Document:

Exhibit 10.8

 

CONVERSION AND AMENDMENT AGREEMENT

 

CONVERSION AND AMENDMENT AGREEMENT
(the “Agreement”),
dated as of June 24, 2003, by and between SuperGen, Inc., a Delaware
corporation, with headquarters located at 4140 Dublin Boulevard, Suite 200,
Dublin, California 94568 (the “Company”), and (the “Investor”).

 

WHEREAS:

 

A.    The Company, the Investor and certain other
investors (the “Other Investors”; and collectively with the Investor, the “Investors”)
have entered into that certain Securities Purchase Agreement, dated as of
February 26, 2003 (the “Securities Purchase Agreement”), pursuant
to which, among other things, the Investors purchased from the Company an
aggregate of $21,250,000 principal amount of senior convertible exchangeable
notes of the Company (the “Notes”);

 

B.    Contemporaneously with the execution and
delivery of the Securities Purchase Agreement, the Company and the Investors
entered into a Registration Rights Agreement, dated as of February 26, 2003
(the “Registration
Rights Agreement”), pursuant to which the Company agreed to provide
certain registration rights with respect to the Registrable Securities (as
defined in the Registration Rights Agreement) under the Securities Act of 1933,
as amended (the “1933 Act”), and the rules and regulations promulgated
thereunder, and applicable state securities laws;

 

C.    The Company and the Investor desire to enter
into this Agreement, pursuant to which, among other things, (i) the Investor
will convert principal amount of the Investor’s Note plus accrued and unpaid
interest thereon (collectively, the “Investor Conversion Amount”) into [       (1)
shares of Common Stock (the “Investor Conversion Shares”) and (ii) the
Company and the Investor will amend the Investor’s Note by exchanging the
Investor’s Note for  an amended and
restated senior convertible note in the form attached hereto as Exhibit A
(the “Amended
and Restated Note” and together with any convertible notes issued in
replacement thereof in accordance with the terms thereof and any amended and
restated convertible notes issued to any Other Investor in exchange for their
Notes, the “Amended and Restated Notes”);

 

D.    The parties hereto desire to amend certain
provisions of the Securities Purchase Agreement and the Registration Rights
Agreement;

 

E.     The conversion of the Notes into the
Conversion Shares and the exchange of the Note for the Amended and Restated
Note is being made in reliance upon the exemption from registration provided by
Section 3(a)(9) of the 1933 Act; and

 

(1)                                  Insert
a number of shares of Common Stock equal to the applicable Investor Conversion
Amount divided by the Fixed Conversion Price of $4.25.

 

 

F.     Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings ascribed to them in
the Securities Purchase Agreement.

 

NOW, THEREFORE, the
Company and the Investor hereby agree as follows:

 

1.                                 CONVERSION AND
AMENDMENT OF NOTES.

 

(a)           Conversion and Amendment of Notes.
Subject to satisfaction (or waiver) of the conditions set forth in Sections 5
and 6, the Investor shall surrender to the Company its Note and the Company
shall (i) deliver to the Investor the Investor Conversion Shares and (ii) issue
an Amended and Restated Note for the remaining outstanding principal amount of
such Investor’s Note (the “Closing”).

 

(b)           Closing Date.  The date and time of the Closing (the “Closing Date”)
shall be 10:00 a.m., New York Time, on the date hereof, subject to notification
of satisfaction (or waiver) of the conditions to the Closing set forth in
Sections 5 and 6 below (or such later date as is mutually agreed to by the
Company and the Investor).  The Closing
shall occur on the Closing Date at the offices of Schulte Roth & Zabel LLP,
919 Third Avenue, New York, New York 10022.

 

(c)           Deliveries.  On the Closing Date, (i) the Company
(A) shall issue (without valid delivery by the Investor of the applicable
Conversion Notice as required pursuant to the Notes) the Investor Conversion
Shares by causing its transfer agent to credit the aggregate number of the
Investor Conversion Shares to the Investor’s or its designee’s balance account
with The Depository Trust Company through its Deposit Withdrawal Agent
Commission system and designated in writing by the Investor to the Company
concurrently herewith (the “Investor DTC Account”) and (B) shall
issue and deliver to the Investor (in the principal amounts as the Investor
shall request), the Investor’s Amended and Restated Note, duly executed on
behalf of the Company and registered in the name of the Investor or its
designee, and (ii) the Investor shall take such action as is necessary to
cause to be delivered to the Company the Investor’s Note for cancellation.

 

2.                                 AMENDMENTS  TO TRANSACTION DOCUMENTS.

 

(a)           Securities Purchase Agreement.  The Securities Purchase Agreement is hereby
amended as follows:

 

(i)            All references to “Notes” are hereby
replaced with “Amended and Restated Notes”; and

 

(ii)           The defined term “Transaction
Documents” is hereby amended to include this Agreement.

 

(b)           Registration Rights Agreement.  The Registration Rights Agreement is hereby
amended as follows:

 

(i)            The term “Registrable Securities” is
hereby replaced by the following:

 

2

 

(a)           “Registrable Securities” means (i) the
Conversion Shares issued or issuable upon conversion of the Notes and the
Amended and Restated Notes, (ii) the Interest Shares (as defined in the Amended
and Restated Notes) issued or issuable under the Amended and Restated Notes,
(iii) the Warrant Shares issued or issuable upon exercise of the Warrants, (iv)
the shares issuable upon exercise of the warrant granted to Rodman &
Renshaw, Inc. in connection with the execution of the Securities Purchase
Agreement and (v) any shares of capital stock issued or issuable with respect
to the Conversion Shares, the Interest Shares, the Notes, the Amended and
Restated Notes, the Warrant Shares or the Warrants as a result of any stock
split, stock dividend, recapitalization, exchange or similar event or otherwise,
without regard to any limitations on conversions of the Notes or the Amended
and Restated Notes or exercise of the Warrants.

 

(ii)           The defined term “Notes” is hereby
amended to replace the term “Notes” with the term “Notes and Amended and
Restated Notes”.

 

3.                                 REPRESENTATIONS AND
WARRANTIES

 

(a)           Investor Bring Down.  The Investor hereby represents and warrants
as to itself only as set forth in Section 2 of the Securities Purchase
Agreement as if such representations and warranties were made as of the date
hereof and set forth in their entirety in this Agreement.

 

(b)           Company Bring Down.  The Company represents and warrants to the
Investor as set forth in Section 3 of the Securities Purchase Agreement as if
such representations and warranties were made as of the date hereof and set
forth in their entirety in this Agreement; provided that the Schedules to the
Securities Purchase Agreement are replaced in their entirety by the Schedules
attached to this Agreement (the “New Schedules”) and the representations and
warranties in the Securities Purchase Agreement are qualified in their entirety
by the New Schedules (regardless of whether such representations and warranties
provide for a Schedule).

 

4.                                 CERTAIN COVENANTS

 

(a)           Disclosure of Transactions and Other
Material Information.  On or before
8:30 a.m., New York Time, on  the first Trading Day following the date
hereof, the Company shall file a Current Report on Form 8-K describing the
terms of the transactions contemplated by this Agreement and by the documents
relating to the conversion and amendment of Other Investor’s Notes on the
Closing Date (the “Other Investor Documents”) in the form
required by the 1934 Act, and attaching the material transaction documents
(including, without limitation, this Agreement, the form of the Amended and
Restated Notes and the Other Investor Documents) as exhibits to such filing
(including all attachments, the “8-K Filing”, and the description and
attachments, the “8-K Materials”).  The 8-K Materials shall be subject to the Investor’s prior
approval, not to be unreasonably withheld or delayed.  From and after the filing of the 8-K Filing with the SEC, the
Investor shall not be in possession of any material, nonpublic information
received from the Company, any of its Subsidiaries or any of its respective
officers,

 

3

 

directors, employees or agents, that is not disclosed in the 8-K
Filing.  The Company shall not, and
shall cause each of its Subsidiaries and its and each of their respective
officers, directors, employees and agents, not to, provide the Investor with
any material nonpublic information regarding the Company or any of its
Subsidiaries from and after the filing of the 8-K Filing with the SEC without
the express written consent of the Investor. 
In the event of a breach of the foregoing covenant by the Company, any
of its Subsidiaries, or any of its or their respective officers, directors,
employees and agents, in addition to any other remedy provided herein or in the
Transaction Documents, the Investor shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of the 8-K Materials without the prior approval by the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees
or agents.  The Investor shall not have
any liability to the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees, shareholders or agents for any such
disclosure.  Subject to the foregoing,
neither the Company nor the Investor shall issue any press releases or any
other public statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, with the prior approval of
the Investor (not to be unreasonably withheld or delayed), to make any press
release or other public disclosure with respect to such transactions (i) in
substantial conformity with the 8-K Filing and contemporaneously therewith and
(ii) as is required by applicable law and regulations, including the applicable
rules and regulations of the Principal Market (provided that in the case of
clause (i) the Investor shall be consulted by the Company (although the
consent of the Investor shall not be required) in connection with any such
press release or other public disclosure prior to its release).

 

(b)           Registration Statement.  If required pursuant to the rules and
regulations of the 1933 Act, the Company shall prepare, and, as soon as
practicable but in no event later than two (2) Business Days after the date
hereof, file with the SEC a prospectus supplement pursuant to Section 424(b) of
the 1933 Act reflecting the changes set forth in this Agreement.

 

5.                                 CONDITIONS TO
COMPANY’S OBLIGATIONS HEREUNDER.

 

The obligations of the Company hereunder are subject
to the satisfaction of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion by providing the Investor with prior written
notice thereof:

 

(a)           The Investor shall have executed this
Agreement and delivered the same to the Company.

 

(b)           The Investor shall have delivered to the
Company the Investor’s Notes.

 

(c)           The representations and warranties of
the Investor shall be true and correct as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Investor shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and 

 

4

 

conditions
required by this Agreement to be performed, satisfied or complied with by such
Investor at or prior to the Closing Date.

 

(d)           The Company shall have entered into
separate but substantially identical conversion and amendment agreements with
each of the Other Investors and all conditions to the closings contemplated by
such agreements shall have been satisfied or waived.

 

6.                                 CONDITIONS TO
INVESTOR’S OBLIGATIONS HEREUNDER.

 

The obligations of the Investor hereunder are subject
to the satisfaction of each of the following conditions, provided that these
conditions are for the Investor’s sole benefit and may be waived by the
Investor at any time in its sole discretion by providing the Company with prior
written notice thereof:

 

(a)           The Company shall have executed and
delivered to the Investor (i) this Agreement and (ii) the Amended and Restated
Notes (in such principal amounts as such Investor shall request).

 

(b)           The Company shall have credited the
Investor Conversion Shares to the Investor DTC Account.

 

(c)           The Investor shall have received the
opinion of Wilson Sonsini Goodrich & Rosati, PC, the Company’s outside counsel,
in substantially the form of Exhibit B attached hereto.

 

(d)           The Company shall have delivered to the
Investor a certificate, executed by the Secretary of the Company and dated as
of the date hereof, as to the resolutions authorizing the transactions set
forth herein as adopted by the Company’s Board of Directors in a form
reasonably acceptable to the Investor (the “Resolutions”).

 

(e)           The Conversion Shares and the Investor
Conversion Shares shall be listed upon the Principal Market.

 

(f)            The representations and warranties of
the Company shall be true and correct as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the Closing
Date.  The Investor shall have received
a certificate, executed by the Chief Executive Officer of the Company, dated as
of the Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by the Investor in the form attached hereto as Exhibit
C.

 

(g)           The Company shall have obtained all
governmental, regulatory or third party consents and approvals, if any,
necessary for the issuance of the Conversion Shares and the Amended and
Restated Notes.

 

5

 

(h)           The Company shall have delivered to the
Investor such other documents relating to the transactions contemplated by this
Agreement as the Investor or its counsel may reasonably request.

 

7.                                 MISCELLANEOUS.

 

(a)           Governing Law; Jurisdiction; Jury
Trial.  All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of
the State of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of New
York.  Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in The City of New York, Borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of
such suit, action or proceeding is improper. 
Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

 

(b)           Counterparts.  This Agreement may be executed in one or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original,
not a facsimile signature.

 

(c)           Headings.  The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.

 

(d)           Severability.  If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.

 

(e)           Entire Agreement; Effect on Prior
Agreements; Amendments.  Except for
the Transaction Documents (to the extent any such Transaction Document is not
amended by this Agreement), this Agreement supersedes all other prior oral or
written agreements between the Investor, the Company, their affiliates and
Persons acting on their behalf

 

6

 

with respect to the matters discussed herein, and this Agreement and
the instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Investor
makes any representation, warranty, covenant or undertaking with respect to
such matters.  No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the Investor and to the extent that Other Investors may be affected
thereby, by holders of Notes representing at least two-thirds of the aggregate
principal amount of the Notes then outstanding.  No provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought.  No consideration shall be offered or paid to
any Person to amend or consent to a waiver or modification of any provision of
any of the Transaction Documents unless the same consideration also is offered
to all of the parties to the Transaction Documents, holders of Notes or holders
of the Warrants, as the case may be. 
The Company has not, directly or indirectly, made any agreements with
any of the Investors relating to the terms or conditions of the transactions
contemplated by the Transaction Documents except as set forth in the
Transaction Documents.

 

(f)            Notices.  Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of transmission
is mechanically or electronically generated and kept on file by the sending
party); or (iii) one Business Day after deposit with an overnight courier
service, in each case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such
communications shall be:

 

	
   

  	
  If to the Company:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SuperGen, Inc.

  
	
   

  	
   

  	
  4140 Dublin Boulevard

  
	
   

  	
   

  	
  Suite 200

  
	
   

  	
   

  	
  Dublin, California 94568

  
	
   

  	
   

  	
  Telephone:   (925) 560-0100

  
	
   

  	
   

  	
  Facsimile:  (925) 560-0101

  
	
   

  	
   

  	
  Attention:  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
   

  	
  Wilson Sonsini Goodrich & Rosati, PC

  
	
   

  	
   

  	
  650 Page Mill Road

  
	
   

  	
   

  	
  Palo Alto, California 93404

  
	
   

  	
   

  	
  Telephone:  (650) 493-9300

  
	
   

  	
   

  	
  Facsimile:  (650) 493-6811

  
	
   

  	
   

  	
  Attention:  John V. Roos, Esq.

  

 

7

 

	
   

  	
  If to the Investor:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

or to such other address and/or facsimile number and/or to the
attention of such other Person as the recipient party has specified by written
notice given to each other party five (5) days prior to the effectiveness of
such change.  Written confirmation of
receipt (A) given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or electronically generated by the sender’s
facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by an overnight
courier service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from an overnight courier service in accordance with
clause (i), (ii) or (iii) above, respectively.

 

(g)           Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Amended and Restated Notes.  The Company shall not assign this Agreement
or any rights or obligations hereunder without the prior written consent of the
holders of Amended and Restated Notes representing at least two-thirds of the
aggregate principal amount of the Amended and Restated Notes then outstanding,
including by merger or consolidation, except pursuant to a Change of Control
(as defined in Section 4 of the Amended and Restated Notes) with respect to
which the Company is in compliance with Section 4 of the Amended and Restated
Notes.  The Investor may assign some or
all of its rights hereunder without the consent of the Company, in which event
such assignee shall be deemed to be a Investor hereunder with respect to such
assigned rights.

 

(h)           No Third Party Beneficiaries.  This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns,
and is not for the benefit of, nor may any provision hereof be enforced by, any
other Person.

 

8

 

(i)            Survival.  The representations and warranties of the
Company and the Investor contained herein, and the agreements and covenants set
forth herein, shall survive the Closing.

 

(j)            Further Assurances.  Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

 

(k)           No Strict Construction.  The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.

 

(l)            Remedies.  The Investor and each holder of the
Securities shall have all rights and remedies set forth in the Transaction
Documents and all rights and remedies which such holders have been granted at
any time under any other agreement or contract and all of the rights which such
holders have under any law.  Any Person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law. 
Furthermore, the Company recognizes that in the event that it fails to
perform, observe, or discharge any or all of its obligations under this
Agreement, any remedy at law may prove to be inadequate relief to the
Investor.  The Company therefore agrees
that the Investor shall be entitled to seek temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages and
without posting a bond or other security.

 

[Signature Page Follows]

 

9

 

IN WITNESS WHEREOF,
the Investor and the Company have caused this Conversion and Amendment
Agreement to be duly executed as of the date first written above.

 

	
  COMPANY:

  	
   

  	
  INVESTOR:

  
	
   

  	
   

  	
   

  
	
  SUPERGEN,
  INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Joseph Rubinfeld 

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President/Chief Executive Officer

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

10

 

EXHIBITS

 

	
  Exhibit A

  	
   

  	
  Form of Amended and Restated Note

  
	
  Exhibit B

  	
   

  	
  Opinion of Wilson Sonsini Goodrich & Rosati, PC

  
	
  Exhibit C

  	
   

  	
  Form of Officer’s Certificate

  

 

11Exhibit
10.9

 

FORM OF
AMENDED AND RESTATED SENIOR 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, AND APPLICABLE STATE SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL, IN
A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS 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 SECTIONS 3(c)(iii) AND 18(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 3(c)(iii) OF THIS NOTE.

 

 

AMENDED AND
RESTATED SENIOR CONVERTIBLE NOTE

 

 

	
  Issuance Date: June 24,
  2003

  	
   

  	
  Principal: U.S.
  $                     (1)

  

 

FOR VALUE RECEIVED, SUPERGEN, INC., a Delaware corporation (the “Company”),
hereby promises to pay to the order of
                           
or its registered assigns (“Holder”)
the amount set out above as the Principal (as reduced pursuant to the terms
hereof pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether upon the
Maturity Date, on any Installment Date with respect to the Installment Amount
due on such Installment Date (each, as defined herein), acceleration,
redemption or otherwise (in each case, in accordance with the terms hereof) and
to pay interest (“Interest”) on
any outstanding Principal at the rate of 4.00% per annum, subject to periodic
adjustment pursuant to Section 2 (the “Interest
Rate”), from the Original Issuance Date (as defined herein) until
the same

 

(1)           Insert half of the Principal
outstanding under the initial Notes.

 

 

becomes
due and payable, whether upon an Interest Date, any Installment Date or the
Maturity Date (each, as defined herein), acceleration, conversion, exchange,
redemption or otherwise (in each case in accordance with the terms hereof).  For avoidance of doubt, any Principal that
comprises a portion of the Conversion Amount pursuant to Section 3(b) in
connection with any conversion of this Note pursuant to Section 3(a) (a “Principal Conversion Amount”) shall reduce
the outstanding Principal of this Note. 
This Senior Convertible Note (including all Senior Convertible Notes
issued in exchange, transfer or replacement hereof, this “Note”) is one of an issue of Senior
Convertible Notes originally issued on the Original Issuance Date pursuant to the
Securities Purchase Agreement (as defined below) and amended and restated
pursuant to the Conversion and Amendment Agreement, dated as of June
   , 2003, by and between the Company and the initial Holder of
this Note (collectively, the “Notes”
and such other Notes, the “Other Notes”).  Certain capitalized terms used herein are
defined in Section 28.

 

(1)           PAYMENTS OF PRINCIPAL.  On each Installment Date, the Company shall pay to the Holder an
amount equal to the Installment Amount due on such Installment Date (each, as
defined in Section 8(h)) in accordance with Section 8.  If any Principal remains outstanding on the
Maturity Date (as defined herein), then the Holder shall surrender this Note to
the Company and the Company shall pay to the Holder in cash an amount equal to
any outstanding Principal, accrued and unpaid Interest and accrued and unpaid
Late Charges, if any.  The “Maturity Date” shall be February 26, 2004,
as extended at the option of the Holder (i) in the event that, and for so long
as, an Event of Default (as defined in Section 4(a)) shall have occurred and be
continuing or any event shall have occurred and be continuing which with the
passage of time and the failure to cure would result in an Event of Default and
(ii) through the date that is ten days after a the consummation of a Change of
Control (as defined in Section 5(a)) in the event that a Change of Control is
publicly announced or a Change of Control Notice (as defined in Section 5(a))
is delivered prior to the Maturity Date.

 

(2)           INTEREST; INTEREST RATE.  Interest on this Note shall commence accruing on the Original
Issuance Date and shall be computed on the basis of a 365-day year and actual
days elapsed and shall be payable during the period beginning on the Original
Issuance Date and ending on, and including, the Maturity Date, on May 26, 2003,
August 26, 2003, November 26, 2003, February 26, 2004 and the Maturity Date (if
the Maturity Date is not February 26, 2004) (each, an “Interest Date”).  Interest shall be payable on each Interest Date, to the record
holder of this Note on the fifth Business Day prior to the applicable Interest
Date, in cash or, at the option of the Company, in shares of Common Stock (“Interest Shares”) provided that the
Interest which accrued during any period shall be payable in Interest Shares
if, and only if, the Company delivers written notice of such election (“Interest Election Notice”) to each holder
of the Notes at least 10 Trading Days prior to the Interest Date (each, an “Interest Election Date”).  Interest to be paid on an Interest Date in
Interest Shares shall be paid in a number of fully paid and nonassessable
shares (rounded to the nearest whole share in accordance with Section 3(a)) of
Common Stock equal to the quotient of (a) the amount of Interest payable on
such Interest Date and (b) the Interest Conversion Price in effect on the
applicable Interest

 

2

 

Date.  If any Interest Shares are to be paid on an
Interest Date, then the Company shall (X) issue and deliver on the applicable
Interest Date, to such address as specified by the Holder in writing to the
Company at least two Business Days prior to the applicable Interest Date, a
certificate, registered in the name of the Holder or its designee, for the
number of Interest Shares to which the Holder shall be entitled, or (Y)
provided that the Company’s transfer agent (the “Transfer Agent”) is participating in the Depository Trust
Company (“DTC”) Fast Automated
Securities Transfer Program and such Interest Shares do not require the
placement of any legends restricting transfer of such Interest Shares, upon the
request of the Holder, credit such aggregate number of Interest Shares to which
the Holder shall be entitled to the Holder’s or its designee’s balance account
with DTC through its Deposit Withdrawal Agent Commission system.  Notwithstanding the foregoing, the Company
shall not be entitled to pay Interest in Interest Shares and shall be required
to pay such Interest in cash on the applicable Interest Date if (w) any event
constituting an Event of Default or an event that with the passage of time and
assuming it were not cured would constitute an Event of Default has occurred
and is continuing on the applicable Interest Election Date or the Interest
Date, unless consented to in writing by the Holder, (x) on each day during the
period beginning on the applicable Interest Election Date and ending on and
including the applicable Interest Date, the Common Stock is not listed on the
Principal Market or The New York Stock Exchange, Inc. (the “NYSE”), and delisting or suspension of the
Common Stock by such market or exchange shall have been threatened either (A)
in writing by such market or exchange or (B) by falling below the minimum
listing maintenance requirements of such market or exchange for the Common
Stock, (y) the Registration Statement (as defined in the Registration Rights
Agreement) covering the Interest Shares is not effective and available for the
resale of all of the Registrable Securities (as defined in the Registration
Rights Agreement) relating to this Note on the Interest Election Date or on the
Interest Date or (z) the Company has not obtained the Stockholder Approval (as
defined in the Securities Purchase Agreement) prior to the Interest Election
Date.  Prior to the payment of Interest
on an Interest Date, Interest on this Note shall accrue at the Interest Rate
and be payable by way of inclusion of the Interest in the Conversion Amount (as
defined below) in accordance with Section 3(b)(i).  From and after the occurrence of an Event of Default, the
Interest Rate shall be increased to 12%. 
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 that the Interest as calculated 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.  The Company shall pay any and
all taxes that may be payable with respect to the issuance and delivery of
Interest Shares; provided that the Company shall not be required
to pay any tax that may be payable in respect of any issuance of Interest
Shares to any Person other than the Holder or with respect to any income tax
due by the Holder with respect to such Interest Shares.

 

(3)           CONVERSION OF NOTES.  This Note shall be convertible into shares of the Company’s common
stock, par value $.001 per share (the “Common
Stock”), on the terms

 

3

 

and
conditions set forth in this Section 3.

 

(a)           Conversion Right. 
Subject to the provisions of Section 3(d), at any time or times on or
after the Original Issuance Date, the Holder shall be entitled to convert any
portion of the outstanding and unpaid Conversion Amount into fully paid and
nonassessable shares of Common Stock in accordance with Section 3(c), at the
Conversion Rate (as defined below) then in effect.  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 up to the
nearest whole share.  The Company shall
pay any and all taxes that may be payable with respect to the issuance and
delivery of Common Stock upon conversion of any Conversion Amount; provided
that the Company shall not be required to pay any tax that may be payable in
respect of any transfer involved in the issue 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 issued upon conversion.

 

(b)           Conversion Rate. 
The number of shares of Common Stock issuable upon conversion of any
Conversion Amount pursuant to Section 3(a) shall be determined by dividing (x)
such Conversion Amount by (y) the Conversion Price (as defined below) (the “Conversion Rate”).

 

(i)            “Conversion Amount”
means the sum of (A) the portion of the outstanding Principal to be converted,
redeemed or otherwise with respect to which this determination is being made
(provided that such portion of the Principal shall be equal to $1,000 or an
integral multiple of $1,000 in excess thereof), (B) accrued and unpaid Interest
with respect to such Principal and (C) accrued and unpaid Late Charges with
respect to such Principal and Interest.

 

(ii)           “Conversion Price”
means (A) as of any Conversion Date (as defined below) or other date of
determination (other than with respect to an Installment Amount on an
Installment Date pursuant to a Company Conversion (as defined in Section 8(a))
during the period beginning on the Original Issuance Date and ending on and
including the Maturity Date, the Fixed Conversion Price, and (B) with respect
to any Installment Amount on an Installment Date pursuant to a Company
Conversion, at the option of the Holder, either the Fixed Conversion Price or
the Company Conversion Price (as defined in Section 8(a)), each in effect as of
such date and subject to adjustment as provided herein.

 

(iii)          “Fixed Conversion Price”
means $4.25, subject to adjustment as provided herein.

 

4

 

(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, (B) if required by Section 3(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 reasonably satisfactory to the Company
with respect to this Note in the case of its loss, theft or destruction) and
(C) pay any transfer taxes or other applicable taxes or duties, if any,
required in connection with the issuance of shares of Common Stock to a Person
other than the Holder.  On or before the first Business Day
following the date of receipt by the Company of a Conversion Notice, the Company
shall transmit by facsimile a confirmation of receipt of such Conversion Notice
to the Holder and the Transfer Agent. 
On or before the third Business Day following the date of receipt by the
Company of a Conversion Notice (the “Share
Delivery Date”), the Company shall (X) issue and deliver to the
address as specified in the Conversion Notice, a certificate, registered in the
name of the Holder or its designee, for the number of shares of Common Stock to
which the Holder shall be entitled, or (Y) provided that the Transfer Agent is
participating in DTC Fast Automated Securities Transfer Program and such shares
of Common Stock do not require the placement of any legends restricting
transfer of such shares of Common Stock, upon the request of the Holder, credit
such aggregate number of shares of Common Stock to which the Holder shall be
entitled to the Holder’s or its designee’s balance account with DTC through its
Deposit Withdrawal Agent Commission system. 
If this Note is physically surrendered for conversion as required by
Section 3(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 (the “Note
Delivery Date”) and at its own expense, issue and deliver to the
holder a new Note (in accordance with Section 18(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.

 

(ii)           Company’s Failure to Timely Convert.  If the Company shall fail to issue a
certificate to the Holder or credit the Holder’s balance account with DTC for
the number of shares of Common Stock to which the Holder is entitled upon
conversion of any Conversion Amount on or prior to the date which is five
Business Days after the Conversion Date (a “Conversion
Failure”), then (A) the Company shall pay damages to the Holder for
each date of such Conversion Failure in an amount equal to 1.0%  of the product of (I) the number of shares
of Common Stock not issued to the Holder on or prior to the Share Delivery Date
and to which the Holder is entitled, and (II) the Closing Sale

 

5

 

Price of the Common Stock on
the Share Delivery Date and (B) the Holder, upon written notice to the Company,
may void its Conversion Notice with respect to, and retain or have returned, as
the case may be, any portion of this Note that has not been converted pursuant
to such Conversion Notice; provided that the voiding of a Conversion Notice
shall not affect the Company’s obligations to make any payments which have
accrued prior to the date of such notice pursuant to this Section 3(c)(ii) or
otherwise.

 

(iii)          Book-Entry. 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 Conversion 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 physical surrender and reissue of this Note.  The Company shall maintain records showing
the Principal, Interest and Late Charges converted and the dates of such conversions
or shall use such other method, reasonably satisfactory to the Holder, so as
not to require physical surrender of this Note upon conversion.

 

(iv)          Pro Rata Conversion; Disputes.  In the event that the Company receives a
Conversion Notice from more than one holder of Notes or Separate Notes for the
same Conversion Date and the Company can convert some, but not all, of such
portions of the Notes submitted for conversion, the Company, subject to Section
3(d), shall convert from each holder of Notes or Separate Notes electing to
have Notes or Separate Notes converted on such date a pro rata amount of such
holder’s portion of its Notes or Separate Notes submitted for conversion based
on the principal amount of Notes and Separate Notes submitted for conversion on
such date by such holder relative to the aggregate principal amount of all
Notes and Separate Notes submitted for conversion on such date.  In the event of a dispute as to the number
of shares of Common Stock issuable to the Holder in connection with a
conversion of this Note, the Company shall issue to the Holder the number of
shares of Common Stock not in dispute and resolve such dispute in accordance
with Section 23.

 

(v)           Application of Conversion Amounts.  Subject to Section 8(b), any Conversion
Amount which the Holder elects to convert in accordance with this Section 3
(other than pursuant to Company Conversions) shall be deducted first from the
Installment Amount relating to the latest Installment Date (i.e., nearest to
the Maturity Date) with respect to which Installment Amounts remain outstanding
and then sequentially from the Installment Amounts relating to the immediately
preceding Installment Dates.

 

(vi)          Holder
Status.  Except as specifically
provided in this Note, the Holder shall not be entitled to any rights relating
to the Common Stock issuable upon conversion of the Notes until the Holder has
converted this Note into Common Stock.

 

6

 

(d)           Limitations on Conversions.  The Company shall not effect any conversion
of this Note, and the Holder of this Note shall not have the right to convert
any portion of this Note, pursuant to Section 3(a), Section 8 or otherwise, to
the extent that after giving effect to such conversion, the Holder (together
with the Holder’s affiliates), as set forth on the applicable Conversion
Notice, would beneficially own in excess of 4.99% of the number of shares of
Common Stock outstanding immediately after giving effect to such conversion.  For purposes of the foregoing sentence, the
number of shares of Common Stock beneficially owned by the Holder and its
affiliates shall include the number of shares of Common Stock issuable upon
conversion of this Note with respect to which the determination of such
sentence is being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (A) conversion of the remaining, nonconverted
portion of this Note beneficially owned by the Holder or any of its affiliates
and (B) exercise or conversion of the unexercised or nonconverted portion of
any other securities of the Company (including, without limitation, any other
Notes, Separate Notes or warrants) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially owned by the
Holder or any of its affiliates.  Except
as set forth in the preceding sentence, for purposes of this Section 3(d)(i),
beneficial ownership shall be calculated in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended (the “1934 Act”).  For purposes of this Section 3(d)(i), in determining the number
of outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company’s most
recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Transfer Agent setting forth the number of shares of Common Stock
outstanding.  Upon the written or oral
request of the Holder, the Company shall within two Business Days confirm
orally and in writing to the Holder the number of shares of Common Stock then
outstanding.  In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this Note, by
the Holder or its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.

 

(4)           RIGHTS UPON EVENT OF DEFAULT.

 

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

 

(i)            the failure of any Registration Statement required to be
filed pursuant to the Registration Rights Agreement to be declared effective by
the SEC on or prior to the date that is 60 days after the applicable
Effectiveness Deadline (as defined in the Registration Rights Agreement), or,
while the applicable Registration Statement is required to be maintained
effective pursuant to the terms of the Registration Rights Agreement, the

 

7

 

effectiveness of the
applicable Registration Statement lapses for any reason (including, without
limitation, the issuance of a stop order) or is unavailable to any holder of
the Notes for sale of all of such holder’s Registrable Securities (as defined
in the Registration Rights Agreement) in accordance with the terms of the
Registration Rights Agreement, and such lapse or unavailability continues for a
period of 10 consecutive days or for more than an aggregate of 30 days in any
365-day period (other than days during an Allowable Grace Period (as defined in
the Registration Rights Agreement));

 

(ii)           the suspension from trading or failure of the Common Stock
to be listed on the Principal Market or the NYSE for a period of five
consecutive days or for more than an aggregate of 10 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 10 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 permitted
request for conversion of any Notes into shares of Common Stock that are
tendered for conversion in accordance with the provisions of the Notes (other
than notice delivered by the Company in good faith in connection with a dispute
that is being resolved in accordance with Section 23 as to the appropriate
number of shares of Common Stock to be delivered upon conversion of the Notes);

 

(iv)          at any time following the tenth consecutive Business Day
that the Holder’s Authorized Share Allocation is less than the number of shares
of Common Stock that the Holder would be entitled to receive upon a conversion
of the full Conversion Amount of this Note (without regard to any limitations
on conversion set forth in Section 3(d) or otherwise);

 

(v)           the Company’s failure to pay to the Holder any amount of
Principal, Interest, Late Charges or other amounts when and as due under this
Note (including, without limitation, the Company’s failure to pay any
redemption payments or amounts hereunder), 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 Late Charges when and as
due, in which case only if such failure continues for a period of at least five
Business Days;

 

(vi)          any default under, redemption of or acceleration prior to
maturity of any Indebtedness (as defined in Section 3(r) of the Securities
Purchase Agreement) in excess of $500,000 in the aggregate of the Company or
any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase
Agreement);

 

8

 

(vii)         the Company or any of its Significant Subsidiaries pursuant
to or within the meaning of Title 11, U.S. Code, or any similar Federal 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 Significant Subsidiaries in an involuntary case, (B)
appoints a Custodian of the Company or any of its Significant Subsidiaries or
(C) orders the liquidation of the Company or any of its Significant
Subsidiaries;

 

(ix)           a final judgment or judgments for the payment of money
aggregating in excess of $1,000,000 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 $1,000,000 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 60 days of the issuance of such judgment;

 

(x)            the Company breaches any representation, warranty,
covenant or other term or condition of this Note, any Other Note or any
Separate Note, any other Transaction Document or any other agreement, document,
certificate or other instrument delivered in connection with the transactions
contemplated thereby and hereby to which the Holder is a party, except, other
than in connection with a breach of Section 29 hereof, (A) to the extent that
such breach would not have a Material Adverse Effect (as defined in Section
3(a) of the Securities Purchase Agreement) and (B) in the case of a breach of a
covenant which is curable, only if such breach continues for a period of at
least five consecutive Business Days;

 

(xi)           any breach or failure in any material respect to comply
with either of Sections 8 or 14 of this Note;

 

(xii)          any Event of Default (as defined in any Other Note or
Separate Note) occurs with respect to any Other Note or Separate Note; or

 

9

 

(xiii)         the Company shall, directly or
indirectly, repay, prepay, redeem, defease or otherwise make any payment on any
Indebtedness existing on the Original Issuance Date (other than Purchase Money
Indebtedness and other than regularly scheduled interest payments on Permitted
Indebtedness at a rate that is not in excess of 7% per annum) in cash or cash
equivalents.

 

(b)           Redemption Right. 
Promptly after the occurrence of an Event of Default with respect to
this Note or any Other Note, the Company shall 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 that the Holder is
electing to redeem.  Each portion of
this Note subject to redemption by the Company pursuant to this Section 4(b)
shall be redeemed by the Company at a price equal to the greater of (i) the
product of (x) the Conversion Amount to be redeemed and (y) the Redemption
Premium and (ii) the product of (A) the Conversion Rate with respect to such
Conversion Amount in effect at such time as the Holder delivers an Event of
Default Redemption Notice and (B) the Closing Sale Price of the Common Stock on
the date immediately preceding such Event of Default (the “Event of Default Redemption Price”).  Redemptions required by this Section 4(b)
shall be made in accordance with the provisions of Section 11.

 

(5)           RIGHTS UPON CHANGE OF CONTROL.

 

(a)           Change
of Control.  Each of the following
events shall constitute a “Change of Control”:

 

(i)            the consolidation, merger or other business combination
(including, without limitation, a reorganization or recapitalization) of the
Company with or into another Person (other than (A) a consolidation, merger or
other business combination (including, without limitation, reorganization or
recapitalization) in which holders of the Company’s voting power immediately
prior to the transaction continue after the transaction to hold, 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 (B) pursuant to a
migratory merger effected solely for the purpose of changing the jurisdiction
of incorporation of the Company);

 

(ii)           the sale or transfer of all or substantially all of the
Company’s assets; or

 

(iii)          a purchase, tender or exchange consummated pursuant to an
offer made to and accepted by a sufficient number of holders of the outstanding
shares of Common Stock

 

10

 

such that after consummation
of such purchase, tender or exchange, the Person or group of Persons proposing
such purchase, tender or exchange beneficially own 50% or more of the
outstanding Common Stock.

 

No sooner than 15 days nor later than 10 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”).

 

(b)           Assumption. 
Prior to the consummation of any Change of Control, the Company will
secure from any Person purchasing the Company’s assets or Common Stock or any
successor resulting from such Change of Control (in each case, an “Acquiring Entity”) a written agreement (in
form and substance satisfactory to the holders of Notes representing at least a
majority of the aggregate principal amount of the Notes then outstanding) to
deliver to each holder of Notes in exchange for such Notes, a security of the
Acquiring 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 held by such holder, and satisfactory to the
holders of Notes representing at least a majority of the aggregate principal amount
of the Notes then outstanding.

 

(c)           Holder Redemption Right.  At any time during the period beginning after the Holder’s
receipt of a Change of Control Notice and ending on the date of the
consummation of such Change of Control (or, in the event a Change of Control
Notice is not delivered at least 10 days prior to a Change of Control, at any
time on or after the date which is 10 days prior to a Change of Control and
ending 10 days after 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 5(c) shall be redeemed by the
Company at a price equal to the greater of (i) the product of (x) the
Conversion Amount being redeemed and (y) the quotient determined by dividing (A)
the Closing Sale Price of the Common Stock on the Trading Day immediately
preceding consummation of such Change of Control by (B) the Conversion Price
and (ii) 120% of the Conversion Amount being redeemed (the “Change of
Control Redemption Price”). 
Redemptions required by this Section 5(c) shall be made in accordance
with the provisions of Section 11 and, to the extent permitted by applicable
law, shall have priority to payments by the Company or the Acquiring Entity, as
applicable, to the stockholders of the Company in connection with a Change of
Control.  Notwithstanding anything to the contrary in this Section 5, but subject
to Section 3(d), 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 5(c) (together with any interest thereon) may be
converted, in whole or in part, by the Holder into Common Stock pursuant to
Section 3.

 

11

 

(d)           Company
Redemption Right.  At any time from
and after the delivery of a Change of Control Notice but not later than the day
immediately preceding the consummation of such Change of Control, the Company
at its option may deliver a written notice via facsimile and overnight courier
to the Holder indicating that if the Company shall not receive from the Holder
a Change of Control Redemption Notice in accordance with Section 5(c), then the
Company is electing to redeem all or any portion of the Principal of this Note,
all Other Notes and all Separate Notes (an “Company Change of Control Redemption Notice”).  The Company Change of Control Redemption
Notice shall be irrevocable.  If the
Company shall not receive from the Holder a Change of Control Redemption Notice
in accordance with Section 6(c) and if the Conditions to Company Change of
Control Redemption (as set forth below) are satisfied or waived in writing by
the Holder, then the Company shall have the right to require the Holder to
submit for redemption all or any such portion of the Principal of this Note
designated in the Company Change of Control Redemption Notice in exchange for
(i) an amount in cash, payable by wire transfer of immediately available funds,
equal to the sum of (A) 120% of the Principal of this Note being redeemed
pursuant to this Section 5(d), plus (B) accrued and unpaid Interest with
respect to such Principal plus (C) accrued and unpaid Late Charges with respect
to such Principal and (ii) delivery of the Change of Control Warrants to the
Holder, duly executed and authorized by the Acquiring Entity (the “Company
Change of Control Redemption Price”).  “Conditions to Company Change of Control Redemption” means the
following conditions: (i) on each day during the period beginning on the date
of delivery of the Company Change of Control Redemption Notice to each holder
of the Notes and Separate Notes and ending on and including the date
immediately preceding the Company Change of Control Redemption Date, no Grace
Period (as defined in the Registration Rights Agreement) shall be in effect and
either (x) the Registration Statement or Registration Statements required
pursuant to the Registration Rights Agreement shall be effective and available
for the resale of all of the Registrable Securities in accordance with the
terms of the Registration Rights Agreement (and analogous provisions with
respect to the Separate Notes) or (y) all shares of Common Stock issuable upon
conversion of the Notes and Separate Notes and shares of Common Stock issuable
upon exercise of the Warrants shall be eligible for sale without restriction
pursuant to Rule 144(k) and the state securities laws; (ii) the Company shall
have no knowledge of any fact that would cause (x) the Registration Statements
required pursuant to the Registration Rights Agreement not to be effective and
available for the resale of at least all of the Registrable Securities in
accordance with the terms of the Registration Rights Agreement (and analogous
provisions with respect to the Separate Notes) or (y) any shares of Common
Stock issuable upon conversion or redemption of the Notes and Separate Notes
and shares of Common Stock issuable upon exercise of the Warrants not to be
eligible for sale without restriction pursuant to Rule 144(k) and any
applicable state securities laws; (iii) on each day during the period beginning
on the date of delivery of the Company Change of Control Redemption Notice and
ending on and including the date immediately preceding the Company Change of
Control Redemption Date, the Common Stock is designated for quotation on the
Principal Market or the NYSE and shall not have been suspended from trading on
such exchange or market nor shall delisting or suspension

 

12

 

by such market or exchange
been threatened or pending either (A) in writing by such market or exchange or
(B) by falling below the minimum listing maintenance requirements of such
market or exchange; (iv) during the period beginning on the Original  Issuance Date and ending on and including
the date immediately preceding the Company Change of Control Redemption Date,
the Company shall have delivered shares of Common Stock upon any conversion of
Conversion Amounts on a timely basis as set forth in Section 3(c)(i) of this
Note (and analogous provisions under the Other Notes and Separate Notes) and
delivered shares of Common Stock upon exercise of any Warrants on a timely
basis as set forth in Section 1(a) of the Warrants; and (v) the Company
otherwise shall have been in material compliance with and shall not have
breached, in any material respect, any provision, covenant, representation or
warranty of this Note, any of the Other Notes, any Separate Notes or any other
Transaction Document.

 

(e)           Pro Rata Company Change of Control Redemption
Requirement. If the Company elects to cause a redemption of all or any
portion of the Principal of this Note pursuant to Section 5(d), then it must
simultaneously take the same action with respect to all Other Notes.  If the Company elects to cause the
redemption of this Note pursuant to Section 5(d) (or analogous provisions under
all Other Notes) with respect to less than the aggregate Principal of the Notes
then outstanding, then the Company shall require redemption of Principal from
each of the holders of the Notes equal to the product of (i) the aggregate
Principal amount of Notes which the Company has elected to cause to be redeemed
pursuant to Section 5(d), multiplied by (ii) the fraction, the numerator of
which is the sum of the aggregate Principal amount of the Notes initially
purchased by such holder on the Original Issuance Date and the denominator of
which is the sum of the aggregate Principal amount of the Notes purchased by
all holders on the Original Issuance Date (such fraction with respect to each
holder is referred to as its “Change of
Control Allocation Percentage,” and such amount with respect to each
holder is referred to as its “Pro Rata Change
of Control Redemption Amount”). 
In the event that the initial holder of any Notes shall sell or
otherwise transfer any of such holder’s Notes, the transferee shall be
allocated a pro rata portion of such holder’s Change of Control Allocation
Percentage.  The Company Change of
Control Redemption Notice shall state (i) the date selected for the redemption
in accordance with Section 5(d), which date shall be the date of consummation
of the Change of Control, (ii)
the aggregate principal amount of the Notes which the Company has elected to
redeem from all of the holders of the Notes pursuant to this Section 5(d) (and
analogous provisions under all Other Notes) and (iii) each holder’s Pro Rata
Change of Control Redemption Amount of the aggregate Principal amount of the
Notes that the Company has elected to redeem pursuant to Section 5(d) (and
analogous provisions under all Other Notes). 
All Principal of this Note redeemed by the Company pursuant to Section
5(d) shall be deducted first from the Installment Amount relating to the
latest Installment Date (i.e., nearest to the Maturity Date) with respect to
which Installment Amounts remain outstanding and then sequentially from the
Installment Amounts relating to the immediately preceding Installment Dates. 
Redemptions under Section 5(d) shall be made in accordance with the
provisions of Section 11.  Notwithstanding anything to the contrary in
this Section 5, but subject to Section 3(d), until the Company Change of
Control Redemption Price (together with any interest

 

13

 

thereon)
is paid in full, the Pro Rata Change of Control Redemption
Amount (together with any interest thereon) may be converted, in whole or in
part, by the Holder into Common Stock pursuant to Section 3.

 

(6)           RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER
CORPORATE EVENTS.

 

(a)           Purchase Rights. 
If at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
“Company Purchase Rights”), then
the Holder will be entitled to acquire, upon the terms applicable to such
Company Purchase Rights, the aggregate Company Purchase Rights which the Holder
could have acquired if the Holder had held the number of shares of Common Stock
acquirable upon complete conversion of this Note (without taking into account
any limitations or restrictions on the convertibility of this Note) immediately
before the date on which a record is taken for the grant, issuance or sale of
such Company Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the grant,
issue or sale of such Company Purchase Rights.

 

(b)           Other Corporate Events. Prior to the consummation
of any recapitalization, reorganization, consolidation, merger, spin-off or
other business combination (other than a Change of Control) pursuant to which
holders of Common Stock are entitled to receive securities or other assets with
respect to or in exchange for Common Stock (a “Corporate
Event”), the Company shall make appropriate provision to insure that
the Holder will thereafter have the right to receive upon a conversion of this
Note, (i) in addition to the shares of Common Stock receivable upon such
conversion, such securities or other assets to which the Holder would have been
entitled with respect to such shares of Common Stock had such shares of Common
Stock been held by the Holder upon the consummation of such Corporate Event or
(ii) in lieu of the shares of Common Stock otherwise receivable upon such
conversion, such securities or other assets received by the holders of Common
Stock in connection with the consummation of such Corporate Event in such
amounts as the Holder would have been entitled to receive had this Note
initially been issued with conversion rights for the form of such consideration
(as opposed to shares of Common Stock) at a conversion rate for such
consideration commensurate with the Conversion Rate.  Provision made pursuant to the preceding sentence shall be in a form
and substance satisfactory to the holders of Notes representing at least a
majority of the aggregate principal amount of the Notes then outstanding.

 

(7)           ADJUSTMENT OF FIXED CONVERSION PRICE.

 

(a)           Adjustment of Fixed Conversion Price upon Subdivision or
Combination of Common Stock.  If the
Company at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of

 

14

 

Common
Stock into a greater number of shares, the Fixed Conversion Price in effect
immediately prior to such subdivision will be proportionately reduced.  If the Company at any time combines (by
combination, reverse stock split or otherwise) one or more classes of its outstanding
shares of Common Stock into a smaller number of shares, the Fixed Conversion
Price in effect immediately prior to such combination will be proportionately
increased.

 

(b)           Other Considerations.  All calculations under this Section 7 shall be made
by the Company in good faith.

 

(8)           COMPANY
INSTALLMENT CONVERSION OR REDEMPTION.

 

(a)           General.  On
each Installment Date, the Company shall pay to the Holder of this Note the
Installment Amount as of such Installment Date by the combination of any of the
following, but subject to and in accordance with the terms of this Section 8,
(i) requiring the conversion of a portion of the applicable Installment Amount,
in whole or in part, in accordance with this Section 8 but subject to the
satisfaction of the Conditions to Company Conversion (as defined below) (a “Company Conversion”) and/or (ii) redeeming
the applicable Installment Amount, in whole or in part, in accordance with this
Section 8 (a “Company Redemption”);
provided that all of the outstanding applicable Installment Amount as of each
such Installment Date must be converted and/or redeemed by the Company on the
applicable Installment Date, subject to the provisions of this Section 8.  On or prior to the date which is at least 21
Trading Days prior to each Installment Date, the Company shall deliver written
notice to the Holder (each, a “Company
Installment Notice”), which Company Installment Notice shall state
(i) the portion, if any, of the applicable Installment Amount which the Company
elects to convert pursuant to a Company Conversion, which amount when added to
the Company Redemption Amount must equal the applicable Installment Amount (the
“Company Conversion Amount”), (ii)
the portion, if any, of the applicable Installment Amount which the Company elects
to redeem pursuant to a Company Redemption (the “Company Redemption Amount”), which amount when added to the
Company Conversion Amount must equal the applicable Installment Amount and
(iii) if the Company has elected, in whole or in part, a Company Conversion,
then the Company Installment Notice shall certify that the Conditions to
Company Conversion are satisfied as of the date of the Company Installment
Notice.  If the Company does not deliver
a Company Installment Notice in accordance with this Section 8(a), then the
“Company Redemption Amount” and the “Company Conversion Amount” with respect to
such Installment Date shall be in such amounts and proportions as the Holder
shall designate in writing to the Company in its sole discretion and the Company
shall be deemed to have delivered a Company Installment Notice setting forth
such amounts.  Each Company Installment
Notice shall be irrevocable.  Except as
expressly provided in this Section 8(a), the Company shall redeem and convert
the applicable Installment Amount of this Note pursuant to this Section 8 and
the corresponding Installment Amounts of the Other Notes pursuant to the
corresponding provisions of the Other Notes in the same ratio of the
Installment Amount being redeemed and converted hereunder.  The Company Redemption Amount (whether set
forth in the Company

 

15

 

Installment
Notice or by operation of this Section 8) shall be redeemed in accordance with
Section 8(b) and the Company Conversion Amount shall be converted in accordance
with Section 8(c).

 

(b)           Mechanics of Company Redemption.  If the Company elects, or is deemed to have
elected, a Company Redemption in accordance with Section 8(a), then the Company
Redemption Amount, if any, which is to be paid to the Holder on the applicable
Installment Date shall be redeemed by the Company on such Installment Date, and
the Company shall pay to the Holder on such Installment Date, by wire transfer
of immediately available funds (provided that the Holder has provided the
Company with written wire transfer instructions not later than the second
Business Day immediately preceding the Installment Date), an amount in cash
(the “Company Installment Redemption Price”)
equal to the sum of 100% of the Company Redemption Amount.  Notwithstanding anything to the contrary in
this Section 8(b), but subject to Section 3(d), until the Company Installment
Redemption Price (together with any interest thereon) is paid in full, the Company
Redemption Amount (together with any interest thereon) may be converted, in
whole or in part, by the Holder into Common Stock pursuant to Section 3.

 

(c)           Mechanics of Company Conversion.  Subject to Sections 3(d) and 8(d), if the
Company delivers a Company Installment Notice and elects or is deemed to have
elected, in whole or in part, a Company Conversion in accordance with Section
8(a), then the applicable Company Conversion Amount, if any, which remains
outstanding shall be converted as of the applicable Installment Date by
converting on such Installment Date such Company Conversion Amount as if the
Holder had delivered a Conversion Notice pursuant to Section 3 with respect to
such Company Conversion Amount on such Installment Date but without the Holder
being required to actually deliver such Conversion Notice; provided that the
Conditions to Company Conversion are satisfied (or waived in writing by the
Holder) on such Installment Date.  If
the Conditions to Company Conversion are not satisfied (or waived in writing by
the Holder) on such Installment Date, then at the option of the Holder
designated in writing to the Company, the Holder may require the Company to do
any one or more of the following: (i) the Company shall redeem all or any part
designated by the Holder of the unconverted Company Conversion Amount (such
designated amount is referred to as the “First
Redemption Amount”) on such Installment Date and the Company shall
pay to the Holder on such Installment Date, by wire transfer of immediately
available funds (provided that the Holder has provided the Company with written
wire transfer instructions not later than the second Business Day immediately
preceding the Installment Date), an amount in cash equal to such First
Redemption Amount or (ii) the Company Conversion shall be null and void with
respect to all or any part designated by the Holder of the unconverted Company
Conversion Amount and the Holder shall be entitled to all the rights of a
holder of this Note with respect to such amount of the Company Conversion
Amount.  If the Company fails to redeem
any First Redemption Amount on the applicable Installment Date by payment of
such amount on the applicable Installment Date, then the Holder shall have the
rights set forth in Section 8(b) as if the Company failed to pay the

 

16

 

applicable
Company Redemption Price and all other rights under this Note (including,
without limitation, such failure constituting an Event of Default described in
Section 4(a)(xii)).  In the event the
Holder delivers a Conversion Notice to the Company after the earlier of the
date which is 10 days prior to the applicable Installment Date and the Holder’s
receipt of the Company Installment Notice in respect of such Installment Date
in which the Company elects or is deemed to have elected a Company Redemption,
the Principal amount specified in such Conversion Notice shall be deducted (1)
first, from the Principal represented by the Company Redemption Amount and then
(2) second, in accordance with Section 3(c)(v).

 

(d)           Conditions to Company Conversion.  For purposes of this Section 8, “Conditions to Company Conversion” means (i) during the period beginning on the
Original Issuance Date and ending on and including the applicable Installment
Date, the Company shall have delivered shares of Common Stock upon any
conversion of Conversion Amounts on a timely basis as set forth in Section
3(c)(i) (and analogous provisions under the Other Notes and Separate
Notes) and delivered shares of Common
Stock upon exercise of any Warrants on a timely basis as set forth in Section
1(a) of the Warrants; (ii) on each day during the period beginning on the first
Trading Day of the Company Total Dollar Trading Volume Measuring Period in
respect of any Installment Date and ending on and including the applicable
Installment Date, the Common Stock shall be listed on the Principal Market or
the NYSE and delisting or suspension of the Common Stock by such market or
exchange shall not have been threatened either (A) in writing by such market or
exchange or (B) by falling below the minimum listing maintenance requirements
of such market or exchange for the Common Stock; (iii) during the period
beginning on the Original Issuance Date and ending on and including the
applicable Installment Date, there shall not have occurred either (x) the
public announcement of a pending, proposed or intended Change of Control which
has not been abandoned, terminated or consummated or (y) an Event of Default;
(iv) during the period beginning on the date which is the first Trading Day of
the Company Total Dollar Trading Volume Measuring Period and ending on and
including the applicable Installment Date, there shall not have occurred an
event that with the passage of time or giving of notice, and assuming it were not
cured, would constitute an Event of Default; (v) on each day of the period
beginning on the date of delivery of an Installment Notice with respect to an
Installment Date and ending on the applicable Installment Date either (x) the
Registration Statement or Registration Statements required pursuant to the
Registration Rights Agreement shall be effective and available for the resale
of all of the Registrable Securities in accordance with the terms of the
Registration Rights Agreement (and analogous provisions under the
Separate Notes) or (y) all shares of
Common Stock issuable upon conversion of the Notes and Separate Notes and
shares of Common Stock issuable upon exercise of the Warrants shall be eligible
for sale without restriction (other than any restriction arising under
applicable federal or state securities laws as a result of the holder of such
securities being an Affiliate of the Company) and without the need for
registration under any applicable federal or state securities laws; (vi) on
each day of the period beginning on the applicable Installment Date and ending
thirty Trading Days thereafter either (x) the Registration Statements required
pursuant to the Registration Rights Agreement shall be expected to be

 

17

 

effective
and available for the resale of at least all of the Registrable Securities in
accordance with the terms of the Registration Rights Agreement (and
analogous provisions under the Separate Notes) or (y) all shares of Common Stock issuable upon conversion of the Notes
and Separate Notes shall be eligible for sale without restriction (other than
any restriction arising under applicable federal or state securities laws as a
result of the holder of such securities being an Affiliate of the Company) and
without the need for registration under any applicable federal or state
securities laws; (vii) the Company shall have obtained the Stockholder Approval
prior to the date of delivery of the Company Installment Notice; and (viii) the
Company otherwise shall have been in material compliance with and shall not
have breached, in any material respect, any provision, covenant, representation
or warranty of the Securities Purchase Agreement, any of the Warrants, any
other Transaction Document or any of the Notes or Separate Notes.

 

(e)           Limitation on Company Conversion Amounts.  Notwithstanding anything herein to the
contrary, in no event shall the Company be required to remit by way of a
Company Conversion the portion of any Installment Amount elected to be paid by
Company Conversion that exceeds the Company Total Dollar Trading Volume during
the Company Total Dollar Trading Volume Measuring Period applicable to such
Installment Date; provided, however, that, the Company may, by so designating
in the applicable Company Installment Notice, elect to extend the Company Total
Dollar Trading Volume Measuring Period until the Conversion Amount may be paid
to the Holder without violating this Section 8(e), but in no event may such
period be extended past the Trading Day immediately preceding the applicable
Installment Date.  In the event the
Company does not remit any portion of the Installment Amount in the form of a
Company Conversion by virtue of this Section 8(e), such amounts shall be paid
in cash in accordance with Section 8(b).

 

(f)            Certain Definitions.  For purposes of this Section 8, the following capitalized terms
shall have the following meanings:

 

(i)            “Company Conversion
Price” means, as of any date of determination, that price
which shall be computed as 90% of the arithmetic average of the Weighted
Average Price of the Common Stock on any fifteen Trading Days designated by the
Holder of this Note to the Company during the period commencing on the
twentieth (20th) Trading Day immediately preceding such date and
ending on the Trading Day immediately preceding such date.  All such determinations to be appropriately
adjusted for any stock split, stock dividend, stock combination or other
similar transaction that proportionately decreases or increases the Common
Stock during such period.

 

(ii)           “Company Total Dollar Trading Volume” means,
with respect to an Installment Date, the product derived by multiplying (A) the
aggregate dollar amount of the trading volume of shares of Common Stock, as
reported by Bloomberg, during all Trading Days during the Company Total Dollar
Trading Volume Measuring Period by (B) .15.

 

18

 

(iii)          “Company Total Dollar Trading Volume Measuring Period”
means, with respect to an Installment Date, the period commencing on and
including the thirty-first (31st) Trading Day immediately preceding
the date of delivery of the Company Installment Notice in respect of such
Installment Date and ending on and including the Trading Day immediately preceding
the date of delivery of the Company Installment Notice in respect of such
Installment Date.

 

(iv)          “Installment Amount” means, with respect to
any Installment Date, the lesser of (A) the quotient of (x) the Principal
amount of this Note on the Issuance Date divided by (y) 2, and (B) the
Principal amount under this Note as of the Installment Date.  In the event the Holder shall sell or
otherwise transfer any portion of this Note, the transferee shall be allocated a
pro rata portion of the Installment Amount.

 

(v)           “Installment Date”
means each of November 26, 2003 and February 26, 2004.

 

(9)           NONCIRCUMVENTION. 
The Company hereby covenants and agrees that the Company will not, by
amendment of its Certificate of Incorporation or through any reorganization, transfer
of assets, consolidation, merger, 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.

 

(10)         RESERVATION OF AUTHORIZED SHARES.

 

(a)           Reservation. 
The Company shall initially reserve out of its authorized and unissued
Common Stock a number of shares of Common Stock for each of the Notes equal to
130% of the Conversion Rate with respect to the Conversion Amount of each such
Note as of the Issuance Date. 
Thereafter, the Company shall, so long as any of the Notes are
outstanding, take all action necessary to reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Notes, 110% of the number of shares of Common Stock as shall
from time to time be necessary to effect the conversion of all of the Notes
then outstanding; provided that at no time shall the number of shares of Common
Stock so reserved be less than the number of shares required to be reserved by
the previous sentence (without regard to any limitations on conversions) (the “Required Reserve Amount”).  The initial number of shares of Common Stock
reserved for conversions of the Notes and each increase in the number of shares
so reserved shall be allocated pro rata among the holders of the Notes based on
the principal amount of the Notes held by each holder on the Issuance Date or
increase in the number of reserved shares, as the case may be (the “Authorized Share Allocation”).  In the event that a holder shall sell or
otherwise transfer any of such holder’s Notes, each transferee shall be
allocated a pro rata portion of such holder’s Authorized Share Allocation.  Any shares of Common Stock reserved and
allocated to any Person which ceases to hold any Notes shall be allocated to
the remaining holders of Notes, pro

 

19

 

rata
based on the principal amount of the Notes then held by such holders.

 

(b)           Insufficient Authorized Shares.  If at any time while any of the Notes remain
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 75 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 reasonable best efforts to solicit its
stockholders’ approval of such increase in authorized shares of Common Stock.

 

(11)         HOLDER’S REDEMPTIONS.

 

(a)           Mechanics. 
In the event that the Holder has sent a Redemption Notice to the Company
pursuant to Section 4(b) or Section 5(c) or the Company has sent a Redemption
Notice to the Holder pursuant to Section 5(d), the Holder shall promptly submit
this Note to the Company in accordance with this Section 11.  The Company shall deliver the applicable
Event of Default Redemption Price to the Holder within five Business Days after
the Company’s receipt of the Holder’s Event of Default Redemption Notice and
thereafter the Holder shall promptly deliver this Note to the Company.  If the Holder has submitted a Change of
Control Redemption Notice in accordance with Section 5(c) or the Company has
submitted a Company Change of Control Redemption Notice, the Company shall
deliver to the Holder the Change of Control Redemption Price or Company Change
of Control Redemption Price, as applicable, concurrently with the consummation
of such Change of Control if such Change of Control Redemption Notice is
received by the Company prior to the consummation of such Change of Control (or
such Company Change of Control Redemption Notice is delivered by the Company in
accordance with Section 5(d)) and within five Business Days after the Company’s
receipt of such Change of Control Redemption Notice otherwise (the “Company Change of Control Redemption Date”).  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
18(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 to, in lieu of redemption, 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

 

20

 

Redemption
Price (together with any Late Charges thereon) has not been paid.  Upon the Company’s receipt of such notice,
(w) the Redemption Notice shall be null and void with respect to such
Conversion Amount, (x) the Company shall immediately return this Note, or issue
a new Note (in accordance with Section 18(d)) to the Holder representing such
Conversion Amount and (y) the Fixed Conversion Price of this Note or such new
Notes shall be adjusted to the lesser of (A) the Fixed Conversion Price as in
effect on the date on which the Redemption Notice is voided and (B) the lowest
Closing Bid Price of the Common Stock during the period beginning on and
including the date on which the Redemption Notice is delivered to the Company
and ending on and including the date on which the Redemption Notice is
voided.  The Holder’s delivery of a
notice voiding a Redemption Notice and exercise of its rights following such
notice shall not affect the Company’s obligations to make any payments of Late
Charges which have accrued prior to the date of such notice with respect to the
Conversion Amount subject to such notice.

 

(b)           Redemption by Other Holders.  Upon the Company’s receipt of notice from
any of the holders of Other Notes or Separate Notes for redemption or repayment
as a result of an event or occurrence substantially similar to the events or
occurrences described in Section 4(b) or Section 5(c) (each, an “Other Redemption Notice”), the Company
shall immediately 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) and Separate Notes based on the
principal amount of the Notes and Separate Notes submitted for redemption
pursuant to such Redemption Notice and such Other Redemption Notices received
by the Company during such seven Business Day period.

 

(12)         RESTRICTION ON REDEMPTION AND CASH DIVIDENDS.  Until all of the Notes have been converted,
redeemed, exchanged or otherwise satisfied in accordance with their terms, the
Company shall not, directly or indirectly, redeem, repurchase or declare or pay
any cash dividend or distribution on its capital stock without the prior
express written consent of the holders of Notes representing at least a
majority of the aggregate principal amount of the Notes then outstanding;
provided that the foregoing shall not prevent the Company from repurchasing
Common Stock with an aggregate value not to exceed $1 million (valued at the
actual purchase price of the Common Stock on the Principal Market) in
transactions on the Principal Market pursuant to employee benefit plans and
employment agreements in existence on the Original Issuance Date.

 

(13)         VOTING RIGHTS. 
The Holder shall have no voting rights as the holder

 

21

 

of
this Note, except as required by law, including, but not limited to, the
General Corporation Law of the State of Delaware, and as expressly provided in
this Note.

 

(14)         RANK; ADDITIONAL INDEBTEDNESS; LIENS.

 

(a)           Rank. 
Payments of Principal and Interest and other payments due under this
Note (a) shall rank pari passu
with all Other Notes and Separate Notes and (b) shall be senior to all other
Indebtedness (as defined in Section 3(r) of the Securities Purchase Agreement)
of the Company and its Subsidiaries (as defined in the Securities Purchase Agreement),
other than Purchase Money Indebtedness (as defined below).

 

(b)           Incurrence of Indebtedness.  So long as this 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 (i) the Indebtedness evidenced by this Note, the Other
Notes and the Separate Notes, (ii) Purchase Money Indebtedness and (iii)
Permitted Indebtedness.

 

(c)           Existence
of Liens.  So long as this Note is outstanding, the
Company shall not, and the Company shall not permit any of its Subsidiaries to,
directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance
upon or in any property or assets (including accounts and contract rights)
owned by the Company or any of its Subsidiaries other than (i) pursuant
to the Separate Notes, (ii) pursuant to the Amended and Restated Pledge Agreement (as defined in the June Purchase
Agreement) and (ii) Permitted Liens.

 

(15)         PARTICIPATION. 
The Holder, as the holder of this Note, shall be entitled to receive
such dividends paid and distributions made to the holders of Common Stock to
the same extent as if the Holder had converted this Note into Common Stock
(without regard to any limitations on conversion herein or elsewhere) and had
held such shares of Common Stock on the record date for such dividends and
distributions.  Payments under the
preceding sentence shall be made concurrently with the dividend or distribution
to the holders of Common Stock.

 

(16)         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
holders of Notes representing not less than two-thirds of the aggregate
principal amount of the then outstanding Notes, shall be required for any
change or amendment to this Note or the Other Notes; provided that the Holder
of this Note may waive any term or provision of this Note without such vote or
written consent.

 

22

 

(17)         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 Sections 2(i) and
2(j) of the Securities Purchase Agreement.

 

(18)         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 18(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 18(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(c)(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 an
indemnification undertaking by the Holder to the Company, which undertaking
shall be reasonably satisfactory to the Company, 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 18(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 18(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.

 

(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 18(a) or Section 18(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

 

23

 

Original
Issuance Date of this Note, (iv) shall have the same rights and conditions as
this Note, and (v) shall represent the proportionate amount of accrued Interest
and Late Charges on the Principal and Interest of this Note that correspond to
the Principal of the new Notes, from the Original Issuance Date.

 

(19)         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.

 

(20)         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 reasonable 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.

 

(21)         CONSTRUCTION;
HEADINGS.  This Note shall be deemed
to be jointly drafted by the Company and all the Purchasers 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.

 

(22)         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.

 

(23)         DISPUTE RESOLUTION.  In the case of a dispute as to the
determination

 

24

 

of
the Closing Bid Price, the Closing Sale Price, the Weighted Average Price, the
Redemption Price or the arithmetic calculation of the Conversion Rate or the
Redemption Price, the Company shall submit the disputed determinations or
arithmetic calculations via facsimile within one Business Day of receipt of the
Conversion Notice or the Redemption Notice giving rise to such dispute, as the
case may be, to the Holder.  If the
Holder and the Company are unable to agree upon such determination or
calculation of the Redemption Price or the Conversion Rate, as applicable,
within one Business Day of such disputed determination or arithmetic calculation
being submitted to the Holder, then the Company shall, within one Business Day
submit via facsimile (a) the disputed determination of the Closing Bid Price,
the Closing Sale Price or the Weighted Average Price to an independent,
reputable investment bank selected by the Company and approved by the Holder or
(b) the disputed arithmetic calculation of the Conversion Rate or the
Redemption Price to the Company’s independent, outside accountant.  The Company, at the Company’s expense, shall
use its reasonable best efforts to cause the investment bank or the accountant,
as the case may be, to perform the determinations or calculations and notify
the Company and the Holder of the results no later than five Business Days from
the time it receives the disputed determinations or calculations.  Such investment bank’s or accountant’s
determination or calculation, as the case may be, shall be binding upon all
parties absent demonstrable error.

 

(24)         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 9(f) 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.  Without limiting the generality of the foregoing, the Company
will give written notice to the Holder (i) immediately upon any adjustment of
the Fixed Conversion Price, setting forth in reasonable detail, and certifying,
the calculation of such adjustment and (ii) at least ten days prior to the date
on which the Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the Common Stock, (B) with respect to any pro
rata subscription offer to holders of Common Stock or (C) for determining
rights to vote with respect to any Change of Control, dissolution or
liquidation, provided in each case that such information shall be made known to
the public prior to or in conjunction with such notice being provided to the
Holder.  Notwithstanding the foregoing,
Section 4(i) of the Securities Purchase Agreement shall apply to all notices
given pursuant to this Note.

 

(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 Purchasers
(as defined in Section 3(d)(ii)), shall initially be as set forth on the
Schedule of Buyers attached to the Securities Purchase

 

25

 

Agreement);
provided 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.  Any amount of
Interest, Principal or other amount due under the Transaction Documents (as
defined in the Securities Purchase Agreement) which is not paid when due shall
result in a late charge being incurred and payable by the Company in an amount
equal to interest on such amount at the rate of 18% per annum from the date
such amount was due until the same is paid in full (“Late Charge”).

 

(25)         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.

 

(26)         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.

 

(27)         GOVERNING LAW. 
This Note shall be construed and enforced in accor­dance with, and all
questions concerning the construction, validity, interpretation and performance
of this Note shall be governed by, the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of New
York.

 

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

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

 

(b)           “Bloomberg”
means Bloomberg Financial Markets.

 

(c)           “Board
of Directors” means the board of directors of the

 

26

 

Company or any
authorized committee of the board of directors.

 

(d)           “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.

 

(e)   “Change of Control Warrants” means
a warrant exercisable for the consideration that would be received at the time
of consummation of the Change of Control by holders of Common Stock (such
consideration for each share of Common Stock, a “Unit of Consideration”) in
substantially the form of the Warrant attached as Exhibit C to the Securities
Purchase Agreement, except that (i) the warrant shall be exercisable for a
number of Units of Consideration determined by dividing (A) the Conversion
Amount being redeemed pursuant to Section 5(d) by (B) the Fixed Conversion
Price in effect on the date of the Change of Control (rounded upward in the
case of fractional shares), (ii) the exercise price for each Unit of
Consideration shall be equal to the Fixed Conversion Price in effect on the
date of the Change of Control and (iii) the expiration date of the warrant
shall be the weighted average remaining term of the portion of this Note and
the Other Notes that are outstanding immediately prior to the date of the
Change of Control (without giving effect to any redemption thereof pursuant to
Section 5).

 

(f)            “Closing
Bid Price” and “Closing Sale
Price” means, for any security as of any date, the last closing bid
price and last closing trade price, respectively, for such security on the
Principal Market, as reported by Bloomberg, or, if the Principal Market begins
to operate on an extended hours basis and does not designate the closing bid
price or the closing trade price, as the case may be, then the last bid price
or last trade price, respectively, of such security prior to 4:00:00 p.m., New
York City Time, as reported by Bloomberg, or, if the Principal Market is not
the principal securities exchange or trading market for such security, the last
closing bid price or last trade price, respectively, of such security on the
principal securities exchange or trading market where such security is listed
or traded as reported by Bloomberg, 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 or
the Closing Sale Price cannot be calculated for a security on a particular date
on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price,
as the case may be, of such security on such date shall be the fair market
value as mutually determined by the Company and the Holder.  If the Company and the Holder are unable to
agree upon the fair market value of such security, then such dispute shall be
resolved pursuant to Section 23  All
such determinations to be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction that proportionately
decreases or increases the Common Stock during the applicable calculation
period.

 

(g)           “Convertible
Securities” means any stock or securities (other

 

27

 

than Options) directly or indirectly convertible into or exercisable or
exchangeable for Common Stock.

 

(h)           “Interest
Conversion Price” means, with respect to any Interest Date, that
price which shall be computed as 95% of the arithmetic average of the Weighted
Average Price of the Common Stock on each of the five consecutive Trading Days
ending on the second Trading Day immediately preceding such Interest Date.  All such determinations to be appropriately
adjusted for any stock split, stock dividend, stock combination or other
similar transaction during such period.

 

(i)            “Issuance
Date” means June 24, 2003.

 

(j)            “June
Purchase Agreement” means that certain securities purchase
agreement, dated as of June 24, 2003, by and among the Company and the initial
holders of the Separate Notes pursuant to which the Company issued the Separate
Notes.

 

(k)           “Options”
means any rights, warrants or options to subscribe for or purchase Common Stock
or Convertible Securities.

 

(l)            “Original
Issuance Date” means February 26, 2003.

 

(m)          “Permitted Indebtedness” means Indebtedness
that is unsecured, that is subordinate in right of payment to this Note, the
Other Notes and the Separate Notes, that shall not have require principal
repayments prior to the Maturity Date and that provides for an interest that is
no greater than market rate interests; provided that the amount of
Permitted Indebtedness shall not exceed the sum of $1,000,000 in the aggregate.

 

(n)           “Permitted Liens” means (i) any lien for
taxes not yet due or delinquent or being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance
with generally acceptable accounting principles in the United States applied on
a consistent basis, (ii) any statutory lien arising in the ordinary course of
business by operation of law with respect to a liability that is not yet due or
delinquent, (iii) any lien created by operation of law, such as materialmen’s
liens, mechanics’ liens and other similar liens, arising in the ordinary course
of business with respect to a liability that is not yet due or delinquent, (iv)
deposits, pledges or liens (other than liens arising under ERISA) securing (A)
obligations incurred in respect of workers’ compensation, unemployment
insurance or other forms of governmental insurance or benefits, (B) the
performance of bids, tenders, leases, contracts (other than for the payment of
money) and statutory obligations or (C) obligations on surety or appeal bonds,
but only to the extent such deposits, pledges or liens are incurred or
otherwise arise in the ordinary course of business and secure obligations not
past due or delinquent, (v) restrictions on the use of real property and minor
irregularities in the title thereto which do not (A) secure obligations for the
payment of money or (B) materially impair the value of such property or its use
in the ordinary course of business, and (vi) any minor imperfection of

 

28

 

title or similar lien which individually or
in the aggregate with other such liens would not reasonably be expected to have
a Material Adverse Effect.

 

(o)           “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.

 

(p)           “Principal
Market” means the Nasdaq National Market.

 

(q)           “Purchase
Money Indebtedness” means Indebtedness of the Company or any
Subsidiary incurred solely for the purpose of financing all or any part of the
purchase price, or the cost of construction or improvement of any property in
an aggregate principal amount outstanding at any one time not in excess of
$500,000; provided, however, that the aggregate principal amount
of any such Indebtedness does not exceed the lesser of the fair market value of
such property, as determined in the good faith judgment of the Board of
Directors, or such purchase price or cost, including any refinancing of such
Indebtedness that does not increase the aggregate principal amount (or accreted
amount, if less) thereof as of the date of refinancing.

 

(r)            “Redemption
Notice” means any of an Event of Default Redemption Notice, Change
of Control Redemption Notice, Company Change of Control Redemption Notice or
Company Installment Notice.

 

(s)           “Redemption
Price” means any of an Event of Default Redemption Price, Change of
Control Redemption Price, Company Change of Control Redemption Price or Company
Installment Redemption Price.

 

(t)            “Redemption
Premium” means (i) in the case of the Events of Default described in
Section 4(a)(i) – (vi) and (x) - (xiii), 120% or (ii) in the case of the Events
of Default described in Section 4(a)(vii) - (ix), 100%.

 

(u)           “Registration
Rights Agreement” means that certain registration rights agreement
between the Company and the initial holders of the Notes relating, among other
things, to the registration of the resale of the shares of Common Stock
issuable upon conversion of the Notes.

 

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

 

(w)          “Securities
Purchase Agreement” means that certain securities purchase agreement
dated as of February 26, 2003 by and among the Company and the initial holders
of the Notes pursuant to which the Company initially issued the Notes.

 

(x)            “Separate
Notes” means the senior convertible notes issued on

 

29

 

June 24, 2003 pursuant to the June Purchase Agreement.

 

(y)           “Significant
Subsidiary” has the meaning assigned to it under Rule 1-02(w)
of Regulation S-X promulgated by the Commission.

 

(z)            “Trading
Day” means any day on which the Common Stock is traded on the
Principal Market, or, if the Principal 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 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).

 

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

 

(bb)         “Weighted
Average Price” means, for any security as of any date, the dollar
volume-weighted average price for such security on the Principal Market during
the period beginning at 9:30:01 a.m., New York City Time (or such other time as
the Principal Market publicly announces is the official open of trading), and
ending at 4:00:00 p.m., New York City Time (or such other time as the Principal
Market publicly announces is the official close of trading) as reported by
Bloomberg through its “Volume at Price” functions, or, if the foregoing does
not apply, the dollar volume-weighted average price of such security in the
over-the-counter market on the electronic bulletin board for such security
during the period beginning at 9:30:01 a.m., New York City Time (or such other
time as the Principal Market publicly announces is the official open of
trading), and ending at 4:00:00 p.m., New York City Time (or such other time as
the Principal Market publicly announces is the official close of trading) as
reported by Bloomberg, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the “pink sheets” by Pink Sheets
LLC (formerly the National Quotation Bureau, Inc.).  If
the Weighted Average Price cannot be calculated for a security on a particular
date on any of the foregoing bases, the Weighted Average Price of such security
on such date shall be the fair market value as mutually determined by the
Company and the Holder.  If the Company
and the Holder are unable to agree upon the fair market value of such security,
then such dispute shall be resolved pursuant to Section 23.  All such determinations to be appropriately
adjusted for any stock dividend, stock split, stock combination or other
similar transaction during the applicable calculation period.

 

(29)         NIPENT.  In
the event that the Company or any of it subsidiaries sells, assigns,
pledges, transfers or otherwise disposes its rights to, into or with respect to, grants a

 

30

 

participation
interest in, or enters into a joint venture relating to, the drug Nipent, or
any derivative thereof (any of the foregoing, a “Nipent Event”), then the Company shall be required to
establish an escrow account (the “Nipent
Escrow”) and deposit or cause to be deposited in the Nipent Escrow
the consideration or proceeds from any such Nipent Event concurrently with the
consummation of any such Nipent Event (the “Nipent
Event Proceeds”).  The Nipent
Escrow shall be established with an independent, third-party escrow agent reasonably
satisfactory to the Company and the holders of the Notes and Separate Notes
representing a majority of the aggregate principal amount of the Notes and
Separate Notes then outstanding.  The
Company, the holders of the Notes and Separate Notes and such escrow agent
shall enter into an escrow agreement in a form that is reasonably acceptable to
the Company and to the holders of the Notes and Separate Notes representing a
majority of the aggregate principal amount of the Notes and Separate Notes then
outstanding.  The Company shall be
required to maintain in the Nipent Escrow a balance (the “Required Nipent Escrow Balance”) at all
times equal to the lesser of (x) the Nipent Event Proceeds and (y) the sum of
(A) the outstanding Principal of all Notes and Separate Notes, (B) accrued and
unpaid Interest with respect to such Principal and (C) accrued and unpaid Late
Charges with respect to such Principal and Interest.  If the consideration or proceeds from any Nipent Event is in a
form other than cash, the amount of the consideration other than cash received
by the Company will be the fair value of such consideration as reasonably
determined in good faith by the Board of Directors, except where such
consideration consists of publicly traded securities, in which case the amount
of consideration received by the Company will be the Closing Sale Price of such
securities on the date of determination. 
If the consideration or proceeds from any Nipent Event is in a form that
is partly cash and partly other than cash, then the Company shall first deposit
all cash in the Nipent Escrow and then the required value of any non-cash
consideration or proceeds.  The Company
shall be allowed to withdraw from the Nipent Escrow any such Nipent Proceeds
that exceed the Required Nipent Escrow Balance and if the balance of the Nipent
Escrow consists of cash and non-cash proceeds or consideration, then any such
withdrawal shall first be from the non-cash portion.  The obligation of the Company to maintain the Required Nipent
Escrow Balance in the Nipent Escrow Account pursuant to this Section 29 shall
be inapplicable to and shall terminate upon a Change of Control provided that
such Change of Control is in conformity with the provisions of the Transaction
Documents.

 

[Signature Page Follows]

 

31

 

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

 

	
   

  	
  SUPERGEN,
  INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Joseph Rubinfeld

  
	
   

  	
   

  	
  Title:

  	
  President / Chief
  Executive Officer

  
						

 

32

 

EXHIBIT I

 

SUPERGEN, INC.

CONVERSION NOTICE

 

TO BE
EXECUTED BY THE REGISTERED HOLDER TO CONVERT THIS NOTE INTO COMMON STOCK

 

Reference is made to the Senior Convertible
Note (the “Note”) issued to the
undersigned by SuperGen, 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
$.001 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:                                                                    

  

 

 

Notwithstanding anything
to the contrary contained herein, this Conversion Notice shall constitute a
representation by the holder of the Note submitting this Conversion Notice
that, after giving effect to the conversion provided for in this Conversion
Notice, such holder (together with its affiliates) will not have beneficial
ownership (together with the beneficial ownership of such Person’s affiliates)
of a number of shares of Common Stock which exceeds 4.99% of the total
outstanding shares of Common Stock, all as determined pursuant to the
provisions of Section 3(d) of the Note.

 

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

 

	
   

  	
  Issue to:

  	
                                                                                                                                                           

  
	
   

  	
                                                                                                                                                           

  
	
   

  	
                                                                                                                                                           

  
	
   

  
	
   

  	
  Facsimile Number:

  	
                                                                                                                                       

  
	
   

  
	
  :

  	
  Authorization

  	
                                                                                                                                                

  
						

 

33

 

	
   

  	
  By:                                                                                                                                                     

  
	
   

  	
  Title:                                              

  
	
   

  	
   

  	
   

  
	
  Dated:                                                                                                                                                                                  

  
	
   

  	
   

  	
   

  
	
   

  	
  Account
  Number:                                                                                                                                                 

  
	
   

  	
   (if electronic book
  entry transfer)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Transaction Code
  Number:                                                                                                                                  

  
	
   

  	
   (if electronic book
  entry transfer)

  	
   

  
				

 

34

 

ACKNOWLEDGMENT

 

 

The Company hereby acknowledges this Conversion Notice and hereby
directs Mellon Investor Services LLC to issue the above indicated number of
shares of Common Stock in accordance with the Transfer Agent Instructions dated
February 26, 2003 from the Company and acknowledged and agreed to by Mellon
Investor Services LLC.

 

	
   

  	
  SUPERGEN,
  INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
						

 

35

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