) with the first Interest
Date being February 25, 2010.  Interest shall be payable on each
Interest Date, to the record holder of this Note on such Interest Date, in cash
(“Cash
Interest”).  Cash Interest shall be paid to the Holder pursuant
to Section
20(b).

     

    (b)           Default
Interest.  From and after the occurrence and during the
continuance of an Event of Default, the Interest Rate shall be increased to
17.72% per annum.  In the event that such Event of Default is
subsequently cured, the adjustment referred to in the preceding sentence shall
cease to be effective as of the date of such cure; provided, however, that the
Interest as calculated and unpaid at such increased rate during the continuance
of such Event of Default shall continue to apply to the extent relating to the
days after the occurrence of such Event of Default through and including the
date of cure of such Event of Default.  

     

    4.             
CONVERSION OF
NOTES.  This Note shall be convertible into shares of the
Company’s common stock, par value $0.01 per share (the “Common Stock”), on the terms
and conditions set forth in this Section 4.

     

    (a)           Conversion
Right.  Subject to the provisions of Section 4(c)(ii), at any time
or times on or after the Issuance Date, the Holder shall be entitled to convert
any portion of the outstanding and unpaid Conversion Amount (as defined below)
into fully paid and nonassessable shares of Common Stock in accordance with
Section 4(c), at the
Conversion Rate (as defined below).  The Company shall not issue any
fraction of a share of Common Stock upon any conversion.  If the
issuance would result in the issuance of a fraction of a share of Common Stock,
the Company shall round such fraction of a share of Common Stock down to the
nearest whole share and shall pay the Holder cash in lieu of such fractional
share.  The Company shall pay any and all transfer, stamp and similar
taxes that may be payable with respect to the issuance and delivery of Common
Stock upon conversion of any Conversion Amount; provided, however, that the
Company shall not be required to pay any tax that may be payable in respect of
the issuance and delivery of Common Stock to any Person other than the Holder or
with respect to any income tax due by the Holder with respect to such Common
Stock.

     

    
      
        
           

        

        
          2

          
            

          

        

        
           

        

      

    

     

    (b)           Conversion
Rate.  The number of shares of Common Stock issuable upon
conversion of any Conversion Amount pursuant to Section 4(a) shall be
determined by dividing (x) such Conversion Amount by (y) the Conversion Price
(the “Conversion
Rate”).

     

    (i)           “Conversion Amount” means the
portion of the Principal to be converted, redeemed or otherwise with respect to
which this determination is being made.

     

    (ii)           “Conversion Price” means, as of
any Conversion Date (as defined below) or other date of determination, $8.1825,
subject to adjustment as provided herein.

     

    (c)           Mechanics of
Conversion.

     

    (i)           Optional
Conversion.  To convert any Conversion Amount into shares of
Common Stock on any date (a “Conversion Date”), the Holder
shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior
to 11:59 p.m., New York City time, on such date, a copy of an executed notice of
conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the
Company and (B) if required by Section 4(c)(iii),
surrender this Note to a common carrier for delivery to the Company as soon as
practicable on or following such date (or an indemnification undertaking with
respect to this Note in the case of its loss, theft or
destruction).  Accrued and unpaid Interest on any Conversion Amount
being converted up to and including the Conversion Date shall be payable to the
record holder of this Note on the Share Delivery Date (as defined below) as Cash
Interest.  On or before the first Business Day following the date of
receipt of a Conversion Notice, the Company shall transmit by facsimile or
electronic mail a confirmation (the “Conversion Confirmation”) of
receipt of such Conversion Notice to the Holder and the Company’s Transfer
Agent.  Any Conversion Confirmation delivered by the Company shall
confirm that any accrued and unpaid Interest on such Conversion Amount up to and
including the Conversion Date shall be paid on the Share Delivery Date as Cash
Interest.  On or before the third Business Day following the date of
receipt of a Conversion Notice (the “Share Delivery Date”), the Company shall pay
to the Holder in cash an amount equal to the accrued and unpaid Interest on the
Conversion Amount up to and including the Conversion Date.  If this
Note is physically surrendered for conversion as required by Section 4(c)(iii) and the
outstanding Principal of this Note is greater than the Principal portion of the
Conversion Amount being converted, then the Company shall as soon as practicable
and in no event later than three Business Days after receipt of this Note and at
its own expense, issue and deliver to the holder a new Note (in accordance with
Section 15(d))
representing the outstanding Principal not converted.  The Person or
Persons entitled to receive the shares of Common Stock issuable upon a
conversion of this Note shall be treated for all purposes as the record holder
or holders of such shares of Common Stock on the Conversion Date.

     

    
      
        
           

        

        
          3

          
            

          

        

        
           

        

      

    

     

    (ii)           Company’s Failure to Timely
Convert.  If the Company fails to deliver the required number
of shares of Common Stock in certificated form to which the Holder is entitled
upon conversion of any Conversion Amount on or prior to the date which is three
Trading Days after the Conversion Date other than pursuant to limitations in
Section 4(c)
hereof (a “Conversion
Failure”), and if after the Conversion Date and prior to the receipt of
such shares of Common Stock in certificated form, the Holder purchases in a
bona fide arm’s length
transaction for fair market value (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of the
shares of Common Stock issuable upon such conversion that the Holder anticipated
receiving upon such conversion (a “Buy-In”), then the Company
shall pay in cash to the Holder the amount by which (x) the Holder’s total
purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of shares of Common Stock that the Company was required to deliver to the
Holder in connection with the Conversion Amount at issue by (B) the Conversion
Price.  The Holder shall provide the Company written notice indicating
the amounts payable to the Holder in respect of the Buy-In.

     

    (iii)           Registration;
Book-Entry.  The Company shall maintain a register (the “Register”) for the recordation
of the names and addresses of the holders of each Note and the principal amount
of the Notes held by such holders (the “Registered
Notes”).  The entries in the Register shall be conclusive and
binding for all purposes absent manifest error.  The Company and the
holders of the Notes shall treat each Person whose name is recorded in the
Register as the owner of a Note for all purposes, including, without limitation,
the right to receive payments of principal and interest hereunder,
notwithstanding notice to the contrary.  A Registered Note may be
assigned or sold in whole or in part only by registration of such assignment or
sale on the Register.  Upon its receipt of a request to assign or sell
all or part of any Registered Note by a Holder, the Company shall record the
information contained therein in the Register and issue one or more new
Registered Notes in the same aggregate principal amount as the principal amount
of the surrendered Registered Note to the designated assignee or transferee
pursuant to Section 15.  Notwithstanding
anything to the contrary set forth herein, upon conversion of any portion of
this Note in accordance with the terms hereof, the Holder shall not be required
to physically surrender this Note to the Company unless (A) the full Principal
amount represented by this Note is being converted or (B) the Holder has
provided the Company with prior written notice (which notice may be included in
a Conversion Notice) requesting reissuance of this Note upon physical surrender
of this Note.  The Holder and the Company shall maintain records
showing the Principal and Interest converted and the dates of such conversions
or shall use such other method, reasonably satisfactory to the Holder and the
Company, so as not to require physical surrender of this Note upon
conversion.

     

    5.            
RIGHTS UPON EVENT OF
DEFAULT.

     

    (a)           Event of
Default.  Each of the following events shall constitute an
“Event of
Default”:

     

    
      
        
           

        

        
          4

          
            

          

        

        
           

        

      

    

     

    (i)           the
failure of the Company to file the Registration Statement (as defined in the
Registration Rights Agreement) on or prior to the Filing Date;

     

    (ii)         the
suspension from trading or failure of the Common Stock to be listed on an the
Trading Market for a period of five consecutive Trading Days or for more than an
aggregate of ten Trading Days in any 365-day period;

     

    (iii)         the
Company’s (A) failure to cure a Conversion Failure by delivery of the required
number of shares of Common Stock within ten Business Days after the applicable
Conversion Date or (B) notice, written or oral, to any holder of the Notes,
including by way of public announcement or through any of its agents, at any
time, of its intention not to comply with a request for conversion of any Notes
into shares of Common Stock that is tendered in accordance with the provisions
of the Notes, other than pursuant to Section 4(c)(ii);

     

    (iv)        the
Company’s failure to pay to the Holder any amount of Principal, Redemption
Price, Interest or other amounts when and as due under this Note or any other
Transaction Document (as defined in the Securities Purchase Agreement) or any
other agreement, document, certificate or other instrument delivered in
connection with the transactions contemplated hereby and thereby to which the
Holder is a party, except, in the case of a failure to pay Interest and other
amounts when and as due, in which case only if such failure continues for a
period of at least five Business Days;

     

    (v)         any
default under, redemption of or acceleration prior to maturity of any
Indebtedness of the Company or any of its Subsidiaries which Indebtedness,
individually or in the aggregate, exceeds $250,000, other than with respect to
any Other Notes;

     

    (vi)        any
failure to timely pay, when due, trade payables of the Company or any of its
Subsidiaries which trade payables, individually or in the aggregate, exceeds
$250,000;

     

    (vii)       the
Company or any of its Subsidiaries, pursuant to or within the meaning of Title
11, U.S. Code, or any similar Federal, foreign or state law for the relief of
debtors (collectively, “Bankruptcy Law”), (A)
commences a voluntary case, (B) consents to the entry of an order for relief
against it in an involuntary case, (C) consents to the appointment of a
receiver, trustee, assignee, liquidator or similar official (a “Custodian”), (D) makes a
general assignment for the benefit of its creditors or (E) admits in writing
that it is generally unable to pay its debts as they become due;

     

    (viii)      a
court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that (A) is for relief against the Company or any of its Subsidiaries in an
involuntary case, (B) appoints a Custodian of the Company or any of its
Subsidiaries for all or substantially all of its property or (C) orders the
liquidation of the Company or any of its Subsidiaries and, in each case, such
order or decree is not dismissed or stayed within 30 days of such
entry;

     

    (ix)        
a final judgment or judgments for the payment of money aggregating in excess of
$250,000 are rendered against the Company or any of its Subsidiaries and which
judgments are not, within 60 days after the entry thereof, bonded, discharged or
stayed pending appeal, or are not discharged within 60 days after the expiration
of such stay; provided,
however, that any judgment which is covered by insurance or an indemnity
from a credit worthy party shall not be included in calculating the $250,000
amount set forth above so long as the Company provides the Holder a written
statement from such insurer or indemnity provider (which written statement shall
be reasonably satisfactory to the Holder) to the effect that such judgment is
covered by insurance or an indemnity and the Company will receive the proceeds
of such insurance or indemnity within 30 days of the issuance of such
judgment;

     

    
      
        
           

        

        
          5

          
            

          

        

        
           

        

      

    

     

    (x)          there
is a material breach of a representation, warranty, covenant or other term or
condition of the Company under any Transaction Document, except, in the case of
a breach of a covenant or other term or condition which is curable, only if such
breach continues for a period of at least ten consecutive Business Days;
or

     

    (xi)         the
SEC commences a formal investigation or enforcement action of the Company and/or
its Subsidiaries, or a formal investigation or enforcement action of any of the
then current officers or directors of the Company that is related to the
Company, its Subsidiaries and/or the Common Stock or enters a consent or other
order against the Company and/or its Subsidiaries or any of the then current
officers or directors of the Company that is related to the Company, its
Subsidiaries and/or the Common Stock.

     

    (b)           Redemption
Right.  Upon the occurrence of an Event of Default, the Company
shall within one Business Day deliver written notice thereof via facsimile and
overnight courier (an “Event of
Default Notice”) to the Holder.  At any time after the earlier
of the Holder’s receipt of an Event of Default Notice and the Holder becoming
aware of an Event of Default, the Holder may require the Company to redeem all
or any portion of this Note by delivering written notice thereof (the “Event of Default Redemption
Notice”) to the Company, which Event of Default Redemption Notice shall
indicate the portion of this Note the Holder is electing to redeem and, in the
case the Holder has not received an Event of Default Notice, the Event of
Default of which the Holder has become aware.  Each portion of this
Note subject to redemption by the Company pursuant to this Section 5(b)
shall be redeemed by the Company at a price equal to the greater of (i) the sum
of the Conversion Amount to be redeemed together with accrued and unpaid
Interest with respect to such Conversion Amount and (ii) the product of (A) the
Conversion Rate with respect to such sum of the Conversion Amount together with
accrued and unpaid Interest with respect to such Conversion Amount in effect at
such time as the Holder delivers an Event of Default Redemption Notice and (B)
the greatest of (x) the Closing Bid Price of the Common Stock on the date
immediately preceding such Event of Default, (y) the Closing Bid Price of the
Common Stock on the date immediately after such Event of Default and (z) the
Closing Bid Price of the Common Stock on the date the Holder delivers the Event
of Default Redemption Notice (the “Event of Default Redemption
Price”).  Redemptions required by this Section 5(b)
shall be made in accordance with the provisions of Section 10.  To
the extent redemptions required by this Section 5(b) are
deemed or determined by a court of competent jurisdiction to be prepayments of
the Note by the Company, such redemptions shall be deemed to be voluntary
prepayments.

     

    6.            
RIGHTS UPON
FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

     

    
      
        
           

        

        
          6

          
            

          

        

        
           

        

      

    

     

    (a)           Assumption.  The
Company shall not enter into or be party to a Fundamental Transaction unless
(i)  the Successor Entity assumes in writing all of the obligations of the
Company under this Note and the other Transaction Documents in accordance with
the provisions of this Section 6(a) pursuant to
written agreements in form and substance reasonably satisfactory to the Required
Holders and approved by the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of Notes in exchange
for such Notes a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to the Notes, including,
without limitation, having a principal amount and interest rate equal to the
principal amounts and the interest rates of the Notes then outstanding held by
such holder, having similar conversion rights and having similar ranking to the
Notes, and satisfactory to the Required Holders and (ii) the Successor
Entity (including its Parent Entity) is a publicly traded corporation whose
common stock is quoted on or listed for trading on an Eligible Market (a “Public Successor
Entity”).  Upon the occurrence of any Fundamental Transaction,
the Successor Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of this Note
referring to the “Company” shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Note with the same effect as if such
Successor Entity had been named as the Company herein.  Upon
consummation of the Fundamental Transaction, the Successor Entity shall deliver
to the Holder confirmation that there shall be issued upon conversion or
redemption of this Note at any time after the consummation of the Fundamental
Transaction, in lieu of the shares of the Company’s Common Stock (or other
securities, cash, assets or other property) issuable upon the conversion or
redemption of the Notes prior to such Fundamental Transaction, such shares of
the publicly traded common stock (or their equivalent) of the Successor Entity
(including its Parent Entity), as adjusted in accordance with the provisions of
this Note.  The provisions of this Section shall apply similarly and
equally to successive Fundamental Transactions and shall be applied without
regard to any limitations on the conversion or redemption of this
Note.

     

    (b)           Occurrence.  Upon
the occurrence of a Fundamental Transaction, and any subsequent conversion of
this Note, the Holder shall have the right to receive, for the Conversion Amount
that would have been issuable upon such conversion immediately prior to the
occurrence of such Fundamental Transaction, at the option of the Holder, (a)
upon conversion of this Note, the number of shares of Common Stock of the
successor or acquiring corporation or of the Company, if it is the surviving
corporation, and any additional consideration (the “Alternate Consideration”)
receivable upon or as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a Holder of the number of shares of
Common Stock for which this Note is convertible immediately prior to such event
or (b) if the Company is acquired in an all cash transaction, cash equal to the
value of this Note as determined in accordance with the Black-Scholes option
pricing formula.  For purposes of any such conversion, the
determination of the Conversion Price shall be appropriately adjusted to apply
to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice as
to the Alternate Consideration it receives upon any conversion of this Note
following such Fundamental Transaction. To the extent necessary to effectuate
the foregoing provisions, any successor to the Company or surviving entity in
such Fundamental Transaction shall issue to the Holder a new note consistent
with the foregoing provisions and evidencing the Holder’s right to convert such
note into Alternate Consideration. The terms of any agreement pursuant to which
a Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section 6 and
ensuring that this Note (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    (c)           
Redemption
Right.  Not later than 30 days prior to the consummation of a
Change of Control, but not prior to the public announcement of such Change of
Control, the Company shall deliver written notice thereof via facsimile and
overnight courier to the Holder (a “Change of Control Notice”).  At any
time during the period beginning after the Holder’s receipt of a Change of
Control Notice and ending 20 Trading Days after the date of the consummation of
such Change of Control, the Holder may require the Company to redeem all or any
portion of this Note by delivering written notice thereof (“Change of Control Redemption
Notice”) to the Company, which Change of Control Redemption Notice shall
indicate the Conversion Amount the Holder is electing to redeem.  The
portion of this Note subject to redemption pursuant to this Section 6 shall
be redeemed by the Company in cash at a price equal to the greater of (i) the
sum of (A) the Conversion Amount being redeemed and (B) the amount of any
accrued but unpaid Interest on such Conversion Amount being redeemed through the
date of such redemption payment and (ii) the sum of (A) the product of (x) the
Conversion Amount being redeemed multiplied by (y) the quotient determined by
dividing (I) the aggregate cash consideration and the aggregate cash value of
any non-cash consideration per Common Share to be paid to the holders of the
Common Shares upon consummation of the Change of Control (any such non-cash
consideration consisting of marketable securities to be valued at the higher of
the Closing Bid Price of such securities as of the Trading Day immediately prior
to, the Closing Bid Price as of the Trading Day immediately following the public
announcement of such proposed Change of Control and the Closing Bid Price of the
Common Stock immediately prior to the public announcement of such proposed
Change of Control) by (II) the Conversion Price plus (B) the amount of any
accrued but unpaid Interest on such Conversion Amount being redeemed through the
date of such redemption payment (the “Change of Control Redemption
Price”).  Redemptions required by this Section 6 shall
be made in accordance with the provisions of Section 10 and
shall have priority to payments to stockholders in connection with a Change of
Control.  To the extent redemptions required by this Section 5(b) are
deemed or determined by a court of competent jurisdiction to be prepayments of
the Note by the Company, such redemptions shall be deemed to be voluntary
prepayments.  Notwithstanding anything to the contrary in this Section 6, until
the Change of Control Redemption Price (together with any interest thereon) is
paid in full, the Conversion Amount submitted for redemption under this Section 6(c)
(together with any interest thereon) may be converted, in whole or in part, by
the Holder into Common Stock pursuant to Section 4.

     

    7.            
CERTAIN
ADJUSTMENTS.

     

    (a)           Stock Dividends and
Splits.  If the Company, at any time on or after the
Subscription Date: (i) pays a stock dividend or otherwise makes a distribution
or distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Company
pursuant to this Note), (ii) subdivides outstanding shares of Common Stock into
a larger number of shares, (iii) combines (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of shares, or
(iv) issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding immediately before
such event and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event and the number of shares issuable
upon conversion of this Note shall be proportionately adjusted.  Any
adjustment made pursuant to this Section 7(a)
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution and shall
become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.

     

    
      
        
           

        

        
          8

          
            

          

        

        
           

        

      

    

     

    (b)           Other
Events.  If any event occurs of the type contemplated by the
provisions of this Section 8 but
not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company’s Board of Directors will make an
appropriate adjustment in the Conversion Price so as to protect the rights of
the Holder under this Note; provided, however, that no
such adjustment will increase the Conversion Price as otherwise determined
pursuant to this Section 7.

     

    8.             NONCIRCUMVENTION.  The
Company hereby covenants and agrees that the Company will not, by amendment of
its Certificate of Incorporation, Bylaws or through any reorganization, transfer
of assets, consolidation, merger, scheme of arrangement, dissolution, issue or
sale of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Note, and will at all
times in good faith carry out all of the provisions of this Note and take all
action as may be required to protect the rights of the Holder of this
Note.

     

    9.           
 RESERVATION OF
AUTHORIZED SHARES.

     

    (a)           Reservation.  Commencing
on or before the Issuance Date, the Company shall take all action necessary to
at all times have authorized, and reserved for the purpose of issuance under
each of the Notes, no less than, 100% of the number of shares of Common Stock
issuable (i) as Conversion Shares upon conversion of the Notes and (ii) as
Warrant Shares upon exercise of the Warrants then outstanding (without taking
into account any limitations on the conversion of the Notes or exercise of the
Warrants set forth in the Notes and Warrants, respectively).

     

    (b)           Insufficient Authorized
Shares.  If at any time while any of the Notes remains
outstanding the Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to reserve for
issuance upon conversion of the Notes at least a number of shares of Common
Stock equal to the Required Reserve Amount (an “Authorized Share Failure”),
then the Company shall immediately take all action necessary to increase the
Company’s authorized shares of Common Stock to an amount sufficient to allow the
Company to reserve the Required Reserve Amount for the Notes then
outstanding.  Without limiting the generality of the foregoing
sentence, as soon as practicable after the date of the occurrence of an
Authorized Share Failure, but in no event later than 60 days after the
occurrence of such Authorized Share Failure, the Company shall hold a meeting of
its stockholders for the approval of an increase in the number of authorized
shares of Common Stock.  In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its best
efforts to solicit its stockholders’ approval of such increase in authorized
shares of Common Stock and to cause its board of directors to recommend to the
stockholders that they approve such proposal.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    10.           HOLDER’S
REDEMPTIONS.

     

    (a)           Mechanics.  The
Company shall deliver the applicable Redemption Price to the Holder within five
Business Days after the Company’s receipt of the Holder’s Event of Default
Redemption Notice.  If the Holder has submitted a Change of Control
Redemption Notice in accordance with Section 6(c),
the Company shall deliver the applicable Redemption Price to the Holder
concurrently with the consummation of such Change of Control if such notice is
received at least one Business Day prior to the consummation of such Change of
Control and within five Business Days after the Company’s receipt of such notice
otherwise.  In the event of a redemption of less than all of the
Conversion Amount of this Note, the Company shall promptly cause to be issued
and delivered to the Holder a new Note (in accordance with Section 15(d))
representing the outstanding Principal which has not been
redeemed.  In the event that the Company does not pay the applicable
Redemption Price to the Holder within the time period required, at any time
thereafter and until the Company pays such unpaid Redemption Price in full, the
Holder shall have the option, in lieu of redemption, to require the Company to
promptly return to the Holder all or any portion of this Note representing the
Conversion Amount that was submitted for redemption and for which the applicable
Redemption Price has not been paid.  Upon the Company’s receipt of
such notice, (x) the applicable Redemption Notice shall be null and void with
respect to such Conversion Amount, and (y) the Company shall immediately return
this Note, or issue a new Note (in accordance with Section 15(d))
to the Holder representing the sum of such Conversion Amount to be redeemed
together with accrued and unpaid Interest with respect to such Conversion
Amount.

     

    (b)           Redemption by Other
Holders.  Upon the Company’s receipt of notice from any of the
holders of the Other Notes for redemption or repayment as a result of an event
or occurrence substantially similar to the events or occurrences described in
Section 5(b) or
Section 6(b)
(each, an “Other Redemption
Notice”), the Company shall immediately, but no later than one Business
Day of its receipt thereof, forward to the Holder by facsimile a copy of such
notice.  If the Company receives a Redemption Notice and one or more
Other Redemption Notices, during the seven Business Day period beginning on and
including the date which is three Business Days prior to the Company’s receipt
of the Holder’s Redemption Notice and ending on and including the date which is
three Business Days after the Company’s receipt of the Holder’s Redemption
Notice and the Company is unable to redeem all principal, interest and other
amounts designated in such Redemption Notice and such Other Redemption Notices
received during such seven Business Day period, then the Company shall redeem a
pro rata amount from
each holder of the Notes (including the Holder) based on the principal amount of
the Notes submitted for redemption pursuant to such Redemption Notice and such
Other Redemption Notices received by the Company during such seven Business Day
period.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    11.           VOTING
RIGHTS.  The Holder shall have no voting rights as the holder
of this Note, except as required by law, including, but not limited to, the
Delaware General Corporation Law, and as expressly provided in this
Note.

     

    12.           COVENANTS.  So
long as this Note is outstanding:

     

    (a)           Rank.  All
payments due under this Note shall rank pari passu with all Other
Notes and, without the written consent of the Required Holders, no other
Indebtedness (other than Permitted Indebtedness) of the Company and its
Subsidiaries shall be senior to the Indebtedness of the Company and its
Subsidiaries evidenced by this Note and the Other Notes.

     

    (b)           Use of Proceeds. The Company will use the
proceeds from the sale of the Notes substantially as set forth on Schedule 5(d)
to the Securities Purchase Agreement.

     

    (c)           HSR
Filing.  If, prior to any proposed issuance of Conversion
Shares to the Holder upon conversion of this Note (including any issuance
pursuant to the last sentence of Section 2), it
is determined by the Company or the Holder that such issuance would require the
filing of a Notification and Report Form under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the “HSR Act”), with the U.S.
Federal Trade Commission and the Antitrust Division of the U.S. Department of
Justice, then the Company shall (i) cooperate fully with the Holder and its
Affiliates with respect to completing such filing as soon as practicable, (ii)
respond as promptly as practicable to any inquiries received from the U.S.
Federal Trade Commission and the Antitrust Division of the U.S. Department of
Justice for additional information or documentation and to all inquiries and
requests received from any State Attorney General or other governmental
authority in connection with antitrust matters, and (iii) not extend any waiting
period under the HSR Act or enter into any other agreement with the U.S. Federal
Trade Commission or the Antitrust Division of the U.S. Department of Justice
with respect to the transaction contemplated by such filing without the prior
written consent of the Holder.  Each of the Company and the Holder
shall be responsible for, and shall pay the amount of, any filing fee required
to be paid by it under the HSR Act.

     

    (d)           Incurrence of
Indebtedness.  So long as this Note or any Other Note is
outstanding, the Company shall not, and the Company shall not permit any of its
Subsidiaries to, directly or indirectly, incur or guarantee, assume or suffer to
exist any Indebtedness, other than the Indebtedness evidenced by this Note and
the Other Notes or Permitted Indebtedness.

     

    (e)           Restriction on Redemption
and Cash Dividends.  So long as this Note or any Other Note is
outstanding, the Company shall not, directly or indirectly, redeem, or declare
or pay any cash dividend or cash distribution on, the Common Stock of the
Company without the prior express written consent of the Required
Holders.

     

    (f)           Additional Notes; Variable
Securities; Dilutive Issuances.  For long as any Notes or
Warrants remain outstanding, the Company shall not, in any manner, issue or sell
any rights, warrants or options to subscribe for or purchase Common Stock or
directly or indirectly convertible into or exchangeable or exercisable for
Common Stock at a price which is less than the then market price of the Common
Stock, including by way of one or more reset(s) to any fixed price, other than
in connection with an underwritten public offering.  For purposes of
clarification, this section does not prohibit the issuance of securities with
customary “weighted average” or “full ratchet” anti-dilution adjustments that
adjust the fixed conversion or exercise price of securities sold by the Company
in the future.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    13.           VOTE TO ISSUE, OR CHANGE THE
TERMS OF, NOTES.  The affirmative vote at a meeting duly called
for such purpose or the written consent without a meeting of the Required
Holders shall be required for any change or amendment to this Note or the Other
Notes.  In no event shall any amendment, modification or waiver be
made to this Note which would adversely effect the Holder without the written
consent of the Holder.

     

    14.           TRANSFER.  This
Note and any shares of Common Stock issued upon conversion of this Note may be
offered, sold, assigned or transferred by the Holder without the consent of the
Company, subject only to the provisions of Section 7 of the Securities
Purchase Agreement.

     

    15.           REISSUANCE OF THIS
NOTE.

     

    (a)           Transfer.  If
this Note is to be transferred, the Holder shall surrender this Note to the
Company, whereupon the Company will forthwith issue and deliver upon the order
of the Holder a new Note (in accordance with Section 15(d)),
registered as the Holder may request, representing the outstanding Principal
being transferred by the Holder and, if less then the entire outstanding
Principal is being transferred, a new Note (in accordance with Section 15(d))
to the Holder representing the outstanding Principal not being
transferred.  The Holder and any assignee, by acceptance of this Note,
acknowledge and agree that, by reason of the provisions of Section 3(b)(iii) following
conversion or redemption of any portion of this Note, the outstanding Principal
represented by this Note may be less than the Principal stated on the face of
this Note.

     

    (b)           Lost, Stolen or Mutilated
Note.  Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Note, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new Note (in accordance with
Section 15(d))
representing the outstanding Principal.

     

    (c)           Note Exchangeable for
Different Denominations.  This Note is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new
Note or Notes (in accordance with Section 15(d)
and in principal amounts of at least $100,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    (d)           Issuance of New
Notes.  Whenever the Company is required to issue a new Note
pursuant to the terms of this Note, such new Note (i) shall be of like tenor
with this Note, (ii) shall represent, as indicated on the face of such new Note,
the Principal remaining outstanding (or in the case of a new Note being issued
pursuant to Section 15(a) or
Section 15(c),
the Principal designated by the Holder which, when added to the principal
represented by the other new Notes issued in connection with such issuance, does
not exceed the Principal remaining outstanding under this Note immediately prior
to such issuance of new Notes), (iii) shall have an issuance date, as indicated
on the face of such new Note, which is the same as the Issuance Date of this
Note, (iv) shall have the same rights and conditions as this Note, and (v) shall
represent accrued and unpaid Interest on the Principal and Interest of this
Note, from the Issuance Date.

     

    16.           REMEDIES, CHARACTERIZATIONS,
OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.  The
remedies provided in this Note shall be cumulative and in addition to all other
remedies available under this Note and any of the other Transaction Documents at
law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the Holder’s right to pursue
actual and consequential damages for any failure by the Company to comply with
the terms of this Note.  Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof) shall
be the amounts to be received by the Holder and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof).  The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate.  The Company
therefore agrees that, in the event of any such breach or threatened breach, the
Holder shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.

     

    17.           PAYMENT OF COLLECTION,
ENFORCEMENT AND OTHER COSTS.  If (a) this Note is placed in the
hands of an attorney for collection or enforcement or is collected or enforced
through any legal proceeding or the Holder otherwise takes action to collect
amounts due under this Note or to enforce the provisions of this Note or (b)
there occurs any bankruptcy, reorganization, receivership of the Company or
other proceedings affecting Company creditors’ rights and involving a claim
under this Note, then the Company shall pay the costs incurred by the Holder for
such collection, enforcement or action or in connection with such bankruptcy,
reorganization, receivership or other proceeding, including, but not limited to,
attorneys’ fees and disbursements.

     

    18.           CONSTRUCTION;
HEADINGS.  This Note shall be deemed to be jointly drafted by
the Company and all the Holders of Notes and shall not be construed against any
person as the drafter hereof.  The headings of this Note are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Note.

     

    19.           FAILURE OR INDULGENCE NOT
WAIVER.  No failure or delay on the part of the Holder in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    20.           NOTICES;
PAYMENTS.

     

    (a)           Notices.  Whenever
notice is required to be given under this Note, unless otherwise provided
herein, such notice shall be given in accordance with Section 11(c) of the
Securities Purchase Agreement.  The Company shall provide the Holder
with prompt written notice of all actions taken pursuant to this Note, including
in reasonable detail a description of such action and the reason
therefore.

     

    (b)           Payments.  Whenever
any payment of cash is to be made by the Company to any Person pursuant to this
Note, such payment shall be made in lawful money of the United States of America
by a check drawn on the account of the Company and sent via overnight courier
service to such Person at such address as previously provided to the Company in
writing (which address, in the case of each of the Holders of Notes, shall
initially be as set forth on the Schedule of Buyers attached to the Securities
Purchase Agreement); provided,
however, that the Holder may elect to receive a payment of cash via wire
transfer of immediately available funds by providing the Company with prior
written notice setting out such request and the Holder’s wire transfer
instructions.  Whenever any amount expressed to be due by the terms of
this Note is due on any day which is not a Business Day, the same shall instead
be due on the next succeeding day which is a Business Day and, in the case of
any Interest Date which is not the date on which this Note is paid in full, the
extension of the due date thereof shall not be taken into account for purposes
of determining the amount of Interest due on such date.  

     

    21.           CANCELLATION.  After
all Principal, accrued Interest and other amounts at any time owed on this Note
have been paid in full, this Note shall automatically be deemed canceled, shall
be surrendered to the Company for cancellation and shall not be
reissued.

     

    22.           WAIVER OF
NOTICE.  To the extent permitted by law, the Company hereby
waives demand, notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance, default or enforcement of this Note
and the Securities Purchase Agreement.

     

    23.           GOVERNING
LAW.  All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
Delaware, without regard to the principles of conflicts of law thereof, and the
forum, venue, jury waiver and other provisions of Section 11(h) of the
Securities Purchase Agreement are hereby incorporated herein and made a part
hereof.

     

    24.           CERTAIN
DEFINITIONS.  For purposes of this Note, the following terms
shall have the following meanings:

     

    (a)           “Bloomberg” means Bloomberg
Financial Markets.

     

    (b)           “Business Day” means any day
other than Saturday, Sunday or other day on which commercial banks in The City
of New York are authorized or required by law to remain closed.

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    (c)           “Change of Control” means any
Fundamental Transaction other than (i) any reorganization, recapitalization or
reclassification of the Common Stock in which holders of the Company’s voting
power immediately prior to such reorganization, recapitalization or
reclassification continue after such reorganization, recapitalization or
reclassification to hold publicly traded securities and, directly or indirectly,
the voting power of the surviving entity or entities necessary to elect a
majority of the members of the board of directors (or their equivalent if other
than a corporation) of such entity or entities, or (ii) pursuant to a migratory
merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Company.

     

    (d)           “Closing Bid Price” means the
closing consolidated bid price of the Common Stock as reported by NASDAQ’s
Market Intelligence Desk as of 4:00 p.m. New York City time on the applicable
payment date, or if the foregoing do not apply, the last closing bid price or
last trade price, respectively, of such security in the over-the-counter market
on the electronic bulletin board for such security as reported by Bloomberg, or,
if no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the “pink
sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.).  If the Closing Bid Price cannot be calculated for a security
on a particular date on any of the foregoing bases, the Closing Bid Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the Holder.  All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during the applicable calculation period.

     

    (e)           “Closing Date” has the meaning
ascribed to such term in the Securities Purchase Agreement which corresponds to
the date this Note and the Other Notes were initially issued pursuant to the
terms of the Securities Purchase Agreement.

     

    (f)           “Effectiveness Date” has the
meaning ascribed to such term in the Registration Rights Agreement.

     

    (g)           “Eligible Market” means the
Trading Market, The New York Stock Exchange, Inc., the American Stock Exchange,
or The Nasdaq Capital Market, or any market that is a successor to any of the
foregoing.

     

    (h)           “Fundamental Transaction” means
(i) any merger or consolidation of the Company with or into another Person, (ii)
any sale of all or substantially all of the Company’s assets in one or a series
of related transactions, (iii) any tender offer or exchange offer (whether by
the Company or another Person) completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (iv) any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property.

     

    (i)           “Indebtedness” of any Person
means, without duplication (i) (a) obligations created, issued or incurred
for borrowed money (whether by loan, the issuance and sale of debt securities or
the sale of property to another Person subject to an understanding or agreement,
contingent or otherwise, to repurchase such property from such Person),
(b) indebtedness of others secured by a lien on the property of the Company
or any of its Subsidiaries, whether or not the respective indebtedness so
secured has been assumed by the Company or any of its Subsidiaries,
(c) obligations (contingent or otherwise) in respect of letters of credit
or similar instruments issued or accepted by banks and other financial
institutions, (d) obligations under repurchase agreements, sale/buy-back
agreements or like arrangements, (e) indebtedness of others guaranteed by
the Company or any of its Subsidiaries and (f) any other obligations that may be
considered debt.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    (j)           “Interest Rate” means 9.72% per
annum.  The Interest Rate shall be subject to adjustment as set forth
in Section 3
hereof.

     

    (k)           “Parent Entity” of a Person
means an entity that, directly or indirectly, controls the applicable Person and
whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the
Person or Parent Entity with the largest public market capitalization as of the
date of consummation of the Fundamental Transaction.

     

    (l)           “Permitted Indebtedness” means
(i) Indebtedness set forth on Schedule 24(1) attached
hereto, and any amendments, modifications or refinancing of such Indebtedness
and (ii) any other Indebtedness, approved by the Board of Directors, in an
aggregate amount of up to $2 million.

     

    (m)           “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

     

    (n)           “Redemption Notices” means,
collectively, the Event of Default Redemption Notice and the Change of Control
Redemption Notice.

     

    (o)           “Redemption Price” means the
Event of Default Redemption Price or the Change of Control Redemption Price, as
applicable.

     

    (p)           “Registration Rights Agreement”
means that certain Registration Rights Agreement dated as of the Subscription
Date by and among the Company and the initial holders of the Notes.

     

    (q)           “Required Holders” means the
holders of Notes representing at least 50% of the aggregate principal amount of
the Notes then outstanding.

     

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

     

    (s)           “Securities Purchase Agreement”
means that certain securities purchase agreement dated as of the Subscription
Date by and among the Company and the initial holders of the Notes pursuant to
which the Company issued the Notes and Warrants.

     

    (t)           “Subscription Date” means
February 25, 2009.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    (u)           “Successor Entity” means the
Person, which may be the Company, formed by, resulting from or surviving any
Fundamental Transaction or the Person with which such Fundamental Transaction
shall have been made, provided that if such Person is not a publicly traded
entity whose common stock or equivalent equity security is quoted or listed for
trading on an Eligible Market, Successor Entity shall mean such Person’s Parent
Entity.

     

    (v)           “Trading Day” means any day on
which the Common Stock is traded on the Trading Market, or, if the Trading
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is
then traded; provided,
however, that “Trading Day” shall not include any day on which the Common
Stock is scheduled to trade on such exchange or market for less than 4.5 hours
or any day that the Common Stock is suspended from trading during the final hour
of trading on such exchange or market (or if such exchange or market does not
designate in advance the closing time of trading on such exchange or market,
then during the hour ending at 4:00 p.m., New York City time).

     

    (w)           “Trading Market” means the Nasdaq
Global Market.

     

    (x)           “Warrants” has the meaning
ascribed to such term in the Securities Purchase Agreement, and shall include
all warrants issued in exchange therefor or replacement thereof.

     

    25.           DISCLOSURE.  Upon
receipt or delivery by the Company of any notice in accordance with the terms of
this Note, unless the Company has in good faith determined that the matters
relating to such notice do not constitute material, nonpublic information
relating to the Company or its Subsidiaries, the Company shall within one
Business Day after any such receipt or delivery publicly disclose such material,
nonpublic information on a Current Report on Form 8-K or
otherwise.  In the event that the Company believes that a notice
contains material, nonpublic information relating to the Company or its
Subsidiaries, the Company so shall indicate to such Holder contemporaneously
with delivery of such notice, and in the absence of any such indication, the
Holder shall be allowed to presume that all matters relating to such notice do
not constitute material, nonpublic information relating to the Company or its
Subsidiaries.

     

    [Signature
Page Follows]

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the
Issuance Date set out above.

     

    

    
      
        
          
            	 
      	
                    Clinical
      Data, Inc.

                  
	 	 
	 
      	
                    By:

                  	 
	 
      	 
      	
                    Caesar
      J. Belbel

                  
	 
      	 
      	
                    Executive
      Vice President, Chief Legal Officer and
  Secretary

                  

          

        

      

    

    

     

    Signature
Page to Convertible Note

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
I

    

    CLINICAL
DATA, INC.

    CONVERSION NOTICE

    

    Reference
is made to the Clinical Data Convertible Note (the “Note”) issued to the
undersigned by Clinical Data, Inc. (the “Company”).  In
accordance with and pursuant to the Note, the undersigned hereby elects to
convert the Conversion Amount (as defined in the Note) of the Note indicated
below into shares of Common Stock par value $0.01 per share (the “Common Stock”) of the Company,
as of the date specified below.

     

    
      
        
          
            	
                    Date
      of Conversion:

                  	 
      

          

        

      

    

    

    
      
        
          
            
              
                
                  	
                          Aggregate
      Conversion Amount to be converted:

                        	 
      

                

              

            

          

        

      

    

    

    
      
        	
                Please
      confirm the following
information:

              

      

    

    

    
      
        
          
            
              	
                      Conversion
      Price:

                    	 
      

            

          

        

      

    

    

    
      
        
          
            
              
                	
                        Number
      of shares of Common Stock to be issued:

                      	 
      

              

            

          

        

      

    

    

    
      	
              Please
      issue the Common Stock into which the Conversion Amount of the Note is
      being converted in the following name and to the following
      address:

            

    

    

    
      
        
          	
                  Issue
      to:

                	 
      
	 
      	 
      
	 
      	 
      

        

      

    

    

    
      
        
          
            	
                    Facsimile
      Number:

                  	 
      

          

        

      

    

    

    
      
        
          	
                  Authorization:

                	 
      

        

      

    

    

    
      
        	
                By:

              	 
      

      

    

    

    
      
        	
                Title:

              	 
      

      

    

    

    
      
        	
                Dated:

              	 
      

      

    

    

    
      
        	
                Account
      Number:

              	 
      

      

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (if
      electronic book entry transfer)

                                
	 	 
	
                                  Transaction
      Code Number:

                                	 
      
	
                                  (if
      electronic book entry
transfer)

                                

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    
      
        
          
            
              
                
                  	
                          Installment
      Amount to be reduced and amount

                        	
                           

                        
	
                          of
      reduction for each Installment Date:

                        	 
      

                

              

            

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ACKNOWLEDGMENT

    

    The
Company hereby acknowledges this Conversion Notice and hereby directs
_________________ to issue the above indicated number of shares of Common Stock
in accordance with the Transfer Agent Instructions dated _________ __, 2009
from the Company and acknowledged and agreed to by
___________________.

     

    

    
      
        
          	 
      	CLINICAL
      DATA, INC.
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                  By:

                	 
      
	 
      	 
      	
                  Name:

                
	 
      	 
      	
                  Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00154-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00154-of-00352.parquet"}]]