Document:

THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
     NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
     "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT
     BE  SOLD,  OFFERED  FOR  SALE,  MORTGAGED,  PLEDGED,  HYPOTHECATED  OR
     OTHERWISE TRANSFERRED EXCEPT PURSUANT TO (A) AN EFFECTIVE REGISTRATION
     STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
     LAWS, OR (B) AN EXEMPTION  THEREFROM AND, IF REQUESTED BY THE COMPANY,
     THE COMPANY HAS  RECEIVED  AN OPINION OF COUNSEL  SATISFACTORY  TO THE
     COMPANY  TO  THE  EFFECT   THAT  THE   TRANSFER  IS  EXEMPT  FROM  THE
     REGISTRATION  PROVISIONS OF THE SECURITIES  ACT AND  APPLICABLE  STATE
     SECURITIES LAWS.

                         WARRANT TO PURCHASE SECURITIES
                                       OF
                         GALAXY NUTRITIONAL FOODS, INC.

                            Void after April 10, 2006

     This Warrant is issued to Frederick DeLuca, or its registered  assigns (the
"Holder")  by GALAXY  NUTRITIONAL  FOODS,  INC.,  a  Delaware  corporation  (the
"Company"), on April 10, 2003 (the "Warrant Issue Date"). This Warrant is issued
pursuant  to the terms of a  Securities  Purchase  Agreement  dated of even date
herewith (the "Purchase  Agreement") in connection with an equity  investment in
the Company by the Holder.  Capitalized  terms used  herein,  but not  otherwise
defined, shall have the meaning ascribed to them in the Purchase Agreement.

     1. Number of Shares Subject to Warrant. Subject to the terms and conditions
hereinafter set forth, the Holder is entitled, upon surrender of this Warrant at
the principal  office of the Company,  to purchase from the Company,  at a price
equal to the  Exercise  Price (as  defined  in  Section 2 below),  shares of the
Warrant Stock.

     For purposes of this Warrant:

          (A) "Common  Stock" shall mean the Company's  common stock,  $0.01 par
value.

          (B) "Warrant Stock" shall mean 100,000 shares of the Company's  Common
Stock, subject to adjustment as described in Section 7 below.

          (C) "Shares" shall mean fully paid and non-assessable shares of Common
Stock.

     2. Exercise  Price.  The per share  purchase  price for the Shares shall be
$1.70 (the "Exercise Price").  The Exercise Price shall be subject to adjustment
pursuant to Section 7 hereof.

     3. Exercise Period.  Except as otherwise provided for herein,  this Warrant
shall be exercisable, in whole or in part, at any time and from time to time. On
the Expiration Date, all Warrants  evidenced hereby shall thereafter be void and
of no further force and effect. Whether or not surrendered to the Company by the
Holder, this Warrant shall be deemed canceled upon the expiration hereof.

<PAGE>

     4.  Method  of  Exercise.   While  this  Warrant  remains  outstanding  and
exercisable  in  accordance  with Section 3 hereof,  the purchase  rights hereby
represented may be exercised in whole or in part, at the election of the Holder,
by the tender of the  Notice of  Exercise  in  substantially  the form  attached
hereto as Exhibit A and the surrender of this Warrant at the principal office of
the Company and by the payment to the Company in cash, by check, cancellation of
indebtedness  or other form of payment  acceptable to the Company,  of an amount
equal to the then applicable  Exercise Price  multiplied by the number of Shares
then being purchased.

     5.  Certificates  for  Shares.  Upon the  exercise of the  purchase  rights
evidenced by this Warrant,  one or more certificates for the number of Shares so
purchased shall be issued as soon as practicable  thereafter  (with  appropriate
restrictive legends, as applicable).

     6. Issuance of Shares.  The Company hereby  covenants that it will duly and
validly  reserve  shares of Common  Stock for  issuance  upon  exercise  of this
Warrant.  The Company  covenants  that the Shares,  when issued  pursuant to the
exercise  of this  Warrant,  will be duly and  validly  issued,  fully  paid and
nonassessable  and free from all taxes,  liens,  and charges with respect to the
issuance  thereof.  The Shares issued  hereunder  shall have the same rights and
obligations  pertaining to the other shares of Common Stock issued previously by
the Company.

     7.  Adjustment  of Exercise  Price and Number of Shares.  The number of and
kind of  securities  purchasable  upon exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time as follows:

          (a)  Subdivisions,  Combinations and Other  Issuances.  If the Company
shall at any time prior to the exercise or expiration of this Warrant  subdivide
its Common  Stock,  by split-up or otherwise,  or combine its Common  Stock,  or
issue  additional  Common Stock as a dividend  with respect to any of its Common
Stock,  the number of Shares  issuable  on the  exercise of this  Warrant  shall
forthwith be  proportionately  increased in the case of a  subdivision  or stock
dividend, or proportionately decreased in the case of a combination. Appropriate
adjustments  shall  also  be made  to the  Exercise  Price,  provided  that  the
aggregate  Exercise  Price  payable  hereunder  for the  total  number of Shares
purchasable  under  this  Warrant  (as  adjusted)  shall  remain  the same.  Any
adjustment  under this  Section  7(a)  shall  become  effective  at the close of
business on the date the subdivision or combination becomes effective,  or as of
the record date of such dividend,  or in the event that no record date is fixed,
upon the making of such dividend.

          (b) Reclassification,  Reorganization and Consolidation.  In the event
of  any  corporate  reclassification,  capital  reorganization,   consolidation,
spin-off or change in the Common Stock of the Company (other than as a result of
a  subdivision,  combination,  or dividend  provided for in Section 7(a) above),
then, as a condition of such event,  lawful  provision  shall be made,  and duly
executed  documents  evidencing the same from the Company or its successor shall
be delivered to the Holder,  so that the Holder shall have the right at any time
prior to the  expiration of this Warrant to purchase,  at a total price equal to
that payable upon the exercise of this Warrant, the kind and amount of shares of
stock and/or other  securities and property  receivable in connection  with such
event by a holder of the same number of shares for which this Warrant could have
been exercised  immediately  prior to such event.  In any such case  appropriate
provisions  shall be made with  respect to the rights and interest of the Holder
so that the provisions hereof shall thereafter be applicable with respect to any
shares of stock or other  securities  and  property  deliverable  upon  exercise
hereof,  and  appropriate  adjustments  shall  be  made to the  Exercise  Price,
provided  that the  aggregate  exercise  price  payable  hereunder for the total
number of Shares  purchasable  under this Warrant (as adjusted) shall remain the
same.

                                      -2-
<PAGE>

          (c)  Adjustment  to Number of  Shares.  Upon  each  adjustment  of the
Exercise Price, the number of Shares issuable upon exercise of the Warrant shall
be  increased  to equal  the  quotient  obtained  by  dividing  (x) the  product
resulting from  multiplying  (i) the number of Shares  issuable upon exercise of
the Warrant,  and (ii) the Exercise Price, in each case as in effect immediately
before such adjustment by (y) the adjusted Exercise Price.

          (d) Notice of  Adjustment.  When any adjustment is required to be made
to the  Exercise  Price or in the  number  or kind of  Shares  purchasable  upon
exercise of the Warrant,  the Company shall  promptly  notify the Holder of such
event and of the adjusted Exercise Price or number of Shares or other securities
or property thereafter purchasable upon exercise of this Warrant.

     8.  Assumption  of  Warrant.  If at any time,  while this  Warrant,  or any
portion  thereof,  is outstanding and unexpired there shall be an acquisition of
the  Company  by  another  entity  by  means  of  a  merger,  reorganization  or
consolidation of the Company or any other transaction in which the owners of the
Company's  outstanding  voting power  immediately prior to such transaction own,
directly or  indirectly,  less than 51% of the voting power of the  resulting or
surviving  entity  immediately upon completion of such  transaction,  then, as a
part of such  acquisition,  lawful  provision  shall be made so that the  Holder
shall  thereafter be entitled to receive upon  exercise of this Warrant,  during
the period  specified  herein and upon payment of the aggregate  Exercise  Price
then in effect, the number of shares of stock or other securities or property of
the successor  corporation resulting from such acquisition which a holder of the
Shares  deliverable  upon  exercise of this Warrant  would have been entitled to
receive in such  acquisition  if this  Warrant  had been  exercised  immediately
before such acquisition.

     9.  No  Fractional   Shares  or  Scrip.  No  fractional   Shares  or  scrip
representing  fractional  Shares  shall  be  issued  upon the  exercise  of this
Warrant,  but in lieu of any  fractional  Share the  Company  shall  make a cash
payment  therefor on the basis of the closing  sale price of the Common Stock on
the AMEX Stock Exchange (or any successor  exchange or quotation system on which
the Common Stock is listed or quoted) on the date of exercise.

     10. No Shareholder  Rights.  Prior to exercise of this Warrant,  the Holder
shall not be entitled to any rights of a shareholder with respect to the Shares,
including (without limitation) the right to vote such Shares,  receive dividends
or other  distributions  thereon,  exercise  preemptive rights or be notified of
shareholder  meetings,  and such  Holder  shall not be entitled to any notice or
other communication concerning the business or affairs of the Company.  However,
nothing in this  Section 10 shall  limit the right of the Holder to be  provided
the notices required under this Warrant or the Purchase Agreement.

     11. Compliance With Securities Act; Transferability of Warrant or Shares.

          (a) Compliance With Securities Act. The Holder, by acceptance  hereof,
agrees that this Warrant, and the Shares issuable upon exercise of this Warrant,
are being acquired for  investment and that such Holder will not offer,  sell or
otherwise dispose of this Warrant,  or any Shares issuable upon exercise of this
Warrant,  except under circumstances which will not result in a violation of the
Securities Act, or any applicable  state  securities  laws. This Warrant and all
Shares  issued  upon  exercise  of this  Warrant  (unless  registered  under the
Securities Act and any  applicable  state  securities  laws) shall be stamped or
imprinted with a legend in substantially the following form:

     "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
     1933,  AS AMENDED (THE  "SECURITIES  ACT"),  OR ANY  APPLICABLE  STATE
     SECURITIES  LAW AND MAY NOT BE  SOLD,  OFFERED  FOR  SALE,  MORTGAGED,
     PLEDGED,  HYPOTHECATED OR OTHERWISE

                                      -3-
<PAGE>

     TRANSFERRED  EXCEPT  PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT
     UNDER THE SECURITIES ACT AND ANY APPLICABLE  STATE SECURITIES LAWS, OR
     AN EXEMPTION THEREFROM,  AND, IF REQUESTED BY THE COMPANY, THE COMPANY
     HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO THAT
     EFFECT.  THIS WARRANT HAS BEEN ACQUIRED FOR  INVESTMENT AND NOT WITH A
     VIEW TO DISTRIBUTION OR RESALE."

          (b) Transferability. Subject to compliance with applicable federal and
state securities laws, this Warrant and all rights hereunder are transferable in
whole or in part by the Holder to any person or entity  upon  written  notice to
the Company. The transfer shall be recorded on the books of the Company upon the
surrender  of this  Warrant,  properly  endorsed  for transfer by delivery of an
Assignment Form in  substantially  the form attached hereto as Exhibit B, to the
Company at the  address  set forth in Section 15 hereof,  and the payment to the
Company of all transfer  taxes and other  governmental  charges  imposed on such
transfer.  In the event of a partial  transfer,  the Company  shall issue to the
holders one or more appropriate new warrants.

     12. Restricted Securities. The Holder understands that this Warrant and the
Shares  issuable upon  exercise of this  Warrant,  will not be registered at the
time of their  issuance  under the  Securities  Act for the reason that the sale
provided for herein and in the Purchase  Agreement is exempt pursuant to Section
4(2) of the Securities Act based on the  representations of the Holder set forth
in the Purchase  Agreement.  The Holder  represents  that it is  experienced  in
evaluating  companies such as the Company,  has such knowledge and experience in
financial  and business  matters as to be capable of  evaluating  the merits and
risks of its  investment,  and has the  ability  to suffer the total loss of the
investment. The Holder further represents that it has had the opportunity to ask
questions  of and  receive  answers  from the Company  concerning  the terms and
conditions  of  this  Warrant,  the  business  of the  Company,  and  to  obtain
additional  information  to  such  Holder's  satisfaction.  The  Holder  further
represents that it is an "accredited  investor" within the meaning of Regulation
D under  the  Securities  Act,  as  presently  in  effect.  The  Holder  further
represents that this Warrant is being acquired for the account of the Holder for
investment only and not with a view to, or with any intention of, a distribution
or  resale  thereof,  in  whole or in part,  or the  grant of any  participation
therein.

     13. Successors and Assigns.  The terms and provisions of this Warrant shall
inure to the benefit of, and be binding upon, the Company and the Holders hereof
and their respective successors and assigns.

     14. Amendments and Waivers. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived  (either  generally or in a
particular instance and either retroactively or prospectively), with the written
consent of the Company and the Holder.

     15.  Notices.  All notices  required  under this Warrant shall be deemed to
have been given or made for all purposes (i) upon personal  delivery,  (ii) upon
confirmation  receipt  that  the  communication  was  successfully  sent  to the
applicable  number if sent by  facsimile,  (iii) one day after being sent,  when
sent by  professional  overnight  courier  service,  or (iv) three business days
after posting when sent by registered or certified mail.  Notices to the Company
shall be sent to the  address of the  Company  set forth below (or at such other
place as the Company  shall notify the Holder  hereof in writing) and notices to
the Holder  shall be sent to the  address  of the Holder set forth  below (or at
such other place as the Holder shall notify the Company hereof in writing):

                                      -4-
<PAGE>

          To the Company:      GALAXY NUTRITIONAL FOODS, INC.
                               2441 Viscount Road
                               Orlando, Florida 23809
                               Telecopier: (407) 855-1099
                               Attn:  Mr. Angelo S. Morini

          With a copy to:      Baker & Hostetler LLP
                               200 S. Orange Avenue
                               SunTrust Center, Suite 2300
                               Telecopier: (407) 841-0168
                               Attn:  Kenneth C. Wright, Esq.

     To the Holder as provided on the signature page of this Warrant.

     16.  Captions.  The section  and  subsection  headings of this  Warrant are
inserted for convenience only and shall not constitute a part of this Warrant in
construing or interpreting any provision hereof.

     17.  Governing Law. This Warrant shall be governed by the laws of the State
of Florida, without regard to the choice or conflict of laws principles thereof.

     IN WITNESS  WHEREOF,  the  undersigned  have caused this Warrant to be duly
executed as of the date first set forth above.

                                        COMPANY

                                        GALAXY NUTRITIONAL FOODS, INC.

                                        By: /s/ Christopher J. New
                                            ----------------------
                                        Name: Christopher J. New
                                        Title: Chief Executive Officer

                                        HOLDER

                                        /s/ Frederick A. DeLuca
                                        -----------------------
                                        Frederick A. DeLuca, individually

                                      -5-
<PAGE>

                                    EXHIBIT A
                                    ---------

                               NOTICE OF EXERCISE

To:  GALAXY NUTRITIONAL FOODS, INC.

          The undersigned hereby elects to [check applicable subsection]:

________  (a)  Purchase  Shares (as defined in the  attached  Warrant) of GALAXY
               NUTRITIONAL  FOODS,  INC.,  pursuant to the terms of the attached
               Warrant  and  payment of the  Exercise  Price per Share  required
               under such Warrant accompanies this notice;

          OR

________  (b)  Exercise  the  attached  Warrant  or portion  thereof  for all of
               ___________ Shares under the Warrant pursuant to the net exercise
               provisions of Section 4 of such Warrant.

     The Holder  represents that it is experienced in evaluating  companies such
as the Company,  has such  knowledge  and  experience  in financial and business
matters as to be capable of evaluating  the merits and risks of its  investment,
and has the  ability  to suffer  the total  loss of the  investment.  The Holder
further  represents  that it has had the  opportunity  to ask  questions  of and
receive  answers from the Company  concerning  the terms and  conditions of this
Warrant,  the business of the Company,  and to obtain additional  information to
such  Holder's  satisfaction.  The  Holder  further  represents  that  it  is an
"accredited  investor"  within the meaning of Regulation D under the  Securities
Act, as presently in effect. The undersigned hereby represents and warrants that
the  undersigned  is  acquiring  such shares for its own account for  investment
purposes only, and not for resale or with a view to  distribution of such shares
or any part thereof.

Date:_______________________            WARRANTHOLDER:

                                        By:_______________________________
                                        Name:
                                        Address:

Name in which shares should be registered:

                                      -6-
<PAGE>

                                    EXHIBIT B
                                    ---------

                                 ASSIGNMENT FORM

TO:  GALAXY NUTRITIONAL FOODS, INC.

The undersigned hereby assigns and transfers unto  _____________________________
of ______________________________________________  (Please typewrite or print in
block  letters)  the right to  purchase  ____________  Shares (as defined in the
Warrant) of GALAXY NUTRITIONAL  FOODS, INC. subject to the Warrant,  dated as of
_____________________________, by and between GALAXY NUTRITIONAL FOODS, INC. and
the undersigned (the "Warrant").

This assignment complies with the provisions of Section 11 of the Warrant and is
accompanied by funds sufficient to pay all applicable transfer taxes.

In addition,  the undersigned  and/or its assignee will provide such evidence as
is  reasonably   requested  by,  GALAXY  NUTRITIONAL  FOODS  INC.,  to  evidence
compliance with applicable securities laws as contemplated by Sections 11 and 12
of the Warrant.

Date:_______________________            By:________________________________

                                        ___________________________________
                                        (Print Name of Signatory)

                                        ___________________________________
                                        (Title of Signatory)

                                      -7-
<PAGE>Exhibit
4.1

 

 

 

INDENTURE

 

 

between

 

 

NEKTAR
THERAPEUTICS,

 

 

as
Issuer

 

 

and

 

 

J.P. MORGAN
TRUST COMPANY,

NATIONAL ASSOCIATION

 

 

as
Trustee

 

 

 

3%
CONVERTIBLE SUBORDINATED NOTES DUE 2010

 

 

Dated
as of October 9, 2003

 

 

 

 

TABLE
OF CONTENTS

 

	
  ARTICLE I

  	
  DEFINITIONS AND
  INCORPORATION BY REFERENCE

  
	
   

  	
   

  
	
  Section 1.1.

  	
  Definitions

  
	
   

  	
   

  
	
  Section 1.2.

  	
  Incorporation
  by Reference of Trust Indenture Act

  
	
   

  	
   

  
	
  Section 1.3.

  	
  Rules
  of Construction

  
	
   

  	
   

  
	
  ARTICLE II

  	
  THE SECURITIES

  
	
   

  	
   

  
	
  Section 2.1.

  	
  Title and Terms

  
	
   

  	
   

  
	
  Section 2.2.

  	
  Form of
  Securities

  
	
   

  	
   

  
	
  Section 2.3.

  	
  Legends

  
	
   

  	
   

  
	
  Section 2.4.

  	
  Execution,
  Authentication, Delivery and Dating

  
	
   

  	
   

  
	
  Section 2.5.

  	
  Registrar and Paying Agent

  
	
   

  	
   

  
	
  Section 2.6.

  	
  Paying Agent to
  Hold Assets in Trust

  
	
   

  	
   

  
	
  Section 2.7.

  	
  General
  Provisions Relating to Transfer and Exchange

  
	
   

  	
   

  
	
  Section 2.8.

  	
  Book-Entry
  Provisions for the Global Securities

  
	
   

  	
   

  
	
  Section 2.9.

  	
  Special Transfer Provisions

  
	
   

  	
   

  
	
  Section 2.10.

  	
  Holder Lists

  
	
   

  	
   

  
	
  Section 2.11.

  	
  Persons
  Deemed Owners

  
	
   

  	
   

  
	
  Section 2.12.

  	
  Mutilated,
  Destroyed, Lost or Stolen Securities

  
	
   

  	
   

  
	
  Section 2.13.

  	
  Treasury
  Securities

  
	
   

  	
   

  
	
  Section 2.14.

  	
  Temporary
  Securities

  
	
   

  	
   

  
	
  Section 2.15.

  	
  Cancellation

  
	
   

  	
   

  
	
  Section 2.16.

  	
  CUSIP Numbers

  
	
   

  	
   

  
	
  Section 2.17.

  	
  Defaulted
  Interest

  
	
   

  	
   

  
	
  ARTICLE III

  	
  SATISFACTION AND DISCHARGE

  
	
   

  	
   

  
	
  Section 3.1.

  	
  Satisfaction
  and Discharge of Indenture

  
	
   

  	
   

  
	
  Section 3.2.

  	
  Deposited Monies
  to be Held in Trust

  
	
   

  	
   

  
	
  Section 3.3.

  	
  Return of Unclaimed Monies

  
	
   

  	
   

  
	
  ARTICLE IV

  	
  DEFAULTS
  AND REMEDIES

  
	
   

  	
   

  
	
  Section 4.1.

  	
  Events of Default

  
	
   

  	
   

  
	
  Section 4.2.

  	
  Acceleration of Maturity; Rescission
  and Annulment

  
	
   

  	
   

  
	
  Section 4.3.

  	
  Other Remedies

  
	
   

  	
   

  
	
  Section 4.4.

  	
  Waiver of Past Defaults

  
	
   

  	
   

  
	
  Section 4.5.

  	
  Control by Majority

  
			

 

i

 

	
  Section 4.6.

  	
  Limitation on Suit

  
	
   

  	
   

  
	
  Section 4.7.

  	
  Unconditional Rights of Holders to
  Receive Payment and to Convert

  
	
   

  	
   

  
	
  Section 4.8.

  	
  Collection of Indebtedness and Suits
  for Enforcement by the Trustee

  
	
   

  	
   

  
	
  Section 4.9.

  	
  Trustee May File Proofs of Claim

  
	
   

  	
   

  
	
  Section 4.10.

  	
  Restoration of Rights and Remedies

  
	
   

  	
   

  
	
  Section 4.11.

  	
  Rights and Remedies Cumulative

  
	
   

  	
   

  
	
  Section 4.12.

  	
  Delay or Omission Not Waiver

  
	
   

  	
   

  
	
  Section 4.13.

  	
  Application of Money Collected

  
	
   

  	
   

  
	
  Section 4.14.

  	
  Undertaking for Costs

  
	
   

  	
   

  
	
  Section 4.15.

  	
  Waiver of Stay or Extension Laws

  
	
   

  	
   

  
	
  ARTICLE V

  	
  THE TRUSTEE

  
	
   

  	
   

  
	
  Section 5.1.

  	
  Certain Duties and Responsibilities

  
	
   

  	
   

  
	
  Section 5.2.

  	
  Certain Rights of Trustee

  
	
   

  	
   

  
	
  Section 5.3.

  	
  Individual Rights of Trustee

  
	
   

  	
   

  
	
  Section 5.4.

  	
  Money Held in Trust

  
	
   

  	
   

  
	
  Section 5.5.

  	
  Trustee’s Disclaimer

  
	
   

  	
   

  
	
  Section 5.6.

  	
  Notice of Defaults

  
	
   

  	
   

  
	
  Section 5.7.

  	
  Reports by Trustee to Holders

  
	
   

  	
   

  
	
  Section 5.8.

  	
  Compensation and Indemnification

  
	
   

  	
   

  
	
  Section 5.9.

  	
  Replacement of Trustee

  
	
   

  	
   

  
	
  Section 5.10.

  	
  Successor Trustee by Merger, Etc

  
	
   

  	
   

  
	
  Section 5.11.

  	
  Corporate Trustee Required;
  Eligibility

  
	
   

  	
   

  
	
  Section 5.12.

  	
  Collection of Claims Against the
  Company

  
	
   

  	
   

  
	
  ARTICLE VI

  	
  CONSOLIDATION, MERGER, CONVEYANCE,
  TRANSFER OR LEASE

  
	
   

  	
   

  
	
  Section 6.1.

  	
  Company May Consolidate, Etc.,
  Only on Certain Terms

  
	
   

  	
   

  
	
  Section 6.2.

  	
  Successor Corporation Substituted

  
	
   

  	
   

  
	
  ARTICLE VII

  	
  AMENDMENTS,
  SUPPLEMENTS AND WAIVERS

  
	
   

  	
   

  
	
  Section 7.1.

  	
  Without Consent of Holders of
  Securities

  
	
   

  	
   

  
	
  Section 7.2.

  	
  With Consent of Holders of Securities

  
	
   

  	
   

  
	
  Section 7.3.

  	
  Compliance with Trust Indenture Act

  
			

 

ii

 

	
  Section 7.4.

  	
  Revocation of Consents and Effect of
  Consents or Votes

  
	
   

  	
   

  
	
  Section 7.5.

  	
  Notation on or Exchange of Securities

  
	
   

  	
   

  
	
  Section 7.6.

  	
  Trustee to Sign Amendment, Etc

  
	
   

  	
   

  
	
  ARTICLE VIII

  	
  MEETING OF HOLDERS OF
  SECURITIES

  
	
   

  	
   

  
	
  Section 8.1.

  	
  Purposes for Which Meetings
  May Be Called

  
	
   

  	
   

  
	
  Section 8.2.

  	
  Call Notice and Place of Meetings

  
	
   

  	
   

  
	
  Section 8.3.

  	
  Persons Entitled to Vote at Meetings

  
	
   

  	
   

  
	
  Section 8.4.

  	
  Quorum; Action

  
	
   

  	
   

  
	
  Section 8.5.

  	
  Determination of Voting Rights;
  Conduct and Adjournment of Meetings

  
	
   

  	
   

  
	
  Section 8.6.

  	
  Counting Votes and Recording Action of
  Meetings

  
	
   

  	
   

  
	
  ARTICLE IX

  	
  COVENANTS

  
	
   

  	
   

  
	
  Section 9.1.

  	
  Payment of Principal, Premium and
  Interest

  
	
   

  	
   

  
	
  Section 9.2.

  	
  Maintenance of Offices or Agencies

  
	
   

  	
   

  
	
  Section 9.3.

  	
  Corporate Existence

  
	
   

  	
   

  
	
  Section 9.4.

  	
  Maintenance of Properties

  
	
   

  	
   

  
	
  Section 9.5.

  	
  Payment of Taxes and Other Claims

  
	
   

  	
   

  
	
  Section 9.6.

  	
  Reports

  
	
   

  	
   

  
	
  Section 9.7.

  	
  Compliance Certificate

  
	
   

  	
   

  
	
  Section 9.8.

  	
  Resale of Certain Securities

  
	
   

  	
   

  
	
  Section 9.9.

  	
  June 2010 Notes

  
	
   

  	
   

  
	
  ARTICLE X

  	
  REDEMPTION
  OF SECURITIES

  
	
   

  	
   

  
	
  Section 10.1.

  	
  Provisional Redemption

  
	
   

  	
   

  
	
  Section 10.2.

  	
  Optional Redemption

  
	
   

  	
   

  
	
  Section 10.3.

  	
  Notice to Trustee

  
	
   

  	
   

  
	
  Section 10.4.

  	
  Selection of Securities to Be
  Redeemed

  
	
   

  	
   

  
	
  Section 10.5.

  	
  Notice of Redemption

  
	
   

  	
   

  
	
  Section 10.6.

  	
  Effect of Notice of Redemption

  
	
   

  	
   

  
	
  Section 10.7.

  	
  Deposit of Redemption Price

  
	
   

  	
   

  
	
  Section 10.8.

  	
  Securities Redeemed in Part

  
			

 

iii

 

	
  ARTICLE XI

  	
  REPURCHASE AT THE
  OPTION OF A HOLDER UPON A CHANGE OF CONTROL

  
	
   

  	
   

  
	
  Section 11.1.

  	
  Repurchase Right

  
	
   

  	
   

  
	
  Section 11.2.

  	
  Conditions to the Company’s Election
  to Pay the Repurchase Price in Common Stock or Acquirer Stock

  
	
   

  	
   

  
	
  Section 11.3.

  	
  Notices; Method of Exercising
  Repurchase Right, Etc

  
	
   

  	
   

  
	
  ARTICLE XII

  	
  CONVERSION
  OF SECURITIES

  
	
   

  	
   

  
	
  Section 12.1.

  	
  Conversion Right and Conversion Price

  
	
   

  	
   

  
	
  Section 12.2.

  	
  Exercise of Conversion Right

  
	
   

  	
   

  
	
  Section 12.3.

  	
  Fractions of Shares

  
	
   

  	
   

  
	
  Section 12.4.

  	
  Adjustment of Conversion Price

  
	
   

  	
   

  
	
  Section 12.5.

  	
  Notice
  of Adjustments of Conversion Price

  
	
   

  	
   

  
	
  Section 12.6.

  	
  Notice
  Prior to Certain Actions

  
	
   

  	
   

  
	
  Section 12.7.

  	
  Company
  to Reserve Common Stock

  
	
   

  	
   

  
	
  Section 12.8.

  	
  Taxes on
  Conversions

  
	
   

  	
   

  
	
  Section 12.9.

  	
  Covenant
  as to Common Stock

  
	
   

  	
   

  
	
  Section 12.10.

  	
  Cancellation
  of Converted Securities

  
	
   

  	
   

  
	
  Section 12.11.

  	
  Effect
  of Reclassification, Consolidation, Merger or Sale

  
	
   

  	
   

  
	
  Section 12.12.

  	
  Responsibility
  of Trustee for Conversion Provisions

  
	
   

  	
   

  
	
  ARTICLE XIII

  	
  SUBORDINATION

  
	
   

  	
   

  
	
  Section 13.1.

  	
  Securities
  Subordinated to Senior Debt

  
	
   

  	
   

  
	
  Section 13.2.

  	
  Subrogation

  
	
   

  	
   

  
	
  Section 13.3.

  	
  Obligation
  of the Company is Absolute and Unconditional

  
	
   

  	
   

  
	
  Section 13.4.

  	
  Maturity
  of or Default on Senior Debt

  
	
   

  	
   

  
	
  Section 13.5.

  	
  Payments
  on Securities Permitted

  
	
   

  	
   

  
	
  Section 13.6.

  	
  Effectuation
  of Subordination by Trustee

  
	
   

  	
   

  
	
  Section 13.7.

  	
  Knowledge of
  Trustee

  
	
   

  	
   

  
	
  Section 13.8.

  	
  Trustee’s
  Relation to Senior Debt

  
	
   

  	
   

  
	
  Section 13.9.

  	
  Rights
  of Holders of Senior Debt Not Impaired

  
	
   

  	
   

  
	
  Section 13.10.

  	
  Modification
  of Terms of Senior Debt

  
	
   

  	
   

  
	
  Section 13.11.

  	
  Certain
  Conversions Not Deemed Payment

  
	
   

  	
   

  
	
  Section 13.12.

  	
  Enforcement
  of Rights Under the Pledge Agreement

  
			

 

iv

 

	
  ARTICLE XIV

  	
  SECURITY

  
	
   

  	
   

  
	
  Section 14.1.

  	
  Pledge Agreement

  
	
   

  	
   

  
	
  Section 14.2.

  	
  Acceptance
  of Terms of Pledge Agreement

  
	
   

  	
   

  
	
  Section 14.3.

  	
  Trust
  Indenture Act Requirements

  
	
   

  	
   

  
	
  Section 14.4.

  	
  Opinions
  as to Collateral

  
	
   

  	
   

  
	
  ARTICLE XV

  	
  OTHER
  PROVISIONS OF GENERAL APPLICATION

  
	
   

  	
   

  
	
  Section 15.1.

  	
  Trust
  Indenture Act Controls

  
	
   

  	
   

  
	
  Section 15.2.

  	
  Notices

  
	
   

  	
   

  
	
  Section 15.3.

  	
  Communication
  by Holders with Other Holders

  
	
   

  	
   

  
	
  Section 15.4.

  	
  Acts
  of Holders of Securities

  
	
   

  	
   

  
	
  Section 15.5.

  	
  Certificate
  and Opinion as to Conditions Precedent

  
	
   

  	
   

  
	
  Section 15.6.

  	
  Statements
  Required in Certificate or Opinion

  
	
   

  	
   

  
	
  Section 15.7.

  	
  Effect
  of Headings and Table of Contents

  
	
   

  	
   

  
	
  Section 15.8.

  	
  Successors
  and Assigns

  
	
   

  	
   

  
	
  Section 15.9.

  	
  Separability
  Clause

  
	
   

  	
   

  
	
  Section 15.10.

  	
  Benefits of
  Indenture

  
	
   

  	
   

  
	
  Section 15.11.

  	
  Governing Law

  
	
   

  	
   

  
	
  Section 15.12.

  	
  Counterparts

  
	
   

  	
   

  
	
  Section 15.13.

  	
  Legal Holidays

  
	
   

  	
   

  
	
  Section 15.14.

  	
  Recourse
  Against Others

  
			

 

v

 

INDENTURE, dated as of October 9, 2003, between
NEKTAR THERAPEUTICS, a corporation duly organized and existing under the laws
of the State of Delaware, having its principal office at 150 Industrial Road,
San Carlos, California 94070 (the “Company”), and J.P. MORGAN TRUST
COMPANY, NATIONAL ASSOCIATION, a national banking association, as Trustee (the
“Trustee”), having its principal corporate trust office at 560 Mission Street,
13th Floor, San Francisco, California 94105.

 

RECITALS
OF THE COMPANY

 

The Company has duly authorized the creation of an
issue of its 3% Convertible Subordinated Notes due 2010 to be issued in one or
more series from time to time (herein called the “Securities”) of substantially
the tenor and amount hereinafter set forth, and to provide therefor the Company
has duly authorized the execution and delivery of this Indenture.

 

All things necessary to make the Securities, when the
Securities are executed by the Company and authenticated and delivered
hereunder and duly issued by the Company, the valid obligations of the Company,
and to make this Indenture a valid agreement of the Company, in accordance with
their and its terms, have been done.

 

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

 

For and in consideration of the premises and the
purchase of the Securities by the Holders thereof, it is mutually covenanted
and agreed, for the equal and proportionate benefit of all Holders of the
Securities or of series thereof, as follows:

 

ARTICLE
I

DEFINITIONS AND INCORPORATION

BY REFERENCE

 

Section 1.1.  Definitions.  For all purposes of this Indenture and the
Securities, the following terms are defined as follows:

 

“Act,” when used with respect to any Holder of a
Security, has the meaning specified in Section 15.4(a) hereof.

 

“Acquiring Party” has the meaning specified in
Section 11.1 hereof.

 

“Acquiror Stock” has the meaning specified in
Section 11.1 hereof.

 

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

 

1

 

“Bankruptcy Law” means Title 11 of the U.S. Code or
any similar federal or state law for the relief of debtors.

 

“Board of Directors” means either the board of
directors of the Company or any committee of that board empowered to act for it
with respect to this Indenture.

 

“Board Resolution” means a resolution duly adopted by
the Board of Directors, a copy of which, certified by the Secretary or an
Assistant Secretary of the Company to be in full force and effect on the date
of such certification, has been delivered to the Trustee.

 

“Business Day,” when used with respect to any Place of
Payment or Place of Conversion, means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in that Place of
Payment or Place of Conversion, as the case may be, are authorized or obligated
by law to close.

 

“Change of Control” means the occurrence of any of the
following after the original issuance of the Securities:

 

(1)                                  the
acquisition by any person, including any syndicate or group deemed to be a
“person” under Section 13(d)(3) of the Exchange Act, of beneficial
ownership, directly or indirectly, through a purchase, merger or other
acquisition transaction or series of transactions, of shares of capital stock
of the Company entitling such person to exercise 50% or more of the total
voting power of all shares of capital stock of the Company entitled to vote
generally in elections of directors, other than any such acquisition by the
Company, any subsidiary of the Company or any employee benefit plan of the
Company; or

 

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

 

provided, however, that a
Change of Control shall not be deemed to have occurred if (i) the closing sales
price per share of the Common Stock for any five Trading Days within the period
of 10 consecutive Trading Days ending immediately after the later of the Change
of Control or the public announcement of the Change of Control, in the case of
a Change of Control under clause (1) above, or the period of 10
consecutive Trading Days ending immediately before the Change of Control, in
the case of a Change of Control under clause (2) above, shall equal or 

 

2

 

exceed 105% of the
Conversion Price of the Securities in effect on each such Trading Day or (ii)
in the case of a merger or consolidation, 90% of the consideration in such
merger or consolidation constituting the Change of Control consists of common
stock traded on a United States national securities exchange or quoted on the
Nasdaq National Market (or which will be so traded or quoted when issued or
exchanged in connection with such Change of Control) and as a result of such
transaction or transactions the Securities become convertible solely into such
common stock.  Beneficial ownership
shall be determined in accordance with Rule 13d-3 promulgated by the SEC
under the Exchange Act.  The term
“person” shall include any syndicate or group which would be deemed to be a
“person” under Section 13(d)(3) of the Exchange Act.

 

“Chief Executive Officer” means the chief executive
officer of the Company.

 

“close of business” means 5:00 p.m., New York
City time.

 

“Closing Date” means October 9, 2003 or such
later date on which the Securities may be delivered pursuant to the Exchange
Agreements.

 

“Closing Price” of any security on any date of
determination means:

 

(1)                                  the
closing sale price (or, if no closing sale price is reported, the last reported
sale price) of such security on the New York Stock Exchange on such date;

 

(2)                                  if
such security is not listed for trading on the New York Stock Exchange on any
such date, the closing sale price as reported in the composite transactions for
the principal U.S. securities exchange on which such security is so listed;

 

(3)                                  if
such security is not so listed on a U.S. national or regional securities
exchange, the closing sale price as reported by the Nasdaq National Market;

 

(4)                                  if
such security is not so reported, the last quoted bid price for such security
in the over-the-counter market as reported by the National Quotation Bureau or
similar organization; or

 

(5)                                  if
such bid price is not available, the average of the mid-point of the last bid
and ask prices of such security on such date from at least three nationally
recognized independent investment banking firms retained for this purpose by
the Company.

 

“Common Stock” means any stock of any class of the
Company which has no preference in respect of dividends or of amounts payable
in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which is not subject to redemption by the
Company.  However, subject to the
provisions of Section 12.11 hereof, shares issuable on conversion of
Securities shall include only shares of the class designated as Common Stock,
par value $0.0001 per share, of the Company at the date of this Indenture or
shares of any class or classes resulting from any reclassification or
reclassifications thereof and which have no preference in respect of dividends
or of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which are not subject to
redemption by the Company, provided that if at any time there shall be more
than one such resulting class, the shares of each such class then so issuable
shall be substantially in the 

 

3

 

proportion which the total number of shares of such class resulting
from all such reclassifications bears to the total number of shares of all such
classes resulting from all such reclassifications.

 

“Company” means the corporation named as the “Company”
in the first paragraph of this instrument until a successor corporation shall
have become such pursuant to the applicable provisions of this Indenture, and
thereafter “Company” shall mean such successor corporation.

 

“Company Notice” has the meaning specified in
Section 11.3 hereof.

 

“Company Order” means a written order signed in the
name of the Company by an Officer of the Company and delivered to the Trustee.

 

“Conversion Agent” means any Person authorized by the
Company to convert Securities in accordance with Article 12 hereof.

 

“Conversion Price” has the meaning specified in
Section 12.1 hereof.

 

“Corporate Trust Office” means for purposes of
presentation or surrender of Securities for payment, registration, transfer,
exchange or conversion or for service of notices or demands upon the Company,
the office of the Trustee located in The City of New York at which at any
particular time its corporate trust business shall be administered (which at
the date of this Indenture is located at 4 New York Plaza, 15th Floor, New
York, New York 10004), and for all other purposes, the office of the Trustee
located in the City of San Francisco (which at the date of this Indenture is
located at 560 Mission Street, 13th Floor, San Francisco, CA 94105).

 

“corporation” means corporations, limited liability
companies, partnerships and trusts.

 

“Current Market Price” has the meaning set forth in
Section 12.4(g).

 

“Custodian” means any receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bankruptcy Law.

 

“Default” means an event which is, or after notice or
lapse of time or both would be, an Event of Default.

 

“Default Exception” has the meaning specified in
Section 4.1(d) hereof.

 

“Defaulted Interest” has the meaning specified in
Section 2.17 hereof.

 

“Depositary” means, with respect to Securities of any
series for which the Company shall determine that such Securities will be
issued as a Global Security, The Depository Trust Company, its nominees and
their respective successors.

 

“Designated Senior Debt” means Senior Debt of the
Company which is specifically designated in the instrument, agreement or other
document evidencing or governing that Senior Debt as “Designated Senior Debt”
for purposes of this Indenture.

 

4

 

“Dollar,” “U.S. Dollar” or “U.S. $” means a dollar or
other equivalent unit in such coin or currency of the United States as at the
time shall be legal tender for the payment of public and private debts.

 

“DTC Participants” has the meaning specified in
Section 2.8 hereof.

 

“Event of Default” has the meaning specified in
Section 4.1 hereof.

 

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

 

“Exchange Agreements” means the Exchange Agreements,
dated October 3 2003, between the Company and the Initial Purchasers.

 

“Expiration Time” has the meaning specified in
Section 12.4(f) hereof.

 

“Fair market value” has the meaning set forth in
Section 12.4(g) hereof.

 

“Global Security” has the meaning specified in
Section 2.2 hereof.

 

“Guarantee” means any obligation, contingent or
otherwise, of any Person, directly or indirectly guaranteeing any Indebtedness
of any other Person and any obligation, direct or indirect, contingent or
otherwise, of such Person:

 

(1)                                  to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness of such other Person (whether arising by virtue of
partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or maintain financial statement
conditions or otherwise); or

 

(2)                                  entered
into for purposes of assuring in any other manner the obligee of such
Indebtedness of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part);

 

provided, however, that
the term “guarantee” will not include endorsements for collection or deposit in
the ordinary course of business.  The
term “guarantee” used as a verb has a corresponding meaning.

 

“Holder,” when used with respect to any Security,
means the Person in whose name the Security is registered in the Register.

 

“Indebtedness,” when used with respect to any Person,
and without duplication means:

 

(1)                                  all
indebtedness, obligations and other liabilities (contingent or otherwise) of
such Person for borrowed money (including obligations of the Company in respect
of overdrafts, foreign exchange contracts, currency exchange agreements,
Interest Rate Protection Agreements, and any loans or advances from banks,
whether or not evidenced by notes or similar instruments) or evidenced by
bonds, debentures, notes or other instruments for the payment of money, or
incurred in connection with the acquisition of 

 

5

 

any property,
services or assets (whether or not the recourse of the lender is to the whole
of the assets of such Person or to only a portion thereof), other than any
account payable or other accrued current liability or obligation to trade
creditors incurred in the ordinary course of business in connection with the
obtaining of materials or services;

 

(2)                                  all
reimbursement obligations and other liabilities (contingent or otherwise) of
such Person with respect to letters of credit, bank guarantees, bankers’
acceptances, surety bonds, performance bonds or other guaranty of contractual
performance;

 

(3)                                  all
obligations and liabilities (contingent or otherwise) in respect of (a) leases
of such Person required, in conformity with generally accepted accounting
principles, to be accounted for as capitalized lease obligations on the balance
sheet of such  Person and (b) any lease
or related documents (including a purchase agreement) in connection with the
lease of real property which provides that such Person is contractually
obligated to purchase or cause a third party to purchase the leased property
and thereby guarantee a minimum residual value of the leased property to the
landlord and the obligations of such Person under such lease or related
document to purchase or to cause a third party to purchase the leased property;

 

(4)                                  all
obligations of such Person (contingent or otherwise) with respect to an
interest rate or other swap, cap or collar agreement or other similar
instrument or agreement or foreign currency hedge, exchange, purchase or
similar instrument or agreement;

 

(5)                                  all
direct or indirect guaranties or similar agreements by such Person in respect
of, and obligations or liabilities (contingent or otherwise) of such Person to
purchase or otherwise acquire or otherwise assure a creditor against loss in
respect of, indebtedness, obligations or liabilities of another Person of the
kind described in clauses (1) through (4);

 

(6)                                  any
indebtedness or other obligations described in clauses (1) through (5) secured
by any mortgage, pledge, lien or other encumbrance existing on property which
is owned or held by such Person, regardless of whether the indebtedness or
other obligation secured thereby shall have been assumed by such Person; and

 

(7)                                  any
and all deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any indebtedness, obligation or liability of
the kind described in clauses (1) through (6).

 

“Indenture” means this instrument as originally
executed or as it may from time to time be supplemented or amended by one or
more indentures supplemental hereto entered into pursuant to the applicable
provisions hereof.

 

“Initial Purchasers” means Salomon Brothers Qualified Investor Portfolios Multi-Strategy Arbitrage
Portfolio, Salomon Brothers Diversified Arbitrage Strategies Fund Ltd., Salomon
Brothers Enhanced Arbitrage Strategies Fund, CEBT- Comingled Employee Benefit
Trust – Capital Structure Arbitrage, General Motors Employees Global Group Pension
Trust, 

 

6

 

General Motors Welfare Benefits Trust,
Salomon Brothers Market Neutral Arbitrage Fund L.P. and Alexandra Global Master
Fund Ltd.

 

“Interest Payment Date” means each June 30 and
December 30.

 

“Interest Rate Protection Agreement” means, with
respect to any Person, any interest rate swap agreement, interest rate cap or
collar agreement or other financial agreement or arrangement designed to
protect such person against fluctuations in interest rates, as in effect from
time to time.

 

“Internal Revenue Code” means the Internal Revenue
Code of 1986, as amended.

 

“Liquidated Damages” means all liquidated damages, if
any, payable pursuant to Section 3 of the Registration Rights Agreement.

 

“June 2003 Indenture” means that certain
Indenture, dated as of June 30, 2003, by and between the Company and J.P.
Morgan Trust Company, National Association, as it may from time to time be
supplemented or amended by one or more indentures supplemental thereto entered
into pursuant to the applicable provisions thereof.

 

“Maturity” means the date on which the principal of
such Security becomes due and payable as therein or herein provided, whether at
the Stated Maturity or by acceleration, conversion, call for redemption,
exercise of a Repurchase Right or otherwise.

 

“Nasdaq National Market” means the National
Association of Securities Dealers Automated Quotation National Market or any
successor national securities exchange or automated over-the-counter trading
market in the United States.

 

“Non-Electing Share” has the meaning specified in
Section 12.11 hereof.

 

“Officer” of the Company means the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Financial Officer,
the Treasurer, any Vice President, the Controller, the Comptroller or the
Secretary of the Company.

 

“Officers’ Certificate” means a certificate signed by
both (1) the Chairman of the Board, the Chief Executive Officer, the President
or a Vice President and (2) so long as not the same as the officer signing
pursuant to clause (1), the Chief Financial Officer or the Secretary of
the Company, and delivered to the Trustee.

 

“Opinion of Counsel” means a written opinion of
counsel, who may be counsel to the Company (and may include directors or
employees of the Company) and which opinion is reasonably acceptable to the
Trustee.

 

“Outstanding,” when used with respect to Securities,
means, as of the date of determination, all Securities theretofore
authenticated and delivered under this Indenture, except Securities:

 

7

 

(1)                                  previously
canceled by the Trustee or delivered to the Trustee for cancellation;

 

(2)                                  for
the payment or redemption of which money in the necessary amount has been
previously deposited with the Trustee or any Paying Agent (other than the
Company) in trust or set aside and segregated in trust by the Company (if the
Company shall act as its own Paying Agent) for the Holders of such Securities,
provided that if such Securities are to be redeemed, notice of such redemption
has been duly given pursuant to this Indenture; and

 

(3)                                  which
have been paid, in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any such
Securities in respect of which there shall have been presented to the Trustee
proof satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company.

 

“Paying Agent” has the meaning specified in
Section 2.5 hereof.

 

“Payment Blockage Notice” has the meaning specified in
Section 13.1(d) hereof.

 

“Periodic
Offering” means an offering of Securities of a series from time to time,
the specific terms of which Securities, including, without limitation, the rate
or rates of interest thereon, the Stated Maturity or maturities thereof and the
redemption provisions with respect thereto, are to be determined by the Company
or its agents upon the issuance of such Securities.

 

“Permitted Payments” means payments on the Securities
derived from United States treasury securities pledged by the Company for the
ratable benefit of the Holders pursuant to the Pledge Agreement or from amounts
deposited with the Trustee in accordance with the provisions of
Article III hereof.

 

“Person” means any individual, corporation, limited
liability company, partnership, joint venture, association, joint-stock
company, trust, estate, unincorporated organization or government or any agency
or political subdivision thereof.

 

“Physical Securities” has the meaning specified in
Section 2.2 hereof.

 

“Place of Conversion” means any city in which any
Conversion Agent is located.

 

“Place of Payment” means any city in which any Paying
Agent is located.

 

“Pledge Account” has the meaning specified in the
Pledge Agreement.

 

“Pledge Agreement” means the Pledge Agreement, dated
as of the date hereof, by and among the Company, the Trustee and J.P. Morgan
Trust Company, National Association, as securities intermediary.

 

“Pledged Securities” has the meaning specified in the
Pledge Agreement.

 

8

 

“Pledged Securities Intermediary” means J.P. Morgan
Trust Company, National Association, as securities intermediary under the
Pledge Agreement until a successor securities intermediary shall have become
such pursuant to the applicable provisions of the Pledge Agreement, and
thereafter Pledged Securities Intermediary shall mean such successor Pledged
Securities Intermediary.

 

“Predecessor Security” of any particular Security
means every previous Security evidencing all or a portion of the same debt as
that evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 2.12 hereof
in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security
shall be deemed to evidence the same debt as the mutilated, destroyed, lost or
stolen Security.

 

“Provisional Redemption” has the meaning specified in
Section 10.1 hereof.

 

“Quoted Price” of the Common Stock means the last
reported sale price of the Common Stock on the Nasdaq National Market, or, if
the Common Stock is listed on a national securities exchange, then on such
exchange, or if the Common Stock is not quoted on Nasdaq National Market or
listed on an exchange, the average of the last bid and asked price on the
National Association of Securities Dealers Automated Quotation System.

 

“Record Date” means either a Regular Record Date or a
Special Record Date, as the case may be, provided that, for purposes of
Section 12.4 hereof, Record Date has the meaning specified in 12.4(g)
hereof.

 

“Redemption Date,” when used with respect to any
Security to be redeemed, means the Optional Redemption Date in the event of an
Optional Redemption or the Provisional Redemption Date, in the event of a
Provisional Redemption, as the case may be.

 

“Redemption Price,” means the Optional Redemption
Price, in the event of an Optional Redemption, or the Provisional Redemption
Price, in the event of a Provisional Redemption, as the case may be.

 

“Reference Dealer” means a dealer engaged in the
trading of convertible securities.

 

“Reference Period” has the meaning set forth in
Section 12.4(d) hereof.

 

“Register” has the meaning specified in Section 2.5
hereof.

 

“Registrar” has the meaning specified in
Section 2.5 hereof.

 

“Registration Rights Agreement” means the Resale
Registration Rights Agreement dated as of October 9, 2003, between the
Company and the Initial Purchasers.

 

“Regular Record Date” for the interest on the
Securities (including Liquidated Damages, if any) payable means the
June 15 (whether or not a Business Day) next preceding a June 30
Interest Payment Date and the December 15 (whether or not a Business Day)
next preceding a December 30 Interest Payment Date.

 

9

 

“Repurchase Date” has the meaning specified in
Section 11.1 hereof.

 

“Repurchase Price” has the meaning specified in
Section 11.1 hereof.

 

“Repurchase Right” has the meaning specified in
Section 11.1 hereof.

 

“Responsible Officer,” when used with respect to the
Trustee, means any officer of the Trustee, including any vice president,
assistant vice president, secretary, assistant secretary, the treasurer, any
assistant treasurer, the managing director or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of such
officer’s knowledge of and familiarity with the particular subject.

 

“Restricted Securities” means the Securities defined
as such in Section 2.3 hereof.

 

“Restricted Securities Legend” has the meaning set
forth in Section 2.3(a) hereof.

 

“Rule 144” means Rule 144 under the
Securities Act (including any successor rule thereof), as the same may be
amended from time to time.

 

“SEC” means the Securities and Exchange Commission.

 

“Securities” has the meaning ascribed to it in the
first paragraph under the caption “Recitals of the Company.”

 

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

 

“Senior Debt” means the principal of, premium, if any,
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) and rent payable on or
termination payment with respect to or in connection with, and all fees, costs,
expenses and other amounts accrued or due on or in connection with,
Indebtedness of the Company, whether outstanding on the date of this Indenture
or thereafter created, incurred, assumed, guaranteed or in effect guaranteed by
the Company (including all deferrals, renewals, extensions or refundings of, or
amendments, modifications or supplements to, the foregoing), unless in the case
of any particular Indebtedness the instrument creating or evidencing such
Indebtedness or the assumption or guarantee thereof expressly provides that
Indebtedness shall not be senior in right of payment to the Securities or
expressly provides that such Indebtedness is pari passu or junior to the
Securities.  The Securities shall not be
senior in right of payment to the outstanding 3% Convertible Subordinated Notes
due 2010 (the “June 2010 Notes”), 63⁄4% Convertible Subordinated Debentures
due October 2006 (the “2006 Debentures”), the 5% Convertible Subordinated
Notes due February 2007 (the “February 2007 Notes”) or the 31⁄2%
Convertible Subordinated Notes due October 2007 (the “October 2007
Notes”) and shall rank pari passu with the June 2010 Notes, 2006
Debentures, the February 2007 Notes and the October 2007 Notes.  Neither the June 2010 Notes, 2006
Debentures, the February 2007 Notes nor the October 2007 Notes shall
be Senior Debt, as that term is defined herein.  Notwithstanding 

 

10

 

the foregoing, the term “Senior Debt” shall include, without
limitation, all Designated Senior Debt, and shall not include Indebtedness of
the Company to any Subsidiary.

 

“Significant Subsidiary” means any Subsidiary which is
a “significant subsidiary” within the meaning of Rule 405 under the
Securities Act.

 

“Special Record Date” for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 2.17
hereof.

 

“Stated Maturity” means the date specified in any
Security as the fixed date for the payment of principal on such Security or on
which an installment of interest on such Security is due and payable.

 

“Subsidiary” means a corporation more than 50% of the
outstanding voting stock of which is owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries.  For the purposes of
this definition only, “voting stock” means stock which ordinarily has voting
power for the election of directors, whether at all times or only so long as no
senior class of stock has such voting power by reason of any contingency.

 

“TIA” means the Trust Indenture Act of 1939 (15 U.S.
Code Section 77aaa-77bbbb), as in effect on the date of this Indenture;
provided, however, that in the event the TIA is amended after such date, “TIA”
means, to the extent required by such amendment, the Trust Indenture Act of
1939, as so amended, or any successor statute.

 

“Trading Day” means:

 

(1)                                  if
the applicable security is listed or admitted for trading on the New York Stock
Exchange or another national security exchange, a day on which the New York
Stock Exchange or such other national security exchange is open for business;

 

(2)                                  if
the applicable security is quoted on the Nasdaq National Market, a day on which
trades may be made thereon; or

 

(3)                                  if
the applicable security is not so listed, admitted for trading or quoted, any
day other than a Saturday or Sunday or a day on which banking institutions in
the State of New York are authorized or obligated by law or executive order to
close.

 

“Trading Price” of a
security on any date of determination means:

 

(1)                                  the
closing sale price (or, if no closing sale price is reported, the last reported
sale price) of such security on the New York Stock Exchange on such date;

 

(2)                                  if
such security is not listed for trading on the New York Stock Exchange on any
such date, the closing sale price as reported in the composite transactions for
the principal U.S. securities exchange on which such security is so listed;

 

11

 

(3)                                  if
such security is not so listed on a U.S. national or regional securities
exchange, the closing sale price as reported by the Nasdaq National Market;

 

(4)                                  if
such security is not so reported, the last price quoted by Interactive Data
Corporation for such security or, if Interactive Data Corporation is not quoting
such price, a similar quotation service selected by the Company;

 

(5)                                  if
such security is not so quoted, the average of the mid-point of the last bid
and ask prices for such security from at least two dealers recognized as
market-makers for such security; or

 

(6)                                  if
such security is not so quoted, the average of the last bid and ask prices for
such security from a Reference Dealer.

 

“Transfer Agent” means any Person, which may be the
Company, authorized by the Company to exchange or register the transfer of
Securities.

 

“Trigger Event” has the meaning specified in
Section 12.4(d) hereof.

 

“Trustee” means the Person named as the “Trustee” in
the first paragraph of this instrument until a successor Trustee shall have
become such pursuant to the applicable provisions of this Indenture, and
thereafter “Trustee” shall mean such successor Trustee.

 

“U.S. Government Obligations” means: (1) direct
obligations of the United States of America for the payment of which the full
faith and credit of the United States of America is pledged or (2) obligations
of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America, the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America and which in either case, are non-callable at the option of
the issuer thereof.

 

“Vice President,” when used with respect to the
Company, means any vice president, whether or not designated by a number or a
word or words added before or after the title “vice president.”

 

Section 1.2.  Incorporation by Reference of
Trust Indenture Act. 
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.

 

The following TIA terms used in this Indenture have
the following meanings:

 

“indenture securities” means the Securities;

 

“indenture security holder” means a Holder;

 

“indenture to be qualified” means this Indenture;

 

“indenture trustee” or “institutional trustee” means
the Trustee; and

 

12

 

“obligor” on the Securities means the Company and any
other obligor on the indenture securities.

 

All other TIA terms used in this Indenture that are
defined by the TIA, defined by TIA reference to another statute or defined by
SEC rule have the meanings assigned to them by such definitions.

 

Section 1.3.  Rules of
Construction.  For all purposes
of this Indenture, except as otherwise expressly provided or unless the context
otherwise requires:

 

(a)                                  the
terms defined in this Article have the meanings assigned to them in this
Article and include the plural as well as the singular;

 

(b)                                 all
accounting terms not otherwise defined herein have the meanings assigned to
them in accordance with accounting principles generally accepted in the United
States prevailing at the time of any relevant computation hereunder; and

 

(c)                                  the
words “herein,” “hereof” and “hereunder” and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision.

 

ARTICLE
II

THE SECURITIES

 

Section 2.1.  Title and Terms.  The Securities shall be known and designated
as the “3% Convertible Subordinated Notes due 2010” of the Company.  The aggregate principal amount of Securities
which may be authenticated and delivered under this Indenture is
unlimited.  The Securities may be issued
in one or more series up to the aggregate principal amount of Securities of
that series from time to time authorized or pursuant to a Board Resolution or
pursuant to one or more Indenture supplements thereto.  The Securities shall be issuable in
denominations of $1,000 or integral multiples thereof. Notwithstanding any
provision to the contrary, any future series of Securities established in or
pursuant to a Board Resolution or a supplemental indenture will be on the same
terms as the Securities issued hereunder in all respects other than the date of
issuance and denomination.  There shall
be established in or pursuant to one or more Board Resolutions, and set forth
in an Officers’ Certificate, or established in one or more indentures
supplemental hereto, prior to the initial issuance of Securities of any series,

 

(i)                                     the
designation of the Securities of the series, which shall distinguish the
Securities of the series from the Securities of all other series;

 

(ii)                                  any
limit upon the aggregate principal amount of the Securities of that series that
may be authenticated and delivered under this Indenture;

 

(iii)                               the
date or dates on which the principal of the Securities of the series is
payable;

 

13

 

(iv)                              the
rate or rates at which the Securities of the series shall bear interest, if
any, the date or dates from which such interest shall accrue, the date or dates
on which a record shall be taken for the determination of Holders to whom
interest is payable and/or the method by which such rate or rates or date or
dates shall be determined;

 

(v)                                 the
place or places where the principal of and any interest on Securities of the
series shall be payable (if other than as provided in Section 2.5);

 

(vi)                              the
right of the Company to redeem Securities, in whole or in part, at its option
and the period or periods within which, the price or prices at which and any
terms and conditions;

 

(vii)                           if the
Holders of the Securities of the series may convert or exchange the Securities
of the series into or for securities of the Company or of other entities or
other property (or the cash value thereof), the specific terms of and period
during which such conversion or exchange may be made;

 

(viii)                        any
restrictions applicable to the offer, sale, transfer, exchange or delivery of
Securities;

 

(ix)                                if
the Securities of such series are to be issuable in definitive form (whether
upon the original issue or upon exchange of a temporary Security of such
series) only upon receipt of certain certificates or other documents or
satisfaction of other conditions, the form and terms of such certificates,
documents or conditions;

 

(x)                                   any
trustee, depositaries, authenticating or paying agents, transfer agents or
registrars or any other agents with respect to the Securities of such series;
and

 

(xi)                                any
other terms of the series.

 

All Securities of any one
series need not be issued at the same time and may be issued from time to time,
consistent with the terms of this Indenture, if so provided by or pursuant to
such Board Resolution, such Officers’ Certificate or in any such indenture
supplemental hereto.

 

The Securities shall mature on June 30, 2010.

 

Interest shall accrue from the date of issuance at a
rate of 3% per annum until the principal thereof is paid or made available for
payment.  Interest shall be payable
semiannually in arrears on June 30 and December 30, in each year,
commencing December 30, 2003.

 

Interest on the Securities shall be computed (i) for
any full semiannual period on the basis of a 360-day year of twelve 30-day
months.

 

A Holder of any Security at the close of business on a
Regular Record Date shall be entitled to receive interest (including Liquidated
Damages, if any) on such Security on the 

 

14

 

corresponding Interest Payment Date. 
A Holder of any Security which is converted after the close of business
on a Regular Record Date and prior to the corresponding Interest Payment Date
(other than any Security whose Maturity is prior to such Interest Payment Date)
shall be entitled to receive interest (including Liquidated Damages, if any) on
the principal amount of such Security, notwithstanding the conversion of such
Security prior to such Interest Payment Date. 
However, any such Holder which surrenders any such Security for
conversion during the period between the close of business on such Regular
Record Date and ending with the opening of business on the corresponding
Interest Payment Date (other than any Security whose Maturity is prior to such
Interest Payment Date) shall be required to pay the Company an amount equal to
the interest (including Liquidated Damages, if any) on the principal amount of
such Security so converted, which is payable by the Company to such Holder on
such Interest Payment Date, at the time such Holder surrenders such Security
for conversion.  Notwithstanding the
foregoing, any such Holder which surrenders for conversion any Security which
has been called for redemption by the Company in a notice of redemption given
by the Company pursuant to Section 10.5 hereof shall be entitled to
receive (and retain) such interest (including Liquidated Damages, if any) and
need not pay the Company an amount equal to the interest (including Liquidated
Damages, if any) on the principal amount of such Security so converted at the
time such Holder surrenders such Security for conversion.

 

Principal of, and premium, if any, and interest on,
Global Securities shall be payable to the Depositary in immediately available
funds.

 

Principal and premium, if any, on Physical Securities
shall be payable at the office or agency of the Company maintained for such
purpose, initially the Corporate Trust Office of the Trustee.  Interest on Physical Securities will be
payable by (i) U.S. Dollar check drawn on a bank in The City of New York mailed
to the address of the Person entitled thereto as such address shall appear in
the Register, or (ii) upon application to the Registrar not later than the
relevant Record Date by a Holder of an aggregate principal amount in excess of
$5,000,000, wire transfer in immediately available funds.

 

The Securities shall be redeemable at the option of
the Company as provided in Article 10 hereof.

 

The Securities shall have a Repurchase Right
exercisable at the option of Holders as provided in Article 11 hereof.

 

The Securities shall be convertible as provided in
Article 12 hereof.

 

The Securities shall be subordinated in right of
payment to Senior Debt of the Company as provided in Article 13 hereof.

 

Section 2.2.  Form of
Securities.  The Securities of
each series and the Trustee’s certificate of authentication to be borne by such
Securities shall be substantially in the form annexed hereto as Exhibit A,
which is incorporated in and made a part of this Indenture.  The terms and provisions contained in the
form of Security shall constitute, and are hereby expressly made, a part of
this Indenture and to the extent applicable, the Company and the Trustee, by
their 

 

15

 

execution and delivery of this Indenture, expressly
agree to such terms and provisions and to be bound thereby.

 

Any of the Securities may have such letters, numbers
or other marks of identification and such notations, legends and endorsements
as the officers executing the same may approve (execution thereof to be
conclusive evidence of such approval) and as are not inconsistent with the provisions
of this Indenture, or as may be required to comply with any law or with any
rule or regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Securities may
be listed or designated for issuance, or to conform to usage.

 

With respect to any series of Securities, the
Securities may be issued in the form of one or more permanent Global Securities
(each, a “Global Security”) in registered form without interest coupons.  The Global Securities shall be:

 

(a)                                  duly
executed by the Company and authenticated by the Trustee as hereinafter
provided;

 

(b)                                 registered
in the name of the Depositary (or its nominee) for credit to the respective
accounts of the Holders at the Depositary; and

 

(c)                                  deposited
with the Trustee, as custodian for the Depositary.

 

The Global Securities of any series shall be
substantially in the form of Security set forth in Exhibit A annexed
hereto (including the text and schedule called for by footnotes 1 and 2 thereto).  The aggregate principal amount of the Global
Securities of any series may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the Depositary
(or its nominee), in accordance with the instructions given by the Holder
thereof, as hereinafter provided.

 

Securities issued in exchange for interests in the
Global Securities pursuant to Section 2.8(d) hereof shall be issued in the
form of permanent definitive Securities (the “Physical Securities”) in registered
form without interest coupons.  The
Physical Securities shall be substantially in the form set forth in
Exhibit A annexed hereto.

 

The Securities shall be typed, printed, lithographed
or engraved or produced by any combination of these methods or may be produced
in any other manner permitted by the rules of any securities exchange on which
the Securities may be listed, all as determined by the Officers executing such
Securities, as evidenced by their execution of such Securities.

 

Section 2.3.  Legends.

 

(a)                                  Restricted
Securities Legends.  Each Security
issued hereunder shall, upon issuance, bear the legend set forth in
Section 2.3(a)(i) or Section 2.3(a)(ii) (each, a “Restricted
Securities Legend”), as the case may be, and such legend shall not be removed
except as provided in Section 2.3(a)(iii).  Each Security that bears or is required to bear the Restricted
Securities Legend set forth in Section 2.3(a)(i) (together with any Common
Stock issued upon conversion of the Securities and required to bear the
Restricted Securities Legend set forth in

 

16

 

Section 2.3(a)(ii), collectively, the “Restricted Securities”)
shall be subject to the restrictions on transfer set forth in this
Section 2.3(a) (including the Restricted Securities Legend set forth
below), and the Holder of each such Restricted Security, by such Holder’s
acceptance thereof, shall be deemed to have agreed to be bound by all such
restrictions on transfer.

 

As used in Section 2.3(a), the term “transfer”
encompasses any sale, pledge, transfer or other disposition whatsoever of any
Restricted Security.

 

(i)                                     Restricted
Securities Legend for Securities. 
Except as provided in Section 2.3(a)(iii), any certificate
evidencing such Security (and all securities issued in exchange therefor or
substitution thereof, other than Common Stock, if any, issued upon conversion
thereof which shall bear the legend set forth in Section 2.3(a)(ii), if
applicable) shall bear a Restricted Securities Legend in substantially the
following form:

 

THE
SECURITY EVIDENCED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE.  BY ACQUISITION
HEREOF, THE HOLDER (1) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THE SECURITY
EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SECURITY
EXCEPT (A) TO NEKTAR THERAPEUTICS (THE “COMPANY”) OR ANY SUBSIDIARY THEREOF,
(B) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE), (C) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (D)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
TRANSFER; AND (2) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE
SECURITY EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO
CLAUSE (1)(D) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.  IN CONNECTION WITH ANY TRANSFER OF THE
SECURITY EVIDENCED HEREBY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF SUCH
SECURITY (OTHER THAN A TRANSFER PURSUANT TO CLAUSE (1)(D) ABOVE), THE
HOLDER MUST MAKE THE REPRESENTATIONS AND WARRANTIES SET FORTH ON THE REVERSE
HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE
TRUSTEE (OR ANY SUCCESSOR TRUSTEE, AS APPLICABLE).  IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE (1)(B) OR
(1)(C) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE
(OR ANY SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS
OR OTHER INFORMATION AS THE COMPANY MAY

 

17

 

REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT.  THIS LEGEND WILL BE REMOVED UPON
THE EARLIER OF THE TRANSFER OF THE SECURITY EVIDENCED HEREBY PURSUANT TO
CLAUSE (1)(D) ABOVE OR THE EXPIRATION OF TWO YEARS FROM THE ORIGINAL ISSUANCE
OF THE SECURITY EVIDENCED HEREBY.

 

(ii)                                  Restricted
Securities Legend for Common Stock Issued Upon Conversion of the Securities.  Until two years after the original issuance
date of any Security, any stock certificate representing Common Stock issued
upon conversion of such Security shall bear a Restricted Securities Legend in
substantially the following form:

 

THE
SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE  SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR
SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.  THE HOLDER HEREOF AGREES THAT UNTIL THE EXPIRATION OF TWO YEARS
AFTER THE ORIGINAL ISSUANCE OF THE SECURITY UPON THE CONVERSION OF WHICH THE
COMMON STOCK EVIDENCED HEREBY WAS ISSUED, (1) IT WILL NOT RESELL OR OTHERWISE
TRANSFER THE SECURITY EXCEPT (A) TO NEKTAR THERAPEUTICS (THE “COMPANY”) OR ANY
SUBSIDIARY THEREOF, (B) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (C) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER; (2) PRIOR
TO ANY SUCH TRANSFER OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(C) ABOVE, IT
WILL FURNISH TO SUCH TRANSFER AGENT (OR ANY SUCCESSOR TRANSFER AGENT, AS
APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE
COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (3) IT WILL DELIVER TO
EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS TRANSFERRED (OTHER
THAN A TRANSFER PURSUANT TO A CLAUSE (1)(C) ABOVE) A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND.  THIS
LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE COMMON STOCK
EVIDENCED HEREBY PURSUANT TO CLAUSE (1)(C) ABOVE OR THE EXPIRATION OF TWO
YEARS FROM THE ORIGINAL ISSUANCE OF THE SECURITY UPON THE CONVERSION OF WHICH
THE COMMON STOCK EVIDENCED HEREBY WAS ISSUED.

 

18

 

(iii)                               Removal of
the Restricted Securities Legends. 
Each Security or share of Common Stock issued upon conversion of such
Security shall bear the Restricted Securities Legend set forth in
Section 2.3(a)(i) or 2.3(a)(ii), as the case may be, until the earlier of:

 

(A)                              two
years after the original issuance date of such Security;

 

(B)                                such
Security or Common Stock has been sold pursuant to a registration statement
that has been declared effective under the Securities Act (and which continues
to be effective at the time of such sale); or

 

(C)                                such
Common Stock has been issued upon conversion of Securities that have been sold
pursuant to a registration statement that has been declared effective under the
Securities Act (and which continues to be effective at the time of such sale).

 

The Holder must give
notice thereof to the Trustee and any transfer agent for the Common Stock, as
applicable.

 

Notwithstanding the foregoing, the Restricted
Securities Legend may be removed if there is delivered to the Company such
reasonably satisfactory evidence, which may include an opinion of independent
counsel, as may be reasonably required by the Company that neither such legend
nor the restrictions on transfer set forth therein are required to ensure that
transfers of such Security will not violate the registration requirements of
the Securities Act.  Upon provision of
such reasonably satisfactory evidence, the Trustee, at the written direction of
the Company, shall authenticate and deliver in exchange for such Securities
another Security or Securities having an equal aggregate principal amount that
does not bear such legend.  If the
Restricted Securities Legend has been removed from a Security as provided
above, no other Security issued in exchange for all or any part of such
Security shall bear such legend, unless the Company has reasonable cause to
believe that such other Security is a “restricted security” within the meaning
of Rule 144 and instructs the Trustee in writing to cause a Restricted
Securities Legend to appear thereon.

 

Any Security (or security issued in exchange or
substitution thereof) as to which such restrictions on transfer shall have
expired in accordance with their terms or as to which the conditions for
removal of the Restricted Securities Legend set forth in Section 2.3(a)(i)
as set forth therein have been satisfied may, upon surrender of such Security
for exchange to the Registrar in accordance with the provisions of Section 2.7
hereof, be exchanged for a new Security or Securities, of like tenor and
aggregate principal amount, which shall not bear the Restricted Securities
Legend required by Section 2.3(a)(i).

 

Any such Common Stock as to which such restrictions on
transfer shall have expired in accordance with their terms or as to which the
conditions for removal of the Restricted Securities Legend set forth in
Section 2.3(a)(ii) as set forth therein have been satisfied may, upon
surrender of the certificates representing such shares of Common Stock for
exchange in accordance with the procedures of the transfer agent for the Common
Stock, be exchanged for a new certificate or 

 

19

 

certificates for a like aggregate number of shares of Common Stock,
which shall not bear the Restricted Securities Legend required by
Section 2.3(a)(ii).

 

(b)                                 Global
Security Legend.  Each Global
Security shall also bear the following legend on the face thereof:

 

UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY (“DTC”) TO NEKTAR THERAPEUTICS (OR ITS SUCCESSOR) OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE, CONVERSION OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

Section 2.4.  Execution, Authentication,
Delivery and Dating.  Two
Officers shall execute the Securities on behalf of the Company by manual or
facsimile signatures.  If such Officer
whose signature is on a Security no longer holds that office at the time the
Security is authenticated, the Security shall be valid nevertheless.

 

At any time and from time
to time after the execution and delivery of this Indenture, the Company may
deliver Securities executed by the Company to the Trustee for authentication,
together with a Company Order for the authentication and delivery of such
Securities, and the Trustee in accordance with such Company Order shall
authenticate and deliver such Securities as in this Indenture provided and not
otherwise.  With respect to Securities
of a series subject to a Periodic Offering, (i) such Company Order may be
delivered by the Company to the Trustee prior to the delivery to the Trustee of
such Securities for authentication and delivery, (ii) the Trustee shall
authenticate and deliver Securities of such series for original issue from time
to time, pursuant to an Company Order, and (iii) the maturity date or dates,
original issue date or dates, interest rate or rates and any other terms of
Securities of such series shall be determined by a Company Order.

 

Each Security shall be
dated the date of its authentication.

 

No Security shall be
entitled to any benefit under this Indenture, or be valid or obligatory for any
purpose, unless there appears on such Security a certificate of authentication
substantially in the form provided for herein executed by or on behalf of the
Trustee by manual signature, and such certificate upon any Security shall be
conclusive evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder.

 

The Trustee may appoint
an authenticating agent or agents reasonably acceptable to the Company with
respect to the Securities.  Unless
limited by the terms of such appointment, an 

 

20

 

authenticating agent may authenticate Securities
whenever the Trustee may do so.  Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent.

 

Section 2.5.  Registrar
and Paying Agent.  The Company
shall maintain an office or agency where Securities may be presented for
registration of transfer or for exchange (the “Registrar”) and an office or
agency where Securities may be presented for payment (the “Paying Agent”).  The Registrar shall keep a register of the
Securities (the “Register”) and of their transfer and exchange.  The Company may appoint one or more
co-Registrars and one or more additional Paying Agents for the Securities.  The term “Paying Agent” includes any
additional paying agent and the term “Registrar” includes any additional
registrar.  The Company may change any
Paying Agent or Registrar without prior notice to any Holder.

 

The Company will cause
each Paying Agent (other than the Trustee) to execute and deliver to the
Trustee an instrument in which such Paying Agent shall agree with the Trustee,
subject to the provisions of this Section, that such Paying Agent will:

 

(a)                                  hold
all sums held by it for the payment of the principal of and premium, if any, or
interest (including Liquidated Damages, if any) on Securities in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as provided in this Indenture;

 

(b)                                 give
the Trustee notice of any Default by the Company in the making of any payment
of principal and premium, if any, or interest (including Liquidated Damages, if
any); and

 

(c)                                  at
any time during the continuance of any such Default, upon the written request
of the Trustee, forthwith pay to the Trustee all sums so held in trust by such
Paying Agent.

 

The Company shall give
prompt written notice to the Trustee of the name and address of any Agent who
is not a party to this Indenture.  If
the Company fails to appoint or maintain another entity as Registrar or Paying
Agent, the Trustee shall act as such. 
The Company or any Affiliate of the Company may act as Paying Agent or
Registrar; provided, however, that none of the Company, its subsidiaries or the
Affiliates of the foregoing shall act:

 

(i)                                     as
Paying Agent in connection with redemptions, offers to purchase and discharges,
as otherwise specified in this Indenture, and

 

(ii)                                  as
Paying Agent or Registrar if a Default or Event of Default has occurred and is
continuing.

 

The Company hereby
initially appoints the Trustee as Registrar and Paying Agent for the
Securities.

 

Section 2.6.  Paying
Agent to Hold Assets in Trust. 
Not later than 12:00 p.m. (New York City time) on each due date of
the principal, premium, if any, and interest (including Liquidated Damages, if
any) on any Securities, the Company shall deposit with one or more Paying
Agents money in immediately available funds sufficient to pay such principal,
premium, if any, and 

 

21

 

interest (including Liquidated Damages, if any) so
becoming due.  The Company at any time
may require a Paying Agent to pay all money held by it to the Trustee.  Upon payment over to the Trustee, the Paying
Agent (if other than the Company) shall have no further liability for the money
so paid over to the Trustee.

 

If the Company shall act
as a Paying Agent, it shall, prior to or on each due date of the principal of
and premium, if any, or interest (including Liquidated Damages, if any) on any
of the Securities, segregate and hold in trust for the benefit of the Holders a
sum sufficient with monies held by all other Paying Agents, to pay the
principal and premium, if any, or interest (including Liquidated Damages, if
any) so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as provided in this Indenture, and shall promptly notify the
Trustee of its action or failure to act.

 

Section 2.7.  General Provisions Relating to
Transfer and Exchange. 
The Securities are issuable only in registered form.  A Holder may transfer a Security only by
written application to the Registrar stating the name of the proposed transferee
and otherwise complying with the terms of this Indenture.  No such transfer shall be effected until,
and such transferee shall succeed to the rights of a Holder only upon, final
acceptance and registration of the transfer by the Registrar in the Register.  Furthermore, any Holder of a Global Security
shall, by acceptance of such Global Security, agree that transfers of
beneficial interests in such Global Security may be effected only through a
book-entry system maintained by the Holder of such Global Security (or its
agent) and that ownership of a beneficial interest in the Security shall be
required to be reflected in a book-entry. 
Notwithstanding the foregoing, in the case of a Restricted Security, a
beneficial interest in a Global Security being transferred in reliance on an
exemption from the registration requirements of the Securities Act other than
in accordance with Rule 144 may only be transferred for a Physical
Security.

 

When Securities are
presented to the Registrar with a request to register the transfer or to
exchange them for an equal aggregate principal amount of Securities of other
authorized denominations, the Registrar shall register the transfer or make the
exchange as requested if its requirements for such transactions are met
(including that such Securities are duly endorsed or accompanied by a written
instrument of transfer duly executed by the Holder thereof or by an attorney
who is authorized in writing to act on behalf of the Holder).  Subject to Section 2.4 hereof, to
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Securities at the Registrar’s request.  No service charge shall be made for any
registration of transfer or exchange or redemption of the Securities, but the
Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any
such transfer taxes or other similar governmental charge payable upon exchanges
pursuant to Section 2.14, 7.5 or 10.8 hereof).

 

Neither the Company nor
the Registrar shall be required to exchange or register a transfer of any
Securities:

 

(a)                                  for
a period of 15 Business Days prior to the day of any selection of Securities
for redemption under Article 10 hereof;

 

22

 

(b)                                 so
selected for redemption or, if a portion of any Security is selected for
redemption, such portion thereof selected for redemption; or

 

(c)                                  surrendered
for conversion or, if a portion of any Security is surrendered for conversion,
such portion thereof surrendered for conversion.

 

Section 2.8.  Book-Entry Provisions for the
Global Securities.

 

(a)                                  The
Global Securities of any series shall:

 

(i)                                     be
registered in the name of the Depositary (or a nominee thereof);

 

(ii)                                  be
delivered to the Trustee as custodian for such Depositary; and

 

(iii)                               bear
the Restricted Securities Legend as set forth in Section 2.3(a)(i) hereof.

 

Members of, or
participants in, the Depositary (“DTC Participants”) shall have no rights under
this Indenture with respect to any Global Security held on their behalf by the
Depositary, or the Trustee as its custodian, or under such Global Security, and
the Depositary may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner of such Global Security for all
purposes whatsoever.  Notwithstanding
the foregoing, nothing contained herein shall prevent the Company, the Trustee
or any agent of the Company or Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or
impair, as between the Depositary and the DTC Participants, the operation of
customary practices governing the exercise of the rights of a Holder of any
Security.

 

(b)                                 The
registered Holder of a Global Security may grant proxies and otherwise
authorize any Person, including DTC Participants and Persons that may hold
interests through DTC Participants, to take any action which a Holder is
entitled to take under this Indenture or the Securities.

 

(c)                                  A
Global Security may not be transferred, in whole or in part, to any Person
other than the Depositary (or a nominee thereof), and no such transfer to any
such other Person may be registered. 
Beneficial interests in a Global Security may be transferred in
accordance with the rules and procedures of the Depositary and the provisions
of Section 2.9 hereof.

 

(d)                                 If
at any time:

 

(i)                                     the
Depositary notifies the Company in writing that it is no longer willing or able
to continue to act as Depositary for such series of Global Securities, or the
Depositary ceases to be a “clearing agency” registered under the Exchange Act
and a successor depositary for the Global Securities is not appointed by the
Company within 90 days of such notice or cessation;

 

(ii)                                  the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of the Securities in definitive form under this Indenture in
exchange 

 

23

 

for all or any part of
the Securities represented by a Global Security or Global Securities; or

 

(iii)                               an
Event of Default has occurred and is continuing and the Registrar has received
a request from the Depositary for the issuance of Physical Securities in
exchange for such Global Security or Global Securities,

 

the Depositary shall
surrender such Global Security or Global Securities to the Trustee for
cancellation and the Company shall execute, and the Trustee, upon receipt of an
Officers’ Certificate and Company Order for the authentication and delivery of
Securities, shall authenticate and deliver in exchange for such Global Security
or Global Securities, Physical Securities of like tenor as that of the Global
Securities in an aggregate principal amount equal to the aggregate principal
amount of such Global Security or Global Securities.  Such Physical Securities shall be registered in such names as the
Depositary shall identify in writing as the beneficial owners of the Securities
represented by such Global Security or Global Securities (or any nominee
thereof).

 

Notwithstanding the
foregoing, in connection with any transfer of beneficial interests in a Global
Security to beneficial owners pursuant to Section 2.8(d) hereof, the
Registrar shall reflect on its books and records the date and a decrease in the
principal amount of such Global Security in an amount equal to the principal
amount of the beneficial interest in such Global Security to be transferred.

 

Section 2.9.  Special
Transfer Provisions.

 

With respect to the
registration of any proposed transfer of Securities:

 

(a)                                  If
the Securities to be transferred consist of an interest in the Global
Securities, the transfer of such interest may be effected only through the
book-entry system maintained by the Depositary.

 

(b)                                 In
addition, the Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Global Securities in an amount equal to
the principal amount of the Physical Securities to be transferred, and the
Trustee shall cancel the Physical Securities so transferred.

 

By its acceptance of any
Security bearing the Restricted Securities Legend, each Holder of such a
Security acknowledges the restrictions on transfer of such Security set forth
in this Indenture and agrees that it will transfer such Security only as
provided in this Indenture.  The
Registrar shall not register a transfer of any Security unless such transfer
complies with the restrictions on transfer of such Security set forth in this
Indenture.  The Registrar shall be
entitled to receive and rely on written instructions from the Company verifying
that such transfer complies with such restrictions on transfer.  In connection with any transfer of
Securities, each Holder agrees by its acceptance of the Securities to furnish
the Registrar or the Company such certifications, legal opinions or other
information as either of them may reasonably require to confirm that such
transfer is being made pursuant to an exemption from, or a transaction not
subject to, the registration requirements of the Securities Act; provided that
the Registrar shall 

 

24

 

not be required to determine (but may rely on a
determination made by the Company with respect to) the sufficiency of any such
certifications, legal opinions or other information.

 

The Registrar shall
retain copies of all letters, notices and other written communications received
pursuant to Section 2.8 hereof or this Section 2.9.  The Company shall have the right to inspect
and make copies of all such letters, notices or other written communications at
any reasonable time upon the giving of reasonable written notice to the
Registrar.

 

Section 2.10.  Holder Lists.  The Trustee shall preserve in as current a
form as is reasonably practicable the most recent list available to it of the
names and addresses of Holders and shall otherwise comply with
Section 312(a) of the TIA.  If the
Trustee is not the Registrar, the Company shall furnish to the Trustee prior to
or on each Interest Payment Date and at such other times as the Trustee may
request in writing a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Holders relating to such
Interest Payment Date or request, as the case may be.

 

Section 2.11.  Persons
Deemed Owners.  The Company, the
Trustee and any agent of the Company or the Trustee may treat the registered
Holder of a Global Security as the absolute owner of such Global Security for
the purpose of receiving payment thereof or on account thereof and for all
other purposes whatsoever, whether or not such Security be overdue, and
notwithstanding any notice of ownership or writing thereon, or any notice of
previous loss or theft or other interest therein.  The Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name any Security is registered as the
owner of such Security for the purpose of receiving payment of principal of and
premium, if any, and interest (including Liquidated Damages, if any) on such
Security and for all other purposes whatsoever, whether or not such Security be
overdue, and notwithstanding any notice of ownership or writing thereon, or any
notice of previous loss or theft or other interest therein.

 

Section 2.12.  Mutilated,
Destroyed, Lost or Stolen Securities.  If any mutilated Security is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor a new Security of like tenor and principal amount and bearing
a number not contemporaneously outstanding.

 

If there is delivered to
the Company and the Trustee

 

(a)                                  evidence
to their satisfaction of the destruction, loss or theft of any Security, and

 

(b)                                 such
security or indemnity as may be required by them to save each of them and any
agent of either of them harmless, then, in the absence of notice to the Company
or the Trustee that such Security has been acquired by a bona fide purchaser,
the Company shall execute and, upon request, the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.

 

In case any such
mutilated, destroyed, lost or stolen Security has become or is about to become
due and payable, the Company in its discretion, but subject to any conversion
rights, 

 

25

 

may, instead of issuing a new Security, pay such
Security, upon satisfaction of the condition set forth in the preceding
paragraph.

 

Upon the issuance of any
new Security under this Section, the Company may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Trustee) connected therewith.

 

Every new Security issued
pursuant to this Section in lieu of any destroyed, lost or stolen Security
shall constitute an original additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Security shall be at any time
enforceable by anyone, and such new Security shall be entitled to all the
benefits of this Indenture equally and proportionately with any and all other
Securities duly issued hereunder.

 

The provisions of this
Section are exclusive and shall preclude (to the extent lawful) all other
rights and remedies with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities.

 

Section 2.13.  Treasury
Securities.  In determining
whether the Holders of the requisite principal amount of Outstanding Securities
are present at a meeting of Holders for quorum purposes or have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Securities owned by the Company or any Affiliate of the Company shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such determination
as to the presence of a quorum or upon any such request, demand, authorization,
direction, notice, consent or waiver, only such Securities of which the Trustee
has received written notice and are so owned shall be so disregarded.

 

Section 2.14.  Temporary
Securities.  Pending the
preparation of Securities in definitive form, the Company may execute and the
Trustee shall, upon written request of the Company, authenticate and deliver
temporary Securities (printed or lithographed).  Temporary Securities shall be issuable in any authorized
denomination, and substantially in the form of the Securities in definitive
form but with such omissions, insertions and variations as may be appropriate
for temporary Securities, all as may be determined by the Company.  Every such temporary Security shall be
executed by the Company and authenticated by the Trustee upon the same
conditions and in substantially the same manner, and with the same effect, as
the Securities in definitive form. Without unreasonable delay, the Company will
execute and deliver to the Trustee Securities in definitive form (other than in
the case of Securities in global form) and thereupon any or all temporary
Securities (other than any such Securities in global form) may be surrendered
in exchange therefor, at each office or agency maintained by the Company
pursuant to Section 9.2 and the Trustee shall authenticate and deliver in
exchange for such temporary Securities an equal aggregate principal amount of
Securities in definitive form.  Such
exchange shall be made by the Company at its own expense and without any charge
therefor.  Until so exchanged, the
temporary Securities shall in all respects be entitled to the same benefits and
subject to the same limitations under this Indenture as Securities in
definitive form authenticated and delivered hereunder.

 

26

 

Section 2.15.  Cancellation.  All securities surrendered for payment,
redemption, repurchase, conversion, registration of transfer or exchange shall,
if surrendered to any Person other than the Trustee, be delivered to the
Trustee.  All Securities so delivered
shall be canceled promptly by the Trustee, and no Securities shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Indenture.  Upon written instructions of
the Company, the Trustee shall destroy canceled Securities and, after such
destruction, shall deliver a certificate of such destruction to the
Company.  If the Company shall acquire
any of the Securities, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Securities unless the same
are delivered to the Trustee for cancellation.

 

Section 2.16.  CUSIP Numbers.  The Company in issuing the Securities may
use “CUSIP” numbers (if then generally in use), and the Trustee shall use CUSIP
numbers in notices of redemption or exchange as a convenience to Holders;
provided that any such notice shall state that no representation is made as to
the correctness of such numbers either as printed on the Securities or as
contained in any such notice and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers.  The Company shall promptly notify the
Trustee of any change in the CUSIP numbers.

 

Section 2.17.  Defaulted
Interest.  If the Company fails
to make a payment of interest (including Liquidated Damages, if any) on any
Security when due and payable (“Defaulted Interest”), it shall pay such
Defaulted Interest plus (to the extent lawful) any interest payable on the
Defaulted Interest, in any lawful manner. 
It may elect to pay such Defaulted Interest, plus any such interest
payable on it, to the Persons who are Holders of such Securities on which the
interest is due on a subsequent Special Record Date.  The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each such Security. The Company shall
fix any such Special Record Date and payment date for such payment.  At least 15 days before any such Special
Record Date, the Company shall mail to Holders affected thereby a notice that
states the Special Record Date, the Interest Payment Date, and amount of such
interest (and such Liquidated Damages, if any) to be paid.

 

ARTICLE III

SATISFACTION AND DISCHARGE

 

Section 3.1.  Satisfaction and Discharge of
Indenture.

 

When:

 

(a)                                  The
Company shall deliver to the trustee for cancellation all securities previously
authenticated (other than any securities which have been destroyed, lost or
stolen and in lieu of, or in substitution for which, other securities shall
have been authenticated and delivered) and not previously canceled, or

 

(b)                                 (i)
all the securities not previously canceled or delivered to the trustee for
cancellation shall have become due and payable, or are by their terms to become
due and payable within one year or are to be called for redemption within one
year under arrangements satisfactory to the Trustee for the giving of notice of
redemption,

 

27

 

(ii)                                  the
Company shall deposit with the Trustee, in trust, cash in U.S. dollars and/or
U.S. Government Obligations which through the payment of interest and principal
in respect thereof, in accordance with their terms, will provide (and without
reinvestment and assuming no tax liability will be imposed on such Trustee),
not later than one day before the due date of any payment of money, an amount
in cash, sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay principal of, premium, if any, or interest
(including Liquidated Damages, if any) on all of the Securities (other than any
Securities which shall have been mutilated, destroyed, lost or stolen and in
lieu of or in substitution for which other Securities shall have been
authenticated and delivered) not previously canceled or delivered to the
Trustee for cancellation, on the dates such payments of principal, premium, if
any, or interest (including Liquidated Damages, if any) are due to such date of
maturity or redemption, as the case may be, and

 

(iii)                               the
Company shall have delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel to the effect that (x) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (y) since
the date of execution of this Indenture, there has been a change in the
applicable federal income tax law, in the case of either clause (x) or (y)
to the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders will not recognize income, gain or loss for federal income
tax purposes as a result of such deposit and discharge and will be subject to
federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and discharge had not
occurred, and

 

if, in the case of either
clause (1) or (2), the Company shall also pay or cause to be paid all
other sums payable hereunder by the Company, then this Indenture shall cease to
be of further effect (except as to:

 

(i)                                     remaining
rights of registration of transfer, substitution and exchange and conversion of
Securities;

 

(ii)                                  rights
hereunder of Holders to receive payments of principal of and premium, if any,
and interest (including Liquidated Damages, if any) on, the Securities and the
other rights, duties and obligations of Holders, as beneficiaries hereof with
respect to the amounts, if any, so deposited with the Trustee; and

 

(iii)                               the
rights, obligations and immunities of the Trustee hereunder),

 

and the Trustee, on
demand of the Company accompanied by an Officers’ Certificate and an Opinion of
Counsel and at the cost and expense of the Company, shall execute proper instruments
acknowledging satisfaction of and discharging this Indenture; provided,
however, the Company shall reimburse the Trustee for all amounts due the
Trustee under Section 5.8 hereof and for any costs or expenses thereafter
reasonably and properly incurred by the Trustee and to compensate the Trustee
for any services thereafter reasonably and properly rendered by the Trustee in
connection with this Indenture or the Securities.

 

28

 

Section 3.2.  Deposited
Monies to be Held in Trust. 
Subject to Section 3.3 hereof, all monies deposited with the
Trustee pursuant to Section 3.1 hereof shall be held in trust and applied
by it to the payment, notwithstanding the provisions of Article 13 hereof,
either directly or through any Paying Agent (including the Company if acting as
its own Paying Agent), to the Holders of the particular Securities for the
payment or redemption of which such monies have been deposited with the
Trustee, of all sums due and to become due thereon for principal, premium, if
any, and interest (including Liquidated Damages, if any).  All monies deposited with the Trustee
pursuant to Section 3.1 hereof (and held by it or any Paying Agent) for
the payment of Securities subsequently converted shall be returned to the
Company upon request of the Company.

 

Section 3.3.  Return
of Unclaimed Monies.  The
Trustee and the Paying Agent shall pay to the Company any money held by them
for the payment of principal or premium, if any, or interest (including Liquidated
Damages, if any) that remains unclaimed for two years after the date upon which
such payment shall have become due. 
After payment to the Company, Holders entitled to the money must look to
the Company for payment as general creditors unless an applicable abandoned
property law designates another Person, and all liability of the Trustee and
such Paying Agent with respect to such money shall cease.

 

ARTICLE
IV

DEFAULTS AND REMEDIES

 

Section 4.1.  Events of
Default.  An “Event of Default”
with respect to the Securities occurs when any of the following occurs
(whatever the reason for such Event of Default and whether it shall be
occasioned by the provisions of Article 13 hereof or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):

 

(a)                                  the
Company defaults in the payment of the principal of or premium, if any, on any
of the Securities when it becomes due and payable at Maturity, upon redemption
or exercise of a Repurchase Right or otherwise, whether or not such payment is
prohibited by Article 13 hereof; or

 

(b)                                 the
Company defaults in the payment of interest (including Liquidated Damages, if
any) on any of the Securities when it becomes due and payable and such default
continues for a period of 30 days, whether or not such payment is prohibited by
Article 13 hereof; provided that a failure to make any of the first six
scheduled interest payments on any of the Securities within three Business Days
of the applicable Interest Payment Date will constitute an Event of Default
with no additional grace or cure period; or

 

(c)                                  the
Company fails to perform or observe any other term, covenant or agreement
contained in the Securities or this Indenture and the default continues for a
period of 60 days after written notice of such failure, requiring the Company
to remedy the same, shall have been given to the Company by the Trustee or to
the Company and 

 

29

 

the Trustee by the
Holders of at least 25% in aggregate principal amount of the Outstanding
Securities; or

 

(d)                                 (i)
the Company fails to make any payment by the end of the applicable grace
period, if any, after the maturity of any Indebtedness for borrowed money in an
amount in excess of $5,000,000 (provided that such failure shall not constitute
an Event of Default if (1) the Company determines, in good faith, that a lessor
under a lease described in clause (3)(a) of the definition of Indebtedness
breached a covenant under the lease and the Company has given notice of the
breach to the lessor and the Trustee and (2) as a result of the breach, the
Company withholds payment under the lease) (a “Default Exception”), or (ii)
there is an acceleration of any Indebtedness for borrowed money in an amount in
excess of $5,000,000 because of a default with respect to such Indebtedness
(other than a Default Exception) without such Indebtedness having been
discharged or such acceleration having been cured, waived, rescinded or
annulled, in the case of either (i) or (ii) above, for a period of 30 days
after written notice to the Company by the Trustee or to the Company and the
Trustee by Holders of at least 25% in aggregate principal amount of the
Outstanding Securities; or

 

(e)                                  the
entry by a court having jurisdiction in the premises of (i) a decree or order
for relief in respect of the Company in an involuntary case or proceeding under
any applicable U.S. federal or state bankruptcy, insolvency, reorganization or
other similar law or (ii) a decree or order adjudging the Company a bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company under
any applicable U.S. federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of the
Company or of any substantial part of its property, or ordering the winding up
or liquidation of its affairs, and the continuance of any such decree or order
for relief or any such other decree or order unstayed and in effect for a
period of 60 consecutive days; or

 

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

 

30

 

(g)                                 the
Pledge Agreement, as such agreement may be amended, restated or supplemented or
otherwise modified from time to time, shall cease to be in full force and
effect or enforceable in accordance with its terms, other than in accordance
with its terms.

 

Section 4.2.  Acceleration of Maturity; Rescission and
Annulment.  If an Event of Default
with respect to Outstanding Securities (other than an Event of Default
specified in Section 4.1(e) or 4.1(f) hereof) occurs and is continuing,
the Trustee or the Holders of at least 25% in aggregate principal amount of the
Outstanding Securities, by written notice to the Company, may declare due and
payable 100% of the principal amount of all Outstanding Securities plus any
accrued and unpaid interest to the date of payment.  Upon a declaration of acceleration, such principal and accrued
and unpaid interest to the date of payment shall be immediately due and
payable.

 

If an Event of Default
specified in Section 4.1(e) or 4.1(f) hereof occurs, all unpaid principal
and accrued and unpaid interest (including Liquidated Damages, if any) on the
Outstanding Securities shall become and be immediately due and payable, without
any declaration or other act on the part of the Trustee or any Holder.

 

Any payments by the
Company on the Securities following any such acceleration will be subject to
the subordination provisions of Article 13 to the extent provided therein.

 

The Holders of a majority
in aggregate principal amount of the Outstanding Securities by written notice
to the Trustee and the Company may rescind and annul an acceleration and waive
such defaults and their consequences if:

 

(a)                                  all
existing Events of Default, other than the nonpayment of principal of or
interest on the Securities which have become due solely because of the
acceleration, have been remedied, cured or waived,

 

(b)                                 the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction, and

 

(c)                                  the
principal of any Securities which has become due otherwise than by such
declaration of acceleration and any interest thereon at the rate or rates
prescribed therefor has been deposited with the Trustee;

 

provided, however, that
in the event such declaration of acceleration has been made based on the
existence of an Event of Default under Section 4.1(d) hereof and such
Event of Default has been remedied, cured or waived in accordance with
Section 4.1(d) hereof, then, without any further action by the Holders,
such declaration of acceleration shall be rescinded automatically and the
consequences of such declaration shall be annulled. No such rescission or
annulment shall affect any subsequent Default or impair any right consequent
thereon.

 

Section 4.3.  Other Remedies.  If an Event of Default with respect to
Outstanding Securities occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of or interest on the Securities or to enforce the performance of any
provision of the Securities.

 

31

 

The Trustee may maintain
a proceeding in which it may prosecute and enforce all rights of action and
claims under this Indenture or the Securities, even if it does not possess any
of the Securities or does not produce any of them in the proceeding.

 

Section 4.4.  Waiver of Past Defaults.  The Holders, either (a) through the written
consent of not less than a majority in aggregate principal amount of the
Outstanding Securities, or (b) by the adoption of a resolution, at a meeting of
Holders of the Outstanding Securities at which a quorum is present, by the
Holders of at least a majority in aggregate principal amount of the Outstanding
Securities represented at such meeting, may, on behalf of the Holders of all of
the Securities, waive an existing Default or Event of Default, except a Default
or Event of Default:

 

(a)                                  in
the payment of the principal of or premium, if any, or interest (including
Liquidated Damages, if any) on any Security (provided, however, that subject to
Section 4.7 hereof, the Holders of a majority in aggregate principal
amount of the Outstanding Securities may rescind an acceleration and its
consequences, including any related payment default that resulted from such
acceleration); or

 

(b)                                 in
respect of a covenant or provision hereof which, under Section 7.2 hereof,
cannot be modified or amended without the consent of the Holders of each
Outstanding Security affected.

 

Upon any such waiver,
such Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured, for every purpose of this Indenture;
provided, however, that no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.

 

Section 4.5.  Control by Majority.  The Holders of a majority in aggregate principal
amount of the Outstanding Securities (or such lesser amount as shall have acted
as a meeting pursuant to the provisions of this Indenture) shall have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee. However, the Trustee may refuse to follow any direction that:

 

(a)                                  conflicts
with any law or with this Indenture;

 

(b)                                 the
Trustee determines may be unduly prejudicial to the rights of the Holders not
joining therein, or

 

(c)                                  may
expose the Trustee to personal liability.

 

The Trustee may take any
other action deemed proper by the Trustee which is not inconsistent with such
direction.

 

Section 4.6.  Limitation on Suit.  No Holder of any Security shall have any
right to pursue any remedy with respect to this indenture or the Securities
(including, instituting any proceeding, judicial or otherwise, with respect to
this Indenture or for the appointment of a receiver or trustee) unless:

 

32

 

(a)                                  such
Holder has previously given written notice to the Trustee of an Event of
Default that is continuing;

 

(b)                                 the
Holders of at least 25% in aggregate principal amount of the Outstanding
Securities shall have made written request to the Trustee to pursue the remedy;

 

(c)                                  such
Holder or Holders have offered to the Trustee indemnity satisfactory to it
against any costs, expenses and liabilities incurred in complying with such
request;

 

(d)                                 the
Trustee has failed to comply with the request for 60 days after its receipt of
such notice, request and offer of indemnity; and

 

(e)                                  during
such 60-day period, no direction inconsistent with such written request has
been given to the Trustee by the Holders of a majority in aggregate principal
amount of the Outstanding Securities (or such amount as shall have acted at a
meeting pursuant to the provisions of this Indenture);

 

provided, however, that
no one or more of such Holders may use this Indenture to prejudice the rights
of another Holder or to obtain preference or priority over another Holder.

 

Section 4.7.  Unconditional Rights of Holders to
Receive Payment and to Convert. 
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of and premium, if any, and interest (including
Liquidated Damages, if any) on such Security on the Stated Maturity expressed
in such Security (or, in the case of redemption, on the Redemption Date, or in
the case of the exercise of a Repurchase Right, on the Repurchase Date) and to
convert such Security in accordance with Article 12, and to bring for the
enforcement of any such payment on or after such respective dates and right to
convert, and such rights shall not be impaired or affected without the consent
of such Holder.

 

Section 4.8.  Collection of Indebtedness and Suits for
Enforcement by the Trustee.  The
Company covenants that if:

 

(a)                                  a
Default or Event of Default is made in the payment of any interest (including
Liquidated Damages, if any) on any Security when such interest (including
Liquidated Damages, if any) becomes due and payable and such Default or Event
of Default continues for a period of 3 Business Days (in the case of any of the
first six interest payments on the Securities) or 30 days (in all other cases),
or

 

(b)                                 a
Default or Event of Default is made in the payment of the principal of or
premium, if any, on any Security at the Maturity thereof,

 

the Company will, upon
demand of the Trustee, pay to it, for the benefit of the Holders of such
Securities, the whole amount then due and payable (as expressed therein or as a
result of any acceleration effected pursuant to Section 4.2 hereof) on
such Securities for principal and premium, if any, and interest (including
Liquidated Damages, if any) and, to the extent that payment of such interest
shall be legally enforceable, interest on any overdue principal and

 

33

 

premium, if any, and on
any overdue interest (including Liquidated Damages, if any), calculated using
the rate of interest on the Security, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.

 

If the Company fails to
pay such amounts forthwith upon such demand, the Trustee, in its own name and
as trustee of an express trust, may institute a judicial proceeding for the
collection of the sums so due and unpaid, may prosecute such proceeding to
judgment or final decree and may enforce the same against the Company and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company, wherever situated.

 

If an Event of Default
occurs and is continuing, the Trustee may in its discretion proceed to protect
and enforce its rights and the rights of the Holders of Securities by such appropriate
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce any such rights, whether for the specific enforcement of any covenant
or agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.

 

Section 4.9.  Trustee May File Proofs of Claim.  In case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to the Company or the
property of the Company or its creditors, the Trustee (irrespective of whether
the principal of the Securities shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand on the Company for the payment of overdue principal
or interest (including Liquidated Damages, if any)) shall be entitled and
empowered, by intervention in such proceeding or otherwise,

 

(a)                                  to
file and prove a claim for the whole amount of principal and premium, if any,
and interest (including Liquidated Damages, if any) owing and unpaid in respect
of the Securities and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including
any claim for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel) and of the Holders of Securities
allowed in such judicial proceeding, and

 

(b)                                 to
collect and receive any moneys or other property payable or deliverable on any
such claim and to distribute the same;

 

and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceedings is hereby authorized by each Holder of Securities
to make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders of Securities,
to pay to the Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel and
any other amounts due the Trustee under Section 5.8.

 

Nothing contained herein
shall be deemed to authorize the Trustee to authorize or consent to or accept,
or adopt on behalf of any Holder of a Security, any plan of reorganization,
arrangement, adjustment or composition affecting the Securities or the rights
of any Holder

 

34

 

thereof or to authorize the Trustee to vote in respect
of the claim of any Holder of a Security in any such proceeding.

 

Section 4.10.  Restoration of Rights and Remedies.  If the Trustee or any Holder of a Security
has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then
and in every such case, subject to any determination in such proceeding, the
Company, the Trustee and the Holders of Securities shall be restored severally
and respectively to their former positions hereunder and thereafter all rights
and remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.

 

Section 4.11.  Rights and Remedies Cumulative.  Except as otherwise provided with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities
in the last paragraph of Section 2.12, no right or remedy conferred in
this Indenture upon or reserved to the Trustee or to the Holders of Securities
is intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.

 

Section 4.12.  Delay or Omission Not Waiver.  No delay or omission of the Trustee or of
any Holder of any Security to exercise any right or remedy accruing upon any
Event of Default shall impair any such right or remedy or constitute a waiver
of any such Event of Default or any acquiescence therein. Every right and remedy
given by this Article or by law to the Trustee or to the Holders of
Securities may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders of Securities, as the case may be.

 

Section 4.13.  Application of Money Collected.  Subject to Article 13, any money
collected by the Trustee pursuant to this Article shall be applied in the
following order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal or premium, if any, or
interest (including Liquidated Damages, if any), upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:

 

FIRST:
To the payment of all amounts due the Trustee;

 

SECOND:
To the payment of the amounts then due and unpaid for principal of and premium,
if any, and interest (including Liquidated Damages, if any) on the Securities
and coupons in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according to
the amounts due and payable on such Securities for principal and premium, if
any, and interest (including Liquidated Damages, if any), respectively; and

 

THIRD:
Any remaining amounts shall be repaid to the Company.

 

Section 4.14.  Undertaking for Costs.  All parties to this Indenture agree, and
each Holder of any Security by such Holder’s acceptance thereof shall be deemed
to have agreed, that any

 

35

 

court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the
costs of such suit, and that such court may in its discretion assess reasonable
costs, including reasonable attorneys’ fees, against any party litigant in such
suit, having due regard to the merits and good faith of the claims or defenses
made by such party litigant; but the provisions of this Section shall not
apply to any suit instituted by the Company, to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in aggregate principal amount of the Outstanding
Securities, or to any suit instituted by any Holder of any Security for the
enforcement of the payment of the principal of or premium, if any, or interest
(including Liquidated Damages, if any) on any Security on or after the Stated
Maturity expressed in such Security (or, in the case of redemption or exercise
of a Repurchase Right, on or after the Redemption Date) or for the enforcement
of the right to convert any Security in accordance with Article 12.

 

Section 4.15.  Waiver of Stay or Extension Laws.  The Company covenants (to the extent that it
may lawfully do so) that it will not at any time insist upon, or plead, or in
any manner whatsoever claim to take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this Indenture; and the Company
(to the extent that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.

 

ARTICLE V

 

THE TRUSTEE

 

Section 5.1.  Certain Duties and Responsibilities.  (a) Except during the continuance of an
Event of Default,

 

(i)                                     The
Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture or the TIA, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and

 

(ii)                                  In
the absence of bad faith on its part, the Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture; provided, however, that in the case of
any such certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee shall examine
the certificates or opinions to determine whether or not, on their face, they
conform to the requirements to this Indenture (but need not investigate or
confirm the accuracy of any facts stated therein).

 

(b)                                 In
case an Event of Default actually known to a Responsible Officer of the Trustee
has occurred and is continuing, the Trustee shall exercise such of the rights
and powers vested in it by this Indenture, and use the same degree of care and
skill in their exercise, as a

 

36

 

prudent person would exercise or use under the
circumstances in the conduct of such person’s own affairs.

 

(c)                                  No
provision of this Indenture shall be construed to relieve the Trustee from
liability for its own negligent action, its own negligent failure to act, or
its own willful misconduct, except that:

 

(i)                                     This
paragraph (c) shall not be construed to limit the effect of
paragraph (a) of this Section 5.1;

 

(ii)                                  The
Trustee shall not be liable for any error of judgment made in good faith by a
Responsible Officer, unless it shall be proved that the Trustee was negligent
in ascertaining the pertinent facts; and

 

(iii)                               The
Trustee shall not be liable with respect to any action taken or omitted to be
taken by it in good faith in accordance with a direction received by it of the
Holders of a majority in principal amount of the Outstanding Securities (or
such lesser amount as shall have acted at a meeting pursuant to the provisions
of this Indenture) relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Indenture.

 

(d)                                 Whether
or not herein expressly so provided, every provision of this Indenture relating
to the conduct or affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this Section 5.1.

 

(e)                                  No
provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers. The Trustee may
refuse to perform any duty or exercise any right or power unless it receives
indemnity reasonably satisfactory to it against any loss, liability, cost or
expense (including, without limitation, reasonable fees of counsel).

 

(f)                                    The
Trustee shall not be obligated to pay interest on any money or other assets
received by it unless otherwise agreed in writing with the Company. Assets held
in trust by the Trustee need not be segregated from other funds except to the
extent required by law.

 

(g)                                 The
Trustee shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note, coupon,
other evidence of indebtedness or other paper or document, but the Trustee, in
its discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney.

 

(h)                                 The
Trustee shall not be deemed to have notice or actual knowledge of any Event of
Default or a Registration Default (as such term is defined in Section 3(a)
of the Registration Rights Agreement) or the obligation of the Company to pay
Liquidated Damages unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any

 

37

 

event which is in fact a Default is received by the
Trustee pursuant to Section 15.2 hereof, and such notice references the
Securities and this Indenture.

 

(i)                                     The
rights, privileges, protections, immunities and benefits given to the Trustee
hereunder, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder and under the Pledge Agreement and as the Pledged Securities
Intermediary under the Pledge Agreement, and each Paying Agent, authenticating
agent, Conversion Agent or Registrar acting hereunder.

 

Section 5.2.  Certain Rights of Trustee.  Subject to the provisions of
Section 5.1 hereof and subject to Section 315(a) through (d) of the
TIA in relation to matters arising hereunder or under the Pledge Agreement:

 

(a)                                  The
Trustee may rely on any document reasonably believed by it to be genuine and to
have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.

 

(b)                                 Before
the Trustee acts or refrains from acting, it may require an Officers’
Certificate or an Opinion of Counsel, or both. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on the
Officers’ Certificate or Opinion of Counsel.

 

(c)                                  The
Trustee may act through attorneys and agents and shall not be responsible for
the misconduct or negligence of any attorney or agent appointed with due care.

 

(d)                                 The
Trustee shall not be liable for any action taken or omitted to be taken by it
in good faith which it believed to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture, unless the Trustee’s
conduct constitutes negligence.

 

(e)                                  The
Trustee may consult with counsel of its selection and the written advice of
such counsel as to matters of law shall be full and complete authorization and
protection in respect of any action taken, omitted or suffered by it hereunder
in good faith and in accordance with the advice or opinion of such counsel;
provided, however, that the provisions shall not protect the Trustee from
liability for its own negligence or willful misconduct.

 

(f)                                    Unless
otherwise specifically provided in this Indenture, any demand, request,
direction or notice from the Company shall be sufficient if signed by an
Officer of the Company.

 

(g)                                 The
permissive rights of the Trustee to do things enumerated in this Indenture
shall not be construed as a duty unless so specified herein.

 

Section 5.3.  Individual Rights of Trustee.  The Trustee in its individual or any other
capacity may become the owner or pledgee of Securities and may otherwise deal
with the Company or any Affiliate of the Company with the same rights it would
have if it were not

 

38

 

Trustee. However, in the event that the Trustee acquires
any conflicting interest (as such term is defined in Section 310(b) of the
TIA), it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee (to the extent permitted under
Section 310(b) of the TIA) or resign. Any agent may do the same with like
rights and duties. The Trustee is also subject to Sections 5.11 and 5.12
hereof.

 

Subject to the
limitations imposed by the Trustee Indenture Act, nothing in this Indenture
shall prohibit the Trustee from becoming and acting as trustee under other
indentures under which other securities, or certificates of interest of
participation in other securities, of the Company are outstanding in the same
manner as if it were not Trustee hereunder.

 

Section 5.4.  Money Held in Trust.  Money held by the Trustee in trust hereunder
need not be segregated from other funds except to the extent required by law.
The Trustee shall be under no liability for interest on any money received by
it hereunder except as otherwise expressly agreed with the Company.

 

Section 5.5.  Trustee’s Disclaimer.  The recitals contained herein and in the
Securities (except for those in the certificate of authentication) shall be
taken as the statements of the Company, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity, sufficiency or priority of this Indenture or of the
Securities.  The Trustee shall not be
accountable for the use or application by the Company of Securities or the
proceeds thereof.

 

Section 5.6.  Notice of Defaults.  Within 90 days after the occurrence of any
Default or Event of Default hereunder of which the Trustee has received written
notice, the Trustee shall give notice to Holders pursuant to Section 15.2
hereof, unless such Default or Event of Default shall have been cured or
waived; provided, however, that, except in the case of a Default or Event of
Default in the payment of the principal of or premium, if any, or interest
(including Liquidated Damages, if any), or in the payment of any redemption or
repurchase obligation on any Security, the Trustee shall be protected in
withholding such notice if and so long as Responsible Officers of the Trustee
in good faith determine that the withholding of such notice is in the interest
of the Holders.

 

Section 5.7.  Reports by Trustee to Holders.  The Trustee shall transmit to Holders such
reports concerning the Trustee and its actions under this Indenture as may be
required by Section 313 of the TIA at the times and in the manner provided
by the TIA.

 

A copy of each report at
the time of its mailing to Holders shall be filed with the SEC, if required,
and each stock exchange, if any, on which the Securities are listed.  The Company shall promptly notify the Trustee
when the Securities become listed on any stock exchange.

 

Section 5.8.  Compensation and Indemnification.  The Company covenants and agrees to pay to
the Trustee from time to time, and the Trustee shall be entitled to, reasonable
compensation (which shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust) and the Company covenants
and agrees to pay or reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by or on behalf of it in
accordance with any of the provisions of this Indenture (including

 

39

 

the reasonable compensation and the expenses and
disbursements of its counsel and of all agents and other persons not regularly
in its employ), except to the extent that any such expense, disbursement or
advance is due to its negligence or bad faith. 
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 4.1 hereof, the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any bankruptcy law. 
The Company also covenants to indemnify the Trustee and its officers,
directors, employees and agents for, and to hold such Persons harmless against,
any loss, liability or expense incurred by them, arising out of or in
connection with the acceptance or administration of this Indenture or the
trusts hereunder or the performance of their duties hereunder, including the
costs and expenses of defending themselves against or investigating any claim
of liability in the premises, except to the extent that any such loss,
liability or expense was due to the negligence or willful misconduct of such
Persons.  The obligations of the Company
under this Section 5.8 to compensate and indemnify the Trustee and its
officers, directors, employees and agents and to pay or reimburse such Persons
for expenses, disbursements and advances shall constitute additional
indebtedness hereunder and shall survive the satisfaction and discharge of this
Indenture or the earlier resignation or removal of the Trustee.  Such additional indebtedness shall be a
senior claim to that of the Securities upon all property and funds held or
collected by the Trustee as such, except funds held in trust for the benefit of
the Holders of particular Securities, and the Securities are hereby
subordinated to such senior claim. 
“Trustee” for purposes of this Section 5.8 shall include any
predecessor Trustee, but the negligence or willful misconduct of any Trustee
shall not affect the indemnification of any other Trustee.

 

Section 5.9.  Replacement of Trustee.  A resignation or removal of the Trustee and
appointment of a successor Trustee shall become effective only upon the
successor Trustee’s acceptance of appointment as provided in this
Section 5.9.

 

The Trustee may resign
and be discharged from the trust hereby created by so notifying the Company in
writing.  The Holders of at least a
majority in aggregate principal amount of Outstanding Securities may remove the
Trustee by so notifying the Trustee and the Company in writing.  The Company must remove the Trustee if:

 

(a)                                  the
Trustee fails to comply with Section 5.11 hereof or Section 310 of
the TIA;

 

(b)                                 the
Trustee becomes incapable of acting;

 

(c)                                  the
Trustee is adjudged a bankrupt or an insolvent or an order for relief is
entered with respect to the Trustee under any Bankruptcy Law; or

 

(d)                                 a
Custodian or public officer takes charge of the Trustee or its property.

 

If the Trustee resigns or
is removed or if a vacancy exists in the office of the Trustee for any reason,
the Company shall promptly appoint a successor Trustee.  The Trustee shall be entitled to payment of
its fees and reimbursement of its expenses while acting as Trustee.  Within one year after the successor Trustee
takes office, the Holders of at least a majority in aggregate

 

40

 

principal amount of Outstanding Securities may appoint
a successor Trustee to replace the successor Trustee appointed by the Company.

 

In the event the Trustee
fails to comply with Section 5.11 hereof, (a) the Company may remove the
Trustee or (b) any Holder may, on behalf of himself or herself and all others
similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.

 

If an instrument of
acceptance by a successor Trustee shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation or removal, the
resigning or removed Trustee, as the case may be, may petition, at the expense
of the Company, any court of competent jurisdiction for the appointment of a
successor Trustee.

 

A successor Trustee shall
deliver a written acceptance of its appointment to the retiring Trustee and to
the Company.  Thereupon the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture.  The Company shall mail a
notice of the successor Trustee’s succession to the Holders.  The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee.  Notwithstanding replacement of the Trustee
pursuant to this Section 5.9, the Company’s obligations under
Section 5.8 hereof shall continue for the benefit of the retiring Trustee
with respect to expenses, losses and liabilities incurred by it prior to such
replacement.

 

Section 5.10.  Successor Trustee by Merger, Etc.  Subject to Section 5.11 hereof, if the
Trustee consolidates with, merges or converts into, or transfers or sells all
or substantially all of its corporate trust business to, another corporation or
national banking association, the successor entity without any further act
shall be the successor Trustee as to the Securities.

 

Section 5.11.  Corporate Trustee Required; Eligibility.  The Trustee shall at all times satisfy the
requirements of Section 310(a)(1), (2) and (5) of the TIA.  The Trustee shall at all times have (or, in
the case of a corporation included in a bank holding company system, the
related bank holding company shall at all times have), a combined capital and
surplus of at least $100 million as set forth in its (or its related bank
holding company’s) most recent published annual report of condition.  The Trustee is subject to
Section 310(b) of the TIA.

 

Section 5.12.  Collection of Claims Against the Company.  The Trustee is subject to
Section 311(a) of the TIA, excluding any creditor relationship listed in
Section 311(b) of the TIA.  A
Trustee who has resigned or been removed shall be subject to
Section 311(a) of the TIA to the extent indicated therein.

 

ARTICLE VI

 

CONSOLIDATION, MERGER,
CONVEYANCE, TRANSFER OR LEASE

 

Section 6.1.  Company May Consolidate, Etc., Only
on Certain Terms.  The Company shall
not consolidate with or merge into any other Person or convey, transfer or
lease all or substantially all of its properties and assets to any Person,
unless:

 

41

 

(a)                                  it
is the continuing corporation or the Person formed by such consolidation or
into which the Company is merged or the Person which acquires by conveyance or
transfer, or which leases, all or substantially all of the properties and
assets of the Company is a corporation organized and validly existing under the
laws of the United States of America, any State thereof or the District of
Columbia and expressly assumes, (1) by an indenture supplemental hereto,
executed and delivered to the Trustee, in form reasonably satisfactory to the
Trustee, the due and punctual payment of the principal of and premium, if any
and interest (including Liquidated Damages, if any), on all the Securities and
the performance of every covenant of this Indenture on the part of the Company
to be performed or observed, which supplemental indenture shall provide for
conversion rights in accordance with Section 12.11 hereof, and (2) by an amendment
to the Pledge Agreement, executed and delivered to the Trustee and the Pledged
Securities Intermediary, in form reasonably satisfactory to each of them, the
performance of every covenant of the Pledge Agreement on the part of the
Company to be performed or observed;

 

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

 

(c)                                  the
Company shall have delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel, each stating that such consolidation, merger, conveyance,
transfer or lease and, if a supplemental indenture is required in connection
with such transaction, such supplemental indenture comply with this
Article and that all conditions precedent herein provided for relating to
such transaction have been complied with.

 

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

 

ARTICLE VII

 

AMENDMENTS, SUPPLEMENTS AND WAIVERS

 

Section 7.1.  Without Consent of Holders of Securities.  Without the consent of any Holders of
Securities, the Company, when authorized by a Board Resolution, and the
Trustee, at any time and from time to time, may amend this Indenture and the
Securities to:

 

(a)                                  add
to the covenants of the Company for the benefit of the Holders of Securities;

 

42

 

(b)                                 surrender
any right or power herein conferred upon the Company;

 

(c)                                  make
provision with respect to the conversion rights of Holders of Securities
pursuant to Section 12.11 hereof;

 

(d)                                 provide
for the assumption of the Company’s obligations to the Holders of Securities in
the case of a merger, consolidation, conveyance, transfer or lease pursuant to
Article 6 hereof;

 

(e)                                  reduce
the Conversion Price; provided, that such reduction in the Conversion Price
shall not adversely affect the interest of the Holders of Securities (after
taking into account tax and other consequences of such reduction) in any
material respect; provided further that the Company may not voluntarily
reduce the Conversion Price if such reduction shall result in the issuance,
upon exchange of all Securities, of a number of shares of Common Stock in
excess of the thresholds requiring stockholder approval under the rules of the
Nasdaq National Market or such other United States securities exchange on which
the Common Stock is traded, unless the Company shall have, prior to such
reduction in the Conversion Price, obtained any such required stockholder
approval;

 

(f)                                    comply
with the requirements of the SEC in order to effect or maintain the
qualification of this Indenture under the TIA;

 

(g)                                 make
any changes or modifications to this Indenture necessary in connection with the
registration of any Securities under the Securities Act as contemplated in the
Registration Rights Agreement, provided, that such action pursuant to this
clause (g) does not adversely affect the interests of the Holders of
Securities in any material respect;

 

(h)                                 establish
the forms or terms of Securities of any series as permitted by
Section 2.01;

 

(i)                                     cure
any ambiguity, to correct or supplement any provision herein which may be
inconsistent with any other provision herein or which is otherwise defective,
or to make any other provisions with respect to matters or questions arising
under this Indenture which the Company and the Trustee may deem necessary or
desirable and which shall not be inconsistent with the provisions of this
Indenture, provided, that such action pursuant to this clause (i) does not
adversely affect the interests of the Holders of Securities in any material
respect;

 

(j)                                     add
or modify any other provisions with respect to matters or questions arising
under this Indenture which the Company and the Trustee may deem necessary or
desirable and which shall not be inconsistent with the provisions of this
Indenture, provided that such action pursuant to this clause (j) does not
adversely affect the interests of the Holders of Securities in any material
respect;

 

43

 

(k)                                  make
provision for the establishment of a book-entry system, in which Holders would
have the option to participate, for the clearance and settlement of
transactions in Securities originally issued in definitive form;

 

(l)                                     provide
for uncertificated notes in addition to or in place of certificated notes; or

 

(m)                               modify
the provisions of the Indenture relating to the Pledge Agreement or any
transactions contemplated thereby, provided that such action pursuant to this
clause (m) does not adversely affect the interests of the Holders of
Securities in any material respect.

 

Section 7.2.  With Consent of Holders of Securities.  Except as provided below in this
Section 7.2, this Indenture or the Securities may be amended or
supplemented, and noncompliance in any particular instance with any provision
of this Indenture or the Securities may be waived, in each case (i) with the
written consent of the Holders of at least a majority in aggregate principal
amount of the Outstanding Securities or (ii) by the adoption of a resolution,
at a meeting of Holders of the Outstanding Securities at which a quorum is
present, by the Holders of a majority in aggregate principal amount of the
Outstanding Securities represented at such meeting.

 

Without the written
consent or the affirmative vote of each Holder of Securities, an amendment or
waiver under this Section 7.2 may not:

 

(a)                                  change
the Stated Maturity of the principal of, or any installment of interest
(including Liquidated Damages, if any) on, any Security;

 

(b)                                 reduce
the principal amount of, or premium, if any, on any Security;

 

(c)                                  reduce
the rate of interest (including Liquidated Damages, if any) on any Security;

 

(d)                                 change
the currency of payment of principal of, premium, if any, or interest
(including Liquidated Damages, if any) on any Security;

 

(e)                                  impair
the right of any Holder to institute suit for the enforcement of any payment in
or with respect to any Security;

 

(f)                                    modify
the obligation of the Company to maintain an office or agency in The City of
New York pursuant to Section 9.2 hereof;

 

(g)                                 except
as permitted by Section 12.11 hereof, adversely affect the Repurchase
Right or the right to convert any Security as provided in Article 12
hereof;

 

(h)                                 modify
the subordination provisions of the Securities in a manner adverse to the
Holders of Securities;

 

44

 

(i)                                     modify
any of the provisions of this Section, Section 4.4 or Section 15.11,
except to increase any percentage contained herein or therein or to provide
that certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby;

 

(j)                                     reduce
the requirements of Section 8.4 hereof for quorum or voting, or reduce the
percentage in aggregate principal amount of the Outstanding Securities the
consent of whose Holders is required for any such supplemental indenture or the
consent of whose Holders is required for any waiver provided for in this
Indenture; or

 

(k)                                  impair
the right of any Holder to receive payment of interest on the first six
scheduled Interest Payment Dates from the portfolio of pledged U.S. treasury
securities as set forth in the Pledge Agreement.

 

It shall not be necessary
for any Act of Holders of Securities under this Section to approve the
particular form of any proposal supplemental indenture, but it shall be
sufficient if such Act shall approve the substance thereof.

 

Section 7.3.  Compliance with Trust Indenture Act.  Every amendment to this Indenture or the
Securities shall be set forth in a supplemental indenture that complies with
the TIA as then in effect.

 

Section 7.4.  Revocation of Consents and Effect of
Consents or Votes.  Until an
amendment, supplement or waiver becomes effective, a written consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of a
Security or portion of a Security that evidences the same debt as the
consenting Holder’s Security, even if notation of the consent is not made on
any Security; provided, however, that unless a record date shall have been
established, any such Holder or subsequent Holder may revoke the consent as to
its Security or portion of a Security if the Trustee receives written notice of
revocation before the date the amendment, supplement or waiver becomes
effective.

 

An amendment, supplement
or waiver becomes effective on receipt by the Trustee of written consents from
or affirmative votes by, as the case may be, the Holders of the requisite
percentage of aggregate principal amount of the Outstanding Securities, and
thereafter shall bind every Holder of Securities; provided, however, if the
amendment, supplement or waiver makes a change described in any of the clauses
(a) through (k) of Section 7.2 hereof, the amendment, supplement or waiver
shall bind only each Holder of a Security which has consented to it or voted
for it, as the case may be, and every subsequent Holder of a Security or
portion of a Security that evidences the same indebtedness as the Security of
the consenting or affirmatively voting, as the case may be, Holder.

 

Section 7.5.  Notation on or Exchange of Securities.  If an amendment, supplement or waiver
changes the terms of a Security:

 

(a)                                  the
Trustee may require the Holder of a Security to deliver such Securities to the
Trustee, the Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder and the Trustee may place an
appropriate notation on any Security of any series thereafter authenticated for
such series; or

 

45

 

(b)                                 if
the Company or the Trustee so determines, the Company in exchange for the
Security shall issue and the Trustee shall authenticate a new Security that reflects
the changed terms.

 

Failure to make the
appropriate notation or issue a new Security shall not affect the validity and
effect of such amendment, supplement or waiver.

 

Section 7.6.  Trustee to Sign Amendment, Etc.  The Trustee shall sign any amendment
authorized pursuant to this Article 7 if the amendment does not adversely
affect the rights, duties, liabilities or immunities of the Trustee in any
material respects.  If the amendment
does adversely affect the rights, duties, liabilities or immunities of the
Trustee, the Trustee may but need not sign it. 
In signing or refusing to sign such amendment, the Trustee shall be
entitled to receive and shall be fully protected in relying upon an Officers’
Certificate and an Opinion of Counsel as conclusive evidence that such
amendment is authorized or permitted by this Indenture.

 

ARTICLE VIII

 

MEETING OF HOLDERS OF SECURITIES

 

Section 8.1.  Purposes for Which Meetings May Be
Called.  A meeting of Holders of
Securities may be called at any time and from time to time pursuant to this
Article to make, give or take any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture
to be made, given or taken by Holders of Securities.

 

Section 8.2.  Call Notice and Place of Meetings.  (a) The Trustee may at any time call a
meeting of Holders of Securities for any purpose specified in Section 8.1
hereof, to be held at such time and at such place in The City of New York.  Notice of every meeting of Holders of
Securities, setting forth the time and the place of such meeting and in general
terms the action proposed to be taken at such meeting, shall be given, in the
manner provided in Section 15.2 hereof, not less than 21 nor more than 180
days prior to the date fixed for the meeting.

 

(b)                                 In
case at any time the Company, pursuant to a Board Resolution, or the Holders of
at least 10% in principal amount of the Outstanding Securities shall have
requested the Trustee to call a meeting of the Holders of Securities for any
purpose specified in Section 8.1 hereof, by written request setting forth
in reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have made the first publication of the notice of such meeting
within 21 days after receipt of such request or shall not thereafter proceed to
cause the meeting to be held as provided herein, then the Company or the
Holders of Securities in the amount specified, as the case may be, may
determine the time and the place in The City of New York for such meeting and
may call such meeting for such purposes by giving notice thereof as provided in
paragraph (a) of this Section.

 

Section 8.3.  Persons Entitled to Vote at Meetings.  To be entitled to vote at any meeting of
Holders of Securities, a Person shall be (a) a Holder of one or more
Outstanding Securities, or (b) a Person appointed by an instrument in writing
as proxy for a Holder or Holders of one or more Outstanding Securities by such
Holder or Holders.  The only Persons who
shall be entitled

 

46

 

to be present or to speak at any meeting of Holders
shall be the Persons entitled to vote at such meeting and their counsel, any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.

 

Section 8.4.  Quorum; Action.  The Persons entitled to vote a majority in
principal amount of the Outstanding Securities shall constitute a quorum.  In the absence of a quorum within 30 minutes
of the time appointed for any such meeting, the meeting shall, if convened at
the request of Holders of Securities, be dissolved.  In any other case, the meeting may be adjourned for a period of
not less than 10 days as determined by the chairman of the meeting prior to the
adjournment of such meeting.  In the
absence of a quorum at any such adjourned meeting, such adjourned meeting may
be further adjourned for a period of not less than 10 days as determined by the
chairman of the meeting prior to the adjournment of such adjourned
meeting.  Notice of the reconvening of
any adjourned meeting shall be given as provided in Section 8.2(a) hereof,
except that such notice need be given only once and not less than five days
prior to the date on which the meeting is scheduled to be reconvened.  Notice of the reconvening of an adjourned
meeting shall state expressly the percentage of the principal amount of the
Outstanding Securities which shall constitute a quorum.

 

Subject to the foregoing,
at the reconvening of any meeting adjourned for a lack of a quorum, the Persons
entitled to vote 25% in principal amount of the Outstanding Securities at the
time shall constitute a quorum for the taking of any action set forth in the
notice of the original meeting.

 

At a meeting or an
adjourned meeting duly reconvened and at which a quorum is present as
aforesaid, any resolution and all matters (except as limited by the proviso to
Section 7.2 hereof) shall be effectively passed and decided if passed or
decided by the Persons entitled to vote not less than a majority in principal
amount of Outstanding Securities represented and voting at such meeting.

 

Any resolution passed or
decisions taken at any meeting of Holders of Securities duly held in accordance
with this Section shall be binding on all the Holders of Securities,
whether or not present or represented at the meeting.

 

Section 8.5.  Determination of Voting Rights; Conduct
and Adjournment of Meetings.

 

(a)                                  Notwithstanding
any other provisions of this Indenture, the Trustee may make such reasonable
regulations as it may deem advisable for any meeting of Holders of Securities
in regard to proof of the holding of Securities and of the appointment of
proxies and in regard to the appointment and duties of inspectors of votes, the
submission and examination of proxies, certificates and other evidence of the
right to vote, and such other matters concerning the conduct of the meeting as
it shall deem appropriate.  Except as
otherwise permitted or required by any such regulations, the holding of
Securities shall be proved in the manner specified in Section 2.2 hereof
and the appointment of any proxy shall be proved in the manner specified in
Section 2.2 hereof.  Such
regulations may provide that written instruments appointing proxies, regular on
their face, may be presumed valid and genuine without the proof specified in
Section 2.2 hereof or other proof.

 

47

 

(b)                                 The
Trustee shall, by an instrument in writing, appoint a temporary chairman (which
may be the Trustee) of the meeting, unless the meeting shall have been called
by the Company or by Holders of Securities as provided in Section 8.2(b)
hereof, in which case the Company or the Holders of Securities calling the
meeting, as the case may be, shall in like manner appoint a temporary
chairman.  A permanent chairman and a
permanent secretary of the meeting shall be elected by vote of the Persons
entitled to vote a majority in principal amount of the Outstanding Securities
represented at the meeting.

 

(c)                                  At
any meeting each Holder of a Security or proxy shall be entitled to one vote
for each $1,000 principal amount of Securities held or represented by him;
provided, however, that no vote shall be cast or counted at any meeting in
respect of any Security challenged as not Outstanding and ruled by the chairman
of the meeting to be not Outstanding. 
The chairman of the meeting shall have no right to vote, except as a
Holder of a Security or proxy.

 

(d)                                 Any
meeting of Holders of Securities duly called pursuant to Section 8.2
hereof at which a quorum is present may be adjourned from time to time by
Persons entitled to vote a majority in principal amount of the Outstanding
Securities represented at the meeting, and the meeting may be held as so
adjourned without further notice.

 

Section 8.6.  Counting Votes and Recording Action of
Meetings.  The vote upon any
resolution submitted to any meeting of Holders of Securities shall be by
written ballots on which shall be subscribed the signatures of the Holders of
Securities or of their representatives by proxy and the principal amounts and
serial numbers of the Outstanding Securities held or represented by them.  The permanent chairman of the meeting shall
appoint two inspectors of votes who shall count all votes cast at the meeting
for or against any resolution and who shall make and file with the secretary of
the meeting their verified written reports in duplicate of all votes cast at
the meeting.  A record, at least in
duplicate, of the proceedings of each meeting of Holders of Securities shall be
prepared by the secretary of the meeting and there shall be attached to said
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more Persons having knowledge of the
facts setting forth a copy of the notice of the meeting and showing that said
notice was given as provided in Section 8.2 hereof and, if applicable,
Section 8.4 hereof.  Each copy
shall be signed and verified by the affidavits of the permanent chairman and
secretary of the meeting and one such copy shall be delivered to the Company
and another to the Trustee to be preserved by the Trustee, the latter to have
attached thereto the ballots voted at the meeting.  Any record so signed and verified shall be conclusive evidence of
the matters therein stated.

 

ARTICLE IX

 

COVENANTS

 

Section 9.1.  Payment of Principal, Premium and
Interest.  The Company will duly and
punctually pay the principal of and premium, if any, and interest (including
Liquidated Damages, if any) in respect of the Securities in accordance with the
terms of the Securities and this Indenture. 
The Company will deposit or cause to be deposited with the Trustee as
directed by the Trustee, no later than the day of the Stated Maturity of any
Security or installment of interest (including Liquidated Damages, if any), all
payments so due.

 

48

 

Section 9.2.  Maintenance of Offices or Agencies.  The Company hereby appoints the Trustee’s
Corporate Trust Office as its office in The City of New York, where Securities
may be:

 

(a)                                  presented
or surrendered for payment;

 

(b)                                 surrendered
for registration of transfer or exchange;

 

(c)                                  surrendered
for conversion;

 

and where notices and
demands to or upon the Company in respect of the Securities and this Indenture
maybe served.

 

The Company may at any
time and from time to time vary or terminate the appointment of any such office
or appoint any additional offices for any or all of such purposes; provided,
however, that until all of the Securities have been delivered to the Trustee
for cancellation, or moneys sufficient to pay the principal of and premium, if
any, and interest (including Liquidated Damages, if any) on the Securities have
been made available for payment and either paid or returned to the Company
pursuant to the provisions of Section 3.3 hereof, the Company will
maintain in The City of New York, an office or agency where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer or exchange, where Securities may be surrendered for
conversion and where notices and demands to or upon the Company in respect of
the Securities and this Indenture may be served.  The Company will give prompt written notice to the Trustee, and
notice to the Holders in accordance with Section 15.2 hereof, of the
appointment or termination of any such agents and of the location and any
change in the location of any such office or agency.

 

If at any time the
Company shall fail to maintain any such required office or agency in The City
of New York, or shall fail to furnish the Trustee with the address thereof,
presentations and surrenders may be made at, and notices and demands may be
served on, the Corporate Trust Office of the Trustee.

 

Section 9.3.  Corporate Existence.  Subject to Article 6 hereof, the
Company will do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, rights (charter and
statutory) and franchises; provided, however, that the Company shall not be
required to preserve any such right or franchise if the Company determines that
the preservation thereof is no longer desirable in the conduct of the business
of the Company and that the loss thereof is not disadvantageous in any material
respect to the Holders.

 

Section 9.4.  Maintenance of Properties.  The Company will maintain and keep its
properties and every part thereof in such repair, working order and condition,
and make or cause to be made all such needful and proper repairs, renewals and
replacements thereto, as in the judgment of the Company are necessary in the
interests of the Company; provided, however, that nothing contained in this
Section shall prevent the Company from selling, abandoning or otherwise
disposing of any of its properties or discontinuing a part of its business from
time to time if, in the judgment of the Company, such sale, abandonment,
disposition or discontinuance is advisable and does not materially adversely
affect the interests or business of the Company.

 

49

 

Section 9.5.  Payment of Taxes and Other Claims.  The Company will, and will cause any
Significant Subsidiary to, promptly pay and discharge or cause to be paid and
discharged all material taxes, assessments and governmental charges or levies
lawfully imposed upon it or upon its income or profits or upon any of its
property, real or personal, or upon any part thereof, as well as all material
claims for labor, materials and supplies which, if unpaid, might by law become
a lien or charge upon its property; provided, however, that neither the Company
nor any Significant Subsidiary shall be required to pay or discharge or cause
to be paid or discharged any such tax, assessment, charge, levy, or claim if
the amount, applicability or validity thereof shall currently be contested in
good faith by appropriate proceedings and if the Company or such Significant
Subsidiary, as the case may be, shall have set aside on its books reserves
deemed by it adequate with respect thereto.

 

Section 9.6.  Reports.  The Company shall deliver to the Trustee within 15 days after it
files them with the SEC copies of the annual reports and of the information,
documents, and other reports (or copies of such portions of any of the
foregoing as the SEC may by rules and regulations prescribe) which the Company
is required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act; provided, however, the Company shall not be required to deliver
to the Trustee any materials for which the Company has sought and received
confidential treatment by the SEC.  The
Company also shall comply with the other provisions of Section 314(a) of
the TIA.

 

Section 9.7.  Compliance Certificate.  The Company shall deliver to the Trustee,
within 120 days after the end of each fiscal year of the Company, an Officers’
Certificate stating that in the course of the performance by the signers of
their duties as Officers of the Company, they would normally have knowledge of
any failure by the Company to comply with all conditions, or Default by the
Company with respect to any covenants, under this Indenture, and further
stating whether or not they have knowledge of any such failure or default and,
if so, specifying each such failure or Default and the nature thereof.  In the event an Officer of the Company comes
to have actual knowledge of a Default, regardless of the date, the Company
shall deliver an Officers’ Certificate to the Trustee specifying such Default
and the nature and status thereof.

 

Section 9.8.  Resale of Certain Securities.  During the period of two years after the
last date of original issuance of any Securities, the Company shall not, and
shall not permit any of its “affiliates” (as defined under Rule 144 under
the Securities Act) to, resell any Securities, or shares of Common Stock
issuable upon conversion of the Securities, which constitute “restricted
securities” under Rule 144, that are acquired by any of them within the
United States or to “U.S. persons” (as defined in Regulation S) except pursuant
to an effective registration statement under the Securities Act or an
applicable exemption therefrom.  The
Trustee shall have no responsibility or liability in respect of the Company’s
performance of its agreement in the preceding sentence.

 

Section 9.9.  June 2010 Notes.  In the event that the Company exercises any
of its rights, in its sole discretion, under Section 3.1,
Section 7.1, Section 10.1, Section 10.2, Section 11.1 and
Section 12.4(h) of the June 2003 Indenture, the Company shall treat
the Holders of the Securities equally with the Holders (as defined in the
June 2003 Indenture) of the June 2010 Notes in all material respects
as if the Securities were issued under the June 2003 Indenture to the
extent permissible under applicable law and the terms of the Indenture and the
June 2003 Indenture.

 

50

 

ARTICLE X

 

REDEMPTION OF SECURITIES

 

Section 10.1.  Provisional Redemption.  Any time prior to June 30, 2006, the
Company may, at its option, redeem the Securities in whole or in part on any
date from time to time, upon notice as set forth in Section 10.5, at a
Redemption Price, payable in cash, equal to $1,000 per $1,000 principal amount
of the Securities redeemed (such amount, together with the Make-Whole Payment
described below, the “Provisional Redemption Price”), on the date of redemption
(the “Provisional Redemption Date”) if (i) the Closing Price of the Common
Stock has exceeded 150% of the Conversion Price (as defined in Article 12
and as such may be adjusted from time to time) then in effect for at least 20
Trading Days in any consecutive 30-Trading Day period ending on the Trading Day
prior to the date of mailing of the provisional notice of redemption pursuant
to Section 10.5 (the “Notice Date”), and (ii) either (a) a registration
statement covering resales of the Securities and the Common Stock issuable upon
conversion thereof is effective and available for use and is expected to remain
effective for the 30 days following the Provisional Redemption Date (such
redemption, a “Provisional Redemption”) or (b) the Securities and the Common
Stock issuable upon conversion thereof are no longer Transfer Restricted
Securities (as defined in the Registration Rights Agreement).

 

Upon any such Provisional
Redemption, the Company shall make an additional payment (the “Make-Whole
Payment”) with respect to the Securities called for redemption to Holders on
the Notice Date in an amount equal to $90 per $1,000 principal amount of the
Securities, less the amount of any interest actually paid on such Securities
prior to the Provisional Redemption Date. The Company shall calculate the
amount of the Make-Whole Payment and make such Make-Whole Payment on all
Securities called for Provisional Redemption, including those Securities
converted into Common Stock between the Notice Date and the Provisional
Redemption Date.

 

The Company may elect to
pay the Make-Whole Payment or any portion thereof (i) in cash or, (ii) subject
to the fulfillment by the Company of the conditions set forth in the following
paragraph, by delivering the number of shares of Common Stock equal to (x) the
Make-Whole Payment (or any portion thereof that the Company elects to pay in
shares of Common Stock) divided by (y) 97% of the average of the Closing Prices
per share of Common Stock for the five consecutive Trading Days immediately
preceding and including the first Trading Day prior to the Provisional
Redemption Date.

 

The following shall
constitute the conditions to any election by the Company pursuant to this
Section 10.1 to pay the Make-Whole Payment (or any portion thereof) in
shares of Common Stock:

 

(a)                                  The
shares of Common Stock to be issued in payment of the Make-Whole Payment (or
any portion thereof) hereunder shall not require registration under any federal
securities law before such shares may be freely transferable without being
subject to any transfer restrictions under the Securities Act, or, if
registration is required, such registration shall be completed and shall become
effective prior to the Provisional Redemption Date (and the Company shall state
in the notice of Provisional Redemption

 

51

 

that the Company expects
that such registration shall remain effective for at least 30 days following
the Provisional Redemption Date);

 

(b)                                 The
shares of Common Stock to be issued in payment of the Make-Whole Payment (or
any portion thereof) hereunder shall not require registration with, or approval
of, any governmental authority under any state law or any other federal law
before such shares may be validly issued or delivered or if such registration
is required or such approval must be obtained, such registration shall be
completed or such approval shall be obtained prior to the Provisional
Redemption Date;

 

(c)                                  The
shares of Common Stock to be issued upon payment of the Make-Whole Payment (or
any portion thereof) hereunder are, or shall have been, approved for listing on
the Nasdaq National Market or the New York Stock Exchange or listed on another
national securities exchange, in any case, prior to the Provisional Redemption
Date;

 

(d)                                 All
shares of Common Stock which may be issued upon payment of the Make-Whole
Payment (or any portion thereof) will be issued out of the Company’s authorized
but unissued Common Stock and will, upon issue, be duly and validly issued and
fully paid and nonassessable and free of any preemptive or similar rights; and

 

(e)                                  If
any of the conditions set forth in clauses (a) through (d) of this paragraph are
not satisfied in accordance with the terms thereof, the Make-Whole Payment
shall be paid by the Company only in cash.

 

Section 10.2.  Optional Redemption.  Except as set forth under Section 10.1,
the Securities are not redeemable prior to June 30, 2006 (the “Optional
Redemption Date”).  On or after
June 30, 2006, the Company may, at its option, redeem the Securities in
whole at any time or in part from time to time, on any date prior to maturity,
upon notice as set forth in Section 10.5, at the redemption price
(expressed as percentages of the principal amount) set forth below if redeemed
during the 12-month period beginning June 30 of the years indicated and
ending June 29 of the following year:

 

	
  During the Twelve 

  Months Commencing

  	
   

  	
  Redemption
  Price

  	
   

  
	
  2006

  	
   

  	
  101.714

  	
  %

  
	
  2007

  	
   

  	
  101.286

  	
  %

  
	
  2008

  	
   

  	
  100.857

  	
  %

  
	
  2009

  	
   

  	
  100.429

  	
  %

  

 

(the “Optional Redemption
Price”), plus any interest accrued but not paid prior to the Optional
Redemption Date.

 

Section 10.3.  Notice to Trustee.  If the Company elects to redeem Securities
pursuant to the redemption provisions of Section 10.1 or Section 10.2
hereof, it shall notify the Trustee at least 30 days prior to the Redemption
Date of such intended Redemption Date, the principal amount of Securities to be
redeemed, the CUSIP numbers of the Securities to be redeemed and,

 

52

 

in the case of a Provisional Redemption, of whether
the Make-Whole Payment shall be paid by the Company (x) in cash, (y) by
delivery of shares of Common Stock or (z) in a combination of cash and delivery
of shares of Common Stock, in which case, the portion of the Make-Whole Payment
that will be paid in cash and the portion that will be paid in shares of Common
Stock.

 

Section 10.4.  Selection of Securities to Be Redeemed.  If fewer than all the Securities are to be
redeemed, the Trustee shall select the particular Securities to be redeemed
from the Outstanding Securities by a method that complies with the requirements
of any exchange on which the Securities are listed, or, if the Securities are
not listed on an exchange, on a pro rata basis or by lot or in accordance with
any other method the Trustee considers fair and appropriate.  Securities and portions thereof  that the Trustee selects shall be in amounts
equal to the minimum authorized denominations for Securities to be redeemed or
any integral multiple thereof.

 

If any Security selected
for partial redemption is converted in part before termination of the
conversion right with respect to the portion of the Security so selected, the
converted portion of such Security shall be deemed to be the portion selected
for redemption (provided, however, that the Holder of such Security so
converted and deemed redeemed shall not be entitled to any additional interest
payment as a result of such deemed redemption than such Holder would have
otherwise been entitled to receive upon conversion of such Security).  Securities which have been converted during
a selection of Securities to be redeemed may be treated by the Trustee as
Outstanding for the purpose of such selection.

 

The Trustee shall
promptly notify the Company and the Registrar in writing of the Securities
selected for redemption and, in the case of any Securities selected for partial
redemption, the principal amount thereof to be redeemed.

 

For all purposes of this
Indenture, unless the context otherwise requires, all provisions relating to
the redemption of Securities shall relate, in the case of any Securities
redeemed or to be redeemed only in part, to the portion of the principal amount
of such Securities which has been or is to be redeemed.

 

Section 10.5.  Notice of Redemption.  Notice of redemption shall be given in the
manner provided in Section 15.2 hereof to the Holders of Securities to be
redeemed.  Such notice shall be given
not less than 20 nor more than 60 days prior to the Redemption Date.

 

All notices of redemption
shall state:

 

(a)                                  the
Redemption Date;

 

(b)                                 the
Redemption Price and interest accrued and unpaid to the Redemption Date, if
any;

 

(c)                                  with
respect to a Provisional Redemption, whether the Make-Whole Payment shall be
paid by the Company (x) in cash, (y) by delivery of shares of Common Stock or
(z) in a combination of cash and delivery of shares of Common Stock, in which
case, the portion of the Make-Whole Payment that will be paid in cash and the
portion that will be paid in shares of Common Stock;

 

53

 

(d)                                 if
fewer than all the Outstanding Securities are to be redeemed, the aggregate
principal amount of Securities to be redeemed and the aggregate principal
amount of Securities which will be outstanding after such partial redemption;

 

(e)                                  that
on the Redemption Date the Redemption Price and interest accrued and unpaid to
the Redemption Date, if any, will become due and payable upon each such
Security to be redeemed, and that interest thereon shall cease to accrue on and
after such date;

 

(f)                                    the
Conversion Price, the date on which the right to convert the principal of the
Securities to be redeemed will terminate and the places where such Securities
may be surrendered for conversion;

 

(g)                                 the
place or places where such Securities are to be surrendered for payment of the
Redemption Price and accrued and unpaid interest, if any; and

 

(h)                                 the
CUSIP number of the Securities.

 

The notice given shall
specify the last date on which exchanges or transfers of Securities may be made
pursuant to Section 2.1 hereof, and shall specify the serial numbers of
Securities and the portions thereof called for redemption.

 

Notice of redemption of
Securities to be redeemed at the election of the Company shall be given by the
Company or, at the Company’s request, by the Trustee in the name of and at the
expense of the Company.

 

Section 10.6.  Effect of Notice of Redemption.  Notice of redemption having been given as
provided in Section 10.5 hereof, the Securities so to be redeemed shall,
on the Redemption Date, become due and payable at the Redemption Price therein
specified and from and after such date (unless the Company shall default in the
payment of the Redemption Price and accrued and unpaid interest) such
Securities shall cease to bear interest. 
Upon surrender of any such Security for redemption in accordance with
such notice, such Security shall be paid by the Company at the Redemption
Price; provided, however, the installments of interest on Securities whose
Stated Maturity is prior to or on the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered
as such on the relevant Record Date according to their terms and the provisions
of Section 2.1 hereof.

 

If any Security called
for redemption shall not be so paid upon surrender thereof for redemption, the
principal and premium, if any, shall, until paid, bear interest from the
Redemption Date at 3% per annum.

 

Section 10.7.  Deposit of Redemption Price.  Prior to or on any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent an amount of
money sufficient to pay the Redemption Price of all the Securities to be
redeemed on that Redemption Date, other than any Securities called for
redemption on that date which have been converted prior to the date of such
deposit, and accrued and unpaid interest, if any, on such Securities.

 

54

 

If any Security called
for redemption is converted, any money deposited with the Trustee or with a
Paying Agent or so segregated and held in trust for the redemption of such
Security shall (subject to any right of the Holder of such Security or any
Predecessor Security to receive interest as provided in the fourth to last
paragraph of Section 2.1 hereof) be paid to the Company at the Company’s
request or, if then held by the Company, shall be discharged from such trust.

 

Section 10.8.  Securities Redeemed in Part.  Any Security which is to be redeemed only in
part shall be surrendered at an office or agency of the Company designated for
that purpose pursuant to Section 9.2 hereof (with, if the Company or the
Trustee so requires, due endorsement by, or a written instrument of transfer in
form satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or the Holder’s attorney duly authorized in writing), and the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder of
such Security without service charge, a new Security or Securities of any
authorized denomination as requested by such Holder in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.

 

ARTICLE XI

 

REPURCHASE AT THE OPTION OF A HOLDER

UPON A CHANGE OF CONTROL

 

Section 11.1.  Repurchase Right.  In the event that a Change of Control shall
occur, each Holder shall have the right (the “Repurchase Right”), at the
Holder’s option, but subject to the provisions of Section 11.2 hereof, to
require the Company to repurchase, and upon the exercise of such right the
Company shall repurchase, all of such Holder’s Securities not theretofore
called for redemption, or any portion of the principal amount thereof that is
equal to $1,000 or any integral multiple thereof (provided that no single
Security may be repurchased in part unless the portion of the principal amount
of such Security to be Outstanding after such repurchase is equal to $1,000 or
integral multiples thereof), on the date (the “Repurchase Date”) that is 45
days after the date of the Company Notice (as defined in Section 11.3) at
a purchase price equal to 100% of the principal amount of the Securities to be
repurchased (the “Repurchase Price”), plus interest accrued and unpaid to, but
excluding, the Repurchase Date; provided, however, that installments of
interest on Securities whose Stated Maturity is prior to or on the Repurchase
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such on the relevant Record Date
according to their terms and the provisions of Section 2.1 hereof.

 

Subject to the
fulfillment by the Company of the conditions set forth in Section 11.2
hereof, the Company may, at its option, elect to pay the Repurchase Price in
Common Stock or in securities of the acquiring party in a Change of Control
(the “Acquiring Party”) for which the Common Stock is exchanged in connection
with such Change of Control (the “Acquiror Stock”), or a combination thereof
with cash, by delivering the number of shares of Common Stock or Acquiror Stock
equal to (i) the Repurchase Price (less any amounts paid in cash) divided by
(ii) 95% of the average of the Closing Prices per share of Common Stock or
Acquiror Stock, as applicable, for the five consecutive Trading Days
immediately preceding and including the third Trading Day prior to the
Repurchase Date.

 

55

 

Whenever in this
Indenture (including Sections 2.2, 4.1(a) and 4.7 hereof) or Exhibit A
annexed hereto there is a reference, in any context, to the principal of any
Security as of any time, such reference shall be deemed to include reference to
the Repurchase Price payable in respect to such Security to the extent that
such Repurchase Price is, was or would be so payable at such time, and express
mention of the Repurchase Price in any provision of this Indenture shall not be
construed as excluding the Repurchase Price in those provisions of this
Indenture when such express mention is not made; provided, however, that, for
the purposes of Article 13 hereof, such reference shall be deemed to
include reference to the Repurchase Price only to the extent the Repurchase
Price is payable in cash.

 

Section 11.2.  Conditions to the Company’s Election to
Pay the Repurchase Price in Common Stock or Acquirer Stock.  (a) The shares of Common Stock or
Acquirer Stock to be issued upon repurchase of Securities hereunder:

 

(i)                                     shall
not require registration under any federal securities law before such shares
may be freely transferable without being subject to any transfer restrictions
under the Securities Act upon repurchase or, if such registration is required,
such registration shall be completed and shall become effective prior to the
Repurchase Date; and

 

(ii)                                  shall
not require registration with, or approval of, any governmental authority under
any state law or any other federal law before shares may be validly issued or
delivered upon repurchase or if such registration is required or such approval
must be obtained, such registration shall be completed or such approval shall
be obtained prior to the Repurchase Date.

 

(b)                                 The
shares of Common Stock or Acquirer Stock to be listed upon repurchase of
Securities hereunder are, or shall have been, approved for listing on the
Nasdaq National Market or the New York Stock Exchange or listed on another
national securities exchange, in any case, prior to the Repurchase Date.

 

(c)                                  All
shares of Common Stock or Acquiror Stock which may be issued upon repurchase of
Securities will be issued out of the Company’s or the Acquiring Party’s, as the
case may be, authorized but unissued Common Stock or Acquiror Stock, as
applicable, and will, upon issue, be duly and validly issued and fully paid and
nonassessable and free of any preemptive or similar rights.

 

(d)                                 If
any of the conditions set forth in clauses (a) through (c) of this
Section 11.2 are not satisfied in accordance with the terms thereof, the
Repurchase Price shall be paid by the Company only in cash.

 

Section 11.3.  Notices; Method of Exercising Repurchase
Right, Etc.  (a) Unless the
Company shall have theretofore called for redemption all of the Outstanding
Securities, prior to or on the 30th day after the occurrence of a Change of
Control, the Company, or, at the written request and expense of the Company
prior to or on the 30th day after such occurrence, the Trustee, shall give to
all Holders of Securities notice, in the manner provided in Section 15.2
hereof, of the occurrence of the Change of Control and of the Repurchase Right
set forth herein

 

56

 

arising as a result thereof (the “Company
Notice”).  The Company shall also deliver
a copy of such notice of a Repurchase Right to the Trustee.  Each notice of a Repurchase Right shall
state:

 

(i)                                     the
Repurchase Date;

 

(ii)                                  the
date by which the Repurchase Right must be exercised;

 

(iii)                               the
Repurchase Price and accrued and unpaid interest, if any, and whether the
Repurchase Price shall, at the option of the Company and in accordance with the
provisions of this Article 11, be paid by the Company in (x) cash,
(y) by delivery of shares of Common Stock or Acquiror Stock or (z) in
a combination of cash and delivery of Common Stock or Acquiror Stock, as the
case may be, in which case the portion of the Redemption Price that will be
paid in cash and the portion that will be paid in shares of Common Stock or
Acquiror Stock;

 

(iv)                              a
description of the procedure which a Holder must follow to exercise a
Repurchase Right, and the place or places where such Securities, are to be
surrendered for payment of the Repurchase Price and accrued and unpaid
interest, if any;

 

(v)                                 that
on the Repurchase Date the Repurchase Price and accrued and unpaid interest, if
any, will become due and payable upon each such Security designated by the
Holder to be repurchased, and that interest thereon shall cease to accrue on
and after said date;

 

(vi)                              the
Conversion Rate then in effect, the date on which the right to convert the
principal amount of the Securities to be repurchased will terminate and the
place where such Securities may be surrendered for conversion, and

 

(vii)                           the
place or places where such Securities, together with the Option to Elect
Repayment Upon a Change of Control certificate included in Exhibit A
annexed hereto are to be delivered for payment of the Repurchase Price and
accrued and unpaid interest, if any.

 

No failure of the Company
to give the foregoing notices or defect therein shall limit any Holder’s right
to exercise a Repurchase Right or affect the validity of the proceedings for
the repurchase of Securities.

 

If any of the foregoing
provisions or other provisions of this Article 11 are inconsistent with
applicable law, such law shall govern.

 

(b)                                 To
exercise a Repurchase Right, a Holder shall deliver to the Trustee prior to or
on the 30th day after the date of the Company Notice:

 

(i)                                     written
notice of the Holder’s exercise of such right, which notice shall set forth the
name of the Holder, the principal amount of the Securities to be repurchased
(and, if any Security is to be repurchased in part, the serial number thereof,
the portion of the principal amount thereof to be repurchased) and a statement
that an election to exercise the Repurchase Right is being made thereby, and,
in the event that all or any

 

57

 

portion of the Repurchase
Price shall be paid with shares of Common Stock or Acquiror Stock, the name or
names (with addresses) in which the certificate or certificates for shares of
Common Stock or Acquiror Stock, as the case may be, shall be issued, and

 

(ii)                                  the
Securities with respect to which the Repurchase Right is being exercised.

 

Such written notice shall
be irrevocable, except that the right of the Holder to convert the Securities
with respect to which the Repurchase Right is being exercised shall continue
until the close of business on the Business Day immediately preceding the Repurchase
Date.

 

(c)                                  In
the event a Repurchase Right shall be exercised in accordance with the terms
hereof, the Company shall pay or cause to be paid to the Trustee the Repurchase
Price in cash or shares of Common Stock or Acquiror Stock or the applicable combination
thereof, as provided above, for payment to the Holder on the Repurchase Date
or, if shares of Common Stock or Acquiror Stock are to be paid, as promptly
after the Repurchase Date as practicable, together with accrued and unpaid
interest to the Repurchase Date payable in cash with respect to the Securities
as to which the Repurchase Right has been exercised; provided, however, that
installments of interest that mature prior to or on the Repurchase Date shall
be payable in cash to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Regular Record Date.

 

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

 

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

 

(f)                                    Any
issuance of shares of Common Stock or Acquiror Stock in respect of the
Repurchase Price shall be deemed to have been effected immediately prior to the
close of business on the Repurchase Date and the Person or Persons in whose
name or names any certificate or certificates for shares of Common Stock or
Acquiror Stock shall be issuable upon such repurchase shall be deemed to have
become on the Repurchase Date the holder or holders of record of the shares
represented thereby; provided, however, that any surrender for repurchase on a
date when the stock transfer books of the Company or the Acquiring Party, as
the case may be, shall be closed shall constitute the Person or Persons in
whose name or names the certificate or certificates for such shares are to be
issued as the record holder or holders thereof for all

 

58

 

purposes at the opening of business on the next succeeding day on which
such stock transfer books are open.  No
payment or adjustment shall be made for dividends or distributions on any
Common Stock or Acquiror Stock issued upon repurchase of any Security declared
prior to the Repurchase Date.

 

(g)                                 No
fractions of shares of Common Stock or Acquiror Stock shall be issued upon
repurchase of any Security or Securities. 
If more than one Security shall be repurchased from the same Holder and
the Repurchase Price shall be payable in shares of Common Stock or Acquiror
Stock, the number of full shares which shall be issued upon such repurchase
shall be computed on the basis of the aggregate principal amount of the
Securities (or specified portions thereof) to be so repurchased.  Instead of any fractional share of Common
Stock or Acquiror Stock which would otherwise be issued on the repurchase of
any Security or Securities (or specified portions thereof), the Company shall
pay a cash adjustment in respect of such fraction (calculated to the nearest
one-100th of a share) in an amount equal to the same fraction of the Quoted
Price of the Common Stock or Acquiror Stock as of the Trading Day preceding the
Repurchase Date.

 

(h)                                 Any
issuance and delivery of certificates for shares of Common Stock or Acquiror
Stock on repurchase of Securities shall be made without charge to the Holder of
Securities being repurchased for such certificates or for any tax or duty in
respect of the issuance or delivery of such certificates or the Securities
represented thereby; provided, however, that the Company shall not be required
to pay any tax or duty which may be payable in respect of (i) income of the
Holder or (ii) any transfer involved in the issuance or delivery of
certificates for shares of Common Stock in a name other than that of the Holder
of the Securities being repurchased, and no such issuance or delivery shall be
made unless the Persons requesting such issuance or delivery has paid to the
Company the amount of any such tax or duty or has established, to the
satisfaction of the Company, that such tax or duty has been paid.

 

(i)                                     All
Securities delivered for repurchase shall be delivered to the Trustee to be
canceled at the direction of the Trustee, which shall dispose of the same as
provided in Section 2.15 hereof.

 

ARTICLE XII

 

CONVERSION OF SECURITIES

 

Section 12.1.  Conversion Right and Conversion Price.  Subject to and upon compliance with the
provisions of this Article, at the option of the Holder thereof, any Security
or any portion of the principal amount thereof which is $1,000 or an integral
multiple of $1,000 may be converted at the principal amount thereof, or of such
portion thereof, into duly authorized, fully paid and nonassessable shares of
Common Stock, at the Conversion Price, determined as hereinafter provided, in
effect at the time of conversion.  Such
conversion right shall expire at the close of business on June 30, 2010.

 

In case a Security or
portion thereof is called for redemption, such conversion right in respect of
the Security or the portion so called, shall expire at the close of business on
the second Business Day preceding the Redemption Date, unless the Company
defaults in making the

 

59

 

payment due upon
redemption.  In the case of a Change of
Control for which the Holder exercises its Repurchase Right with respect to a
Security or portion thereof, such conversion right in respect of the Security
or portion thereof shall expire at the close of business on the Business Day
immediately preceding the Repurchase Date.

 

The price at which shares
of Common Stock shall be delivered upon conversion (the “Conversion Price”)
shall be initially equal to $11.35 per share of Common Stock.  The Conversion Price shall be adjusted in
certain instances as provided in paragraphs (a), (b), (c), (d), (e), (f), (h)
and (i) of Section 12.4 hereof.

 

Section 12.2.  Exercise of Conversion Right.  To exercise the conversion right, the Holder
of any Security to be converted shall surrender such Security duly endorsed or
assigned to the Company or in blank, at the office of any Conversion Agent,
accompanied by a duly signed conversion notice substantially in the form
attached to the Security to the Company stating that the Holder elects to
convert such Security or, if less than the entire principal amount thereof is
to be converted, the portion thereof to be converted.

 

Securities surrendered
for conversion during the period from the close of business on any Regular
Record Date to the opening of business on the next succeeding Interest Payment
Date (except in the case of any Security whose Maturity is prior to such
Interest Payment Date) shall be accompanied by payment in New York Clearing
House funds or other funds acceptable to the Company of an amount equal to the
interest to be received on such Interest Payment Date on the principal amount
of Securities being surrendered for conversion.

 

Securities shall be
deemed to have been converted immediately prior to the close of business on the
day of surrender of such Securities for conversion in accordance with the
foregoing provisions, and at such time the rights of the Holders of such
Securities as Holders shall cease, and the Person or Persons entitled to
receive the Common Stock issuable upon conversion shall be treated for all purposes
as the record holder or holders of such Common Stock at such time.  As promptly as practicable on or after the
conversion date, the Company shall cause to be issued and delivered to such
Conversion Agent a certificate or certificates for the number of full shares of
Common Stock issuable upon conversion, together with payment in lieu of any
fraction of a share as provided in Section 12.3 hereof.

 

In the case of any
Security which is converted in part only, upon such conversion the Company
shall execute and the Trustee shall authenticate and deliver to the Holder
thereof, at the expense of the Company, a new Security or Securities of
authorized denominations in aggregate principal amount equal to the unconverted
portion of the principal amount of such Securities.

 

If shares of Common Stock
to be issued upon conversion of a Restricted Security, or Securities to be
issued upon conversion of a Restricted Security in part only, are to be
registered in a name other than that of the Holder of such Restricted Security,
such Holder must deliver to the Conversion Agent a certificate in substantially
the form set forth in the form of Security set forth in Exhibit A annexed
hereto, dated the date of surrender of such Restricted Security and signed by
such Holder, as to compliance with the restrictions on transfer applicable to
such Restricted Security.  Neither the
Trustee nor any Conversion Agent, Registrar or Transfer Agent shall be required
to register in a name other than that of the Holder shares of Common Stock or

 

60

 

Securities issued upon
conversion of any such Restricted Security not so accompanied by a properly
completed certificate.

 

The Company hereby
initially appoints the Trustee as the Conversion Agent.

 

Section 12.3.  Fractions of Shares.  No fractional shares of Common Stock shall
be issued upon conversion of any Security or Securities.  If more than one Security shall be
surrendered for conversion at one time by the same Holder, the number of full
shares which shall be issued upon conversion thereof shall be computed on the
basis of the aggregate principal amount of the Securities (or specified
portions thereof) so surrendered. 
Instead of any fractional share of Common Stock which would otherwise be
issued upon conversion of any Security or Securities (or specified portions
thereof), the Company shall pay a cash adjustment in respect of such fraction
(calculated to the nearest one-100th of a share) in an amount equal to the same
fraction of the Quoted Price of the Common Stock as of the Trading Day
preceding the date of conversion.

 

Section 12.4.  Adjustment of Conversion Price.  The Conversion Price shall be subject to
adjustments, calculated by the Company, from time to time as follows:

 

(a)                                  In
case the Company shall hereafter pay a dividend or make a distribution to all
holders of the outstanding Common Stock in shares of Common Stock, the
Conversion Price in effect at the opening of business on the date following the
date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such Conversion
Price by a fraction:

 

(i)                                     the
numerator of which shall be the number of shares of Common Stock outstanding at
the close of business on the Record Date (as defined in Section 12.4(g))
fixed for such determination, and

 

(ii)                                  the
denominator of which shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution.

 

Such reduction shall
become effective immediately after the opening of business on the day following
the Record Date.  If any dividend or
distribution of the type described in this Section 12.4(a) is declared but
not so paid or made, the Conversion Price shall again be adjusted to the
Conversion Price which would then be in effect if such dividend or distribution
had not been declared.

 

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

 

61

 

opening of business on
the day following the day upon which such subdivision or combination becomes
effective.

 

(c)                                  In
case the Company shall issue rights or warrants (other than any rights or
warrants referred to in Section 12.4(d)) to all holders of its outstanding
shares of Common Stock entitling them for a period of not more than 60 days to
subscribe for or purchase shares of Common Stock (or securities convertible
into Common Stock) at a price per share (or having a conversion price per
share) less than the Current Market Price (as defined in Section 12.4(g))
on the Record Date fixed for the determination of stockholders entitled to
receive such rights or warrants, the Conversion Price shall be adjusted so that
the same shall equal the price determined by multiplying the Conversion Price
in effect at the opening of business on the date after such Record Date by a
fraction:

 

(i)                                     the
numerator of which shall be the number of shares of Common Stock outstanding at
the close of business on the Record Date plus the number of shares which the
aggregate offering price of the total number of shares so offered for
subscription or purchase (or the aggregate conversion price of the convertible securities
so offered) would purchase at such Current Market Price, and

 

(ii)                                  the
denominator of which shall be the number of shares of Common Stock outstanding
on the close of business on the Record Date plus the total number of additional
shares of Common Stock so offered for subscription or purchase (or into which
the convertible securities so offered are convertible).

 

Such adjustment shall
become effective immediately after the opening of business on the day following
the Record Date fixed for determination of stockholders entitled to receive
such rights or warrants.  To the extent
that shares of Common Stock (or securities convertible into Common Stock) are
not delivered pursuant to such rights or warrants, upon the expiration or
termination of such rights or warrants the Conversion Price shall be readjusted
to the Conversion Price which would then be in effect had the adjustments made
upon the issuance of such rights or warrants been made on the basis of the
delivery of only the number of shares of Common Stock (or securities
convertible into Common Stock) actually delivered.  In the event that such rights or warrants are not so issued, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such date fixed for the determination of stockholders
entitled to receive such rights or warrants had not been fixed.  In determining whether any rights or
warrants entitle the holders to subscribe for or purchase shares of Common
Stock at less than such Current Market Price, and in determining the aggregate
offering price of such shares of Common Stock, there shall be taken into
account any consideration received for such rights or warrants, the value of
such consideration if other than cash, to be determined by the Board of
Directors.

 

(d)                                 In
case the Company shall, by dividend or otherwise, distribute to all holders of
its Common Stock shares of any class of capital stock of the Company (other
than any dividends or distributions to which Section 12.4(a) applies) or
evidences of its indebtedness, cash or other assets, including securities, but
excluding (1) any rights or warrants referred to in Section 12.4(c), (2)
any stock, securities or other property or assets

 

62

 

(including cash)
distributed in connection with a reclassification, change, merger,
consolidation, statutory share exchange, combination, sale or conveyance to
which Section 12.11 hereof applies and (3) dividends and distributions
paid exclusively in cash (the securities described in foregoing clauses (1),
(2) and (3) hereinafter in this Section 12.4(d) called the “securities”),
then, in each such case, subject to the second succeeding paragraph of this
Section 12.4(d), the Conversion Price shall be reduced so that the same
shall be equal to the price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on the Record Date (as
defined in Section 12.4(g)) with respect to such distribution by a
fraction:

 

(i)                                     the
numerator of which shall be the Current Market Price (determined as provided in
Section 12.4(g)) on such date less the fair market value (as determined by
the Board of Directors, whose determination shall be conclusive and set forth
in a Board Resolution) on such date of the portion of the securities so
distributed applicable to one share of Common Stock (determined on the basis of
the number of shares of the Common Stock outstanding on the Record Date), and

 

(ii)                                  the
denominator of which shall be such Current Market Price.

 

Such reduction shall
become effective immediately prior to the opening of business on the day
following the Record Date.  However, in
the event that the then fair market value (as so determined) of the portion of
the securities so distributed applicable to one share of Common Stock is equal
to or greater than the Current Market Price on the Record Date, in lieu of the
foregoing adjustment, adequate provision shall be made so that each Holder
shall have the right to receive upon conversion of a Security (or any portion
thereof) the amount of securities such Holder would have received had such
Holder converted such Security (or portion thereof) immediately prior to such
Record Date.  In the event that such
dividend or distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in effect if
such dividend or distribution had not been declared.

 

If the
Board of Directors determines the fair market value of any distribution for
purposes of this Section 12.4(d) by reference to the actual or when issued
trading market for any securities comprising all or part of such distribution,
it must in doing so consider the prices in such market over the same period
(the “Reference Period”) used in computing the Current Market Price pursuant to
Section 12.4(g) to the extent possible, unless the Board of Directors in a
Board Resolution determines in good faith that determining the fair market
value during the Reference Period would not be in the best interest of the
Holder.

 

Rights
or warrants distributed by the Company to all holders of Common Stock entitling
the holders thereof to subscribe for or purchase shares of the Company’s
capital stock (either initially or under certain circumstances), which rights
or warrants, until the occurrence of a specified event or events (“Trigger
Event”):

 

(i)                                     are
deemed to be transferred with such shares of Common Stock;

 

63

 

(ii)                                  are
not exercisable; and

 

(iii)                               are
also issued in respect of future issuances of Common Stock,

 

shall be deemed not to
have been distributed for purposes of this Section 12.4(d) (and no
adjustment to the Conversion Price under this Section 12.4(d) will be
required) until the occurrence of the earliest Trigger Event.  If such right or warrant is subject to
subsequent events, upon the occurrence of which such right or warrant shall
become exercisable to purchase different securities, evidences of indebtedness
or other assets or entitle the holder to purchase a different number or amount
of the foregoing or to purchase any of the foregoing at a different purchase
price, then the occurrence of each such event shall be deemed to be the date of
issuance and record date with respect to a new right or warrant (and a
termination or expiration of the existing right or warrant without exercise by
the holder thereof).  In addition, in
the event of any distribution (or deemed distribution) of rights or warrants,
or any Trigger Event or other event (of the type described in the preceding
sentence) with respect thereto, that resulted in an adjustment to the
Conversion Price under this Section 12.4(d):

 

(i)                                     in
the case of any such rights or warrants which shall all have been redeemed or
repurchased without exercise by any holders thereof, the Conversion Price shall
be readjusted upon such final redemption or repurchase to give effect to such
distribution or Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase price received by
a holder of Common Stock with respect to such rights or warrant (assuming such
holder had retained such rights or warrants), made to all holders of Common
Stock as of the date of such redemption or repurchase, and

 

(ii)                                  in
the case of such rights or warrants all of which shall have expired or been
terminated without exercise, the Conversion Price shall be readjusted as if
such rights and warrants had never been issued.

 

For
purposes of this Section 12.4(d) and Sections 12.4(a), 12.4(b) and
12.4(c), any dividend or distribution to which this Section 12.4(d) is
applicable that also includes shares of Common Stock, a subdivision or
combination of Common Stock to which Section 12.4(b) applies, or rights or
warrants to subscribe for or purchase shares of Common Stock to which
Section 12.4(c) applies (or any combination thereof), shall be deemed
instead to be:

 

(i)                                     a
dividend or distribution of the evidences of indebtedness, assets, shares of
capital stock, rights or warrants other than such shares of Common Stock, such
subdivision or combination or such rights or warrants to which Sections
12.4(a), 12.4(b) and 12.4(c) apply, respectively (and any Conversion Price
reduction required by this Section 12.4(d) with respect to such dividend
or distribution shall then be made), immediately followed by

 

(ii)                                  a
dividend or distribution of such shares of Common Stock, such subdivision or
combination or such rights or warrants (and any further Conversion

 

64

 

Price reduction required
by Sections 12.4(a), 12.4(b) and 12.4(c) with respect to such dividend or
distribution shall then be made), except:

 

(A)                              the
Record Date of such dividend or distribution shall be substituted as (x) “the
date fixed for the determination of stockholders entitled to receive such
dividend or other distribution,” “Record Date fixed for such determinations”
and “Record Date” within the meaning of Section 12.4(a), (y) “the day upon
which such subdivision becomes effective” and “the day upon which such
combination becomes effective” within the meaning of Section 12.4(b), and
(z) as “the date fixed for the determination of stockholders entitled to
receive such rights or warrants,” “the Record Date fixed for the determination
of the stockholders entitled to receive such rights or warrants” and such
“Record Date” within the meaning of Section 12.4(c), and

 

(B)                                any
shares of Common Stock included in such dividend or distribution shall not be
deemed “outstanding at the close of business on the date fixed for such
determination” within the meaning of Section 12.4(a) and any reduction or
increase in the number of shares of Common Stock resulting from such
subdivision or combination shall be disregarded in connection with such dividend
or distribution.

 

(e)                                  In
case the Company shall, by dividend or otherwise, distribute to all holders of
its Common Stock cash (excluding any cash that is distributed upon a
reclassification, change, merger, consolidation, statutory share exchange,
combination, sale or conveyance to which Section 12.11 hereof applies or
as part of a distribution referred to in Section 12.4(d) hereof), in an
aggregate amount that, combined together with:

 

(i)                                     the
aggregate amount of any other such distributions to all holders of Common Stock
made exclusively in cash within the 12 months preceding the date of payment of
such distribution, and in respect of which no adjustment pursuant to this
Section 12.4(e) has been made, and

 

(ii)                                  the
aggregate of any cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and set forth in a Board
Resolution) of consideration payable in respect of any tender offer by the
Company or any of its subsidiaries for all or any portion of the Common Stock
concluded within the 12 months preceding the date of such distribution, and in
respect of which no adjustment pursuant to Section 12.4(f) hereof has been
made,

 

exceeds (A) 1% in the
case of any such dividend or other distribution made prior to June 30,
2006 or (B) 10% in the case of any such dividend or distribution made on or
after June 30, 2006, of the product of the Current Market Price
(determined as provided in Section 12.4(g)) on the Record Date with
respect to such distribution times the number of shares of Common Stock
outstanding on such date, then and in each such case,

 

65

 

immediately after the
close of business on such date, the Conversion Price shall be reduced so that
the same shall equal the price determined by multiplying the Conversion Price
in effect immediately prior to the close of business on such Record Date by a
fraction:

 

(i)                                     the
numerator of which shall be equal to the Current Market Price on the Record
Date less an amount equal to the quotient of (x) the excess of such combined
amount over such 1% or 10%, as the case may be, and (y) the number of shares of
Common Stock outstanding on the Record Date, and

 

(ii)                                  the
denominator of which shall be equal to the Current Market Price on such date.

 

However, in the event
that the then fair market value (as so determined) of the portion of the
securities so distributed applicable to one share of Common Stock is equal to
or greater than the Current Market Price on the Record Date, in lieu of the
foregoing adjustment, adequate provision shall be made so that each Holder
shall have the right to receive upon conversion of a Security (or any portion
thereof) the amount of cash such Holder would have received had such Holder
converted such Security (or portion thereof) immediately prior to such Record
Date.  In the event that such dividend
or distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such dividend
or distribution had not been declared.

 

(f)                                    In
case a tender offer made by the Company or any of its subsidiaries for all or
any portion of the Common Stock shall expire and such tender offer (as amended
upon the expiration thereof) shall require the payment to stockholders (based
on the acceptance (up to any maximum specified in the terms of the tender
offer) of Purchased Shares (as defined below)) of an aggregate consideration
having a fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and set forth in a Board Resolution) that
combined together with:

 

(i)                                     the
aggregate of the cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and set forth in a Board
Resolution), as of the expiration of such tender offer, of consideration
payable in respect of any other tender offers, by the Company or any of its
subsidiaries for all or any portion of the Common Stock expiring within the 12
months preceding the expiration of such tender offer and in respect of which no
adjustment pursuant to this Section 12.4(f) has been made, and

 

(ii)                                  the
aggregate amount of any distributions to all holders of the Company’s Common
Stock made exclusively in cash within 12 months preceding the expiration of
such tender offer and in respect of which no adjustment pursuant to
Section 12.4(e) has been made,

 

exceeds 10% of the
product of the Current Market Price (determined as provided in
Section 12.4(g)) as of the last time (the “Expiration Time”) tenders could
have been made

 

66

 

pursuant to such tender
offer (as it may be amended) times the number of shares of Common Stock
outstanding (including any tendered shares) on the Expiration Time, then, and
in each such case, immediately prior to the opening of business on the day
after the date of the Expiration Time, the Conversion Price shall be adjusted
so that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to close of business on the date of the
Expiration Time by a fraction:

 

(A)                              the
numerator of which shall be the number of shares of Common Stock outstanding
(including any tendered shares) at the Expiration Time multiplied by the
Current Market Price of the Common Stock on the Trading Day next succeeding the
Expiration Time, and

 

(B)                                the
denominator shall be the sum of (x) the fair market value (determined as
aforesaid) of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender offer) of
all shares validly tendered and not withdrawn as of the Expiration Time (the
shares deemed so accepted, up to any such maximum, being referred to as the
“Purchased Shares”) and (y) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) on the Expiration Time and the Current
Market Price of the Common Stock on the Trading Day next succeeding the
Expiration Time.

 

Such reduction (if any)
shall become effective immediately prior to the opening of business on the day
following the Expiration Time.  In the
event that the Company is obligated to purchase shares pursuant to any such
tender offer, but the Company is permanently prevented by applicable law from
effecting any such purchases or all such purchases are rescinded, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such tender offer had not been made.  If the application of this
Section 12.4(f) to any tender offer would result in an increase in the
Conversion Price, no adjustment shall be made for such tender offer under this
Section 12.4(f).

 

(g)                                 For
purposes of this Section 12.4, the following terms shall have the meanings
indicated:

 

(i)                                     “Current
Market Price” shall mean the average of the daily Closing Prices per share of
Common Stock for the ten consecutive Trading Days immediately prior to the date
in question; provided, however, that if:

 

(A)                              the
“ex” date (as hereinafter defined) for any event (other than the issuance or
distribution requiring such computation) that requires an adjustment to the
Conversion Price pursuant to Section 12.4(a), (b), (c), (d), (e) or (f)
occurs during such ten consecutive Trading Days, the Closing Price for each
Trading Day prior to the “ex” date for such other event shall be adjusted by
multiplying such Closing Price by the same

 

67

 

fraction by which the Conversion Price is so required
to be adjusted as a result of such other event;

 

(B)                                the
“ex” date for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Price pursuant to
Section 12.4(a), (b), (c), (d), (e) or (f) occurs on or after the “ex”
date for the issuance or distribution requiring such computation and prior to
the day in question, the Closing Price for each Trading Day on and after the
“ex” date for such other event shall be adjusted by multiplying such Closing Price
by the reciprocal of the fraction by which the Conversion Price is so required
to be adjusted as a result of such other event; and

 

(C)                                the
“ex” date for the issuance or distribution requiring such computation is prior
to the day in question, after taking into account any adjustment required
pursuant to clause (i) or (ii) of this proviso, the Closing Price for each
Trading Day on or after such “ex” date shall be adjusted by adding thereto the
amount of any cash and the fair market value (as determined by the Board of
Directors in a manner consistent with any determination of such value for
purposes of Section 12.4(d) or (f), whose determination shall be
conclusive and set forth in a Board Resolution) of the evidences of
indebtedness, shares of capital stock or assets being distributed applicable to
one share of Common Stock as of the close of business on the day before such
“ex” date.

 

For purposes of any
computation under Section 12.4(f), the Current Market Price of the Common
Stock on any date shall be deemed to be the average of the daily Closing Prices
per share of Common Stock for such day and the next two succeeding Trading
Days; provided, however, that if the “ex” date for any event (other than the
tender offer requiring such computation) that requires an adjustment to the
Conversion Price pursuant to Section 12.4(a), (b), (c), (d), (e) or (f)
occurs on or after the Expiration Time for the tender or exchange offer
requiring such computation and prior to the day in question, the Closing Price
for each Trading Day on and after the “ex” date for such other event shall be
adjusted by multiplying such Closing Price by the reciprocal of the fraction by
which the Conversion Price is so required to be adjusted as a result of such
other event.  For purposes of this
paragraph, the term “ex” date, when used:

 

(A)                              with
respect to any issuance or distribution, means the first date on which the
Common Stock trades regular way on the relevant exchange or in the relevant
market from which the Closing Price was obtained without the right to receive
such issuance or distribution;

 

(B)                                with
respect to any subdivision or combination of shares of Common Stock, means the
first date on which the Common Stock trades regular way on such exchange or in
such market after the time at which such subdivision or combination becomes
effective, and

 

68

 

(C)                                with
respect to any tender or exchange offer, means the first date on which the
Common Stock trades regular way on such exchange or in such market after the
Expiration Time of such offer.

 

Notwithstanding the
foregoing, whenever successive adjustments to the Conversion Price are called
for pursuant to this Section 12.4, such adjustments shall be made to the
Current Market Price as may be necessary or appropriate to effectuate the
intent of this Section 12.4 and to avoid unjust or inequitable results as
determined in good faith by the Board of Directors.

 

(ii)                                  “fair
market value” shall mean the amount which a willing buyer would pay a willing
seller in an arm’s length transaction.

 

(iii)                               “Record
Date” shall mean, with respect to any dividend, distribution or other
transaction or event in which the holders of Common Stock have the right to
receive any cash, securities or other property or in which the Common Stock (or
other applicable security) is exchanged for or converted into any combination
of cash, securities or other property, the date fixed for determination of
stockholders entitled to receive such cash, securities or other property (whether
such date is fixed by the Board of Directors or by statute, contract or
otherwise).

 

(h)                                 The
Company may make such reductions in the Conversion Price, in addition to those
required by Sections 12.4(a), (b), (c), (d), (e) or (f), as the Board of
Directors considers to be advisable to avoid or diminish any income tax to
holders of Common Stock or rights to purchase Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any
event treated as such for income tax purposes.

 

To the
extent permitted by applicable law, the Company from time to time may reduce
the Conversion Price by any amount for any period of time if the period is at
least 20 days and the reduction is irrevocable during the period and the Board
of Directors determines in good faith that such reduction would be in the best
interests of the Company, which determination shall be conclusive and set forth
in a Board Resolution; provided however, the Company may not voluntarily
reduce the Conversion Price if such reduction shall result in the issuance,
upon exchange of all Securities, of a number of shares of Common Stock in
excess of the thresholds requiring stockholder approval under the rules of the
Nasdaq National Market or such other United States securities exchange on which
the Common Stock is traded, unless the Company shall have, prior to such
reduction in the Conversion Price, obtained any such required stockholder
approval. Whenever the Conversion Price is reduced pursuant to the preceding sentence,
the Company shall mail to the Trustee and each Holder at the address of such
Holder as it appears in the Register a notice of the reduction at least 15 days
prior to the date the reduced Conversion Price takes effect, and such notice
shall state the reduced Conversion Price and the period during which it will be
in effect.

 

69

 

(i)                                     No
adjustment in the Conversion Price shall be required unless such adjustment
would require an increase or decrease of at least 1% in such price; provided,
however, that any adjustments which by reason of this Section 12.4(i) are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment.  All calculations
under this Article 12 shall be made by the Company and shall be made to
the nearest cent or to the nearest one hundredth of a share, as the case
may be.  No adjustment need be made for
a change in the par value or no par value of the Common Stock.

 

(j)                                     In
any case in which this Section 12.4 provides that an adjustment shall
become effective immediately after a Record Date for an event, the Company may
defer until the occurrence of such event (i) issuing to the Holder of any
Security converted after such Record Date and before the occurrence of such
event the additional shares of Common Stock issuable upon such conversion by
reason of the adjustment required by such event over and above the Common Stock
issuable upon such conversion before giving effect to such adjustment and (ii) paying
to such holder any amount in cash in lieu of any fraction pursuant to
Section 12.3 hereof.

 

(k)                                  For
purposes of this Section 12.4, the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the Company
but shall include shares issuable in respect of scrip certificates issued in
lieu of fractions of shares of Common Stock. 
The Company will not pay any dividend or make any distribution on shares
of Common Stock held in the treasury of the Company.

 

(l)                                     If
the distribution date for the rights provided in the Company’s rights
agreement, if any, occurs prior to the date a Security is converted, the Holder
of the Security who converts such Security after the distribution date is not
entitled to receive the rights that would otherwise be attached (but for the
date of conversion) to the shares of Common Stock received upon such
conversion; provided, however, that an adjustment shall be made to the
Conversion Price pursuant to clause 12.4(b) as if the rights were being
distributed to the common stockholders of the Company immediately prior to such
conversion.  If such an adjustment is
made and the rights are later redeemed, invalidated or terminated, then a
corresponding reversing adjustment shall be made to the Conversion Price, on an
equitable basis, to take account of such event.

 

Section 12.5. 
Notice of Adjustments of Conversion Price.  Whenever the Conversion Price is adjusted as
herein provided (other than in the case of an adjustment pursuant to the second
paragraph of Section 12.4(h) for which the notice required by such
paragraph has been provided), the Company shall promptly file with the Trustee
and any Conversion Agent other than the Trustee an Officers’ Certificate
setting forth the adjusted Conversion Price and showing in reasonable detail
the facts upon which such adjustment is based. 
Promptly after delivery of such Officers’ Certificate, the Company shall
prepare a notice stating that the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price and the date on which each
adjustment becomes effective, and shall mail such notice to each Holder at the
address of such Holder as it appears in the Register within 20 days of the
effective date of such adjustment. 
Failure to deliver such notice shall not effect the legality or validity
of any such adjustment.

 

70

 

Section 12.6. 
Notice Prior to Certain Actions.  In case at any time after the date hereof:

 

(a)                                  the
Company shall declare a dividend (or any other distribution) on its Common
Stock payable otherwise than in cash out of its capital surplus or its
consolidated retained earnings;

 

(b)                                 the
Company shall authorize the granting to the holders of its Common Stock of
rights or warrants to subscribe for or purchase any shares of capital stock of
any class (or of securities convertible into shares of capital stock of any
class) or of any other rights;

 

(c)                                  there
shall occur any reclassification of the Common Stock of the Company (other than
a subdivision or combination of its outstanding Common Stock, a change in par
value, a change from par value to no par value or a change from no par value to
par value), or any merger, consolidation, statutory share exchange or
combination to which the Company is a party and for which approval of any
shareholders of the Company is required, or the sale, transfer or conveyance of
all or substantially all of the assets of the Company; or

 

(d)                                 there
shall occur the voluntary or involuntary dissolution, liquidation or winding up
of the Company;

 

the Company shall cause
to be filed at each office or agency maintained for the purpose of conversion
of securities pursuant to Section 9.2 hereof, and shall cause to be
provided to the Trustee and all Holders in accordance with Section 15.2
hereof, at least 20 days (or 10 days in any case specified in clause (1)
or (2) above) prior to the applicable record or effective date hereinafter
specified, a notice stating:

 

(a)                                  the
date on which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, rights or warrants are to be determined, or

 

(b)                                 the
date on which such reclassification, merger, consolidation, statutory share
exchange, combination, sale, transfer, conveyance, dissolution, liquidation or
winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property deliverable
upon such reclassification, merger, consolidation, statutory share exchange,
sale, transfer, dissolution, liquidation or winding up.

 

Neither the failure to give such notice nor any defect
therein shall affect the legality or validity of the proceedings or actions
described in clauses (1) through (4) of this Section 12.6.

 

Section 12.7. 
Company to Reserve Common Stock.  The Company shall at all times use its best
efforts to reserve and keep available, free from preemptive rights, out of its
authorized but unissued Common Stock, for the purpose of effecting the
conversion of Securities, the full

 

71

 

number of shares of fully paid and nonassessable Common Stock then
issuable upon the conversion of all Outstanding Securities.

 

Section 12.8. 
Taxes on Conversions.  Except as provided in the next sentence, the Company will pay any
and all taxes (other than taxes on income) and duties that may be payable in
respect of the issue or delivery of shares of Common Stock on conversion of
Securities pursuant hereto.  A Holder
delivering a Security for conversion shall be liable for and will be required
to pay any tax or duty which may be payable in respect of any transfer involved
in the issue and delivery of shares of Common Stock in a name other than that
of the Holder of the Security or Securities to be converted, and no such issue
or delivery shall be made unless the Person requesting such issue has paid to
the Company the amount of any such tax or duty, or has established to the
satisfaction of the Company that such tax or duty has been paid.

 

Section 12.9. 
Covenant as to Common Stock.  The Company covenants that all shares of
Common Stock which may be issued upon conversion of Securities will upon issue
be fully paid and nonassessable and, except as provided in Section 12.8,
the Company will pay all taxes, liens and charges with respect to the issue
thereof.

 

Section 12.10. 
Cancellation of Converted Securities.  All Securities delivered for conversion
shall be delivered to the Trustee to be canceled by or at the direction of the
Trustee, which shall dispose of the same as provided in Section 2.9.

 

Section 12.11. 
Effect of Reclassification, Consolidation,
Merger or Sale.  If any of following
events occur, namely:

 

(a)                                  any
reclassification or change of the outstanding shares of Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination),

 

(b)                                 any
merger, consolidation, statutory share exchange or combination of the Company
with another corporation as a result of which holders of Common Stock shall be
entitled to receive stock, securities or other property or assets (including
cash) with respect to or in exchange for such Common Stock or

 

(c)                                  any
sale or conveyance of all or substantially all of the properties and assets of
the Company to any other corporation as a result of which holders of Common
Stock shall be entitled to receive stock, securities or other property or
assets (including cash) with respect to or in exchange for such Common Stock,

 

the Company or the
successor or purchasing corporation, as the case may be, shall execute with the
Trustee a supplemental indenture (which shall comply with the TIA as in force
at the date of execution of such supplemental indenture if such supplemental
indenture is then required to so comply) providing that such Security shall be
convertible into the kind and amount of shares of stock and other securities or
property or assets (including cash) which such Holder would have been entitled
to receive upon such reclassification, change, merger, consolidation, statutory
share exchange, combination, sale or conveyance had such Securities been
converted into Common Stock immediately prior to such reclassification, change,
merger, consolidation, statutory share exchange, combination, sale or
conveyance assuming such holder of Common Stock did not

 

72

 

exercise its rights of
election, if any, as to the kind or amount of securities, cash or other
property receivable upon such reclassification, change, merger, consolidation,
statutory share exchange, combination, sale or conveyance (provided that, if
the kind or amount of securities, cash or other property receivable upon such
reclassification, change, merger, consolidation, statutory share exchange,
combination, sale or conveyance is not the same for each share of Common Stock
in respect of which such rights of election shall not have been exercised
(“Non-Electing Share”), then for the purposes of this Section 12.11 the
kind and amount of securities, cash or other property receivable upon such
reclassification, change, merger, consolidation, statutory share exchange,
combination, sale or conveyance for each Non-Electing Share shall be deemed to
be the kind and amount so receivable per share by a plurality of the
Non-Electing Shares).  Such supplemental
indenture shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Article 12.  If, in the case of any such
reclassification, change, merger, consolidation, statutory share exchange,
combination, sale or conveyance, the stock or other securities and assets
receivable thereupon by a holder of shares of Common Stock includes shares of
stock or other securities and assets of a corporation other than the successor
or purchasing corporation, as the case may be, in such reclassification,
change, merger, consolidation, statutory share exchange, combination, sale or
conveyance, then such supplemental indenture shall also be executed by such
other corporation and shall contain such additional provisions to protect the
interests of the Holders of the Securities as the Board of Directors shall
reasonably consider necessary by reason of the foregoing, including to the
extent practicable the provisions providing for the Repurchase Rights set forth
in Article 11 hereof.

 

The Company shall cause notice of the execution of
such supplemental indenture to be mailed to each Holder, at the address of such
Holder as it appears on the Register, within 20 days after execution
thereof.  Failure to deliver such notice
shall not affect the legality or validity of such supplemental indenture.

 

The above provisions of this Section shall
similarly apply to successive reclassifications, mergers, consolidations,
statutory share exchanges, combinations, sales and conveyances.

 

If this Section 12.11 applies to any event or
occurrence, Section 12.4 hereof shall not apply.

 

Section 12.12. 
Responsibility of Trustee for Conversion Provisions.  The Trustee, subject to the provisions of Section 5.1
hereof, and any Conversion Agent shall not at any time be under any duty or
responsibility to any Holder of Securities to determine whether any facts exist
which may require any adjustment of the Conversion Price, or with respect to
the nature or intent of any such adjustments when made, or with respect to the
method employed, or herein or in any supplemental indenture provided to be
employed, in making the same.  Neither
the Trustee, subject to the provisions of Section 5.1 hereof, nor any
Conversion Agent shall be accountable with respect to the validity or value (of
the kind or amount) of any Common Stock, or of any other securities or
property, which may at any time be issued or delivered upon the conversion of
any Security; and it or they do not make any representation with respect
thereto.  Neither the Trustee, subject
to the provisions of Section 5.1 hereof, nor any Conversion Agent shall be
responsible for any failure of the Company to make any cash payment or to
issue, transfer or deliver any shares of stock or share certificates or other
securities or property upon the surrender of any Security for the purpose of
conversion; and the Trustee, subject to the provisions of

 

73

 

Section 5.1 hereof, and any Conversion Agent shall not be
responsible or liable for any failure of the Company to comply with any of the
covenants of the Company contained in this Article.

 

ARTICLE XIII

 

SUBORDINATION

 

Section 13.1. 
Securities Subordinated to Senior Debt.  The Company covenants and agrees, and each
Holder of Securities, by such Holder’s acceptance thereof, likewise covenants
and agrees, that the Indebtedness represented by the Securities and the payment
of the principal of and premium, if any, and interest (including Liquidated
Damages, if any) on each and all of the Securities is hereby expressly
subordinated and junior, to the extent and in the manner set forth and as set
forth in this Section 13.1, in right of payment to the prior payment in
full of all Senior Debt.

 

(a)                                  Subject
to the rights of the Holders of the Securities pursuant to the Pledge
Agreement, in the event of any distribution of assets of the Company upon any
dissolution, winding up, liquidation or reorganization of the Company, whether
in bankruptcy, insolvency, reorganization or receivership proceedings or upon
an assignment for the benefit of creditors or any other marshalling of the
assets and liabilities of the Company or otherwise, the holders of all Senior
Debt shall first be entitled to receive payment of the full amount due thereon
in respect of all such Senior Debt and all other amounts due or provision shall
be made for such amount in cash, or other payments satisfactory to the holders
of Senior Debt, before the Holders of any of the Securities are entitled to
receive any payment or distribution of any character, whether in cash,
securities or other property, on account of the principal of or premium, if
any, or interest (including Liquidated Damages, if any) on the Indebtedness evidenced
by the Securities.

 

(b)                                 In
the event of any acceleration of Maturity of the Securities because of an Event
of Default, unless the full amount due in respect of all Senior Debt is paid in
cash or other form of payment satisfactory to the holders of Senior Debt,  no payment shall be made (except, in each
case, for Permitted Payments) by the Company with respect to the principal of,
premium, if any, or interest (including Liquidated Damages, if any) on the
Securities or to acquire any of the Securities (including any redemption,
conversion or cash repurchase pursuant to the exercise of the Repurchase
Right), and the Company shall give prompt written notice of such acceleration
to such holders of Senior Debt.

 

(c)                                  In
the event of and during the continuance of any default in payment of the
principal of or premium, if any, or interest on, rent or other payment
obligation in respect of, any Senior Debt, unless all such payments due in
respect of such Senior Debt have been paid in full in cash or other payments
satisfactory to the holders of Senior Debt, no payment shall be made (except,
in each case, for Permitted Payments) by the Company with respect to the
principal of, premium, if any, or interest (including Liquidated Damages, if
any) on the Securities or to acquire any of the Securities (including any
redemption, conversion or cash repurchase pursuant to the exercise of the
Repurchase Right).  The Company shall
give prompt written notice to the Trustee of any default

 

74

 

under any Senior Debt or under any agreement pursuant
to which Senior Debt may have been issued.

 

(d)                                 During
the continuance of any event of default with respect to any Designated Senior
Debt, as such event of default is defined under any such Designated Senior Debt
or in any agreement pursuant to which any Designated Senior Debt has been
issued (other than a default in payment of the principal of or premium, if any,
or interest on, rent or other payment obligation in respect of any Designated
Senior Debt), permitting the holder or holders of such Designated Senior Debt
to accelerate the maturity thereof (or in the case of any lease, permitting the
landlord either to terminate the lease or to require the Company to make an
irrevocable offer to terminate the lease following an event of default
thereunder), no payment shall be made (except, in each case, for Permitted
Payments) by the Company, directly or indirectly, with respect to principal of,
premium, if any, or interest (including Liquidated Damages, if any) on the
Securities for 179 days following notice in writing (a “Payment Blockage
Notice”) to the Company, from any holder or holders of such Designated Senior
Debt or their representative or representatives or the trustee or trustees under
any indenture or under which any instrument evidencing any such Designated
Senior Debt may have been issued, that such an event of default has occurred
and is continuing, unless such event of default has been cured or waived or
such Designated Senior Debt has been paid in full; provided, however, if the
maturity of such Designated Senior Debt is accelerated (or in the case of any
lease, as a result of such event of default, the landlord under the lease has
given the Company notice of its intention to terminate the lease or to require
the Company to make an irrevocable offer to terminate the lease), no payment
may be made (except, in each case, for Permitted Payments) on the Securities
until such Designated Senior Debt has been paid in full in cash or other
payment satisfactory to the holders of such Designated Senior Debt or such
acceleration (or termination, in the case of a lease) has been cured or waived.

 

For
purposes of this Section 13.1(d), such Payment Blockage Notice shall be
deemed to include notice of all other events of default under such indenture or
instrument which are continuing at the time of the event of default specified
in such Payment Blockage Notice.  The
provisions of this Section 13.1(d) shall apply only to one such Payment
Blockage Notice given in any period of 365 days with respect to any issue of
Designated Senior Debt, and no such continuing event of default that existed or
was continuing on the date of delivery of any Payment Blockage Notice shall be,
or shall be made, the basis for a subsequent Payment Blockage Notice.

 

(e)                                  In
the event that, notwithstanding the foregoing provisions of Sections 13.1(a),
13.1(b), 13.1(c) and 13.1(d), any payment (except for any Permitted Payment on
account of principal, premium, if any, or interest (including Liquidated
Damages, if any) on the Securities shall be made by or on behalf of the Company
and received by the Trustee, by any Holder or by any Paying Agent (or, if the
Company is acting as its own Paying Agent, money for any such payment shall be
segregated and held in trust):

 

75

 

(i)                                     after
the occurrence of an event specified in Section 13.1(a) or 13.1(b), then,
unless all Senior Debt is paid in full in cash, or provision shall be made
therefor;

 

(ii)                                  after
the happening of an event of default of the type specified in
Section 13.1(c) above, then, unless the amount of such Senior Debt then
due shall have been paid in full, or provision made therefor or such event of
default shall have been cured or waived; or

 

(iii)                               after
the happening of an event of default of the type specified in
Section 13.1(d) above and delivery of a Payment Blockage Notice, then,
unless such event of default shall have been cured or waived or the 179-day
period specified in Section 13.1(d) shall have expired,

 

such payment (subject, in
each case, to the provisions of Section 13.7 hereof) shall be held in
trust for the benefit of, and shall be immediately paid over to, the holders of
Designated Senior Debt (unless an event described in Section 13.1(a), (b)
or (c) has occurred, in which case the payment shall be held in trust for the
benefit of, and shall be immediately paid over to all holders of Senior Debt)
or their representative or representatives or the trustee or trustees under any
indenture under which any instruments evidencing any of the Designated Senior
Debt or Senior Debt, as the case may be, may have been issued, as their
interests may appear.

 

Section 13.2. 
Subrogation. 
Subject to the payment in full of all Senior Debt (and except for
Permitted Payments) to which the Indebtedness evidenced by the Securities is in
the circumstances subordinated as provided in Section 13.1 hereof, the
Holders of the Securities shall be subrogated to the rights of the holders of
such Senior Debt to receive payments or distributions of cash, property or
securities of the Company applicable to such Senior Debt until all amounts
owing on the Securities shall be paid in full, and, as between the Company, its
creditors other than holders of such Senior Debt, and the Holders of the
Securities, no such payment or distribution made to the holders of Senior Debt
by virtue of this Article which otherwise would have been made to the
holders of the Securities shall be deemed to be a payment by the Company on
account of such Senior Debt, provided that the provisions of this
Article are and are intended solely for the purpose of defining the
relative rights of the Holders of the Securities, on the one hand, and the
holders of Senior Debt, on the other hand.

 

Section 13.3. 
Obligation of the Company is Absolute and Unconditional.  Nothing contained in this Article or
elsewhere in this Indenture or in the Securities is intended to or shall
impair, as between the Company, its creditors other than the holders of Senior
Debt, and the Holders of the Securities, the obligation of the Company, which
is absolute and unconditional, to pay to the Holders of the Securities the
principal of and premium, if any, and interest (including Liquidated Damages,
if any) on the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders of the Securities and creditors of the Company other than
the holders of Senior Debt, nor shall anything contained herein or therein
prevent the Trustee or the Holder of any Security from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture,

 

76

 

subject to the rights, if any, under this Article of the holders
of Senior Debt in respect of cash, property or securities of the Company
received upon the exercise of any such remedy.

 

Section 13.4. 
Maturity of or Default on Senior Debt.  Upon the maturity of any Senior Debt by
lapse of time, acceleration or otherwise, all principal of or premium, if any,
or interest on, rent or other payment obligations in respect of all such
matured Senior Debt shall first be paid in full, or such payment shall have
been duly provided for, before any payment on account of principal, or premium,
if any, or interest (including Liquidated Damages, if any) is made upon the
Securities (other than with respect to Permitted Payments).

 

Section 13.5. 
Payments on Securities Permitted.  Except as expressly provided in this Article,
nothing contained in this Article shall affect the obligation of the
Company to make, or prevent the Company from making, payments of the principal
of, or premium, if any, or interest (including Liquidated Damages, if any) on
the Securities in accordance with the provisions hereof and thereof, or shall
prevent the Trustee or any Paying Agent from applying any moneys deposited with
it hereunder to the payment of the principal of, or premium, if any, or interest
(including Liquidated Damages, if any) on the Securities.

 

Section 13.6. 
Effectuation of Subordination by Trustee.  Each Holder of Securities, by such Holder’s
acceptance thereof, authorizes and directs the Trustee on such Holder’s behalf
to take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article and appoints the Trustee such
Holder’s attorney-in-fact for any and all such purposes.

 

Upon any payment or distribution of assets of the
Company referred to in this Article, the Trustee and the Holders of the
Securities shall be entitled to rely upon any order or decree made by any court
of competent jurisdiction in which any such dissolution, winding up,
liquidation or reorganization proceeding affecting the affairs of the Company
is pending or upon a certificate of the trustee in bankruptcy, receiver,
assignee for the benefit of creditors, liquidating trustee or agent or other
Person making any payment or distribution, delivered to the Trustee or to the
Holders of the Securities, for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, and as to other facts pertinent
to the right of such Persons under this Article, and if such evidence is not
furnished, the Trustee may defer any payment to such Persons pending judicial
determination as to the right of such Persons to receive such payment.

 

Section 13.7. 
Knowledge of Trustee.  Notwithstanding the provision of this Article or any other
provisions of this Indenture, the Trustee shall not be charged with knowledge
of the existence of any Senior Debt, of any default in payment of principal of,
premium, if any, or interest on, rent or other payment obligation in respect of
any Senior Debt, or of any facts which would prohibit the making of any payment
of moneys to or by the Trustee, or the taking of any other action by the
Trustee, unless a Responsible Officer of the Trustee having responsibility for
the administration of the trust established by this Indenture shall have received
written notice thereof from the Company, any Holder of Securities, any Paying
or Conversion Agent of the Company or the holder or representative of any class
of Senior Debt, and, prior to the receipt of any such written notice, the
Trustee shall be entitled in all respects to assume that no such default or
facts exist; provided, however, that unless on the third Business Day prior to
the date upon which by the terms hereof any such moneys may become payable for
any purpose the Trustee

 

77

 

shall have received the notice provided for in this Section 13.7,
then, anything herein contained to the contrary notwithstanding, the Trustee
shall have full power and authority to receive such moneys and apply the same
to the purpose for which they were received, and shall not be affected by any
notice to the contrary which may be received by it on or after such date.

 

Section 13.8. 
Trustee’s Relation to Senior Debt.  The Trustee shall be entitled to all the
rights set forth in this Article with respect to any Senior Debt at the
time held by it, to the same extent as any other holder of Senior Debt and
nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder.

 

Nothing contained in this Article shall apply to
claims of or payments to the Trustee under or pursuant to Section 5.8
hereof.

 

With respect to the holders of Senior Debt, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article, and no implied
covenants or obligations with respect to the holders of Senior Debt shall be
read into this Indenture against the Trustee. 
The Trustee shall not be deemed to owe any fiduciary duty to the holders
of Senior Debt and the Trustee shall not be liable to any holder of Senior Debt
if it shall pay over or deliver to Holders, the Company or any other Person
moneys or assets to which any holder of Senior Debt shall be entitled by virtue
of this Article or otherwise.

 

Section 13.9. 
Rights of Holders of Senior Debt Not Impaired.  No right of any present or future holder of
any Senior Debt to enforce the subordination herein shall at any time or in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company or by any noncompliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof any such
holder may have or be otherwise charged with.

 

Section 13.10. 
Modification of Terms of Senior Debt.  Any renewal or extension of the time of
payment of any Senior Debt or the exercise by the holders of Senior Debt of any
of their rights under any instrument creating or evidencing Senior Debt,
including without limitation the waiver of default thereunder, may be made or
done all without notice to or assent from the Holders of the Securities or the
Trustee.

 

No compromise, alteration, amendment, modification,
extension, renewal or other change of, or waiver, consent or other action in
respect of, any liability or obligation under or in respect of, or of any of
the terms, covenants or conditions of any indenture or other instrument under
which any Senior Debt is outstanding or of such Senior Debt, whether or not
such release is in accordance with the provisions or any applicable document,
shall in any way alter or affect any of the provisions of this Article or
of the Securities relating to the subordination thereof.

 

Section 13.11. 
Certain Conversions Not Deemed Payment.  For the purposes of this Article 13 only:

 

(a)                                  the
issuance and delivery of junior securities upon conversion of Securities in
accordance with Article 12 hereof shall not be deemed to constitute a
payment or distribution on account of the principal of, premium, if any, or
interest (including Liquidated Damages, if any) on Securities or on account of
the purchase or other acquisition of Securities, and

 

78

 

(b)                                 the
payment, issuance or delivery of cash (except in satisfaction of fractional
shares pursuant to Section 12.3 hereof), property or securities (other
than junior securities) upon conversion of a Security shall be deemed to
constitute payment on account of the principal of, premium, if any, or interest
(including Liquidated Damages, if any) on such Security.

 

For the purposes of this
Section 13.11, the term “junior securities” means:

 

(a)                                  shares
of any common stock of the Company or

 

(b)                                 other
securities of the Company that are subordinated in right of payment to all
Senior Debt that may be outstanding at the time of issuance or delivery of such
securities to substantially the same extent as, or to a greater extent that,
the Securities are so subordinated as provided in this Article.

 

Nothing contained in this
Article 13 or elsewhere in this Indenture or in the Securities is intended
to or shall impair, as among the Company, its creditors (other than holders of
Senior Debt) and the Holders of Securities, the right, which is absolute and
unconditional, of the Holder of any Security to convert such Security in
accordance with Article 12 hereof.

 

Section 13.12. 
Enforcement of Rights Under the Pledge Agreement.  No provision in this Article 13 shall
prohibit any Holder from enforcing its rights under the Pledge Agreement.

 

ARTICLE XIV

 

SECURITY

 

Section 14.1. 
Pledge Agreement.  The Company agrees to (i) enter into the Pledge Agreement on the
Closing Date and comply with the terms and provisions thereof and (ii) purchase
the Pledged Securities to be pledged to the Trustee for ratable benefit of the
Holders in such amount as will be sufficient upon receipt of scheduled interest
and/or principal payments of such Pledged Securities to provide for payment in
full of the first six scheduled interest payments due on the Securities and to
secure repayment of the principal, premium, if any, and interest on the
Securities in the event that the Securities become due and payable prior to
such time as the first six scheduled interest payments thereon shall have been
paid in full. The Pledged Securities shall be pledged by the Company to the
Trustee for the ratable benefit of the Holders, and shall be held by the
Trustee in the Pledge Account pending disposition pursuant to the Pledge
Agreement.

 

Section 14.2. 
Acceptance of Terms of Pledge Agreement.  Each Holder, by its acceptance of a
Security, consents and agrees to the terms of the Pledge Agreement (including,
without limitation, the provisions providing for foreclosure and release of the
Pledged Securities) as the same may be in effect or may be amended from time to
time in accordance with its terms, and authorizes and directs the Trustee, in
its capacity as such, to enter into the Pledge Agreement and to perform its
obligations and exercise its rights thereunder in accordance therewith.  The Company will do or cause to be done all
such acts and things as may be necessary or reasonably requested by the
Trustee, or as may be required by the provisions of the Pledge Agreement, to

 

79

 

assure and confirm to the Trustee the security interest in the Pledged
Securities contemplated hereby, by the Pledge Agreement or any part thereof, as
from time to time constituted, so as to render the same available for the
security and benefit of this Indenture and of the Securities secured thereby,
according to the intent and purposes herein and therein expressed.  The Company shall take, or shall cause to be
taken, upon request of the Trustee, any and all actions reasonably required to
cause the Pledge Agreement to create and maintain, as security for the
obligations of the Company under this Indenture and the Securities, valid and
enforceable first priority liens in and on all the Pledged Securities, in favor
of the Trustee, superior to and prior to the rights of third Persons and subject
to no other liens.

 

Section 14.3. 
Trust Indenture Act Requirements.  The release of any Pledged Securities (as
defined in the Pledge Agreement) pursuant to the Pledge Agreement will not be
deemed to impair the security granted thereunder in respect of the Securities
in contravention of the provisions hereof and thereof if and to the extent the
Pledged Securities are released pursuant to this Indenture and the Pledge
Agreement.  To the extent applicable,
the Company shall cause TIA Section 314(d) relating to the release of
property or securities from the lien and security interest created under the
Pledge Agreement and relating to the substitution therefor of any property or
securities to be subjected to the lien and security interest created under the
Pledge Agreement to be complied with. Any certificate or opinion required by
TIA Section 314(d) may be made by an Officer of the Company, except in
cases where TIA Section 314(d) requires that such certificate or opinion
be made by an independent Person, which Person shall be an independent
engineer, appraiser or other expert selected by the Company.

 

Section 14.4. 
Opinions as to Collateral.  The Company shall cause TIA
Section 314(b) to be complied with.

 

ARTICLE XV

 

OTHER PROVISIONS OF
GENERAL APPLICATION

 

Section 15.1. 
Trust Indenture Act Controls.  This Indenture is subject to the provisions
of the TIA which are required to be part of this Indenture, and shall, to the
extent applicable, be governed by such provisions.

 

Section 15.2. 
Notices. 
Any notice or communication to the Company or the Trustee is duly given
if in writing and delivered in person or mailed by first-class mail to the
address set forth below:

 

(a)                                  if
to the Company:

 

Nektar Therapeutics

150 Industrial Road

San Carlos, California

Attention: Paula Kesler,
Esq.

 

80

 

with a copy to:

 

Cooley Godward LLP

3000 Sand Hill Road

Building #3, Suite 230

Menlo Park, California 94025

Attention: John Geschke,
Esq.

 

(b)                                 if
to the Trustee:

 

J.P. Morgan Trust
Company, National Association

560 Mission Street

13th Floor

San Francisco, California 94105

Attention: Institutional Trust Services

 

The Company or the
Trustee by notice to the other may designate additional or different addresses
for subsequent notices or communications.

 

Any notice or communication to a Holder shall be
mailed by first-class mail to his address shown on the Register kept by the
Registrar.  Failure to mail a notice or
communication to a Holder or any defect in such notice or communication shall
not affect its sufficiency with respect to other Holders.

 

If a notice or communication is mailed or sent in the
manner provided above within the time prescribed, it is duly given as of the
date it is mailed, whether or not the addressee receives it, except that notice
to the Trustee shall only be effective upon receipt thereof by the Trustee.

 

If the Company mails a notice or communication to
Holders, it shall mail a copy to the Trustee at the same time.

 

Section 15.3. 
Communication by Holders with Other Holders.  Holders may communicate pursuant
to Section 312(b) of the TIA with other Holders with respect to their
rights under the Securities or this Indenture. 
The Company, the Trustee, the Registrar and anyone else shall have the
protection of Section 312(c) of the TIA.

 

Section 15.4. 
Acts of Holders of Securities.  (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture
to be given or taken by Holders of Securities may be embodied in and evidenced
by:

 

(i)                                     one
or more instruments of substantially similar tenor signed by such Holders in
person or by agent or proxy duly appointed in writing;

 

(ii)                                  the
record of Holders of Securities voting in favor thereof, either in person or by
proxies duly appointed in writing, at any meeting of Holders of Securities duly
called and held in accordance with the provisions of Article 8; or

 

(iii)                               a
combination of such instruments and any such record.

 

81

 

Except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments or record or both are delivered to the Trustee and,
where it is hereby expressly required, to the Company.  Such instrument or instruments and record
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the “Act” of the Holders of Securities signing such instrument
or instruments and so voting at such meeting. 
Proof of execution of any such instrument or of a writing appointing any
such agent or proxy, or of the holding by any Person of a Security, shall be
sufficient for any purpose of this Indenture and (subject to Section 5.1
hereof) conclusive in favor of the Trustee and the Company if made in the
manner provided in this Section.  The
record of any meeting of Holders of Securities shall be proved in the manner
provided in Section 8.6 hereof.

 

(b)                                 The
fact and date of the execution by any Person of any such instrument or writing
may be provided in any manner which the Trustee reasonably deems sufficient.

 

(c)                                  The
principal amount and serial numbers of Securities held by any Person, and the
date of such Person holding the same, shall be proved by the Register.

 

(d)                                 Any
request, demand, authorization, direction, notice, consent, election, waiver or
other Act of the Holders of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.

 

Section 15.5. 
Certificate and Opinion as to Conditions Precedent.  In any case where several matters are
required to be certified by, or covered by an opinion of, any specified Person,
it is not necessary that all such matters be certified by, or covered by the
opinion of, only one such Person, or that they be so certified or covered by
only one document, but one such Person may certify or give an opinion with
respect to some matters and one or more other such Persons as to other matters,
and any such Person may certify or give an opinion as to such matters in one or
several documents.

 

Any certificate or opinion of an officer of the
Company may be based, insofar as it relates to legal matters, upon an Opinion
of Counsel, unless such officer knows, or in the exercise of reasonable care
should know, that the Opinion of Counsel with respect to the matters upon which
such certificate or opinion is based is erroneous.  Any such Opinion of Counsel may be based, insofar as it relates
to factual matters, upon a certificate or representations by, an officer or
officers of the Company stating that the information with respect to such
factual matters is in the possession of the Company, unless such counsel knows,
or in the exercise of reasonable care should know, that the certificate or
representations with respect to such matters are erroneous.

 

Where any Person is required to make, give or execute
two or more applications, requests, consents, certificates, statements,
opinions or other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.

 

Upon any application or request by the Company to the
Trustee to take any action under any provision of this Indenture, the Company
shall furnish to the Trustee an Officers’ Certificate

 

82

 

stating that all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with and an
Opinion of Counsel stating that in the opinion of such Counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.

 

Section 15.6. 
Statements Required in Certificate or Opinion.  Each certificate or opinion with respect to
compliance with a condition or covenant provided for in this Indenture shall
include:

 

(a)                                  a
statement that each individual signing such certificate or opinion on behalf of
the Company has read such covenant or condition and the definitions herein
relating thereto;

 

(b)                                 a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based;

 

(c)                                  a
statement that, in the opinion of each such individual, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and

 

(d)                                 a
statement as to whether, in the opinion of each such individual, such condition
or covenant has been complied with.

 

Section 15.7. 
Effect of Headings and Table of Contents.  The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.

 

Section 15.8. 
Successors and Assigns.  All covenants and agreements in this
Indenture by the Company shall bind its successors and assigns, whether so
expressed or not.

 

Section 15.9. 
Separability Clause.  In case any provision in this Indenture or the Securities shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.

 

Section 15.10. 
Benefits of Indenture.  Nothing contained in this Indenture or in
the Securities, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, the holders of Senior Debt and
the Holders of Securities, any benefit or legal or equitable right, remedy or
claim under this Indenture.

 

Section 15.11. 
Governing Law. 
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

83

 

Section 15.12. 
Counterparts. 
This instrument may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original but all such
counterparts shall together constitute but one and the same instrument.

 

Section 15.13. 
Legal Holidays.  In any case where any Interest Payment Date, Redemption Date or
Stated Maturity of any Security or the last day on which a Holder of a Security
has a right to convert such Security shall not be a Business Day at any Place
of Payment or Place of Conversion, then (notwithstanding any other provision of
this Indenture or of the Securities) payment of interest (including Liquidated
Damages, if any) or principal or premium, if any, or conversion of the
Securities, need not be made at such Place of Payment or Place of Conversion on
such day, but may be made on the next succeeding Business Day at such Place of
Payment or Place of Conversion with the same force and effect as if made on the
Interest Payment Date or Redemption Date or at the Stated Maturity or on such
last day for conversion, provided, that in the case that payment is made on
such succeeding Business Day, no interest shall accrue on the amount so payable
for the period from and after such Interest Payment Date, Redemption Date or
Stated Maturity, as the case may be.

 

Section 15.14. 
Recourse Against Others.  No recourse for the payment of the principal
of or premium, if any, or interest (including Liquidated Damages, if any) on
any Security, or for any claim based thereon or otherwise in respect thereof,
shall be had against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company or of any successor corporation,
whether by virtue of any constitution, statute or rule of law or by the
enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance thereof and as part of the consideration for the issue
thereof, expressly waived and released.

 

IN WITNESS WHEREOF, the parties hereto have caused
this Indenture to be duly executed all as of the day and year first above
written.

 

	
   

  	
  NEKTAR THERAPEUTICS

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ajit S. Gill

  	
   

  
	
   

  	
   

  	
  Name:  Ajit S. Gill

  
	
   

  	
   

  	
  Title:  Chief Executive Officer and President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  J.P. MORGAN TRUST
  COMPANY,

  NATIONAL ASSOCIATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Nagy

  	
   

  
	
   

  	
   

  	
  Name:  James Nagy

  
	
   

  	
   

  	
  Title:  Assistant Vice President

  

 

84

 

EXHIBIT A

 

FORM
OF SECURITY

 

[FACE
OF SECURITY]

 

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (“DTC”) TO NEKTAR THERAPEUTICS
(OR ITS SUCCESSOR) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE,
CONVERSION OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.(1)

 

THE SECURITY EVIDENCED BY THIS CERTIFICATE HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD EXCEPT
AS SET FORTH IN THE FOLLOWING SENTENCE. 
BY ACQUISITION HEREOF, THE HOLDER (1) AGREES THAT IT WILL NOT WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER
THE SECURITY EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF
SUCH SECURITY EXCEPT (A) TO NEKTAR THERAPEUTICS (THE “COMPANY”) OR ANY
SUBSIDIARY THEREOF, (B) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (C) PURSUANT TO ANY
OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OR (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF
SUCH TRANSFER; AND (2) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE
SECURITY EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO
CLAUSE (1)(D) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.  IN CONNECTION WITH ANY TRANSFER OF THE
SECURITY EVIDENCED HEREBY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF SUCH
SECURITY (OTHER THAN A TRANSFER PURSUANT TO CLAUSE (1)(D) ABOVE), THE
HOLDER MUST MAKE THE REPRESENTATIONS AND WARRANTIES SET FORTH ON THE REVERSE
HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO
THE TRUSTEE (OR ANY SUCCESSOR TRUSTEE, AS APPLICABLE).  IF THE PROPOSED TRANSFER IS PURSUANT TO
CLAUSE (1)(B) OR (1)(C) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE (OR ANY SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH

 

(1) This legend should be included on if the Security is issued in
global form

 

A-1

 

CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF
THE SECURITY EVIDENCED HEREBY PURSUANT TO CLAUSE (1)(D) ABOVE OR THE
EXPIRATION OF TWO YEARS FROM THE ORIGINAL ISSUANCE OF THE SECURITY EVIDENCED
HEREBY.

 

A-2

 

NEKTAR
THERAPEUTICS

 

 

3% Convertible
Subordinated Note due 2010

 

CUSIP
NO. 640268 AC

 

	
  No. 1

  	
  $

  	
   

  

 

NEKTAR THERAPEUTICS, a Delaware corporation (the
“Company,” which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to Cede
& Co., or its registered assigns, the principal sum of U.S. Dollars
($                         )
on June 30, 2010.

 

Interest Payment Dates: June 30 and
December 30, commencing December 30, 2003

 

Regular Record Dates: June 15 and
December 15

 

Reference is hereby made to the further provisions of
this Security set forth on the reverse hereof, which further provisions shall
for all purposes have the same effect as if set forth at this place.

 

A-3

 

IN WITNESS WHEREOF, the Company has caused this
Security to be duly executed manually or by facsimile by its duly authorized
officers.

 

Dated: 
October     , 2003

 

	
   

  	
  NEKTAR THERAPEUTICS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

Trustee’s Certificate of
Authentication

 

This is one of the 3%
Convertible Subordinated

Notes due 2010 described in the within-named

Indenture.

 

	
  J.P. MORGAN TRUST
  COMPANY,

  NATIONAL ASSOCIATION, as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized
  Signatory

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
  , 2003

  
					

 

A-4

 

[REVERSE OF
SECURITY]

 

NEKTAR
THERAPEUTICS

 

3% Convertible
Subordinated Note due 2010

 

Capitalized terms used herein but not defined shall
have the meanings assigned to them in the Indenture referred to below unless
otherwise indicated.

 

1.                                       Principal
and Interest.

 

Nektar Therapeutics, a Delaware corporation (the
“Company”) promises to pay interest on the principal amount of this Security at
the rate of 3 percent per annum from
              
until repayment at Maturity, redemption or repurchase.  The Company will pay interest on this
Security semiannually in arrears on June 30 and December 30 of each
year (each an “Interest Payment Date”), commencing December 30, 2003.

 

Interest on the Securities shall be computed on the
basis of a 360-day year of twelve 30-day months.

 

A Holder of any Security at the close of business on a
Regular Record Date shall be entitled to receive interest on such Security on
the corresponding Interest Payment Date. 
A Holder of any Security which is converted after the close of business
on a Regular Record Date and prior to the corresponding Interest Payment Date
(other than any Security whose Maturity is prior to such Interest Payment Date)
shall be entitled to receive interest on the principal amount of such Security,
notwithstanding the conversion of such Security prior to such Interest Payment
Date.  However, any such Holder which
surrenders any such Security for conversion during the period between the close
of business on such Regular Record Date and ending with the opening of business
on the corresponding Interest Payment Date shall be required to pay the Company
an amount equal to the interest on the principal amount of such Security so
converted, which is payable by the Company to such Holder on such Interest
Payment Date, at the time such Holder surrenders such Security for
conversion.  Notwithstanding the
foregoing, any such Holder which surrenders for conversion any Security which
has been called for redemption by the Company in a notice of redemption given
by the Company pursuant to Section 10.5 of the Indenture shall be entitled
to receive (and retain) such interest and need not pay the Company an amount
equal to the interest on the principal amount of such Security so converted at
the time such Holder surrenders such Security for conversion.

 

To the maximum extent permitted by applicable law, in
the event that any amounts owing in respect of the principal of, the premium
(if any) or interest on the Securities is not paid in full on the due date
therefor, interest shall accrue on such unpaid amounts at the rate of 3% per
annum until such amounts are paid in full.

 

In accordance with the terms of the Resale
Registration Rights Agreement, dated October 9, 2003, between the Company
and the Initial Purchasers party thereto (the “Registration Rights Agreement”),
during the first 90 days following a Registration Default (as

 

A-5

 

defined in the Registration Rights Agreement), the interest rate borne
by the Securities shall be increased by 0.25% on:

 

(a)                                  May 7,
2004, if the Shelf Registration Statement is not declared effective by the
Securities and Exchange Commission prior to or on May 6, 2004;

 

(b)                                 the
day after the fifth Business Day after the Shelf Registration Statement,
previously declared effective, ceases to be effective or fails to be usable, if
a post-effective amendment (or report filed pursuant to the Exchange Act) that,
upon effectiveness would cure the Shelf Registration Statement is not filed
with the Securities and Exchange Commission during such five Business Day
period; or

 

(c)                                  the
day following the 45th, 60th or 90th day, as
the case may be, of any Suspension Period (as defined in the Registration
Rights Agreement), if such suspension has not been terminated.

 

From and after the 91st
day following such Registration Default, the interest rate borne by the
Securities shall be increased by 0.50%. 
In no event shall the interest rate borne by the Securities be increased
by more than 0.50%.

 

Any amount of additional interest will be payable in
cash semiannually, in arrears, on each Interest Payment Date and will cease to
accrue on the date the Registration Default is cured.

 

2.                                       Method
of Payment.

 

Interest on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be
paid to the person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest.

 

Principal of, and premium, if any, and interest on,
Global Securities will be payable to the Depositary in immediately available
funds.

 

Principal and premium, if any, on Physical Securities
will be payable at the office or agency of the Company maintained for such
purpose, initially the Corporate Trust Office of the Trustee.  Interest on Physical Securities will be
payable by (i) U.S. Dollar check drawn on a bank in The City of New York mailed
to the address of the Person entitled thereto as such address shall appear in
the Register, or (ii) upon application to the Registrar not later than the
relevant Record Date by a Holder of an aggregate principal amount in excess of
$5,000,000, wire transfer in immediately available funds.

 

3.                                       Paying
Agent and Registrar.

 

Initially, J.P. Morgan Trust Company, National
Association, the Trustee under the Indenture, will act as Paying Agent and
Registrar.  The Company may change the
Paying Agent or Registrar without notice to any Holder.

 

A-6

 

4.                                       Indenture.

 

This Security is one of a duly authorized series of
Securities issued under an Indenture, dated as of October 9, 2003 (the
“Indenture”), between the Company and J.P. Morgan Trust Company, National
Association, as trustee (the “Trustee”). 
The Securities issued under the Indenture may be issued in one or more
series and the Securities of each such series shall rank equally and pari passu
with the Securities of each other series. Notwithstanding any provision to the
contrary, any future series of Securities established in or pursuant to a Board
Resolution or a supplemental indenture will be on the same terms as the
Securities issued pursuant to the Indenture in all respects other than the date
of issuance.  All Securities of any one
series need not be issued at the same time and may be issued from time to time,
consistent with the terms of the Indenture, if so provided by or pursuant to
such Board Resolution, such Officers’ Certificate or in any such indenture
supplemental thereto.  The terms of the
Security include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended
(“TIA”).  This Security is subject to
all such terms, and Holders are referred to the Indenture and the TIA for a
statement of all such terms.  To the
extent permitted by applicable law, in the event of any inconsistency between
the terms of this Security and the terms of the Indenture, the terms of the
Indenture shall control.

 

5.                                       Provisional
Redemption.

 

The Securities may be redeemed at the election of the
Company, as a whole or from time to time in part or any date, at any time prior
to June 30, 2006 (a “Provisional Redemption”), at a Redemption Price,
payable in cash, equal to $1,000 per $1,000 principal amount of the Securities,
on the date of redemption (the “Provisional Redemption Date”) if (i) the
Closing Price of the Common Stock has exceeded 150% of the Conversion Price (as
may be adjusted from time to time) then in effect for at least 20 Trading Days
in any consecutive 30 Trading Day period ending on the Trading Day prior to the
date of mailing of the provisional notice of redemption upon not less than 20
nor more than 60 days notice (the “Notice Date”), and (ii) either (a) a
registration statement covering resales of the Securities and the Common Stock
issuable upon conversion thereof is effective and available for use and is
expected to remain effective for the 30 days following the Provisional
Redemption Date or (b) the Securities and the Common Stock issuable upon
conversion thereof are no longer Transfer Restricted Securities (as defined in
the Registration Rights Agreement).

 

Upon any such Provisional Redemption, the Company
shall make an additional payment (the “Make-Whole Payment”) with respect to the
Securities called for redemption to Holders on the Notice Date in an amount
equal to $90 per $1,000 principal amount of the Securities, less the amount of
any interest actually paid on such Securities prior to the Provisional
Redemption Date.  The Company shall make
the Make-Whole Payment on all Securities called for Provisional Redemption,
including those Securities converted into Common Stock between the Notice Date
and the Provisional Redemption Date.

 

The Company may elect to pay the Make-Whole Payment or
any portion thereof (i) in cash or, (ii) subject to the fulfillment by the
Company of the conditions set forth in Section 10.1 of the Indenture, by
delivering the number of shares of Common Stock equal to (x) the Make-Whole
Payment (or any portion thereof that the Company elects to pay in shares of
Common

 

A-7

 

Stock) divided by (y) 97% of the average of the Closing Prices per
share of Common Stock for the five consecutive Trading Days immediately
preceding and including the first Trading Day prior to the Provisional
Redemption Date.

 

6.                                       Optional
Redemption.

 

Except as provided above, this Security is not
redeemable prior to June 30, 2006. 
This Security may be redeemed in whole or in part, upon not less than 20
nor more than 60 days’ notice, at any time on or after June 30, 2006, at
the option of the Company, at the Redemption Prices (expressed as percentages
of the principal amount) set forth below if redeemed during the 12-month period
beginning June 30 of the years indicated and ending June 29 of the
following years, plus any interest accrued but not paid prior to the Optional
Redemption Date.

 

	
  During the Twelve Months

  Commencing

  	
   

  	
  Redemption
  Prices

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  June 30,
  2006

  	
   

  	
  101.714

  	
  %

  
	
  June 30,
  2007

  	
   

  	
  101.286

  	
  %

  
	
  June 30,
  2008

  	
   

  	
  100.857

  	
  %

  
	
  June 30,
  2009

  	
   

  	
  100.429

  	
  %

  

 

Securities in original denominations larger than
$1,000 may be redeemed in part.  If any
Security selected for partial redemption is converted in part before
termination of the conversion right with respect to the portion of the Security
so selected, the converted portion of such Security shall be deemed to be the
portion selected for redemption (provided, however, that the Holder of such
Security so converted and deemed redeemed shall not be entitled to any
additional interest payment as a result of such deemed redemption than such
Holder would have otherwise been entitled to receive upon conversion of such Security).  Securities which have been converted during
a selection of Securities to be redeemed may be treated by the Trustee as
Outstanding for the purpose of such selection.

 

On and after the Redemption Date, interest ceases to
accrue on Securities or portions of Securities called for redemption, unless
the Company defaults in the payment of the Redemption Price and accrued and
unpaid interest.

 

Notice of redemption will be given by the Company to
the Holders as provided in the Indenture.

 

7.                                       Repurchase
Right Upon a Change of Control.

 

If a Change of Control occurs, the Holder of
Securities, at the Holder’s option, shall have the right, in accordance with
the provisions of the Indenture, to require the Company to repurchase the
Securities (or any portion of the principal amount hereof that is at least
$1,000 or an integral multiple thereof, provided that the portion of the
principal amount of this Security to be Outstanding after such repurchase is at
least equal to $1,000) at the Repurchase Price in cash, plus any interest
accrued and unpaid to the Repurchase Date.

 

A-8

 

Subject to the conditions provided in the Indenture,
the Company may, at its option, elect to pay the Repurchase Price in Common
Stock or in securities of the acquiring party in a Change of Control for which
the Common Stock is exchanged in connection with such Change of Control, or a
combination thereof with cash, by delivering the number of shares of Common
Stock or Acquiror Stock equal to (i) the Repurchase Price (less any amounts
paid in cash) divided by (ii) 95% of the average of the Closing Prices per
share of Common Stock or Acquiror Stock, as applicable, for the five
consecutive Trading Days immediately preceding and including the third Trading
Day prior to the Repurchase Date.

 

No fractional shares of Common Stock or Acquiror Stock
will be issued upon repurchase of any Securities.  Instead of any fractional share of Common Stock or Acquiror Stock
which would otherwise be issued upon conversion of such Securities, the Company
shall pay a cash adjustment as provided in the Indenture.

 

A Company Notice will be given by the Company to the
Holders as provided in the Indenture. 
To exercise a repurchase right, a Holder must deliver to the Trustee a
written notice as provided in the Indenture.

 

8.                                       Conversion
Rights.

 

Subject to and upon compliance with the provisions of
the Indenture, the Holder of Securities is entitled, at such Holder’s option,
at any time before the close of business on June 30, 2010, to convert the
Holder’s Securities (or any portion of the principal amount hereof which is
$1,000 or an integral multiple thereof), at the principal amount thereof or of
such portion, into duly authorized, fully paid and nonassessable shares of Common
Stock of the Company at the Conversion Price in effect at the time of
conversion.

 

In the case of a Security (or a portion thereof)
called for redemption, such conversion right in respect of the Security (or
such portion thereof) so called, shall expire at the close of business on the
second Business Day preceding the Redemption Date, unless the Company defaults
in making the payment due upon redemption. 
In the case of a Change of Control for which the Holder exercises its
Repurchase Right with respect to a Security (or a portion thereof), such
conversion right in respect of the Security (or portion thereof) shall expire
at the close of business on the Business Day preceding the Repurchase Date.

 

The Conversion Price shall be initially equal to
$11.35 per share of Common Stock.  The
Conversion Price shall be adjusted under certain circumstances as provided in
the Indenture.

 

To exercise the conversion right, the Holder must
surrender the Security (or portion thereof) duly endorsed or assigned to the
Company or in blank, at the office of the Conversion Agent, accompanied by a
duly signed conversion notice to the Company. 
Any Security surrendered for conversion during the period from the close
of business on any Regular Record Date to the opening of business on the
corresponding Interest Payment Date (other than any Security whose Maturity is
prior to such Interest Payment Date), shall also be accompanied by payment in
New York Clearing House funds or other funds acceptable to the Company of an
amount equal to the interest payable on such Interest Payment Date on the
principal amount of the Securities being surrendered for conversion.

 

A-9

 

No fractional shares of Common Stock will be issued
upon conversion of any Securities. 
Instead of any fractional share of Common Stock which would otherwise be
issued upon conversion of such Securities, the Company shall pay a cash
adjustment as provided in the Indenture.

 

9.                                       Subordination.

 

The Indebtedness evidenced by this Security is, to the
extent and in the manner provided in the Indenture, subordinated and subject in
right of payment to the prior payment in full of all amounts then due on all
Senior Debt of the Company, and this Security is issued subject to such provisions
of the Indenture with respect thereto. 
Each Holder of this Security, by accepting the same, (a) agrees to and
shall be bound by such provisions, (b) authorizes and directs the Trustee on
such Holder’s behalf to take such action as may be necessary or appropriate to
effectuate the subordination so provided and (c) appoints the Trustee such
Holder’s attorney-in-fact for any and all such purposes.

 

10.                                 Security.

 

The Holder of this Note is entitled to the benefits of
a Pledge Agreement, dated as of October 9, 2003, among the Company, the
Trustee and the Pledged Securities Intermediary named therein, pursuant to
which the Company has placed in the Pledge Account cash or Pledged Securities
sufficient to provide for the payment of the first six scheduled interest
payments due on the Notes and to secure repayment of the principal, premium (if
any) and interest on the Notes in the event that the Notes become due and
payable prior to such time as the first six scheduled interest payments thereon
shall have been paid in full.

 

11.                                 Denominations;
Transfer; Exchange.

 

The Securities are issuable in registered form,
without coupons, in denominations of $1,000 and integral multiples of $1,000 in
excess thereof.  A Holder may register
the transfer or exchange of Securities in accordance with the Indenture.  The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and
the Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture.

 

In the event of a redemption in part, the Company will
not be required (a) to register the transfer of, or exchange, Securities for a
period of 15 days immediately preceding the date notice is given identifying
the serial numbers of the Securities called for such redemption, or (b) to
register the transfer of, or exchange, any such Securities, or portion thereof,
called for redemption.

 

In the event of redemption, conversion or repurchase
of the Securities in part only, a new Security or Securities for the
unredeemed, unconverted or unrepurchased portion thereof will be issued in the
name of the Holder hereof.

 

12.                                 Persons
Deemed Owners.

 

The registered Holder of this Security shall be
treated as its owner for all purposes.

 

A-10

 

13.                                 Unclaimed
Money.

 

The Trustee and the Paying Agent shall pay to the
Company any money held by them for the payment of principal, premium, if any,
or interest that remains unclaimed for two years after the date upon which such
payment shall have become due.  After
payment to the Company, Holders entitled to the money must look to the Company
for payment as general creditors unless an applicable abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.

 

14.                                 Discharge
Prior to Redemption or Maturity.

 

Subject to certain conditions contained in the
Indenture, the Company may discharge its obligations under the Securities and
the Indenture if (1) (a) all of the Outstanding Securities shall become due and
payable at their scheduled Maturity within one year or (b) all of the
Outstanding Securities are scheduled for redemption within one year, and (2)
the Company shall have deposited with the Trustee money and/or U.S. Government
Obligations sufficient to pay the principal of, and premium, if any, and
interest on, all of the Outstanding Securities on the date of Maturity or
redemption, as the case may be.

 

15.                                 Amendment;
Supplement; Waiver.

 

The Indenture permits, with certain exceptions as
therein provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities
under the Indenture at any time by the Company and the Trustee with the consent
of the Holders of a majority in aggregate principal amount of the Outstanding
Securities (or such lesser amount as shall have acted at a meeting pursuant to
the provisions of the Indenture).  The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities at the time Outstanding, on
behalf of the Holders of all the Securities, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences.  Any
such consent or waiver by the Holder of this Security shall be conclusive and
binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security or such other Security.

 

No reference herein to the Indenture and no provision
of this Security or of the Indenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest (including Liquidated Damages, if any) on this
Security at the times, places and rate, and in the coin or currency, herein
prescribed or to convert this Security (or pay cash in lieu of conversion) as
provided in the Indenture.

 

16.                                 Defaults
and Remedies.

 

The Indenture provides that an Event of Default with
respect to the Securities occurs when any of the following occurs:

 

(a)                                  the
Company defaults in the payment of the principal of or premium, if any, on any
of the Securities when it becomes due and payable at Maturity, upon redemption

 

A-11

 

or exercise of a
Repurchase Right or otherwise, whether or not such payment is prohibited by the
subordination provisions of Article 13 of the Indenture;

 

(b)                                 the
Company defaults in the payment of interest on any of the Securities when it
becomes due and payable and such default continues for a period of 30 days,
whether or not such payment is prohibited by the subordination provisions of
Article 13 of the Indenture; provided that a failure to make any of the
first six scheduled interest payments on any of the Securities within three Business
Days of the applicable Interest Payment Date will constitute an Event of
Default with no additional grace or cure period;

 

(c)                                  the
Company fails to perform or observe any other term, covenant or agreement
contained in the Securities or the Indenture and such default continues for a
period of 60 days after written notice of such failure is given as specified in
the Indenture;

 

(d)                                 (i)
the Company fails to make any payment by the end of the applicable grace
period, if any, after the maturity of any Indebtedness for borrowed money in an
amount in excess of $5,000,000 (provided that such failure shall not constitute
an Event of Default if (1) the Company determines, in good faith, that a lessor
under a lease described in clause (3)(a) of the definition of Indebtedness
set forth in the Indenture breached a covenant under the lease and the Company
has given notice of the breach to the lessor and the Trustee and (2) as a
result of the breach, the Company withholds payment under the lease) (a
“Default Exception”), or (ii) there is an acceleration of any Indebtedness for
borrowed money in an amount in excess of $5,000,000 because of a default with
respect to such Indebtedness (other than a Default Exception) without such
Indebtedness having been discharged or such acceleration having been cured,
waived, rescinded or annulled, in the case of either clause (i) or (ii)
above, for a period of 30 days after written notice is given to the Company as
specified in the Indenture;

 

(e)                                  the
Pledge Agreement, as such agreement may be amended, restated or supplemented or
otherwise modified from time to time, shall cease to be in full force and
effect or enforceable in accordance with its terms, other than in accordance
with its terms; and

 

(f)                                    there
are certain events of bankruptcy, insolvency or reorganization of the Company.

 

If an Event of Default shall occur and be continuing,
the principal of all the Securities may be declared due and payable in the
manner and with the effect provided in the Indenture.

 

17.                                 Authentication.

 

This Security shall not be valid until the Trustee (or
authenticating agent) executes the certificate of authentication on the other
side of this Security.

 

A-12

 

18.                                 Abbreviations.

 

Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts
to Minors Act).

 

19.                                 Additional
Rights of Holders of Restricted Securities.

 

In addition to the rights provided to Holders under
the Indenture, Holders of Restricted Securities shall have all the rights set
forth in the Registration Rights Agreement.

 

20.                                 CUSIP
Numbers.

 

Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on this Security and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders.  No representation is made as to the accuracy
of such numbers either as printed on this Security or as contained in any
notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.

 

21.                                 Governing
Law.

 

The Indenture and this Security shall be governed by,
and construed in accordance with, the law of the State of New York.

 

22.                                 Successor
Corporation.

 

In the event a successor corporation assumes all the
obligations of the Company under this Security, pursuant to the terms hereof
and of the Indenture, the Company will be released from all such obligations.

 

A-13

 

ASSIGNMENT FORM

 

To assign this Security, fill in the form below and
have your signature guaranteed: (I) or (we) assign and transfer this Security
to:

 

	
   

  

(Insert assignee’s
soc. sec. or tax I.D. no.)

 

	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  

(Print or type
assignee’s name, address and zip code)

 

and irrevocably appoint
                                                                                                                                                                           to
transfer this Security on the books of the Company.  The agent may substitute another to act for him.

 

	
  Dated:

  	
   

  	
   

  	
  Your Name:

  	
   

  
	
   

  	
   

  	
  (Print your name
  exactly as it appears on the

  face of this Security)

  
	
   

  	
   

  
	
   

  	
  Your Signature:

  	
   

  
	
   

  	
   

  	
  (Sign exactly as your
  name appears on

  the face of this Security)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature Guarantee*:

  	
   

  
							

 

 

* Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor acceptable to the Trustee).

 

A-14

 

In connection with any
transfer of this Security occurring prior to the date which is two years
following the original issuance of this Security, the undersigned represents
and warrants that without utilizing any general solicitation or general
advertising that this Security is being transferred in compliance with an
exemption from registration under the Securities Act of 1933, as amended and
documents are being furnished which comply with the conditions of transfer set
forth in this Security and the Indenture.

 

The Trustee or other
Registrar shall not be obligated to register this Security in the name of any
Person other than the Holder hereof unless the conditions to any such transfer
of registration set forth herein and in Sections 2.7, 2.8 and 2.9 of the
Indenture shall have been satisfied.

 

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  NOTICE: The signature
  to this assignment must

  correspond with the name as written upon

  the face of the within-mentioned instrument in

  every particular, without alteration or any

  change whatsoever.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Signature Guarantee:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Signature must be
  guaranteed by a participant

  in a recognized signature guaranty medallion

  program or other signature guarantor

  acceptable to the Trustee.

  

 

A-15

 

CONVERSION NOTICE

 

TO:                            NEKTAR
THERAPEUTICS

150 Industrial Road

San Carlos, California 94070

 

The undersigned registered owner of this Security
hereby irrevocably exercises the option to convert this Security, or the
portion hereof (which is $1,000 principal amount or an integral multiple
thereof) below designated, into shares of Common Stock in accordance with the
terms of the Indenture referred to in this Security, and directs that the
shares issuable and deliverable upon such conversion, together with any check
in payment for fractional shares and any Securities representing any
unconverted principal amount hereof, be issued and delivered to the registered
holder hereof unless a different name has been indicated below.  If shares or any portion of this Security
not converted are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.  Any amount required to be paid to the
undersigned on account of interest (including Liquidated Damages, if any)
accompanies this Security.

 

	
  Dated:

  	
   

  	
   

  	
  Your Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (Print your name
  exactly as it appears on the

  face of this Security)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Your Signature:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (Sign exactly as your
  name appears on

  the face of this Security)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Signature Guarantee*:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Principal amount to be
  converted (if less than all): $

  	
   

  
							

 

 

* Participant in a recognized
Signature Guarantee Medallion Program (or other signature guarantor acceptable
to the Trustee).

 

A-16

 

Fill in for registration of shares (if to be issued)
and Securities (if to be delivered) other than to and in the name of the
registered holder:

 

	
   

  	
   

  
	
   

  	
  (Name)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Street Address)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (City, State and Zip
  Code)

  

 

A-17

 

NOTICE OF EXERCISE
OF REPURCHASE RIGHT

 

TO:                            NEKTAR
THERAPEUTICS

150 Industrial Road

San Carlos, California 94070

 

The undersigned registered owner of this Security
hereby irrevocably acknowledges receipt of a notice from Nektar Therapeutics
(the “Company”) as to the occurrence of a Change of Control with respect to the
Company and requests and instructs the Company to repay the entire principal
amount of this Security, or the portion thereof (which is $1,000 principal
amount or an integral multiple thereof) below designated, in accordance with
the terms of the Indenture referred to in this Security, together with interest
(including Liquidated Damages, if any) accrued and unpaid to, but excluding,
such date, to the registered holder hereof, in cash or by delivery of shares of
Common Stock as specified in the Company’s notice.

 

	
  Dated:

  	
   

  	
   

  	
  Your Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (Print your name
  exactly as it appears on the

  face of this Security)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Your Signature:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (Sign exactly as your
  name appears on

  the face of this Security)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Signature Guarantee*:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Principal amount to be
  converted (if less than all): $

  	
   

  
							

 

 

* Participant in a recognized
Signature Guarantee Medallion Program (or other signature guarantor acceptable
to the Trustee).

 

A-18

 

SCHEDULE OF
EXCHANGES FOR PHYSICAL SECURITIES(2)

 

The following exchanges of a part of this Global
Security for Physical Securities have been made:

 

	
  Date of Exchange

  	
   

  	
  Amount of
  decrease in

  Principal Amount of this

  Global Security

  	
   

  	
  Amount of
  increase in

  Principal Amount of this

  Global Security

  	
   

  	
  Principal
  Amount of this

  Global Security following

  such decrease (or increase)

  	
   

  	
  Signature
  of authorized

  officer of Trustee

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

(2) This schedule should
be included only if the Security is issued in global form.

 

A-19

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