Document:

EXHIBIT 10.21

                          REGISTRATION RIGHTS AGREEMENT

     REGISTRATION  RIGHTS  AGREEMENT,  dated as of September  16,  1998,  by and
between Celgene Corporation, a Delaware corporation (the "Company"), and Warburg
Dillon Read LLC (the  "Purchaser")  entered into in connection with the issuance
of a Convertible  Note due September 16, 2003  convertible into shares of Common
Stock, par value $.01 per share ("Common Stock") of the Company.

     1.   Certain Definitions.

     For purposes of this  Registration  Rights  Agreement,  the following terms
shall have the following respective meanings:

          (a) "Commission" shall mean the Securities and Exchange Commission, or
any other  federal  agency at the time  administering  the  Exchange  Act or the
Securities Act, whichever is the relevant statute for the particular purpose.

          (b)  "Convertible  Note" shall mean the Convertible Note due September
16,  2003,  of the  Company  to be  issued  and sold to the  Purchaser,  and any
Convertible Note issued in exchange therefor or in lieu thereof.

          (c)  "Effective  Time"  shall  mean the date on which  the  Commission
declares the Shelf  Registration  effective  or on which the Shelf  Registration
otherwise becomes effective.

          (d) "Exchange Act" shall mean the Securities  Exchange Act of 1934, or
any successor thereto, as the same shall be amended from time to time.

          (e) "Issue  Date" shall mean the date on which a  Convertible  Note is
initially issued.

          (f)  The  term  "person"  shall  mean  a   corporation,   association,
partnership,   organization,   business,  individual,  government  or  political
subdivision thereof or governmental agency.

          (g) "Registration Expenses" shall have the meaning assigned thereto in
Section 4 hereof.

          (h)  "Securities  Act" shall mean the  Securities  Act of 1933, or any
successor thereto, as the same shall be amended from time to time.

          (i) "Shares"  means the shares of Common Stock  issuable upon exercise
of the Convertible Note.

          (j) "Shelf  Registration"  shall have the meaning  assigned thereto in
Section 2 hereof.

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     In addition,  capitalized  terms not defined  herein shall have the meaning
ascribed in the Convertible Note.

     2.   Shelf Registration of Shares.

     (a) Not later than  September  16, 1999,  the Company  shall file under the
Securities Act a "shelf"  registration  statement providing for the registration
of, and the sale on a  continuous  or  delayed  basis by the  Purchaser  of, all
Shares issuable upon conversion of the Convertible  Notes,  pursuant to Rule 415
under the  Securities  Act  and/or any  similar  rule that may be adopted by the
Commission  (the  "Shelf  Registration").  The  Company  agrees  to use its best
efforts to cause the Shelf  Registration  to become or be declared  effective no
later than 45  calendar  days after the  filing  thereof  and to keep such Shelf
Registration continuously effective for a period ending on the earliest to occur
of (i) the  second  anniversary  of the Issue  Date,  (ii)  notification  to the
Company by the Purchaser that it has sold all Shares issuable upon conversion of
the  Convertible  Notes so owned by it, or (iii) such time as the  Purchaser may
sell all of such shares  pursuant to Rule 144(k) under the  Securities  Act. The
Company  further agrees,  if necessary,  to supplement or make amendments to the
Shelf  Registration,  if  required  by the rules,  regulations  or  instructions
applicable  to  the  registration  form  used  by the  Company  for  such  Shelf
Registration  or by the Securities Act or rules and  regulations  thereunder for
shelf registration, and the Company agrees to furnish to the Purchaser copies of
any such  supplement or amendment  prior to its being used and/or filed with the
Commission,  and will not file any such  supplement  or  amendment  to which the
Purchaser reasonably objects.

     (b) Notwithstanding the foregoing, following the effectiveness of the Shelf
Registration,  the Company may, at any time,  suspend the  effectiveness of such
Shelf Registration for up to 60 days, as appropriate (a "Suspension Period"), by
giving notice to the Purchaser,  if the Company shall have  determined  that the
Company may be required to disclose any  material  corporate  development  which
disclosure  may  jeopardize a material  transaction or otherwise have a material
adverse effect on the Company. The Company will use its best efforts to minimize
the length of any Suspension Period. Notwithstanding the foregoing, no more than
one  Suspension  Period may occur  within any 180 day period.  The period of any
such  suspension of the  registration  statement shall be added to the period of
time the Company agrees to keep the Shelf Registration  effective as provided in
Section  2(a).  The Purchaser  agrees that,  upon receipt of any notice from the
Company of a  Suspension  Period,  the  Purchaser  shall  forthwith  discontinue
disposition of shares covered by the Shelf  Registration until the Purchaser (i)
is advised in writing by the Company that the use of the  applicable  prospectus
may  be  resumed,  (ii)  has  received  copies  of  a  supplemental  or  amended
prospectus,  if applicable,  and (iii) has received  copies of any additional or
supplemental  filings which are  incorporated  or deemed to be  incorporated  by
reference in such prospectus.

     3.   Registration Procedures.

     (a) In connection  with any  obligation of the Company to register  Shares,
the Company shall use its best efforts to effect or cause such  registration  to
permit the sale of the Shares by the Purchaser in  accordance  with the intended
method  or  methods  of  distribution   thereof   described  in  the  applicable
registration statement.  In connection therewith,  the Company shall, within the
time specified in Section 2 above:

          (i) prepare and file with the Commission a  registration  statement on
     any form which may be utilized  by the  Company and which shall  permit the
     disposition of the Shares in accordance with the intended method or methods
     thereof, as specified in writing by the Purchaser;

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          (ii) comply with the  provisions of the Securities Act with respect to
     the disposition of all of the Shares covered by such registration statement
     in accordance with the intended methods of disposition by the Purchaser set
     forth in such registration statement;

          (iii) provide (A) the Purchaser, (B) the underwriters (which term, for
     purposes of these Registration  Rights, shall include a person deemed to be
     an underwriter within the meaning of Section 2(1.1) of the Securities Act),
     if any, thereof,  (C) the sales or placement agent, if any,  therefor,  (D)
     counsel for such  underwriters or agent,  and (E) counsel for the Purchaser
     the  opportunity  to participate  in the  preparation of such  registration
     statement,  each prospectus  included therein or filed with the Commission,
     and each amendment or supplement thereto;

          (iv) for a reasonable  period prior to the filing of such registration
     statement,  and throughout the period  specified in Section 2 hereof,  make
     available for  inspection by the parties  referred to in Section  3(a)(iii)
     above who shall  certify to the Company that they have a current  intention
     to sell the Shares  pursuant to the  registration  statement such financial
     and other  information and books and records of the Company,  and cause the
     officers,  employees,  counsel and independent certified public accountants
     of the  Company  to  respond  to such  inquiries,  as shall  be  reasonably
     necessary,  in the judgment of the respective  counsel  referred to in such
     Section,  to  conduct a  reasonable  investigation  within  the  meaning of
     Section 11 of the Securities Act; provided,  however,  that each such party
     shall be  required to  maintain  in  confidence  and not to disclose to any
     other person any information or records  provided by the Company until such
     time as (A) such information  becomes a matter of public record (whether by
     virtue of its inclusion in such  registration  statement or otherwise),  or
     (B) such person shall be required so to disclose such information  pursuant
     to the subpoena or order of any court or other governmental  agency or body
     having  jurisdiction  over the matter (subject to the  requirements of such
     order, and only after such person shall have given the Company prompt prior
     written notice of such requirement), or (C) such information is required to
     be set forth in such  registration  statement,  or the prospectus  included
     therein or in an amendment to such  registration  statement or an amendment
     or supplement to such prospectus in order that such registration statement,
     prospectus,  amendment or supplement,  as the case may be, does not contain
     an untrue  statement of a material fact or omit to state therein a material
     fact  required to be stated  therein or  necessary  to make the  statements
     therein not misleading;

          (v) promptly  notify the Purchaser,  the sales or placement  agent, if
     any, therefor and the managing underwriter or underwriters, if any, thereof
     and confirm such advice in writing, (A) when such registration statement or
     the prospectus  included therein or any prospectus  amendment or supplement
     or  post-effective  amendment  has been filed,  and,  with  respect to such
     registration statement or any post-effective  amendment,  when the same has
     become effective, (B) of any comments by the Commission and by the Blue Sky
     or securities  commissioner  or regulator of any state with respect thereto
     or any request by the  Commission  for  amendments or  supplements  to such
     registration statement or prospectus or for additional information,  (C) of
     the  issuance  by  the   Commission  of  any  stop  order   suspending  the
     effectiveness  of such  registration  statement or the  initiation or overt
     threatening  of any  proceedings  for that purpose,  (D) if at any time the
     representations  and  warranties of the Company  contemplated  by Section 5
     hereof  cease to be true and correct in all material  respects,  (E) of the
     receipt by the Company of any  notification  with respect to the suspension
     of the  qualification  of the  Shares for sale in any  jurisdiction  or the
     initiation or overt threatening of any proceeding for such purpose,  or (F)
     at any time  when a  prospectus  is  required  to be  delivered  under  the
     Securities  Act, if such  registration  statement,  prospectus,  prospectus
     amendment  or  supplement  or  post-effective  amendment,  or any  document
     incorporated by reference in any of the foregoing, contains an untrue

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     statement of a material  fact or omits to state any material  fact required
     to be stated  therein  or  necessary  to make the  statements  therein  not
     misleading in light of the circumstances then existing;

          (vi) use its best  efforts  to  obtain  the  withdrawal  of any  order
     suspending  the ,  effectiveness  of  such  registration  statement  or any
     post-effective amendment thereto at the earliest practicable date;

          (vii) if requested by any managing  underwriter or  underwriters,  any
     placement  or  sales  agent or the  Purchaser,  promptly  incorporate  in a
     prospectus  supplement or  post-effective  amendment such information as is
     required by the applicable  rules and  regulations  of the Commission  that
     such  managing  underwriter  or  underwriters,  such agent or the Purchaser
     specify  should be  included  therein  relating to the terms of the sale of
     such Shares, including, without limitation, information with respect to the
     number  of  Shares  being  sold  by  the  Purchaser  or  agent  or  to  any
     underwriters,   the  name  and  description  of  the  Purchaser,  agent  or
     underwriter, the offering price of such Shares and any discount, commission
     or other compensation  payable in respect thereof, the purchase price being
     paid therefor by such  underwriters  and with respect to any other terms of
     the offering of the Shares to be sold by the  Purchaser or agent or to such
     underwriters;  and make all required filings of such prospectus  supplement
     or post-effective  amendment  promptly after notification of the matters to
     be incorporated in such prospectus supplement or post-effective amendment;

          (viii)  furnish to the Purchaser,  each  placement or sales agent,  if
     any, therefor, each underwriter, if any, thereof and the respective counsel
     referred to in Section 3(a)(iii) a copy of such  registration  statement in
     the form in which it became  effective,  each such amendment and supplement
     thereto  (in  each  case  including  all  exhibits  thereto  and  documents
     incorporated  by  reference  therein)  and such  number  of  copies of such
     registration   statement   (excluding   exhibits   thereto  and   documents
     incorporated by reference  therein unless  specifically so requested by the
     Purchaser, agent or underwriter,  as the case may be) and of the prospectus
     included  in  such  registration  .statement  (including  each  preliminary
     prospectus and any summary prospectus), in conformity with the requirements
     of the Securities Act, and such other documents,  as the Purchaser,  agent,
     if any,  and  underwriter,  if any,  may  reasonably  request  in  order to
     facilitate  the  offering  and  disposition  of  the  Shares  owned  by the
     Purchaser,   offered  or  sold  by  such  agent  or  underwritten  by  such
     underwriter  and to permit the Purchaser,  agent and underwriter to satisfy
     the prospectus delivery requirements of the Securities Act; and the Company
     hereby consents to the use of such prospectus  (including such  preliminary
     and summary  prospectus)  and any  amendment or  supplement  thereto by the
     Purchaser and by any such agent and  underwriter,  in each case in the form
     most recently provided to such party by the Company, in connection with the
     offering and sale of the Shares covered by the prospectus  (including  such
     preliminary and summary prospectus) or any supplement or amendment thereto;

          (ix) use its best  efforts to (A) register or qualify the Shares to be
     included in such registration  statement under such securities laws or blue
     sky laws of such jurisdictions as the Purchaser and each placement or sales
     agent, if any,  therefor and underwriter,  if any, thereof shall reasonably
     request, (B) keep such registrations or qualifications in effect and comply
     with  such  laws so as to  permit  the  continuance  of  offers,  sales and
     dealings therein in such  jurisdictions  during the respective periods such
     registration  statements are required to remain  effective  under Section 2
     above and for so long as may be  necessary  to enable the  Purchaser or any
     agent or underwriter  to complete its  distribution  of Shares  pursuant to
     such  registration  statement and (C) take any and all other actions as may
     be reasonably  necessary or advisable to enable the  Purchaser,  agent,  if
     any,  and  underwriter,  if any,  to  consummate  the  disposition  in such
     jurisdictions of such Shares; provided, however, that the Company

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     shall not be  required  for any such  purpose  to (I)  qualify as a foreign
     corporation in any jurisdiction  wherein it would not otherwise be required
     to  qualify  but for the  requirements  of this  Section  3(a)(ix)  or (II)
     consent to general service of process in any such jurisdiction;

          (x) use its best  efforts to obtain the  consent or  approval  of each
     governmental  agency or authority,  whether federal,  state or local, which
     may be required to effect the Shelf Registration or the offering or sale in
     connection  therewith or to enable the Purchaser to offer, or to consummate
     the disposition of, its Shares;

          (xi)  cooperate with the Purchaser and the managing  underwriters,  if
     any, to facilitate the timely  preparation and delivery of any certificates
     representing  Shares  to be sold,  which  certificates  shall  be  printed,
     lithographed  or engraved,  or produced by any combination of such methods,
     and which  shall  not,  once sold  under the Shelf  Registration,  bear any
     restrictive legends; and, in the case of an underwritten  offering,  enable
     such Shares to be in such denominations and registered in such names as the
     managing  underwriters  may request at least two business days prior to any
     sale of the Shares:

          (xii)  enter  into  one or more  underwriting  agreements,  engagement
     letters, agency agreements or similar agreements, as appropriate, including
     (without  limitation)  customary provisions relating to indemnification and
     contribution,  and take such other actions in connections  therewith as the
     Purchaser shall  reasonably  request in order to expedite or facilitate the
     disposition of the Shares;

          (xiii)  notify the Purchaser in writing of any proposal by the Company
     to amend or waive any provision of these  Registration  Rights  pursuant to
     Section  7(g)  hereof  and of any  amendment  or waiver  effected  pursuant
     thereto,  each of which  notices shall contain the text of the amendment or
     waiver proposed or effected, as the case may be;

          (xiv)  in the  event  that  any  broker-dealer  registered  under  the
     Exchange Act shall  underwrite  any Shares or participate as a member of an
     underwriting  syndicate  or selling  group or "assist in the  distribution"
     (within  the meaning of the Rules of Fair  Practice  and the By-Laws of the
     National Association of Securities Dealers, Inc. ("NASD")) thereof, whether
     as an  underwriter,  a  placement  or sales  agent or a broker or dealer in
     respect thereof, or otherwise,  assist such broker-dealer in complying with
     the requirements of such Rules and By-Laws, including,  without limitation,
     by providing such  information to such  broker-dealer as may be required in
     order for such  broker-dealer  to comply with the requirements of the Rules
     of Fair Practice of the NASD;

          (xv)  comply  with  all  applicable   rules  and  regulations  of  the
     Commission, and make generally available to its security holders as soon as
     practicable  but in any event  not later  than  eighteen  months  after the
     effective date of such registration  statement, an earning statement of the
     Company and its subsidiaries complying with Section 1l(a) of the Securities
     Act (including, at the option of the Company, Rule 158 thereunder); and

          (xvi) use its best efforts to have the Shares  approved for trading on
     the Nasdaq National Market.

     (b) In the event that the Company  would be  required,  pursuant to Section
3(a)(v)(F) above, to notify the Purchaser, the placement or sales agent, if any,
therefor and the  managing  underwriters,  if any,  thereof,  the Company  shall
without delay prepare and furnish to the  Purchaser,  to each placement or sales
agent,

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if any,  and to each  underwriter,  if any, a  reasonable  number of copies of a
prospectus supplemented or amended in form and substance reasonably satisfactory
to them,  so that,  as  thereafter  delivered  to  purchasers  of  Shares,  such
prospectus  shall not contain an untrue  statement of a material fact or omit to
state a material  fact  required to be stated  therein or  necessary to make the
statements  therein not misleading in light of the circumstances  then existing.
The Purchaser  agrees that upon receipt of any notice from the Company  pursuant
to Section  3(a)(v)(F)  hereof,  the Purchaser shall  forthwith  discontinue the
disposition of Shares pursuant to the registration  statement applicable to such
Shares  until the  Purchaser  shall  have  received  copies of such  amended  or
supplemented prospectus,  and if so directed by the Company, the Purchaser shall
deliver  to the  Company  (at the  Company's  expense)  all  copies,  other than
permanent  file copies,  then in the  Purchaser's  possession of the  prospectus
covering such Shares at the time of receipt of such notice.

     (c) The Company may require the  Purchaser  to furnish to the Company  such
information  regarding  the  Purchaser and the  Purchaser's  intended  method of
distribution  of the  Shares as the  Company  may from  time to time  reasonably
request in writing,  but only to the extent that such information is required in
order to comply with the  Securities  Act.  The  Purchaser  agrees to notify the
Company as promptly as  practicable  of any  inaccuracy or change in information
previously furnished by the Purchaser to the Company or of the occurrence of any
event in  either  case as a result  of which  any  prospectus  relating  to such
registration  contains or would  contain an untrue  statement of a material fact
regarding the Purchaser or the  Purchaser's  intended  method of distribution of
such Shares or omits to state any material  fact  regarding the Purchaser or the
Purchaser's intended method of distribution of such Shares required to be stated
therein or necessary to make the  statements  therein not misleading in light of
the  circumstances  then  existing,  and  promptly to furnish to the Company any
additional  information  required to correct and update any previously furnished
information or required so that such prospectus shall not contain,  with respect
to the Purchaser or the  distribution of such Shares,  an untrue  statement of a
material fact or omit to state a material fact required to be stated  therein or
necessary  to make  the  statements  therein  not  misleading  in  light  of the
circumstances  then  existing.  The Purchaser  agrees that upon  delivering  any
notice to the  Company  pursuant  to this  Section  3(c),  the  Purchaser  shall
forthwith  discontinue the  disposition of Shares  pursuant to the  registration
statement  applicable  to such Shares until the  Purchaser  shall have  received
copies of such  amended or  supplemented  prospectus,  and if so directed by the
Company,  the Purchaser shall deliver to the Company (at the Company's  expense)
all copies, other than permanent file copies then in the Purchaser's  possession
of the prospectus covering such Shares at the time of receipt of such notice.

     4.   Registration Expenses.

     The  Company  agrees to bear and to pay or cause to be paid  promptly  upon
request being made therefor all expenses  incident to the Company's  performance
of or  compliance  with these  Registration  Rights as they  relate to the Shelf
Registration,  including,  without  limitation,  (i) all Commission and any NASD
registration  and  filing  fees and  expenses,  (ii) all  fees and  expenses  in
connection with the  qualification of the Shares for offering and sale under the
State  securities  and blue sky laws  referred  to in Section  3(a)(ix)  hereof,
including  reasonable  fees and  disbursements  of counsel for the  placement or
sales agent or underwriters in connection  with such  qualifications,  (iii) all
fees and expenses in  connection  with the approval for trading of the Shares on
the Nasdaq  National  Market,  (iv) all  expenses  relating to the  preparation,
printing,  distribution and reproduction of each registration statement required
to be  filed  hereunder,  each  prospectus  included  therein  or  prepared  for
distribution pursuant hereto, each amendment or supplement to the foregoing, the
certificates  representing  the Shares and all other documents  relating hereto,
(v) internal expenses (including,  without limitation, all salaries and expenses
of the Company's officers and employees  performing legal or accounting duties),
and (vi) fees,  disbursements and expenses of counsel and independent  certified
public  accountants  of the Company  (including  the expenses of any opinions or
"cold comfort" letters required by or incident to such

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performance  and  compliance)   (collectively,   the  "Registration  Expenses").
Notwithstanding  the  foregoing,  the  Purchaser  shall pay all agency  fees and
commissions and underwriting discounts and commissions  attributable to the sale
of the Shares and the fees and disbursements of any counsel or other advisors or
experts retained by the Purchaser.

     5.   Representations and Warranties.

     The Company  represents  and warrants to, and agrees  with,  the  Purchaser
that:

          (a) Each  registration  statement  covering Shares and each prospectus
(including any preliminary or summary prospectus) contained therein or furnished
pursuant to Section  3(a)(viii) hereof and any further amendments or supplements
to any such registration  statement or prospectus,  when it becomes effective or
is  filed  with the  Commission,  as the  ease  may be,  and,  in the case of an
underwritten  offering  of  Shares,  at  the  time  of  the  closing  under  the
underwriting agreement relating thereto will conform in all material respects to
the requirements of the Securities Act, and will not contain an untrue statement
of a  material  fact or omit to state a  material  fact  required  to be  stated
therein or necessary to make the statements  therein not misleading;  and at all
times subsequent to the Effective Time when a prospectus would be required to be
delivered  under the  Securities  Act, other than from (i) such time as a notice
has been given to the Purchaser pursuant to Section 3(a)(v)(F) hereof until (ii)
such  time as the  Company  furnishes  an  amended  or  supplemented  prospectus
pursuant to Section  3(b) hereof,  each such  registration  statement,  and each
prospectus  (including any summary  prospectus)  contained  therein or furnished
pursuant to Section  3(a)(viii)  hereof,  as then amended or supplemented,  will
conform in all material  respects to the requirements of the Securities Act, and
will not  contain  an untrue  statement  of a  material  fact or omit to state a
material fact required to be stated  therein or necessary to make the statements
therein  not  misleading  in the  light  of  the  circumstances  then  existing;
provided,  however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with information
furnished in writing to the Company by the Purchaser expressly for use therein.

          (b) Any documents incorporated by reference in any prospectus referred
to in Section 5(a) hereof,  when they become or became  effective or are or were
filed with the Commission, or if amended, when amended, as the case may be, will
conform  or  conformed  in all  material  respects  to the  requirements  of the
Exchange  Act,  and none of such  documents  will contain or contained an untrue
statement  of a material  fact or will omit or omitted to state a material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading;  provided,  however, that this representation and warranty shall not
apply to any  statements  or omissions  made in reliance  upon and in conformity
with information  furnished in writing to the Company by the Purchaser expressly
for use therein.

     6.   Indemnification.

          (a)  Indemnification  by the Company.  Upon the registration of Shares
pursuant to Section 2 hereof,  and in  consideration  of the  agreements  of the
Purchaser  contained  herein,  and as an inducement to the Purchaser to purchase
the Convertible Notes, the Company shall, and it hereby agrees to, indemnify and
hold harmless the Purchaser and each person who  participates  as a placement or
sales agent or as an  underwriter in any offering or sale of such Shares against
any losses,  claims,  damages or  liabilities,  joint or  several,  to which the
Purchaser  or any  such  agent or  underwriter  may  become  subject  under  the
Securities  Act or  otherwise,  insofar  as  such  losses,  claims,  damages  or
liabilities  (or actions in respect  thereof)  arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
registration  statement  under  which  such  Shares  were  registered  under the
Securities Act, or any preliminary,

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final or summary prospectus contained therein or furnished by the Company to the
Purchaser,  agent or  underwriter,  or any amendment or supplement  thereto,  or
arise out of or are based upon the omission or alleged omission to state therein
a  material  fact  required  to be  stated  therein  or  necessary  to make  the
statements  therein not misleading,  and the Company shall, and it hereby agrees
to,  reimburse the Purchaser,  such agent and such  underwriter for any legal or
other expenses  reasonably  incurred by them in connection with investigating or
defending  any such action or claim as such  expenses  are  incurred;  provided,
however,  that the  Company  shall not be liable to any such  person in any such
case to the extent that any such loss, claim,  damage or liability arises out of
or is based upon an untrue  statement or alleged untrue statement or omission or
alleged omission made in such registration statement,  or preliminary,  final or
summary  prospectus,  or  amendment  or  supplement  in  reliance  upon  and  in
conformity  with  written  information  furnished  to the Company by such person
expressly for use therein; provided further, however, that the Company shall not
be liable to any such Person if such Person  failed to deliver a  prospectus  in
the form most  recently  provided by the Company  (including  any  amendments or
supplements thereto previously provided by the Company), in any such case to the
extent that any loss, claim,  damage or liability arises out of or is based upon
an untrue  statement or an omission  which was  corrected in such most  recently
furnished prospectus (including any such amendments or supplements).

          (b)  Indemnification by the Purchaser and any Agents and Underwriters.
The  Company  may  require,  as a  condition  to  including  any  Shares  in any
registration  statement  filed pursuant to Section 2 hereof and to entering into
an underwriting  agreement, if any, with respect thereto, that the Company shall
have received an undertaking  reasonably  satisfactory  to it from the Purchaser
and from each  underwriter,  if any, named in any such  underwriting  agreement,
severally  and not  jointly,  to (i)  indemnify  and hold  harmless  the Company
against  any losses,  claims,  damages or  liabilities  to which the Company may
become subject,  under the Securities Act or otherwise,  insofar as such losses,
claims,  damages or liabilities (or actions in respect  thereof) arise out of or
are based upon an untrue  statement  or alleged  untrue  statement of a material
fact contained in such  registration  statement,  or any  preliminary,  final or
summary  prospectus  contained  therein  or  furnished  by  the  Company  to the
Purchaser,  agent or  underwriter,  or any amendment or supplement  thereto,  or
arise out of or are based upon the omission or alleged omission to state therein
a  material  fact  required  to be  stated  therein  or  necessary  to make  the
statements  therein not misleading,  in each case to the extent, but only to the
extent,  that such untrue  statement or alleged untrue  statement or omission or
alleged  omission  was made in  reliance  upon and in  conformity  with  written
information  furnished to the Company by the Purchaser or underwriter  expressly
for use therein,  and (ii) reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
any such action or claim as such expenses are incurred.

          (c) Notices of Claims.  Etc.  Promptly after receipt by an indemnified
party under subsection (a) or (b) above of written notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions of
or contemplated by this Section 6, notify such indemnifying  party in writing of
the commencement of such action;  but the omission so to notify the indemnifying
party  shall  not  relieve  it  from  any  liability  which  it may  have to any
indemnified  party  other  than  under  the  indemnification  provisions  of  or
contemplated  by Section 6(a) or 6(b)  hereof.  In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying  party
of the  commencement  thereof,  such  indemnifying  party  shall be  entitled to
participate  therein  and, to the extent that it shall  wish,  jointly  with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel  satisfactory to such indemnified  party (who shall not, except with the
consent of the indemnified  party, be counsel to the indemnifying  party),  and,
after  notice  from  the  indemnifying  party to such  indemnified  party of its
election so to assume the defense thereof,  such indemnifying party shall not be
liable to such indemnified party for any legal expenses of other counsel or any

                                       8

<PAGE>

other expenses, in each case subsequently incurred by such indemnified party, in
connection   with  the  defense   thereof   other  than   reasonable   costs  of
investigation.

          (d) Contribution. Each party hereto agrees that, if for any reason the
indemnification  provisions  contemplated  by Section  6(a) or Section  6(b) are
unavailable to or insufficient to hold harmless an indemnified  party in respect
of any losses,  claims,  damages or liabilities (or actions in respect  thereof)
referred to  .therein,  then each  indemnifying  party shall  contribute  to the
amount  paid or payable by such  indemnified  party as a result of such  losses,
claims,  damages  or  liabilities  (or  actions  in  respect  thereof)  in  such
proportion  as is  appropriate  to reflect  the  relative  benefits  received by
indemnified  party on the one hand and the indemnifying  party on the other from
any  offering  of the  Shares.  If,  however,  the  allocation  provided  by the
immediately  preceding  sentence is not  permitted by  applicable  law or if the
indemnified party failed to give the notice required under subsection (c) above,
then each indemnifying  party shall contribute to such amount paid or payable by
such indemnified  party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the indemnifying party and
the  indemnified  party in connection  with the  statements  or omissions  which
resulted in such losses,  claims,  damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable  considerations.  The relative
benefits  received by the Company on the one hand and the Purchaser on the other
shall be  deemed  to be in the  same  proportion  as the  total  purchase  price
received  by the Company  upon  issuance  of the  Convertible  Note bears to the
difference  between the proceeds from the offering of the Shares received by the
Purchaser and such purchase price. The relative fault of such indemnifying party
and  indemnified  party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged  omission to state a material  fact relates to  information  supplied by
such indemnifying  party or by such indemnified  party, and the parties relative
intent,  knowledge,  access to information and opportunity to correct or prevent
such  statement or omission.  The parties hereto agree that it would not be just
and equitable if contributions  pursuant to this Section 6(d) were determined by
pro rata allocation  (even if the Purchaser or any agents or underwriters or all
of them were  treated as one entity for such  purpose) or by any other method of
allocation which does not take account of the equitable  considerations referred
to in this Section 6(d). The amount paid or payable by an indemnified party as a
result of the losses,  claims,  damages,  or liabilities  (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees or
expenses  reasonably  incurred  by such  indemnified  party in  connection  with
investigating  or  defending  any such  action  or  claim.  Notwithstanding  the
provisions  of this  Section  6(d),  the  Purchaser  shall  not be  required  to
contribute  any amount in excess of the amount by which the dollar amount of the
proceeds  received by the Purchaser from the sale of any Shares (after deducting
any fees,  discounts and commissions  applicable  thereto) exceeds the amount of
any damages which the Purchaser has otherwise  been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission,  and no
underwriter  shall be required to contribute  any amount in excess of the amount
by which the total price at which the Shares  underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages which
such  underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue  statement or omission or alleged  omission.  No person guilty of
fraudulent  misrepresentation  (within  the  meaning  of  Section  1 l(f) of the
Securities  Act) shall be entitled to  contribution  from any person who was not
guilty of such fraudulent  misrepresentation.  Any underwriters'  obligations in
this Section 6(d) to contribute  shall be several in proportion to the principal
amount of Shares underwritten by them and not joint.

          (e) The  obligations  of the Company  under this Section 6 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and Conditions, to each officer, director and partner of the
Purchaser,  any agent and any underwriter and each person,  if any, who controls
the Purchaser or any agent or  underwriter  within the meaning of the Securities
Act;  and the  obligations  of the  Purchaser  and any agents  and  underwriters
contemplated by this Section 6 shall be in addition to any

                                       9

<PAGE>

liability  which the Purchaser or any such agent or  underwriter,  respectively,
may otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company (including any person who, with his consent,
is named in any  registration  statement  as about to become a  director  of the
Company) and to each person, if any, who controls the Company within the meaning
of the Securities Act.

     7.   Miscellaneous.

          (a) No  Inconsistent  Agreements.  The Company  represents,  warrants,
covenants and agrees that it has not granted, and shall not grant,  registration
rights with respect to Shares or any other  securities which would conflict with
the terms contained in these Registration Rights.

          (b) Specific  Performance.  The parties hereto  acknowledge that there
may be no  adequate  remedy  at law if any  party  fails to  perform  any of its
obligations  hereunder and that each party may be irreparably harmed by any such
failure,  and accordingly agree that each party, in addition to any other remedy
to which it may be  entitled  at law or in equity,  shall be  entitled to compel
specific  performance  of  the  obligations  of  any  other  party  under  these
Registration  Rights  in  accordance  with the  terms  and  conditions  of these
Registration  Rights,  in any court of the  United  States or any State  thereof
having jurisdiction.

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

                  If to the Company, to:

                  Celgene Corporation
                  7 Powder Horn Drive
                  Warren, NJ 07059

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

                  with a copy to:

                  Proskauer Rose LLP
                  1585 Broadway
                  New York, NY 10036

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

                                       10

<PAGE>

                  If to Warburg Dillon Read LLC, to:

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

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

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

          (d) Survival. The respective indemnities, agreements, representations,
warranties and each other  provision set forth in these  Registration  Rights or
made  pursuant  hereto shall remain in full force and effect  regardless  of any
investigation  (or statement as to the results  thereof) made by or on behalf of
the Purchaser,  any director,  officer or partner of the Purchaser, any agent or
underwriter  or any director,  officer or partner  thereof,  or any  controlling
person of any of the foregoing.

          (e) Law Governing.  These Registration Rights shall be governed by and
construed in accordance with the laws of the State of New York.

          (f) Headings.  The  descriptive  headings of the several  Sections and
paragraphs of these  Registration  Rights are inserted for convenience  only, do
not constitute a part of these  Registration  Rights and shall not affect in any
way the meaning or interpretation of these Registration Rights.

          (g) Entire Agreement:  Amendments.  These Registration  Rights and the
other writings referred to herein or delivered pursuant hereto which form a part
hereof  contain  the entire  understanding  of the parties  with  respect to its
subject matter.  These  Registration  Rights  supersede all prior agreements and
understandings  between the parties  with respect to its subject  matter.  These
Registration  Rights  may be  amended  and the  observance  of any term of these
Registration  Rights may be waived (either generally or in a particular instance
and either  retroactively or  prospectively)  only by a written  instrument duly
executed by the Company and the Purchaser.

          (h)  Assignment.  In connection  with.  any permitted  transfer of the
Convertible  Note or any portion thereof in a principal  amount of not less than
$1,000,000  the  Purchaser  may assign its rights  hereunder  in respect of such
Convertible Note to the transferee.  Upon such assignment the transferee  shall,
insofar as the transferred  Convertible Notes are concerned,  be entitled to all
of the rights, and be subject to all of the obligations,  of the Purchaser under
these  Registration  Rights,  and all references to the "purchaser" herein shall
thereafter be deemed to refer to the Purchaser, or such transferee,  or both, as
the circumstances warrant.

          (i)  Counterparts.  This  agreement  may be  executed  by the  parties
counterparts,  each of which  shall be  deemed to be an  original,  but all such
respective counterparts shall together constitute one and the same instrument.

                                       11

<PAGE>

     Agreed to and accepted as of the date referred to above.

                                                 CELGENE CORPORATION

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

                                                 WARBURG DILLON READ LLC

                                                 By:
                                                    ----------------------------
                                                    Name:
                                                    Title:EXHIBIT 10.22

                             NOTE PURCHASE AGREEMENT

                                                                 January 20,1999

To the Purchasers
listed on attached
Schedule I

Dear Sirs:

     CELGENE  CORPORATION (the "Company") wishes to confirm its arrangement with
the  Purchasers  named on Schedule I to this  Agreement  (the  "Purchasers"  and
singly each  "Purchaser")  in  connection  with the issuance to the  Purchasers,
against payment in immediately  available funds of the purchase price of 100% of
the principal  amount thereof,  of one or more senior  convertible  notes in the
form attached hereto as Exhibit A (collectively  the "Convertible  Notes") in an
aggregate principal amount of $15,000,000 and convertible initially into 833,400
fully paid and  non-assessable  shares (each a "Share") of the Company's  Common
Stock, par value $.01 per share (the "Common  Stock"),  subject to adjustment as
set forth in the Convertible Notes.

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

     1. AGREEMENT TO ISSUE AND ACCEPT. On the basis of the  representations  and
warranties  made by the  Company  to  induce  the  Purchasers  to  purchase  the
Convertible Notes and subject to the terms and conditions set forth herein,  the
Company will issue to each  Purchaser,  and each  Purchaser will accept from the
Company,  the Convertible Notes in the principal amount specified  opposite such
Purchaser's  name on Schedule I attached hereto at the purchase price of 100% of
the principal  amount thereof  against payment of the  above-specified  purchase
price  therefor.  The closing (the  "Closing") of the issuance and acceptance of
the Convertible  Notes against such payment shall take place on the date hereof,
at which time the Company shall deliver to each Purchaser the Convertible Notes,
against  delivery by each  Purchaser of a wire transfer of the purchase price to
the Company's account at PNC Bank New Jersey Trust, ABA No.  031000053,  benefit
Account  No.  8511074024,  for  further  credit to Account  No.  42432012020943,
Celgene Corporation, Attn: Lisa Goldhammer,  Telephone No. (732) 220-3112. If at
the  Closing  the  Company  shall fail to tender the  Convertible  Notes to each
Purchaser  as provided in this Section 1 or any of the  conditions  specified in
Section 5 shall not have been fulfilled to each Purchaser's  satisfaction,  each
Purchaser,  at its election,  shall be relieved of all further obligations under
this  Agreement,  without  thereby waiving any rights each Purchaser may have by
reason of such failure or such nonfulfillment.

<PAGE>

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

     3.  AGREEMENTS OF PURCHASER.  Each Purchaser  covenants and agrees with the
Company that:

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

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

          (c) Such Purchaser is an "accredited  investor"  within the meaning of
Rule 501 under the Act.

          (d) During the period  that the Company is  prohibited  from making an
optional  redemption  under  Section  1 of the  Convertible  Note,  so long as a
Purchaser holds a Convertible  Note, such Purchaser shall not undertake any form
of short sale,  derivative or other transaction which has the effect of taking a
"short  position" in the Common  Stock of the Company to hedge such  Purchaser's
investment in the Company, provided, however, that no affiliate of any Purchaser
shall be  subject  to the  provisions  of this  subsection  3(d).  The  covenant
contained in this Section 3(d) shall be,  subject to the  limitations  contained
herein, binding on any holder of a Convertible Note.

          (e)  Each  Purchaser  represents  that at least  one of the  following
statements is an accurate representation as to each source of funds (a "Source")
to be used by such Purchaser to pay the purchase price of the Convertible  Notes
to be purchased by it hereunder:

          (i) the Source is an "insurance  company  general  account" within the
     meaning of Department of Labor  Prohibited  Transaction  Exemption  ("PTE")
     95-60  (issued  July 12,  1995)  and  there is no  employee  benefit  plan,
     treating as a single plan all plans,  maintained  by the same  employer (or
     affiliate  thereof as defined in Section  V(a)(1) of PTE 95-60) or employee
     organization,  with  respect  to which the  amount of the  general  account
     reserves and  liabilities  for all  contracts  held by or on behalf of such
     plan exceeds ten percent  (10%) of the total  reserves and  liabilities  of
     such general  account  (exclusive  of separate  account  liabilities)  plus
     surplus,  as set  forth  in the  NAIC  Annual  Statement  filed  with  such
     Purchaser's state of domicile; or

                                        2

<PAGE>

          (ii) the Source is either (a) an  insurance  company  pooled  separate
     account,  within the meaning of Prohibited  Transaction  Exemption  ("PTE")
     90-1 (issued January 29, 1990), or (b) a bank collective  investment  fund,
     within the meaning of the PTE 91-38  (issued July 12, 1991) and,  except as
     you have  disclosed  to the Company in writing  pursuant to this  paragraph
     (ii),  no employee  benefit plan or group of plans  maintained  by the same
     employer or employee  organization  beneficially  owns more than 10% of all
     assets allocated to such pooled separate  account or collective  investment
     fund; or

          (iii) the Source  constitutes  assets of an "investment  fund" (within
     the  meaning  of Part V of the  QPAM  Exemption)  managed  by a  "qualified
     professional  asset manager" or "QPAM" (within the meaning of Part V of the
     QPAM  Exemption),  no employee  benefit  plan's assets that are included in
     such  investment  fund, when combined with the assets of all other employee
     benefit  plans  established  or  maintained  by the same  employer or by an
     affiliate  (within the meaning of Section V(c)(1) of the QPAM Exemption) of
     such  employer  or by the same  employee  organization  and managed by such
     QPAM,  exceed 20% of the total  client  assets  managed  by such QPAM,  the
     conditions  of Part  I(c)  and (g) of the  QPAM  Exemption  are  satisfied,
     neither  the  QPAM  nor a  person  controlling  or  controlled  by the QPAM
     (applying  the  definition  of  "control"  in  Section  V(e)  of  the  QPAM
     Exemption)  owns a 5% or more  interest in the Company and (a) the identity
     of such QPAM and (b) the names of all employee  benefit  plans whose assets
     are included in such  investment fund have been disclosed to the Company in
     writing pursuant to this paragraph (iii); or

          (iv) the Source is a governmental plan; or

          (v) the Source is one or more employee  benefit  plans,  or a separate
     account or trust fund comprised of one or more employee benefit plans, each
     of which has been  identified  to the  Company in writing  pursuant to this
     paragraph (e); or

          (vi) the Source does not include assets of any employee  benefit plan,
     other than a plan exempt from the coverage of ERISA.

As used in this Section 3(e), the terms "employee  benefit plan",  "governmental
plan",  "party in interest" and  "separate  account"  shall have the  respective
meanings assigned to such terms in Section 3 of ERISA.

Prior to any holder of this Security  transferring this Security,  the holder of
this  Security  shall  provide  a  certificate  from  such  proposed  subsequent
transferee   wherein  such  proposed   subsequent   transferee  shall  make  the
representations made in this Section 3(e) and shall  simultaneously  deliver any
disclosure letter required under Section 3(e)(iii). Such subsequent transferee's
failure to deliver such a certificate  shall not relieve the Company from any of
the terms, covenants or conditions of this Security.

                                       3

<PAGE>

     4.  Agreements of the Company.  From and after the date of this  Agreement,
and thereafter so long as any of the Convertible Notes remain  outstanding,  the
Company  will duly  perform and  observe,  for the benefit of the holders of the
Convertible Notes, each and all of the covenants and agreements  hereinafter set
forth:

          (a) The Company shall deliver to each holder of a Convertible Note:

               i.  Quarterly  Statements  -- upon  the  earlier  of (x) when the
          Company  files  its  Form  10-Q  with  the   Securities  and  Exchange
          Commission  for a fiscal  period and (y) 50 days after the end of each
          quarterly fiscal period in each fiscal year of the Company (other than
          the last quarterly fiscal period of each such fiscal year),  duplicate
          copies of,

                    (1) a  consolidated  balance  sheet of the  Company  and its
               Subsidiaries as at the end of such quarter, and

                    (2)   consolidated   statements   of   income,   changes  in
               shareholders'  equity  and  cash  flows  of the  Company  and its
               Subsidiaries, for such quarter and (in the case of the second and
               third  quarters)  for the  portion of the fiscal year ending with
               such quarter,

               setting  forth in each case in  comparative  form the figures for
               the  corresponding  periods in the previous  fiscal year,  all in
               reasonable detail, prepared in accordance with GAAP applicable to
               quarterly  financial  statements  generally,  and  certified by a
               Senior Financial  Officer as fairly  presenting,  in all material
               respects,  the financial position of the companies being reported
               on and their  results of  operations  and cash flows,  subject to
               changes  resulting  from  year-end  adjustments,   provided  that
               delivery within the time period  specified above of copies of the
               Company's  Quarterly  Report on Form 10-Q  prepared in compliance
               with the requirements  therefor and filed with the Securities and
               Exchange  Commission  shall be deemed to satisfy the requirements
               of this Section 4(a)(i);

               ii. Annual  Statements -- upon the earlier of(x) when the Company
          files its Form 10-K with the Securities and Exchange  Commission for a
          fiscal  period and (y) 105 days after the end of each  fiscal  year of
          the Company, duplicate copies of,

                    (1) a  consolidated  balance  sheet of the  Company  and its
               Subsidiaries, as at the end of such year, and

                    (2)   consolidated   statements   of   income,   changes  in
               shareholders'  equity  and  cash  flows  of the  Company  and its
               Subsidiaries, for such year,

               setting  forth in each case in  comparative  form the figures for
               the previous fiscal year, all in reasonable  detail,  prepared in
               accordance with GAAP, and accompanied

                                        4

<PAGE>

                         (A) by an  opinion  thereon  of  independent  certified
                    public accountants of recognized  national  standing,  which
                    opinion shall state that such financial  statements  present
                    fairly, in all material respects,  the financial position of
                    the  companies  being  reported  upon and their  results  of
                    operations   and  cash  flows  and  have  been  prepared  in
                    conformity  with  GAAP,  and  that the  examination  of such
                    accountants in connection with such financial statements has
                    been made in accordance  with  generally  accepted  auditing
                    standards,  and that such audit provides a reasonable  basis
                    for such opinion in the circumstances, and

                         (B) a certificate of such accountants stating that they
                    have reviewed this Agreement and stating further whether, in
                    making their audit,  they have become aware of any condition
                    or event  that then  constitutes  a  Default  or an Event of
                    Default,  and, if they are aware that any such  condition or
                    event then exists,  specifying  the nature and period of the
                    existence thereof (it being understood that such accountants
                    shall not be liable, directly or indirectly, for any failure
                    to  obtain  knowledge  of any  Default  or Event of  Default
                    unless  such  accountants  should  have  obtained  knowledge
                    thereof  in making  an audit in  accordance  with  generally
                    accepted auditing standards or did not make such an audit),

               provided that the delivery within the time period specified above
               of the Company's  Annual Report on Form 10-K for such fiscal year
               (together with the Company's  annual report to  shareholders,  if
               any,  prepared  pursuant  to Rule 14a-3 under the  Exchange  Act)
               prepared in accordance with the  requirements  therefor and filed
               with the  Securities and Exchange  Commission,  together with the
               accountant's  certificate described in clause (B) above, shall be
               deemed to satisfy the requirements of this Section 4(a)(ii);

               iii.  SEC and Other  Reports  --  promptly  upon  their  becoming
          available, one copy of (i) each financial statement, report, notice or
          proxy  statement  sent by the  Company  or any  Subsidiary  to  public
          securities  holders  generally,  and (ii)  each  regular  or  periodic
          report,  each registration  statement that shall have become effective
          (without exhibits except as expressly  requested by such holder),  and
          each prospectus and all amendments thereto filed by the Company or any
          Subsidiary  with the  Securities  and Exchange  Commission  and of all
          press  releases and  statements in the nature  thereof made  available
          generally by the Company or any  Subsidiary  to the public  concerning
          developments that are Material;

               iv. Notice of Default or Event of Default -- promptly, and in any
          event within five days after a Responsible  Officer  becoming aware of
          the  existence  of any  Default or Event of Default or that any Person
          has given any  notice or taken any  action  with  respect to a claimed
          default  under any of the  Convertible  Notes or that any  Person  has
          given any notice or taken may action with respect to a claimed default
          of the type referred to in Section

                                       5

<PAGE>

         4(a)(7) of the  Convertible  Notes,  a written  notice  specifying  the
         nature and period of  existence  thereof and what action the Company is
         taking or proposes to take with respect thereto;

               v. ERISA  Matters -- promptly,  and in any event within five days
          after a Responsible Officer becoming aware of any of the following,  a
          written  notice  setting forth the nature  thereof and the action,  if
          any,  that the  Company or an ERISA  Affiliate  proposes  to take with
          respect thereto:

                    (1) with  respect  to any Plan,  any  reportable  event,  as
               defined  in  section   4043(c)  of  ERISA  and  the   regulations
               thereunder, for which notice thereof has not been waived pursuant
               to such regulations as in effect on the date hereof; or

                    (2) the  taking  by the PBGC of steps to  institute,  or the
               threatening by the PBGC of the institution of,  proceedings under
               section 4042 of ERISA for the  termination of, or the appointment
               of a trustee  to  administer,  any Plan,  or the  receipt  by the
               Company or any ERISA  Affiliate of a notice from a  Multiemployer
               Plan that such action has been taken by the PBGC with  respect to
               such Multiemployer Plan; or

                    (3) any event, transaction or condition that could result in
               the  incurrence  of any  liability  by the  Company  or any ERISA
               Affiliate  pursuant  to Title I or IV of ERISA or the  penalty or
               excise tax  provisions of the Code  relating to employee  benefit
               plans,  or in the  imposition  of any Lien on any of the  rights,
               properties  or  assets  of the  Company  or any  ERISA  Affiliate
               pursuant to Title I or IV of ERISA or such  penalty or excise tax
               provisions,  if such  liability or Lien,  taken together with any
               other such  liabilities or Liens then existing,  could reasonably
               be expected to have a Material Adverse Effect;

               vi. Notices from Governmental  Authority -- promptly,  and in any
          event within thirty days of receipt  thereof,  copies of any notice to
          the Company or any Subsidiary  from any Federal or state  Governmental
          Authority  relating  to any  order,  ruling,  statute  or other law or
          regulation  that  could  reasonably  be  expected  to have a  Material
          Adverse Effect; and

               vii. Requested  Information -- with reasonable  promptness,  such
          other  data and  information  relating  to the  business,  operations,
          affairs,  financial condition,  assets or properties of the Company or
          any of its  Subsidiaries  or relating to the ability of the Company to
          perform its obligations  hereunder and under the Convertible  Notes as
          from time to time may be  reasonably  requested  by any such holder of
          Convertible Notes.

          (b) The Company  shall  permit the  representatives  of each holder of
Convertible Notes:

                                        6

<PAGE>

               i. No Default -- if no Default or Event of Default  then  exists,
          at the expense of such holder and upon reasonable  prior notice to the
          Company,  to visit the principal  executive office of the Company,  to
          discuss  the  affairs,  finances  and  accounts of the Company and its
          Subsidiaries with the Company's officers, and (with the consent of the
          Company,   which  consent  will  not  be  unreasonably  withheld)  its
          independent public accountants,  and (with the consent of the Company,
          which  consent will not be  unreasonably  withheld) to visit the other
          offices and properties of the Company and each Subsidiary, all at such
          reasonable  times  and as  often  as may be  reasonably  requested  in
          writing; and

               ii.  Default -- if a Default or Event of Default then exists,  at
          the  expense of the Company to visit and inspect any of the offices or
          properties  of the  Company or any  Subsidiary,  to examine  all their
          respective  books of account,  records,  reports and other papers,  to
          make copies and extracts  therefrom,  and to discuss their  respective
          affairs,  finances and  accounts  with their  respective  officers and
          independent  public  accountants  (and by this  provision  the Company
          authorizes  said  accountants  to discuss the  affairs,  finances  and
          accounts of the Company and its  Subsidiaries),  all at such times and
          as often as may be requested.

          (c) The Company will and will cause each of its Subsidiaries to comply
with all laws,  ordinances or governmental rules or regulations to which each of
them is subject,  including,  without  limitation,  Environmental Laws, and will
obtain and maintain in effect all licenses,  certificates,  permits,  franchises
and  other  governmental  authorizations  necessary  to the  ownership  of their
respective properties or to the conduct of their respective businesses,  in each
case to the  extent  necessary  to ensure  that  non-compliance  with such laws,
ordinances  or  governmental  rules or  regulations  or  failures  to  obtain or
maintain in effect such licenses,  certificates,  permits,  franchises and other
governmental  authorizations  could  not,  individually  or  in  the  aggregate,
reasonably be expected to have a Material Adverse Effect.

          (d) The  Company  will  and will  cause  each of its  Subsidiaries  to
maintain, with financially sound and reputable insurers,  insurance with respect
to their  respective  properties  and  businesses  against such  casualties  and
contingencies,  of such  types,  on such  terms and in such  amounts  (including
deductibles,   co-insurance  and   self-insurance,   if  adequate  reserves  are
maintained  with  respect  thereto) as is  customary  in the case of entities of
established  reputations engaged in the same or a similar business and similarly
situated.

          (e) The  Company  will  and will  cause  each of its  Subsidiaries  to
maintain  and  keep,  or cause  to be  maintained  and  kept,  their  respective
properties in good repair, working order and condition (other than ordinary wear
and tear),  so that the  business  carried  on in  connection  therewith  may be
properly  conducted at all times,  provided  that this Section shall not prevent
the  Company  or  any  Subsidiary  from  discontinuing  the  operation  and  the
maintenance of any of its properties if such  discontinuance is desirable in the
conduct of its business and the Company has concluded  that such  discontinuance
could not,  individually  or in the aggregate,  reasonably be expected to have a
Material Adverse Effect.

                                        7

<PAGE>

          (f) The Company will and will cause each of its  Subsidiaries  to file
all  tax  returns  required  to be  filed  in any  jurisdiction  and to pay  and
discharge  all taxes shown to be due and  payable on such  returns and all other
taxes,  assessments,  governmental  charges, or levies imposed on them or any of
their  properties,  assets,  income or franchises,  to the extent such taxes and
assessments  have become due and payable and before they have become  delinquent
and all  claims for which sums have  become due and  payable  that have or might
become a Lien on properties or assets of the Company or any Subsidiary, provided
that neither the Company nor any Subsidiary  need pay any such tax or assessment
or claims if (i) the amount,  applicability  or validity thereof is contested by
the  Company  or  such  Subsidiary  on a  timely  basis  in  good  faith  and in
appropriate  proceedings,  and  the  Company  or a  Subsidiary  has  established
adequate  reserves  therefor in accordance with GAAP on the books of the Company
or such  Subsidiary or (ii) the nonpayment of all such taxes and  assessments in
the  aggregate  could not  reasonably  be  expected  to have a Material  Adverse
Effect.

          (g) The Company will at all times  preserve and keep in full force and
effect its corporate existence.  The Company will at all times preserve and keep
in full force and effect the  corporate  existence  of each of its  Subsidiaries
(unless  merged into the Company or a Subsidiary)  and all rights and franchises
of the Company and its  Subsidiaries  unless,  in the good faith judgment of the
Company,  the  termination  of or failure to preserve and keep in full force and
effect such corporate existence,  right or franchise could not,  individually or
in the aggregate, have a Material Adverse Effect.

          (h) The  Company  will  promptly  notify the  holders in the event the
Company discovers or determines that any computer  application  (including those
of its suppliers,  vendors and customers)  that is Material to its or any of its
Subsidiaries' business and operations will not be Year 2000 compliant, except to
the extent that such failure could not reasonably be expected to have a Material
Adverse Effect.

          (i) The Company will not and will not permit any  Subsidiary  to enter
into  directly  or  indirectly  any  transaction  or  Material  group of related
transactions (including without limitation the purchase, lease, sale or exchange
of  properties  of any kind or the  rendering of any service) with any Affiliate
(other than the Company or another  Subsidiary),  except in the ordinary  course
and  pursuant  to  the  reasonable   requirements   of  the  Company's  or  such
Subsidiary's  business  and upon  terms  determined  by the  Company's  Board of
Directors,  in its good faith judgment,  to be fair and reasonable  terms and no
less favorable to the Company or such  Subsidiary  than would be obtainable in a
comparable transaction with a Person not an Affiliate.

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

                                        8

<PAGE>

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

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

          (c)  The  representations  and  warranties  of  the  Company  in  this
Agreement shall be correct when made and at the time of the Closing.

          (d) The Company shall have  performed and complied with all agreements
and conditions  contained in this Agreement required to be performed or complied
with by it prior to or at the Closing and after  giving  effect to the issue and
sale of the  Convertible  Notes,  no  Default  or Event of  Default  shall  have
occurred and be continuing.

          (e) The Company  shall have  delivered to each  Purchaser an Officer's
Certificate,  dated  the date of the  Closing,  certifying  that the  conditions
specified in Sections 5(c), 5(d) and 5(k) have been fulfilled.

          (f) The Company shall have  delivered to each  Purchaser a certificate
certifying  as  to  the  resolutions   attached   thereto  and  other  corporate
proceedings  relating  to  the  authorization,  execution  and  delivery  of the
Convertible Notes and the Agreements.

          (g) On the date of the Closing the  purchase of  Convertible  Notes by
each  Purchaser  shall  (i) be  permitted  by the laws and  regulations  of each
jurisdiction to which such Purchaser is subject,  without recourse to provisions
(such as Section  1405(a)(8) of the New York Insurance Law)  permitting  limited
investments by insurance  companies  without  restriction as to the character of
the  particular  investment,  (ii) not violate any  applicable law or regulation
(including,  without limitation,  Regulation U, T or X of the Board of Governors
of the Federal  Reserve System) and (iii) not subject such Purchaser to any tax,
penalty or  liability  under or pursuant to any  applicable  law or  regulation,
which law or  regulation  was not in effect on the date hereof.  If requested by
any  Purchaser,  such  Purchaser  shall have  received an Officer's  Certificate
certifying as to such matters of fact as such Purchaser may  reasonably  specify
to enable such Purchaser to determine whether such purchase is so permitted.

          (h)  The  Company  shall  sell  the  entire  principal  amount  of the
Convertible Notes scheduled to be sold at the Closing as specified in Schedule I
hereto.

          (i) Without limiting the provisions of Section 6(f), the Company shall
have paid on or before the Closing the fees,  charges and  disbursements  of the
Purchasers' special counsel.

                                        9

<PAGE>

          (j) A Private  Placement  number  issued by  Standard  & Poor's  CUSIP
Service  Bureau (in  cooperation  with the  Securities  Valuation  Office of the
National  Association of Insurance  Commissioners)  shall have been obtained for
the Convertible Notes.

          (k)  The  Company   shall  not  have  changed  its   jurisdiction   of
incorporation or been a party to any merger or consolidation  and shall not have
succeeded to all or any substantial part of the liabilities of any other entity,
at any time following the date of the most recent financial  statements referred
to in the Memorandum (defined below).

          (1) All  corporate  and  other  proceedings  in  connection  with  the
transactions  contemplated  by this Agreement and all documents and  instruments
incident to such  transactions  shall be  satisfactory to each Purchaser and its
special counsel,  and each Purchaser and its special counsel shall have received
all such counterpart originals or certified or other copies of such documents as
such Purchaser or it may reasonably request.

     6.   MISCELLANEOUS.

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

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

                     If to the Company, to:

                     Celgene Corporation
                     7 Powder Horn Drive
                     Warren, NJ 07059

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

                     with a copy to:

                     Proskauer Rose LLP
                     1585 Broadway
                     New York, NY 10036

                                       10

<PAGE>

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

                     If to Purchaser:
                     at the address and to the Person appearing on Schedule I to
                     this Agreement

                     with a copy to:

                     Choate, Hall & Stewart
                     Exchange Place
                     53 State Street
                     Boston, MA 02109

                     Attention: Frank B. Porter, Jr.
                     Telephone Number: (617) 248-5000
                     Facsimile Transmission Number: (617) 248-4000

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

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

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

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

          (f)  Whether  or  not  the   transactions   contemplated   hereby  are
consummated,  the Company will pay all costs and expenses (including  reasonable
attorneys' fees of a special counsel)  incurred by each Purchaser or holder of a
Convertible Note in connection with such transactions and in connection with any
amendments,  waivers or consents  under or in respect of this  Agreement  or the
Convertible  Notes  (whether or not such  amendment,  waiver or consent  becomes
effective),  including,  without limitation: (a) the costs and expenses incurred
in enforcing or defending (or  determining  whether or how to enforce or defend)
any rights under this Agreement or the Convertible Notes or in responding to any
subpoena  or other  legal  process or informal  investigative  demand  issued in
connection with this Agreement or the Convertible Notes, or by reason of being a
holder  of any  Convertible  Note,  and (b) the costs  and  expenses,  including
financial  advisors'  fees,  incurred  in  connection  with  the  insolvency  or
bankruptcy of the Company or any  Subsidiary or in connection  with any work-out
or restructuring of the

                                       11

<PAGE>

transactions  contemplated hereby and by the Convertible Notes. The Company will
pay, and will save each  Purchaser and each other holder of a  Convertible  Note
harmless from,  all claims in respect of any fees,  costs or expenses if any, of
brokers and finders (other than those retained by you).

          (g)  Anything  in  this  Agreement  or the  Convertible  Notes  to the
contrary  notwithstanding,  any payment of principal of or Make-Whole  Amount or
interest on any Convertible Note that is due on a date other than a Business Day
shall  be made  on the  next  succeeding  Business  Day  without  including  the
additional days elapsed in the computation of the interest  payable on such next
succeeding Business Day.

          (h) This Agreement and the Convertible  Notes may be amended,  and the
observance of any term hereof or of the Convertible  Notes may be waived (either
retroactively or prospectively), with (and only with) the written consent of the
Company and each of the holders.

          (i) From time to time hereafter, the Company will execute and deliver,
or  will  cause  to be  executed  and  delivered,  such  additional  agreements,
documents and  instruments and will take all such other actions as any holder or
holders of the Convertible Notes may reasonably request

                                  [END OF PAGE]

                                       12

<PAGE>

                    Signature Page of Note Purchase Agreement

for the purpose of implementing or effectuating the provisions contained herein,
in the Convertible Notes or in the Registration Rights Agreement.

                                                     Very truly yours,

                                                     CELGENE CORPORATION

                                                     By:/s/ Sol J. Barer
                                                        ------------------------
                                                        Name: Sol J. Barer
                                                        Title: Pres/COO

<PAGE>

       Signature Page of Note Purchase Agreement with Celgene Corporation

Accepted as of the date hereof:

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

By:      /s/Stephen J. Blewitt
   -----------------------------------
Name:       Stephen J. Blewitt
     ---------------------------------
Title:      Senior Investment Officer
      --------------------------------

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

By:      /s/Stephen J. Blewitt
   -----------------------------------
Name:       Stephen J. Blewitt
     ---------------------------------
Title:      Senior Investment Officer
      --------------------------------

SIGNATURE lA (CAYMAN), LTD.
By: John Hancock Mutual Life Insurance
         Company, Portfolio Advisor

By:      /s/Stephen J. Blewitt
   -----------------------------------
Name:       Stephen J. Blewitt
     ---------------------------------
Title:      Senior Investment Officer
      --------------------------------

Signature 3 Limited
By: John Hancock Mutual Life Insurance Company,
         as Portfolio Advisor

By:      /s/Stephen J. Blewitt
   -----------------------------------
Name:       Stephen J. Blewitt
     ---------------------------------
Title:      Senior Investment Officer
      --------------------------------

Hancock Mezzanine Partners L.P.
By: Hancock Mezzanine Investments LLC, its General Partner
By: John Hancock Mutual Life Insurance Company.
                           as Investment Manager

By:      /s/Stephen J. Blewitt
   -----------------------------------
Name:       Stephen J. Blewitt
     ---------------------------------
Title:      Senior Investment Officer
      --------------------------------

<PAGE>

                                                                       EXHIBIT A

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

                               CELGENE CORPORATION

                9.00% SENIOR CONVERTIBLE NOTE DUE JANUARY , 2004

_______                                                                  $______
No. R-

     CELGENE  CORPORATION,  a corporation  duly organized and existing under the
laws of Delaware (the "Company") for value  received,  hereby promises to pay to
__________________,    or   registered    assigns,    the   principal   sum   of
___________________________________________   Dollars  ($__________________)  on
January _____, 2004 and to pay interest thereon, from __________________,  1999,
or from the most recent interest payment date to which interest has been paid or
duly  provided  for,  semi-annually  on  January  __ and  July __ in each  year,
commencing  July __, 1999,  at the rate of 9.00% per annum,  until the principal
hereof is due, and at the rate of 11.00% per annum on any overdue  principal and
premium,  if any, and, to the extent permitted by law, on any overdue  interest.
The  interest so  payable,  and  punctually  paid or duly  provided  for, on any
interest payment date will be paid to the person in whose name this Security (or
one or more  predecessor  Securities)  is registered at the close of business on
the regular record date for such interest,  which shall be the January 1 or July
1 (whether  or not a Business  Day),  as the case may be,  next  preceding  such
interest  payment date.  Payment of the  principal of (and premium,  if any, on)
this Security  shall be made upon the surrender of this Security to the Company,
at its office at 7 Powder Horn  Drive,  Warren,  NJ 07059 (or such other  office
within  the  United  States as shall be  notified  by the  Company to the holder
hereof) (the "Designated Office"), in such coin or currency of the United States
of America as at the time of payment  shall be legal  tender for the  payment of
public and private debts, by transfer to a U.S. dollar account maintained by the
payee with a bank in the United  States of America.  Payment of interest on this
Security shall be made by wire transfer to a U.S.  dollar account  maintained by
the payee  with a bank in the United  States of  America,  provided  that if the
holder shall not have furnished wire  instructions  in writing to the Company no
later than the record date relating to an interest  payment  date,  such payment
may be made by U.S.  dollar check  mailed to the address of the Person  entitled
thereto as such address  shall  appear in the Company  security  register.  This
Security  will rank pari passu with all existing  and future  senior debt of the
Company.

<PAGE>

     This Security is one of the Company's  9.00% Senior  Convertible  Notes due
January 20, 2004, limited to $15,000,000.00  aggregate principal amount,  issued
pursuant to that certain Note  Purchase  Agreement  dated January 20, 1999 (such
agreements,  as amended,  modified and supplemented from time to time, the "Note
Purchase  Agreement") between the Company and the Purchasers named therein,  and
the holder  hereof is entitled to the benefits of the Note  Purchase  Agreement,
and may enforce the  agreements  contained  herein and therein and  exercise the
remedies  provided  for hereby and  thereby or  otherwise  available  in respect
hereof and thereof, all in accordance with the terms hereof and thereof.

          1.  Optional  Redemption  With  Premium.  This  Security is subject to
redemption  upon not less than 30 nor more than 60 days' notice by mail,  at any
time on or after January 20, 2001, as a whole or in part, (in any amount that is
an integral  multiple of $1000) at the election of the Company,  at a redemption
price of 103% the principal  amount thereof,  together with accrued  interest to
the redemption  date, but interest  installments  whose stated maturity is on or
prior to such redemption date will be payable to the holder of this Security, or
one or more  predecessor  Securities,  of record at the close of business on the
relevant record dates referred to on the face hereof;  provided,  however,  that
the Company may not redeem this  Security on or prior to January 20, 2002 unless
the Closing Price of the Common Stock exceeds 225 % of the Conversion  Price for
each  Trading Day in a period of 20  Consecutive  Trading  Days  commencing  not
earlier  than  January 20, 2001.  The term  "Conversion  Price" on any day shall
equal $1,000 divided by the Conversion Rate in effect on each such day.

          2. Conversion. (a) The holder of this Security is entitled at any time
on or after  January  20,  2000 and before the close of  business on January 20,
2004 (or, in case this Security or a portion  hereof is called for redemption or
the holder  hereof has  exercised its right to require the Company to repurchase
this  Security  or a portion  hereof,  then in respect of this  Security or such
portion hereof, as the case may be, until and including, but (unless the Company
defaults in making the payment due upon  redemption or  repurchase,  as the case
may  be)  not  after,  the  close  of  business  on the  redemption  date or the
Repurchase Date, as the case may be) to convert this Security (or any portion of
the principal amount hereof that is an integral multiple of $1,000),  into fully
paid and nonassessable  shares  (calculated as to each conversion to the nearest
1/100 of a share) of Common  Stock of the Company at the rate of 55.56 shares of
Common  Stock for each $1,000  principal  amount of Security  (or at the current
adjusted rate if an adjustment has been made as provided below) (the "Conversion
Rate") by surrender of this  Security,  duly endorsed or assigned to the Company
or in blank to the  Company at the  Designated  Office,  accompanied  by written
notice to the Company that the holder hereof elects to convert this Security (or
if less than the entire principal  amount hereof is to be converted,  specifying
the  portion  hereof to be  converted).  Upon  surrender  of this  Security  for
conversion,  the holder will be entitled to receive the interest accruing on the
principal amount of this Security then being converted from the interest payment
date next preceding the date of such  conversion to such date of conversion.  No
payment or adjustment is to be made on conversion for dividends on the

                                        2

<PAGE>

Common  Stock  issued on  conversion  hereof.  No  fractions  of shares or scrip
representing  fractions of shares will be issued on  conversion,  but instead of
any fractional  interest,  the Company shall pay a cash adjustment,  computed on
the basis of the Closing  Price of the Common  Stock on the date of  conversion,
or, at its option,  the Company  shall round up to the next higher  whole share.
This Security  shall be deemed to have been converted  immediately  prior to the
close of business on the day of surrender  hereof for conversion,  in accordance
with the foregoing provisions, and at such time the rights of the holder hereof,
as a holder hereof,  shall cease,  and the Person or Persons entitled to receive
the Common Stock  issuable on conversion  shall be treated by all Persons as the
holder or holders of such Common Stock at such time. Upon any partial conversion
of this Security,  the Company, at its expense, will forthwith issue and deliver
to,  or  upon  the  order  of the  holder  hereof,  a new  Convertible  Note  or
Convertible Notes in principal amount equal to the unconverted  principal amount
of such surrendered  Convertible  Note, such new Convertible Note or Convertible
Notes to be dated and to bear interest from the date to which  interest has been
paid on such surrendered Convertible Note.

          As promptly as possible  after the  conversion  of this  Security,  in
whole or in part, and in any event within ten (10) days thereafter, the Company,
at its expense,  will issue and deliver a certificate  or  certificates  for the
number of full shares of Common Stock issuable upon such conversion.

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

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

          (2) Subject to the last  sentence  of  paragraph  (7) of this  Section
     2(b),  in case  the  Company  shall  issue  rights,  options,  warrants  or
     convertible  securities  entitling the holders  thereof to subscribe for or
     purchase shares of Common Stock at a

                                        3

<PAGE>

     price per share less than the current market price per share (determined as
     provided in paragraph  (8) of this Section 2(b)) of the Common Stock on the
     Determination Date for such distribution,  the Conversion Rate in effect at
     the opening of business on the day following such Determination Date, shall
     be increased by dividing  such  Conversion  Rate by a fraction of which the
     numerator shall be the number of shares of Common Stock  outstanding at the
     close of business on such  Determination  Date plus the number of shares of
     Common Stock which the  aggregate  amount  received by the Company upon the
     issuance of such rights,  options,  warrants or convertible securities plus
     the  aggregate  amount  receivable  by the  Company  upon the  exercise  or
     conversion  of such rights,  options,  warrants or  convertible  securities
     would  purchase at such current market price and the  denominator  shall be
     the number of shares of Common Stock  outstanding  at the close of business
     on such  Determination  Date plus the  number of shares of Common  Stock so
     offered for  subscription  or purchase,  such increase to become  effective
     immediately  after  the  opening  of  business  on the day  following  such
     Determination Date provided, that no such adjustment need to be made in the
     case of the  granting  by the  Company to  employees  or  directors  of the
     Company or  consultants  to the Company of Common Stock  and/or  options to
     purchase Common Stock and the issuance of Common Stock upon the exercise of
     such options.  For the purposes of this paragraph (2), the number of shares
     of Common Stock at any time  outstanding  shall not include  shares held in
     the treasury of the Company but shall include shares issuable in respect of
     scrip  certificates  issued in lieu of fractions of shares of Common Stock.
     The Company  will not issue any rights,  options,  warrants or  convertible
     securities in respect of shares of Common Stock held in the treasury of the
     Company.

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

          (4) Subject to the last  sentence  of  paragraph  (7) of this  Section
     2(b),  in case the Company  shall,  by dividend  or  otherwise,  distribute
     evidences of its  indebtedness,  shares of any class of capital  stock,  or
     other  property  (including  securities,  but  excluding  (i)  any  rights,
     options,  warrants or convertible  security referred to in paragraph (2) of
     this Section 2(b) (ii) any dividend or  distribution  paid  exclusively  in
     cash,  (iii) any dividend or  distribution  referred to in paragraph (1) of
     this Section  2(b) and (iv) any merger or  consolidation  to which  Section
     2(h) applies),

                                        4

<PAGE>

     the Conversion Rate shall be adjusted so that the same shall equal the rate
     determined by dividing the Conversion Rate in effect  immediately  prior to
     the close of business on the Determination  Date for such distribution by a
     fraction of which the numerator shall be the current market price per share
     (determined  as  provided in  paragraph  (8) of this  Section  2(b)) of the
     Common Stock on such Determination Date less the then fair market value (as
     determined  in good faith by the Board of  Directors of the Company) of the
     portion of the assets,  shares or evidences of  indebtedness so distributed
     applicable to one share of Common Stock and the  denominator  shall be such
     current  market price per share of the Common  Stock,  such  adjustment  to
     become  effective  immediately  prior to the opening of business on the day
     following such Determination Date provided, that no such adjustment need be
     made in the case of an  underwritten  public  offering  of Common  Stock in
     which  the  shares of  Common  Stock are sold to the  public at a price per
     share  equal to or in excess of 95 % of the  market  price per share of the
     Common  Stock as of the date of the  pricing  of such  underwritten  public
     offering. If the Board of Directors determines the fair market value of any
     distribution  for purposes of this paragraph (4) by reference to the actual
     or  when  issued  trading  market  for  any  securities   comprising   such
     distribution,  it must in doing so consider  the prices in such market over
     the same  period  used in  computing  the  current  market  price per share
     pursuant to paragraph (8) of this Section 2(b).

          (5) In case the Company shall,  by dividend or otherwise,  make a Cash
     Distribution,  then, and in each such case,  immediately after the close of
     business  on  the  Determination  Date  for  such  Cash  Distribution,  the
     Conversion  Rate shall be  adjusted  so that the same shall  equal the rate
     determined by dividing the Conversion Rate in effect  immediately  prior to
     the close of  business  on such  Determination  Date by a fraction  (a) the
     numerator  of which  shall be equal to the current  market  price per share
     (determined  as  provided in  paragraph  (8) of this  Section  2(b)) of the
     Common  Stock  on such  Determination  Date  less an  amount  equal  to the
     quotient  of (1) the  amount of such Cash  Distribution  divided by (2) the
     number of shares of Common Stock outstanding on such Determination Date and
     (b) the denominator of which shall be equal to the current market price per
     share (determined as provided in paragraph (8) of this Section 2(b)) of the
     Common Stock on such Determination Date.

          (6) In case  the  Company  or any  Subsidiary  shall  make  an  Excess
     Purchase  Payment,  then, and in each such case,  immediately  prior to the
     opening of business  on the day after the tender  offer in respect of which
     such Excess  Purchase  Payment is to be made expires,  the Conversion  Rate
     shall be  adjusted  so that the same  shall  equal the rate  determined  by
     dividing the Conversion  Rate in effect  immediately  prior to the close of
     business on the Determination  Date for such tender offer by a fraction (a)
     the numerator of which shall be equal to the current market price per share
     (determined  as  provided in  paragraph  (8) of this  Section  2(b)) of the
     Common  Stock  on such  Determination  Date  less an  amount  equal  to the
     quotient of (A) the Excess Purchase

                                       5

<PAGE>

     Payment  divided  by (B) the number of shares of Common  Stock  outstanding
     (including  any  tendered  shares)  as of the  Determination  Date less the
     number  of  all  shares  validly  tendered  and  not  withdrawn  as of  the
     Determination  Date and (b) the  denominator of which shall be equal to the
     current market price per share  (determined as provided in paragraph (8) of
     this Section 2(b)) of the Common Stock as of such Determination Date.

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

          (8)  Except  as  otherwise  provided  in the  last  sentence  of  this
     subsection  (8) of Section  2(b) for the purpose of any  computation  under
     paragraphs  (2),  (4), (5) or (6) of this  Section 2(b) the current  market
     price per  share of Common  Stock on any date  shall be  calculated  by the
     Company and be deemed to be the average of the daily Closing Prices for the
     five (5)  consecutive  Trading Days selected by the Company  commencing not
     more than ten (10)  Trading  Days  before,  and ending not later than,  the
     earlier  of the day in  question  and the day  before  the "ex  date"  with
     respect to the issuance or  distribution  requiring such  computation.  For
     purposes of this paragraph,  the term "ex date",  when used with respect to
     any  issuance  or  distribution,  means the first  date on which the Common
     Stock  trades  regular way in the  applicable  securities  market or on the
     applicable  securities  exchange without the right to receive such issuance
     or distribution. The current market price with respect to any option issued
     to any  employee or director  of the Company or  consultant  to the Company
     shall be the fair market value on the date of grant determined by reference
     to the market price on the day of the grant of such option or to the market
     price at the close of business on the  Trading  Day  immediately  preceding
     such grant.

                                        6

<PAGE>

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

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

          (c)  Whenever the  Conversion  Rate is adjusted as provided in Section
2(b), the Company shall compute the adjusted  Conversion Rate in accordance with
Section 2(b) and shall prepare a certificate (the "Conversion Rate Certificate")
signed by the Senior Financial Officer of the Company setting forth the adjusted
Conversion  Rate and  showing  in  reasonable  detail  the facts upon which such
adjustment is based,  and shall promptly  deliver such certificate to the holder
of this Security. If the holders of the Convertible Notes and the Company cannot
agree in writing as to the adjusted  Conversion  Rate in accordance with Section
2(b), the holders of the  Convertible  Notes and the Company shall determine the
adjusted Conversion Rate in accordance with the following procedure. The holders
of the  Convertible  Notes and the Company  shall each  appoint  one  registered
securities broker,  licensed with the Securities and Exchange Commission to sell
securities  to the  public,  which  broker  shall  be a senior  vice  president,
managing  director or equivalent of a major  securities  brokerage  company with
offices in New York, New York.  Each of such brokers shall have no less than ten
(10) years  experience  in such field,  shall be  unaffiliated  with,  and their
employer securities brokerage company shall be unaffiliated with, the holders of
the Convertible Notes and the Company and shall not have previously participated
in any  underwriting  of the  Company's  Common Stock in any public  offering or
provided any Material  investment  banking or corporate advisory services to the
Company.  The holders of the Convertible  Notes and the Company shall make their
appointments  promptly and, in any event,  within thirty (30) days from the date
of the  Conversion  Rate  Certificate.  The two brokers  shall meet and shall be
instructed  to render a  determination  of the adjusted  Conversion  Rate to the
holders of the  Convertible  Notes and the Company within sixty (60) days of the
date of the Conversion Rate  Certificate.  If the two brokers cannot agree, then
each broker  shall render their  independent  determination  and the two brokers
shall simultaneously  therewith provide the name of a third broker acceptable to
the two brokers meeting the criteria set forth above.  The third broker shall be
instructed  to render a  determination  of the adjusted  Conversion  Rate within
thirty (30) days of his or her

                                       7

<PAGE>

appointment.  The two closest  determinations  of the adjusted  Conversion  Rate
shall be averaged and shall constitute the adjusted  Conversion Rate. If the two
brokers cannot agree upon a third broker,  the selection of a third broker shall
be submitted to binding arbitration in New York, New York under the rules of the
American Arbitration  Association.  In the event that the difference between the
Company's calculation of the adjusted Conversion Rate and the calculation of the
adjusted  Conversion Rate determined by the foregoing process is five percent (5
%) or greater  then the costs and  expenses of the  brokers and any  arbitration
shall be paid by and be the obligation of the Company and in the event that such
difference is less than five percent (5 %) the holders of the Convertible  Notes
(as a group) shall each pay its pro rata share of 50% of such costs and expenses
and the Company shall pay 50% of such costs and expenses.

          (d) In case:

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

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

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

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

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

then the Company shall cause to be delivered to the holder of this Security,  at
least 20 days (or 10 days in any case  specified  in  clause  (1) or (2)  above)
prior  to the  applicable  record,  expiration  or  effective  date  hereinafter
specified,  a notice  stating  (x) the date on which a record is to be taken for
the  purpose  of such  dividend,  distribution,  rights,  options,  warrants  or
convertible  securities or, if a record is not to be taken, the date as of which
the  holders  of  Common  Stock  of  record  to be  entitled  to such  dividend,
distribution, rights, options,

                                       8

<PAGE>

warrants or convertible  securities are to be determined,  (y) the date on which
the right to make  tenders  under such tender  offer  expires or (z) the date on
which such reclassification,  consolidation, merger, share exchange, conveyance,
transfer,  sale,  lease,  dissolution,  liquidation or winding up is expected to
become effective, and the date as of which it is expected that holders of Common
Stock of record  shall be entitled to exchange  their shares of Common Stock for
securities,  cash or other  property  deliverable  upon  such  reclassification,
consolidation,  merger,  share  exchange,  conveyance,  transfer,  sale,  lease,
dissolution,  liquidation or winding up. Neither the failure to give such notice
nor any defect therein shall affect the legality or validity of the  proceedings
described in clauses (1) through (5) of this Section 2(d).

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

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

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

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

                                        9

<PAGE>

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

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

                                       10

<PAGE>

          (j) For purposes  hereof:  (references to Sections shall mean Sections
of this Security unless otherwise specified)

          "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.

          "Business Day" means any day other than a Saturday,  a Sunday or other
day which  shall be in Boston,  Massachusetts  or New York,  New York or a legal
holiday or a day on which commercial banks in Boston, Massachusetts or New York,
New York are required or authorized to be closed.

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

          "Change of Control" is defined in Section 3(f)(2).

          "Closing" is defined in Section 1 of the Note Purchase Agreement.

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

          "Code" means the Internal  Revenue Code of 1986,  as amended from time
to time, and the rules and regulations promulgated thereunder from time to time.

          "Common  Stock" means the Common Stock,  par value $.01 per share,  of
the Company  authorized at the date of this  instrument as originally  executed.
Subject to the  provisions  of Section  2(h),  shares  issuable on conversion or
repurchase of this Security  shall include only shares of Common Stock or shares
of any class or classes of common stock resulting from any  reclassification  or
reclassifications thereof; provided, however, that if at

                                       11

<PAGE>

any time  there  shall be more  than one such  resulting  class,  the  shares so
issuable  on  conversion  of this  Security  shall  include  shares  of all such
classes,  and  the  shares  of  each  such  class  then  so  issuable  shall  be
substantially  in the proportion  which the total number of shares of such class
resulting from all such reclassifications bears to the total number of shares of
all such classes resulting from all such reclassifications.

          "Convertible  Note(s)"shall  mean one or more of the  Company's  9.00%
Senior Convertible Notes due January 20, 2004.

          "Conversion Price" is defined in Section 1.

          "Conversion Rate" is defined in Section 2(a).

          "Default"  means an event or condition the  occurrence or existence of
which would,  with the lapse of time or the giving of notice or both,  become an
Event of Default.

          "Designated Office" is defined in the Preamble.

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

          "Environmental  Laws" means any and all  Federal,  state,  local,  and
foreign statutes,  laws,  regulations,  ordinances,  rules,  judgments,  orders,
decrees,   permits,   licenses,   written  agreements  or  written  governmental
restrictions  relating to pollution and the protection of the environment or the
release of any  materials  into the  environment,  including  but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.

          "ERISA" means the Employee  Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations  promulgated thereunder
from time to time in effect.

          "ERISA  Affiliate"  means  any  trade  or  business  (whether  or  not
incorporated)  that is treated as a single  employer  together  with the Company
under section 414 of the Code.

          "Excess Purchase Payment" means the product of (A) the excess, if any,
of (i) the  amount of cash plus the fair  market  value (as  determined  in good
faith  by the  Company's  Board  of  Directors)  of any  non-cash  consideration
required to be paid with respect to one share of Common Stock  acquired or to be
acquired in a tender offer made by the Company

                                       12

<PAGE>

or any Subsidiary of the Company for all or any portion of the Common Stock over
(ii) the current  market price per share as of the last time that tenders  could
have been  made  pursuant  to such  tender  offer  and (B) the  number of shares
validly  tendered and not withdrawn as of the  Determination  Date in respect of
such tender offer.

          "Event of Default" is defined in the preamble to Section 4.

          "Exchange  Act" shall mean the  Securities  Exchange  Act of 1934,  as
amended, or any successor Federal statute,  and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder, all as the same shall
be in effect from time to time.

          "GAAP" means  generally  accepted  accounting  principles as in effect
from time to time in the United States of America.

          "Hazardous Materials" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
remediation of which may be required or the generation,  manufacture,  refining,
production, processing, treatment, storage, handling, transportation,  transfer,
use, disposal, release, discharge,  spillage, seepage, or filtration of which is
restricted,   prohibited  or  penalized  by  any  applicable  Environmental  Law
(including, without limitation,  asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).

          "holder" means, with respect to this Security or any other Convertible
Note,  the Person in whose name it is registered  in the register  maintained by
the Company pursuant to Section 6(d).

          "Lien" means, with respect to any Person, any mortgage,  lien, pledge,
charge, security interest or other encumbrance,  or any interest or title of any
vendor,  lessor,  lender or other  secured  party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease (as defined
by  GAAP),  upon or  with  respect  to any  property  or  asset  of such  Person
(including in the case of stock, stockholder agreements, voting trust agreements
and all similar arrangements).

          "Make-Whole Amount" is defined in Section 4(g).

          "Material"  means  material in relation to the  business,  operations,
affairs,  financial condition,  assets,  properties, or prospects of the Company
and its Subsidiaries taken as a whole.

          "Material  Adverse Effect" means a material  adverse effect on (a) the
business,  operations,  affairs,  financial  condition,  assets,  properties  or
prospects  of the  Company  and its  Subsidiaries  taken as a whole,  or (b) the
ability of the  Company  to  perform  its  obligations  under the Note  Purchase
Agreement, the Registration Rights Agreement and the Convertible Notes, or (cc.)
the validity or enforceability of this Agreement or the Convertible Notes.

                                       13

<PAGE>

          "Multiemployer Plan" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).

          "Note Purchase Agreement" is defined in the Preamble.

          "PBGC" means the Pension Benefit Guaranty  Corporation referred to and
defined in ERISA or any successor thereto.

          "Person"  means  an  individual,  partnership,   corporation,  limited
liability  company,  association,   trust,  unincorporated  organization,  or  a
government or agency or political subdivision thereof.

          "Plan" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or,  within the preceding  five years,  has been  established  or
maintained,  or to which  contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA  Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.

          "Purchaser(s)"  JOHN  HANCOCK  MUTUAL  LIFE  INSURANCE  COMPANY;  JOHN
HANCOCK VARIABLE LIFE INSURANCE COMPANY; SIGNATURE 1A (CAYMAN), LTD; SIGNATURE 3
LIMITED; and HANCOCK MEZZANINE PARTNERS L.P.

          "Registration   Rights   Agreement"  means  the  Registration   Rights
Agreement dated as of the date hereof among the Purchasers and the Company.

          "Repurchase Date" is defined in Section 3(a).

          "Repurchase Price" is defined in Section 3(a).

          "Responsible  Officer" means any),  Senior  Financial  Officer and any
other senior officer of the Company with  responsibility  for the administration
of the relevant covenants in this Security or in the Note Purchase Agreement.

          "Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor  Federal statute,  and the rules and regulations of the Securities
and  Exchange  Commission  promulgated  thereunder,  all as the same shall be in
effect from time to time.

          "Senior  Financial   Officer"  means  the  chief  financial   officer,
principal accounting officer, treasurer or comptroller of the Company.

          "Subsidiary" means, as to any Person, any corporation,  association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or

                                       14

<PAGE>

more of its Subsidiaries owns sufficient equity or voting interests to enable it
or them (as a group)  ordinarily,  in the absence of  contingencies,  to elect a
majority of the  directors  (or Persons  performing  similar  functions) of such
entity,  and any partnership or joint venture if more than a 50% interest in the
profits  or  capital  thereof  is  owned  by such  Person  or one or more of its
Subsidiaries  or such Person and one or more of its  Subsidiaries  (unless  such
partnership  can and does  ordinarily  take major business  actions  without the
prior  approval of such Person or one or more of its  Subsidiaries).  Unless the
context  otherwise  clearly  requires,  any  reference  to a  "Subsidiary"  is a
reference to a Subsidiary of the Company.

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

          3.  Right to  Require  Repurchase.  (a) In the event  that a Change in
Control shall occur,  then the holder of this Security shall have the right,  at
such  holder's  option,  to  require  the  Company to  repurchase,  and upon the
exercise of such right the  Company  shall  repurchase,  this  Security,  or any
portion of the  principal  amount hereof that is equal to $1,000 or any integral
multiple  thereof,  on the date (the  "Repurchase  Date")  that is  thirty  (30)
Trading  Days after the date on which the Company  gives  notice  thereof to the
holder of this  Security,  at a purchase  price  equal to 100% of the  principal
amount  of  this  Security  to be  repurchased  plus  interest  accrued  to  the
Repurchase Date (the "Repurchase Price");  provided,  however, that installments
of  interest  on this  Security  whose  stated  maturity  is on or  prior to the
Repurchase Date shall be payable to the holder of this Security,  or one or more
predecessor Securities, registered as such on the relevant Record Date according
to their terms. At the option of the Company,  the Repurchase  Price may be paid
in cash or subject to the fulfillment by the Company of the conditions set forth
in each of Section 5 and Section 6 and subject to the  limitations  set forth in
each of Section 5 and  Section 6, by  delivery  of shares of Common  Stock or in
common stock of any Person which  succeeds the Company up to a maximum amount of
ten percent  (10%) of the then  issued and  outstanding  Common  Stock or common
stock of such Person  following any Change in Control,  provided,  however,  the
cash plus the fair market value of such shares shall equal the Repurchase Price.
The Company  agrees to give the holder of this Security  notice of any Change in
Control,  by facsimile  transmission  confirmed in writing by overnight  courier
service, promptly and in any event within two (2) Trading Days of the occurrence
thereof.

                                       15

<PAGE>

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

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

          (d)  If  this  Security  (or  portion   thereof)  is  surrendered  for
repurchase and is not so paid on or prior to the Repurchase  Date, the principal
amount of this  Security  (or such  portion  hereof,  as the case may be) shall,
until paid,  bear interest to the extent  permitted by  applicable  law from the
Repurchase Date at eleven percent (11%) per annum, and shall remain  convertible
into Common Stock until the principal of this Security (or portion  thereof,  as
the case may be) shall have been paid or duly provided for.

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

          (f) For purposes of this Section 3.

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

                                       16

<PAGE>

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

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

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

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

          (1) (A) default in the payment of any  principal  or premium,  if any,
     upon this  Security  when the same  becomes  due and  payable,  whether  at
     maturity or at a date fixed for  prepayment or by  declaration or otherwise
     or (B) default in the payment of any interest  upon this  Security  when it
     becomes due and payable,  and  continuance  of such default for a period of
     five (5) days; or

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

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

          (4) default in the performance, or breach, of any material covenant or
     warranty of the Company herein, in the Note Purchase  Agreement,  or in the
     Registration

                                       17

<PAGE>

     Rights  Agreements  (other  than a  covenant  or  warranty a default in the
     performance or breach of which is specifically dealt with elsewhere in this
     Section 4(a)) and  continuance of such default or breach for a period of 30
     days after the earlier to occur of (A) the Company's obtaining knowledge of
     such default or (B) the Company's  receiving written notice specifying such
     default or breach and  requiring  it to be remedied  and stating  that such
     notice is a "Notice of Default" hereunder; or

          (5) any  representation or warranty made in writing by or on behalf of
     the Company or by any officer of the Company  furnished in connection  with
     the transactions contemplated hereby proves to have been false or incorrect
     in any material respect on the date as of which made; or

          (6) a final judgment or judgments for the payment of money aggregating
     in excess of $250,000 are  rendered  against one or more of the Company and
     its  Subsidiaries  and which  judgments are not, within 60 days after entry
     thereof, bonded, discharged or stayed pending appeal, or are not discharged
     within 60 days after the expiration of such stay; or

          (7) a default  under any bond,  debenture,  note or other  evidence of
     indebtedness  for money  borrowed by the Company,  or under any  agreement,
     mortgage,  indenture  or  instrument  under which there may be issued or by
     which there may be secured or evidenced any indebtedness for money borrowed
     by the  Company,  with a  principal  amount then  outstanding  in excess of
     $1,000,000,  whether  such  indebtedness  now exists or shall  hereafter be
     created,  which default shall  constitute a failure to pay the principal of
     such  indebtedness  (in whole or in any part greater than  $1,000,000) when
     due and payable or shall have resulted in such indebtedness (in whole or in
     any part  greater  than  $1,000,000)  becoming  or being  declared  due and
     payable prior to the date on which it would  otherwise  have become due and
     payable; or

          (8) if(i) any Plan  other  than a  Multiemployer  Plan  shall  fail to
     satisfy the  minimum  funding  standards  of ERISA or the Code for any plan
     year or part  thereof or a waiver of such  standards  or  extension  of any
     amortization  period is sought or granted  under  section  412 of the Code,
     (ii) a notice of intent to  terminate  any Plan other than a  Multiemployer
     Plan shall have been or is reasonably expected to be filed with the PBGC or
     the PBGC shall have  instituted  proceedings  under ERISA  section  4042 to
     terminate  or  appoint  a  trustee  to  administer  any Plan  other  than a
     Multiemployer Plan or the PBGC shall have notified the Company or any ERISA
     Affiliate that a Plan other than a Multiemployer  Plan may become a subject
     of any such  proceedings,  (iii) the aggregate  "amount of unfunded benefit
     liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all
     Plans other than a Multiemployer Plan,  determined in accordance with Title
     IV of ERISA, shall exceed $250,000, (iv) the Company or any ERISA Affiliate
     shall  have  incurred  or is  reasonably  expected  to incur any  liability
     pursuant to Title I or IV of ERISA or the penalty or excise tax  provisions
     of the Code  relating to  employee  benefit  plans,  (v) the Company or any
     ERISA Affiliate  withdraws from any Multiemployer Plan, or (vi) the Company
     or any Subsidiary  establishes or amends any employee  welfare benefit plan
     that  provides  post-employment  welfare  benefits  in a manner  that would
     increase the liability of the

                                       18

<PAGE>

     Company  or any  Subsidiary  thereunder;  and  any  such  event  or  events
     described  in clauses  (i)  through  (vi)  above,  either  individually  or
     together with any other such event or events,  could reasonably be expected
     to have a Material Adverse Effect.  (As used in this Section  4(a)(8),  the
     terms  "employee  benefit plan" and "employee  welfare  benefit plan" shall
     have  the  respective  meanings  assigned  to such  terms in  Section  3 of
     ERISA.); or

          (9)  if,  as  a  result  of  any   Change  of  Control  or  any  other
     consolidation  or merger,  the holding by the  Purchasers  or any assignees
     thereof of this Security or the holding of any Common Stock or common stock
     of any Person  succeeding  the  Company,  issued to the  Purchasers  or any
     assignees thereof after conversion of this Security would constitute,  with
     respect  to  any  Plan  (other  than a  Multiemployer  Plan)  a  prohibited
     transaction which would violate the prohibitions of section 406 of ERISA or
     which  would  subject  any  "disqualified  person"  (as  defined in section
     4975(e)(2) of the Code) to a tax pursuant to section  4975(c)(1)(A)-(D)  of
     the Code; or

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

          (11) the commencement by the Company of a voluntary case or proceeding
     under   any   applicable   Federal   or   State   bankruptcy,   insolvency,
     reorganization  or other  similar law or of any other case or proceeding to
     be  adjudicated a bankrupt or insolvent,  or the consent by it to the entry
     of a decree or order for relief in respect of the Company in an involuntary
     case or  proceeding  under  any  applicable  Federal  or State  bankruptcy,
     insolvency,  reorganization  or other similar law or to the commencement of
     any bankruptcy or insolvency  case or proceeding  against it, or the filing
     by it of a petition or answer or consent seeking  reorganization or similar
     relief under any  applicable  Federal or State law, or the consent by it to
     the filing of such petition or to the  appointment of or taking  possession
     by a custodian,  receiver,  liquidator,  assignee, trustee, sequestrator or
     other  similar  official of the Company or of any  substantial  part of its
     property,  or  the  making  by it of  an  assignment  for  the  benefit  of
     creditors,  or not paying its debts as they become due or the  admission by
     it in writing of its  inability  to pay its debts  generally as they become
     due, or the taking of corporate action by the Company in furtherance of any
     such action.

          (b) If an Event of Default  (other than an Event of Default  specified
in Section  4(a)(10) or 4(a)(11))  occurs and is continuing,  then in every such
case the holder of this Security may declare the principal  hereof to be due and
payable immediately, by a notice in

                                       19

<PAGE>

writing to the Company,  and upon any such  declaration  such  principal and all
accrued  interest  hereon  shall  become  immediately  due and  payable  without
presentment,  demand,  protest  or other  notice of any  kind,  all of which are
hereby  expressly  waived,  and  the  Company  shall  forthwith  upon  any  such
acceleration  pay to the holder of this Security 0) the entire  principal of and
interest accrued on this Security, and (ii) in addition, to the extent permitted
by  applicable  law, an amount  equal to the Make Whole  Amount,  as  liquidated
damages  and not as a penalty;  and,  in case of the  occurrence  of an Event of
Default of the  character  described  in  subdivisions  4(a)(10) or 4(a)(11) the
principal  of and accrued  interest on this  Security,  ipso facto shall  become
immediately  due and payable  without any declaration or other act of the holder
of this Security and without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived,  and the Company shall forthwith
upon any such  acceleration  pay to the holder of this  Security  (x) the entire
principal of and interest accrued on this Security and (y) in addition,  if such
Event  of  Default  is  "Voluntary"  (as  hereinafter  defined),  to the  extent
permitted  by  applicable  law, an amount  equal to the  Make-Whole  Amount,  as
liquidated damages and not as a penalty.

     For  purposes  of this  section  4(a),  "Voluntary"  shall mean an Event of
Default of the character  described in  subdivisions  4(a)(10) or 4(a)(11) which
shall  have  been  (x-)  procured  by  the  Company  or any  officer,  director,
stockholder or Affiliate of the Company or (y) primarily the result of action or
inaction by the Company or by any officer, director, stockholder or Affiliate of
the Company.

          (c) In case any one or more of the  Events  of  Default  specified  in
section 4(a) shall have occurred,  and irrespective of whether this Security has
become or has been declared  immediately due and payable under section 4(a), the
holder of this  Security may proceed to protect and enforce its rights either by
suit in equity or by action at law,  or both.  The Company  stipulates  that the
remedies  at law of the holder of this  Security  in the event of any Default or
threatened  Default by the Company in the  performance of or compliance with any
covenant or  agreement  in this  Security,  the Note  Purchase  Agreement or the
Registration  Rights Agreement are not and will not be adequate and that, to the
fullest extent  permitted by law, such terms may be  specifically  enforced by a
decree for the specific performance thereof,  whether by an injunction against a
violation thereof or otherwise.

          (d) No remedy conferred in this Security,  the Note Purchase Agreement
or the  Registration  Rights  Agreement is intended to be exclusive of any other
remedy,  and each and every  such  remedy  shall be  cumulative  and shall be in
addition to every other remedy given hereunder or thereunder or now or hereafter
existing at law or in equity or by statute or otherwise.

          (e)  No  course  of  dealing  between  the  Company  and  any  of  its
Subsidiaries,  on the one hand,  and the holder of this  Security,  on the other
hand,  and no delay by any such holder in  exercising  any rights  hereunder  or
under the Note Purchase  Agreement or the  Registration  Rights  Agreement shall
operate as a waiver of any rights of such holder.

                                       20

<PAGE>

          (f) In case any one or more of the  Events  of  Default  specified  in
section 4(a) shall have occurred, all amounts to be applied to the prepayment or
payment of this  Security  shall be  applied,  after the  payment of all related
costs and expenses incurred by the holder of this Security  (including,  without
limitation,  compensation  to any and all  trustees,  liquidators,  receivers or
similar officials and reasonable fees, expenses and disbursements of counsel) in
such order of priority as is determined by the holder of this Security.

          (g) The term "Make-Whole Amount" means, with respect to this Security,
an amount equal to the excess,  if any, of the Discounted Value of the Remaining
Scheduled  Payments  with respect to the Called  Principal of this Security over
the amount of such Called Principal,  provided that the Make-Whole Amount may in
no event be less than zero.  For the  purposes  of  determining  the  Make-Whole
Amount, the following terms have the following meanings:

          "Called Principal" means, with respect to this Security, the principal
     of this Security that has become or is declared to be  immediately  due and
     payable pursuant to Section 4(b).

          "Discounted Value" means, with respect to the Called Principal of this
     Security,  the amount  obtained  by  discounting  all  Remaining  Scheduled
     Payments  with  respect to such  Called  Principal  from  their  respective
     scheduled  due dates to the  Settlement  Date with  respect to such  Called
     Principal, in accordance with accepted financial practice and at a discount
     factor  (applied on the same  periodic  basis as that on which  interest on
     this Security is payable) equal to the  Reinvestment  Yield with respect to
     such Called Principal.

          "Reinvestment  Yield" means,  with respect to the Called  Principal of
     this Security,  150 basis points over the yield to maturity  implied by (i)
     the yields  reported,  as of 10:00 A.M.  (New York City time) on the second
     Business  Day  preceding  the  Settlement  Date with respect to such Called
     Principal,  on the display designated as "PX-I" of the Bloomberg  Financial
     Markets Services Screen for actively traded U.S. Treasury securities having
     a maturity equal to the Remaining  Average Life of such Called Principal as
     of such Settlement Date, or (ii) if such yields are not reported as of such
     time or the  yields  reported  as of such time are not  ascertainable,  the
     Treasury Constant  Maturity Series Yields reported,  for the latest day for
     which such  yields  have been so  reported  as of the second  Business  Day
     preceding the  Settlement  Date with respect to such Called  Principal,  in
     Federal  Reserve  Statistical  Release  H.  15  (519)  (or  any  comparable
     successor  publication) for actively traded U.S. Treasury securities having
     a constant  maturity  equal to the  Remaining  Average  Life of such Called
     Principal  as  of  such  Settlement   Date.  Such  implied  yield  will  be
     determined,  if necessary,  by (a) converting U.S. Treasury bill quotations
     to  bond-equivalent  yields in accordance with accepted  financial practice
     and (b)  interpolating  linearly  between  (1)  the  actively  traded  U.S.
     Treasury  security  with  the  duration  closest  to and  greater  than the
     Remaining  Average Life and (2) the actively traded U.S.  Treasury security
     with the duration closest to and less than the Remaining Average Life.

                                       21

<PAGE>

          "Remaining  Average Life" means, with respect to any Called Principal,
     the number of years  (calculated to the nearest  one-twelfth year) obtained
     by dividing  (i) such Called  Principal  into (ii) the sum of the  products
     obtained by  multiplying  (,a.) the principal  component of each  Remaining
     Scheduled  Payment with respect to such Called  Principal by (b) the number
     of years  (calculated  to the  nearest  one-twelfth  year) that will elapse
     between the Settlement  Date with respect to such Called  Principal and the
     scheduled due date of such Remaining Scheduled Payment.

          "Remaining  Scheduled  Payment"  means,  with  respect  to the  Called
     Principal  of this  Security,  all  payments of such Called  Principal  and
     interest  thereon that would be due after the Settlement  Date with respect
     to such Called  Principal if no payment of such Called  Principal were made
     prior to its scheduled due date,  provided that if such  Settlement Date is
     not a date on which interest payments are due to be made under the terms of
     this Security,  then the amount of the next succeeding  scheduled  interest
     payment  will  be  reduced  by the  amount  of  interest  accrued  to  such
     Settlement Date.

          "Settlement  Date" means, with respect to the Called Principal of this
     Security,  the date on which  such  Called  Principal  or has  become or is
     declared to be immediately due and payable pursuant to Section 4(b).

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

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

          (2) immediately  after giving effect to such  transaction and treating
     any indebtedness which becomes an obligation of the Company or a Subsidiary
     of the Company as a result of such  transaction  as having been incurred by
     the  Company  or  such  Subsidiary  of the  Company  at the  time  of  such
     transaction, no Event of Default, and no

                                       22

<PAGE>

     event which,  after notice or lapse of time or both,  would become an Event
     of Default, shall have happened and be continuing;

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

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

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

          6.  Payment in Stock.  (a) The Company may elect to pay some or all of
the  Repurchase  Price by delivery of shares of Common Stock or shares of common
stock  in any  Person  succeeding  the  Company,  if and  only  if,  each of the
following  conditions shall be satisfied  (without limiting any other conditions
contained herein):

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

          (2) In the event any  shares  of Common  Stock or common  stock of any
Person  succeeding  the  Company  to be  issued in  respect  of any  amount  due
hereunder  require  registration  under any Federal  securities  law before such
shares  may be  freely  transferrable  without  being  subject  to any  transfer
restrictions under the Securities Act of 1933 upon

                                       23

<PAGE>

issuance,  such  registration  shall have been  completed  and shall have become
effective prior to the date of the first such installment;

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

          (4)  The  shares  of  Common  Stock  or  common  stock  of any  Person
succeeding the Company deliverable in payment of such amount due hereunder shall
have been approved for quotation in the Nasdaq National Market immediately prior
to the date of the  first  such  installment  or,  if at the time its  shares of
Common Stock or shares of common stock of any Person  succeeding the Company are
listed or admitted for trading on any national securities  exchange,  the shares
of  Common  Stock or common  stock in any  Person  succeeding  the  Company  and
deliverable shall have been so listed or admitted for trading.

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

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

          (7) The Company shall deliver,  or cause to be delivered a certificate
from the Person succeeding the Company which states, that after giving effect to
any  Change of  Control  that the  holding by the  Purchasers  or any  assignees
thereof of this Security,  or the holding of any Common Stock or common stock of
any Person  succeeding  the Company after  conversion of this Security would not
constitute a  prohibited  transaction  which would  violate the  prohibition  of
section  406 of ERISA or which  would  subject  any  "disqualified  person"  (as
defined in section  4975(e)(2)  of the Code) to a tax  pursuant to section  4975
(c)(1)(A)-(D) of the Code.

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

          (b) Any  issuance of shares of Common  Stock or shares of common stock
of any Person succeeding the Company in respect of any installment due hereunder
pursuant  to this  Section 6 shall be deemed to have been  effected  immediately
prior to the close of

                                       24

<PAGE>

business on the date of delivery of such  installment  and the person or persons
in whose  name or names any  certificate  or  certificates  for shares of Common
Stock shall be  issuable  upon such  delivery  shall be deemed to have become on
such date the holder or holders  of record of the  shares  represented  thereby;
provided,  however, that in case any installment shall be due on a date when the
stock  transfer  books of the Company shall be closed,  the person or persons in
whose name or names the  certificate or  certificates  for such shares are to be
issued shall be deemed to have become the record  holder or holders  thereof for
all purposes at the opening of business on the next succeeding day on which such
stock  transfer  books are open.  No  payment  or  adjustment  shall be made for
dividends or distributions on any Common Stock issued pursuant to this Section 6
declared prior to the relevant delivery date; and

          (c) Any  issuance and  delivery of  certificates  for shares of common
stock or shares of common stock of any Person succeeding the Company pursuant to
this Section 6 shall be made without  charge to the holder of this  Security for
such  certificates or for any tax or duty in respect of the issuance or delivery
of such certificates or the securities represented thereby.

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

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

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

          (d) The Company shall keep at the Designated Office a register for the
registration  and  registration of transfers of Convertible  Notes. The name and
address of each holder of one or more Convertible  Notes,  each transfer thereof
and the name and address of each  transferee  of one or more  Convertible  Notes
shall be registered in such register.  Prior to due presentment for registration
of transfer, the Person in whose name any Convertible Note

                                       25

<PAGE>

shall be registered  shall be deemed and treated as the owner and holder thereof
for all purposes hereof,  and the Company shall not be affected by any notice or
knowledge to the contrary. The Company shall give to any holder of a Convertible
Note  promptly upon request  therefor,  a complete and correct copy of the names
and addresses of all registered holders of Convertible Notes.

          (e) Upon surrender of any  Convertible  Note at the Designated  Office
for  registration  of transfer or exchange  (and in the case of a surrender  for
registration of transfer,  duly endorsed or accompanied by a written  instrument
of transfer duly executed by the registered  holder of such  Convertible Note or
his  attorney  duly  authorized  in writing and  accompanied  by the address for
notices  of each  transferee  of such  Convertible  Note or part  thereof),  the
Company shall execute and deliver,  at the Company's expense (except as provided
below),  one or more new Convertible  Notes (as requested by the holder thereof)
in exchange  therefor,  in an  aggregate  principal  amount  equal to the unpaid
principal amount of the surrendered  Convertible Note. Each such new Convertible
Note shall be payable to such  Person as such  holder may  request  and shall be
substantially in the form of this Security. Each such new Convertible Note shall
be dated and bear interest from the date to which  interest shall have been paid
on the  surrendered  Convertible  Note or  dated  the  date  of the  surrendered
Convertible  Note if no interest  shall have been paid thereon.  The Company may
require  payment  of a sum  sufficient  to cover any  stamp tax or  governmental
charge  imposed in respect of any such  transfer of this  Security.  Convertible
Notes shall not be transferred in denominations of less than $100,000,  provided
that if  necessary  to enable the  registration  of  transfer by a holder of its
entire  holding  of  Convertible  Notes,  one  Convertible  Note  may  be  in  a
denomination  of less than  $100,000.  Any  transferee,  by its  acceptance of a
Convertible  Note registered in its name (or the name of its nominee),  shall be
deemed  to have  made the  representation  set  forth in  Section  3 of the Note
Purchase Agreement.

          (f) Upon receipt by the Company of evidence reasonably satisfactory to
it of the ownership of and the loss,  theft,  destruction  or mutilation of this
Security  (which evidence shall be notice from such holder of such ownership and
such loss, theft, destruction or mutilation), and

          (i) in the case of loss, theft or destruction, of indemnity reasonably
     satisfactory  to it (provide) that if the holder of this Security is, or is
     a nominee for, an original holder or another institutional  investor holder
     of this Security,  such Person's own unsecured agreement of indemnity shall
     be deemed to be satisfactory), or

          (ii) in the  case  of  mutilation,  upon  surrender  and  cancellation
     thereof,

the Company at its own expense shall execute and deliver, in lieu thereof, a new
Convertible  Note,  dated and bearing  interest from the date to which  interest
shall have been paid on such lost,  stolen,  destroyed or mutilated  Convertible
Note or dated the date of such lost, stolen,  destroyed or mutilated Convertible
Note if no interest shall have been paid thereon.

                                       26

<PAGE>

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

          (h) So long as you or your  nominee  shall be holder of this  Security
and notwithstanding  anything in this Security to the contrary, the Company will
pay all sums becoming due hereunder for principal,  Make-Whole  Amount,  if any,
and interest by the method and at the address  specified  for such purpose below
your name in Schedule I of the Note Purchase Agreement,  or by such other method
provided in the Preamble or at such other address as you shall have from time to
time  specified  to the  Company  in  writing  for  such  purpose,  without  the
presentation  or  surrender  of this  Security,  or the  making of any  notation
hereon,  except that upon written request of the Company made  concurrently with
or  reasonably  promptly  after  payment  in full of this  Security,  you  shall
surrender  this Security for  cancellation,  reasonably  promptly after any such
request to the  Company  at its  principal  executive  office or at the place of
payment most  recently  designated  by the  Company.  Prior to any sale or other
disposition of this Security you will, at your election,  either endorse thereon
the amount of  principal  paid  thereon and the last date to which  interest has
been paid  thereon or surrender  this  Security to the Company in exchange for a
new Convertible  Note pursuant to the terms hereof.  The Company will afford the
benefits of this  Section to any  institutional  investor  that is the direct or
indirect transferee of this Security.

                     [END OF PAGE - SIGNATURE PAGE FOLLOWS]

                                       27

<PAGE>

                    Signature Page of Note Purchase Agreement

for the purpose of implementing or effectuating the provisions contained herein,
in the Convertible Notes or in the Registration Rights Agreement.

                                                     Very truly yours,

                                                     CELGENE CORPORATION

                                                     By:/s/ Sol J. Barer
                                                        ------------------------
                                                        Name: Sol J. Barer
                                                        Title: Pres/COO

<PAGE>

       Signature Page of Note Purchase Agreement with Celgene Corporation

Accepted as of the date hereof:

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

By:      /s/Stephen J. Blewitt
   -----------------------------------
Name:       Stephen J. Blewitt
     ---------------------------------
Title:      Senior Investment Officer
      --------------------------------

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

By:      /s/Stephen J. Blewitt
   -----------------------------------
Name:       Stephen J. Blewitt
     ---------------------------------
Title:      Senior Investment Officer
      --------------------------------

SIGNATURE 1A (CAYMAN), LTD.
By: John Hancock Mutual Life Insurance
         Company, Portfolio Advisor .

By:      /s/Stephen J. Blewitt
   -----------------------------------
Name:       Stephen J. Blewitt
     ---------------------------------
Title:      Senior Investment Officer
      --------------------------------

Signature 3 Limited

  By: John Hancock Mutual Life Insurance Company,
         as Portfolio Advisor

By:      /s/Stephen J. Blewitt
   -----------------------------------
Name:       Stephen J. Blewitt
     ---------------------------------
Title:      Senior Investment Officer
      --------------------------------

Hancock Mezzanine Partners L.P.
By: Hancock Mezzanine Investments LLC, its General Partner
By: John Hancock Mutual Life Insurance Company.
                           as Investment Manager

By:      /s/Stephen J. Blewitt
   -----------------------------------
Name:       Stephen J. Blewitt
     ---------------------------------
Title:      Senior Investment Officer
      --------------------------------

<PAGE>

                    ELECTION OF HOLDER TO REQUIRE REPURCHASE

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

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

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

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

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

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

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

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

<PAGE>

                                CONVERSION NOTICE

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

Dated:
      ------------------------------              ------------------------------
                                                           Signature

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

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

                                          1.   Principal amount to be converted:

                                               $
------------------------------                  ------
           Name

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

------------------------------
         Address
                                               Amount: $__________

                                               Denominations: $__________
                                               (any integral multiple of $1,000)
------------------------------
Social Security or other Taxpayer
Identification Number, if any

<PAGE>

                                                                        ANNEX II

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

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

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

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

     (d)  The  execution,  delivery  and  performance  of  this  Agreement,  the
Registration  Rights  Agreement  and the  Convertible  Notes,  compliance by the
Company  with all  provisions  hereof and  thereof and the  consummation  of the
transactions contemplated hereby or thereby and the issuance and delivery of the
Convertible  Notes will not conflict  with or  constitute a breach of any of the
terms or  provisions  of, or a default  under,  the  charter  or  by-laws of the
Company  or any of  its  Subsidiaries,  or any  agreement,  indenture  or  other
instrument to which it or any of its  Subsidiaries  is a party or by which it or
any of its Subsidiaries or their respective  properties are bound, or violate or
conflict with any laws,  administrative  regulations or rulings or court decrees
applicable to the Company, any of its subsidiaries or their respective property;
and, except (i) as required pursuant to the Registration  Rights  Agreement,  or
(ii) for the disclosure  required to be included in the Company's next Quarterly
Report on Form 10-Q, when filed, pursuant to Item 2(c) of Form 10-Q, no consent,
approval,  authorization  or order of or filing or  registration  with, any such
court or governmental agency or body is required for the execution, delivery and
performance of this Agreement, the Registration

                                        1

<PAGE>

Rights  Agreement and the Convertible  Notes by the Company and the consummation
of the transactions contemplated hereby and thereby.

     (e) Except as otherwise set forth in the Exchange Act Reports, there are no
material legal or governmental  proceedings  pending to which the Company or any
of its subsidiaries is a party or of which any of their  respective  property is
the subject which, if determined  adversely to the Company or its  subsidiaries,
might  have a  Material  Adverse  Effect,  and,  to the  best  of the  Company's
knowledge, no such proceedings are threatened or contemplated.

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

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

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

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

     (j) The Company is a corporation  duly organized,  validly  existing and in
good standing under the laws of its jurisdiction of  incorporation,  and is duly
qualified as a foreign  corporation and is in good standing in each jurisdiction
in which such  qualification is required by law, other than those  jurisdictions
as to which the  failure  to be so  qualified  or in good  standing  could  not,
individually  or in the  aggregate,  reasonably  be  expected to have a Material
Adverse Effect. The Company has the corporate power and authority to own or hold
under lease the  properties it purports to own or hold under lease,  to transact
the business it transacts and proposes to transact,  to execute and deliver this
Agreement and the Other Agreements and the Convertible  Notes and to perform the
provisions hereof and thereof.

     (k) The  Company,  through  its  agent,  Warburg,  Dillon,  Read  LLC,  has
delivered  to each  Purchaser a copy of a Private  Placement  Memorandum,  dated
December  1998 (the  "MEMORANDUM"),  relating to the  transactions  contemplated
hereby.  The "Executive  Summary",  "Investment  Highlights" and "Management and
Directors" sections of the Memorandum, when read together with Exhibits 1, 2 and
3 of the Memorandum,  fairly  describe,  in all material  respects,  the general
nature  of the  business  and  principal  properties  of  the  Company  and  its
Subsidiaries.  This Agreement,  the aforesaid sections of the Memorandum and the
documents,  certificates  or other writings  delivered to you by or on behalf of
the Company pursuant hereto

                                        2

<PAGE>

taken as a whole, do not contain any untrue statement of a material fact or omit
to state  any  material  fact  necessary  to make  the  statements  therein  not
misleading in light of the  circumstances  under which they were made. Except as
disclosed in the  Memorandum or in one of the documents,  certificates  or other
writings identified therein, or in the financial  statements  comprising part of
Exhibits 1, 2 or 3 of the Memorandum,  since September 30, 1998,  there has been
no  change in the  financial  condition,  operations,  business,  properties  or
prospects of the Company or any Subsidiary  except changes that  individually or
in the aggregate  could not  reasonably  be expected to have a Material  Adverse
Effect.  There is no fact known to the Company that could reasonably be expected
to have a Material  Adverse  Effect that has not been set forth herein or in the
Memorandum   (including  the  Exhibits  thereto)  or  in  the  other  documents,
certificates and other writings  delivered to you by or on behalf of the Company
specifically  for use in connection with the transactions  contemplated  hereby.
The projections referred to in the Memorandum in Section 4 were prepared in good
faith,  are based upon  assumptions  that the Company believes are reasonable to
make and, in good faith judgment of the Company,  take into account all Material
information  regarding the matters set forth therein. Such projections represent
a reasonable estimate by the Company of the future financial  performance of the
Company.  The Company does not presently  anticipate any Material deviation from
such  projections  and the  Company  reasonably  believes  that the  results  of
operations  reflected  therein  are  obtainable.  The  statements  of action the
Company  plans to take,  the  prediction  of  potential  sales  and  returns  on
investments  and  similar  statements  regarding  events to occur in the  future
contained in Section 2 of the Memorandum were made in good faith, are based upon
assumptions  that the  Company  believes  are  reasonable  to make and take into
account all Material information  regarding the matters set forth therein.  Such
statements  represent  a  reasonable  estimate  by the  Company  of  the  future
performance of the Company and are not statements of currently  existing  facts.
The Company does not presently anticipate any Material deviation from such plans
or predictions and the Company reasonably believes that the results suggested by
such predictions are obtainable.

     (1) No consent,  approval or authorization  of, or registration,  filing or
declaration with, any Governmental  Authority is required in connection with the
execution,  delivery  or  performance  by the Company of this  Agreement  or the
Convertible Notes.

     (m) (i) the  Company  and its  Subsidiaries  own or possess  all  licenses,
     permits, franchises,  authorizations,  patents, copyrights,  service marks,
     trademarks and trade names, or rights thereto,  that individually or in the
     aggregate are Material,  without known  conflict with the rights of others,
     except for those conflicts that  individually,  or in the aggregate,  would
     not have a Material Adverse Effect;

          (ii) to the best  knowledge of the Company,  no product of the Company
     infringes  in  any  material  respect  any  license,   permit,   franchise,
     authorization,  patent, copyright,  service mark, trademark,  trade name or
     other right owned by any other Person except for those  infringements which
     would  not  individually,  or in the  aggregate,  have a  Material  Adverse
     Effect; and

                                        3

<PAGE>

          (iii) to the  best  knowledge  of the  Company,  there is no  Material
     violation  by  any  Person  of  any  right  of  the  Company  or any of its
     Subsidiaries  with  respect  to  any  patent,   copyright,   service  mark,
     trademark, trade name or other fight owned or used by the Company or any of
     its Subsidiaries.

     (n) (i) The Company and each ERISA Affiliate have operated and administered
     each Plan in compliance  with all applicable laws except for such instances
     of  noncompliance  as have not  resulted  in and  could not  reasonably  be
     expected to result in a Material  Adverse  Effect.  Neither the Company nor
     any ERISA Affiliate has incurred any liability pursuant to Title I or IV of
     ERISA or the  penalty  or excise tax  provisions  of the Code  relating  to
     employee  benefit  plans (as defined in Section 3 of ERISA),  and no event,
     transaction  or condition  has occurred or exists that could  reasonably be
     expected to result in the  incurrence of any such  liability by the Company
     or any  ERISA  Affiliate,  or in the  imposition  of any Lien on any of the
     rights,  properties  or assets of the  Company or any ERISA  Affiliate,  in
     either case pursuant to Title I or IV of ERISA or to such penalty or excise
     tax provisions or to Section 401(a)(29) or 412 of the Code, other than such
     liabilities  or Liens  as would  not be  individually  or in the  aggregate
     Material.

          (ii) The present value of the aggregate benefit liabilities under each
     of the Plans subject to Title IV of ERISA (other than Multiemployer Plans),
     determined  as of the end of such Plan's most  recently  ended plan year on
     the basis of the actuarial  assumptions  specified for funding  purposes in
     such Plan's  most recent  actuarial  valuation  report,  did not exceed the
     aggregate  current  value of the  assets  of such  Plan  allocable  to such
     benefit  liabilities.  The  term  "benefit  liabilities"  has  the  meaning
     specified  in  section  4001 of ERISA and the  terms  "current  value"  and
     "present value" have the meaning specified in section 3 of ERISA.

          (iii)  The  Company  and  its  ERISA   Affiliates  have  not  incurred
     withdrawal  liabilities  (and  are not  subject  to  contingent  withdrawal
     liabilities)   under   section   4201  or  4204  of  ERISA  in  respect  of
     Multiemployer Plans that individually or in the aggregate are Material.

          (iv) The expected  postretirement benefit obligation (determined as of
     the last day of the Company's most recently ended fiscal year in accordance
     with Financial Accounting Standards Board Statement No. 106, without regard
     to liabilities  attributable to continuation  coverage  mandated by section
     4980B of the Code) of the Company and its Subsidiaries is not Material.

          (v) The execution and delivery of this  Agreement and the issuance and
     sale of the  Convertible  Notes  hereunder will not involve any transaction
     that  is  subject  to  the  prohibitions  of  section  406 of  ERISA  or in
     connection  with  which  a  tax  could  be  imposed   pursuant  to  section
     4975(c)(1)(A)-(D)  of the Code.  The  representation  by the Company in the
     first  sentence of this Section  Annex II n(v) is made in reliance upon and
     subject

                                        4

<PAGE>

     to the accuracy of the  representation  made by each Purchaser in Section 3
     of this  Agreement  as to the sources of the funds used to pay the purchase
     price of the Convertible Notes to be purchased by the Purchasers.

     (o) Neither  the  Company  nor anyone  acting on its behalf has offered the
Convertible Notes or any similar  securities for sale to, or solicited any offer
to buy any of the same from,  or otherwise  approached  or negotiated in respect
thereof  with,  any person  other than you,  the Other  Purchasers  and no other
Institutional Investors, each of which has been offered the Convertible Notes at
a private  sale for  investment.  Neither the  Company nor anyone  acting on its
behalf has taken,  or will take,  any action that would  subject the issuance or
sale of the Convertible  Notes to the registration  requirements of Section 5 of
the Securities Act.

     (p) No  part  of the  proceeds  from  the  sale  of the  Convertible  Notes
hereunder  will be used,  directly or  indirectly,  for the purpose of buying or
carrying  any margin  stock  within the meaning of  Regulation U of the Board of
Governors  of the  Federal  Reserve  System (12 CFR 221),  or for the purpose of
buying or carrying or trading in any securities  under such  circumstances as to
involve the Company in a violation of Regulation X of said Board (12 CFR 224) or
to involve any broker or dealer in a violation of Regulation T of said Board (12
CFR 220).  As used in this  Section,  the terms  "margin  stock" and "purpose of
buying or carrying" shall have the meanings  assigned to them in said Regulation
U.

     (q) Neither the sale of the Convertible  Notes by the Company hereunder nor
its use of the proceeds  thereof will violate the Trading with the Enemy Act, as
amended,  or any of the foreign assets control  regulations of the United States
Treasury  Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.

     (r) Neither the Company nor any  Subsidiary  has  knowledge of any claim or
has received any notice of any claim, and neither the Company nor any Subsidiary
has any knowledge of any proceeding that has been  instituted  raising any claim
against the Company or any of its  Subsidiaries or any of their  respective real
properties  now or  formerly  owned,  leased or operated by any of them or other
assets, alleging any damage to the environment or violation of any Environmental
Laws,  except,  in each case, such as could not reasonably be expected to result
in a Material Adverse Effect. Except as otherwise disclosed to you in writing,

          (i) neither the Company nor any  Subsidiary has knowledge of any facts
     which is reasonably likely to give rise to any claim, public or private, of
     violation  of  Environmental  Laws or damage to the  environment  emanating
     from, occurring on or in any way related to real properties now or formerly
     owned,  leased or  operated by the  Company or any  Subsidiary  or to their
     respective  assets or the use thereof,  except, in each case, such as could
     not reasonably be expected to result in a Material Adverse Effect;

          (ii)  neither the Company nor any of its  Subsidiaries  has stored any
     Hazardous  Materials on real  properties now or formerly  owned,  leased or
     operated by the Company

                                        5

<PAGE>

     or any  Subsidiary  and has not  disposed of any  Hazardous  Materials in a
     manner contrary to any Environmental  Laws, in each case in any manner that
     could reasonably be expected to result in a Material Adverse Effect; and

          (iii)  all  buildings  on all real  properties  now  owned,  leased or
     operated by the Company or any of its  Subsidiaries  are in compliance with
     applicable Environmental Laws, except where the failure to comply could not
     reasonably be expected to result in a Material Adverse Effect.

     (s) The Company  has (i)  initiated  a review and  assessment  of all areas
within its and each of its  Subsidiaries'  business  and  operations  (including
those  affected by  suppliers,  vendors and  customers)  that could be adversely
affected  by  the  "Year  2000  Problem"   (that  is,  the  risk  that  computer
applications  used by the  Company  or any of its  Subsidiaries  (or  suppliers,
vendors  and  customers)  may  be  unable  to  recognize  and  perform  properly
date-sensitive  functions  involving  certain  dates prior to and any date after
December 31, 1999),  (ii)  developed a plan and timeline for addressing the Year
2000  Problem on a timely  basis,  and (iii) to date,  implemented  that plan in
accordance with that  timetable.  Based on the foregoing,  the Company  believes
that  its  computer  applications  that  are  material  to  its  or  any  of its
Subsidiaries'  business and operations are reasonably expected on a timely basis
to be able to perform properly date-sensitive functions for all dates before and
after January 1, 2000 (that is, be "Year 2000 compliant"),  except to the extent
that a failure  to do so could  not  reasonably  be  expected  to have  Material
Adverse Effect. The Company is not aware that any of its suppliers,  vendors and
customers'  computer  applications  that are Material to the Company's or any of
its Subsidiaries'  business and operations are not expected on a timely basis to
be Year 2000 compliant.  The Company has requested a certificate from suppliers,
vendors and customers certifying that such Person is Year 2000 compliant.  As of
the date hereof, the Company has not received all of such certificates.

     All  representations  and  warranties  contained  herein shall  survive the
execution and delivery of this Note Purchase  Agreement,  the Convertible  Notes
and the Registration Rights Agreement, the purchase or transfer by a holder of a
Convertible  Note or any portion thereof or interest  therein and the payment of
any  Convertible  Note and may be  relied  upon by any  subsequent  holder  of a
Convertible  Note  regardless  of any  investigation  made at any  time by or on
behalf  of you  or any  other  holder  of a  Convertible  Note.  All  statements
contained in any  certificate or other  instrument  delivered by or on behalf of
the  Company   pursuant  to  this  Note  Purchase   Agreement  shall  be  deemed
representations   and  warranties  of  the  Company  under  this  Note  Purchase
Agreement.  Subject to the preceding sentence, this Note Purchase Agreement, the
Convertible  Notes, and the  Registration  Rights  Agreement,  embody the entire
agreement and understanding  between you and the Company and supersede all prior
agreements and understandings relating to the subject matter hereof.

                                        6

<PAGE>

                                                                       ANNEX III

                           OPINION OF COMPANY COUNSEL

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

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

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

     (d) This Note  Purchase  Agreement has been duly  authorized,  executed and
delivered by the Company and is enforceable in accordance with its terms.

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

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

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

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

     (i)  The  execution,  delivery  and  performance  of  this  Agreement,  the
Registration  Rights  Agreement  and  the  Convertible  Notes  by  the  Company,
compliance by the Company with all the

                                       1

<PAGE>

provisions   hereof  and  thereof  and  the  consummation  of  the  transactions
contemplated hereby and thereby will not conflict with or constitute a breach of
any of the terms or provisions of, or a default under, the charter or by-laws of
the Company or any agreement, indenture or other instrument to which the Company
is a party or by which the Company or its  properties  are bound,  or violate or
conflict with any laws,  administrative  regulations or rulings or court decrees
applicable  to the  Company or its  properties  in any case which is  reasonably
likely to have a Material Adverse Effect.

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

     (k) Assuming  that the proceeds are used in  accordance  with the Officers'
Certificate,  no part of the proceeds of the sale of the Convertible  Notes will
be used  directly  or  indirectly  to  purchase,  acquire  or carry any  "margin
security" or "margin  stock" as such terms are used in  Regulation U, X and T of
the Board of Governors of the Federal Reserve System 12 C.F.R. Parts 221,224 and
220 respectively.

                          ['33 Act and '39 Act opinion]

                                  [litigation]

                                        2

<PAGE>

                                   SCHEDULE I
                                   Cover Page

<TABLE>
<CAPTION>
          Payee                                             Amount                    No.
          -----                                             ------                    ---
<S>                                                       <C>                         <C>
John Hancock Mutual Life Insurance                        $2,100,000                  R-1
Company

John Hancock Mutual Life Insurance                        $2,000,000                  R-2
Company

John Hancock Mutual Life Insurance                          $200,000                  R-3
Company

John Hancock Variable Life Insurance                        $200,000                  R-4
Company

John Hancock Mutual Life Insurance                          $500,000                  R-5
Company

Signature lA (Cayman), Ltd.                                 $500,000                  R-6
(nominee: Barnett & Co.)

Signature 3 Limited                                       $2,000,000                  R-7
(nominee: Hare & Co.)

Hancock Mezzanine Partners L.P.                           $7,500,000                  R-8
</TABLE>

<PAGE>

                                   SCHEDULE I
                   JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

     $2,100,000 GENERAL ACCOUNT
     $2,000,000 GUARANTEED BENEFIT SUB ACCOUNT
     $200,000 SEPARATE ACCOUNT 12

1.   All payments on account of the  Convertible  Notes or other  obligations in
     accordance with the provisions  thereof shall be made by bank wire transfer
     of immediately  available funds for credit,  not later than 12 noon, Boston
     time, to:

         BankBoston
         ABA No. 011000390
         Boston, Massachusetts 02110
         Account of:      John Hancock Mutual Life Insurance Company
                          Private Placement Collection Account

         Account Number: 541-55417
         On Order of: Celgene Corporation [PPN No.]o
         Celgene Corporation 9.00% Senior Convertible Notes due January 20, 2004

2.   Contemporaneous with the above wire transfer, advice setting forth:

          (1)  the full name, interest rate and maturity date of the Convertible
               Notes or other obligations;
          (2)  allocation  of payment  between  principal  and  interest and any
               special payment; and
          (3)  name and address of Bank (or  Trustee)  from which wire  transfer
               was sent shall be delivered or faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention: Manager
                     Investment Accounting Division, B-3
          Fax: 617-572-0628

3.   All notices with respect to  prepayments,  both scheduled and  unscheduled,
     whether  partial or in full,  and notice of maturity  shall be delivered or
     faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention: Manager

                                     1 of 12

<PAGE>

                     Investment Accounting Division, B-3
          Fax: 617-572-0628

4.   All other  communications  which  shall  include,  but not be  limited  to,
     financial   statements  and   certificates  of  compliance  with  financial
     covenants, shall be delivered or faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention:    Bond and Corporate Finance Group, T-57
          Fax: 617-572-1605

5.   A copy of any  notices  relating  to change in  issuer's  name,  address or
     principal  place of business or  location of  collateral  and a copy of any
     legal opinions shall be delivered or faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention:    Investment Law Division, T-50
          Fax: 617-572-9268

6.   All securities shall be registered in the name of: John Hancock Mutual Life
     Insurance Company

7.   Tax I.D. No. 04-1414660

                                     2 of 12

<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
                                    $200,000

1.   All payments on account of the  Convertible  Notes or other  obligations in
     accordance with the provisions  thereof shall be made by bank wire transfer
     of immediately  available funds for credit,  not later than 12 noon, Boston
     time, to:

         BankBoston
         ABA No. 011000390
         Boston, Massachusetts 02110
         Account of:       John Hancock Mutual Life Insurance Company
                           Private Placement Collection Account

         Account Number: 541-55417
         On Order of: Celgene Corporation [PPN No.]
         Celgene Corporation 9.00% Senior Convertible Notes due January 20, 2004

2.   Contemporaneous with the above wire transfer, advice setting forth:

          (1)  the full name, interest rate and maturity date of the Convertible
               Notes or other obligations;
          (2)  allocation  of payment  between  principal  and  interest and any
               special payment; and
          (3)  name and address of Bank (or  Trustee)  from which wire  transfer
               was sent shall be delivered or fixed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention: Manager
                     Investment Accounting Division, B-3
          Fax: 617-572-0628

3.   All notices with respect to  prepayments,  both scheduled and  unscheduled,
     whether  partial or in full,  and notice of maturity  shall be delivered or
     faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention: Manager
                     Investment Accounting Division, B-3
          Fax: 617-572-0628

                                     3 of 12

<PAGE>

4.   All other  communications  which  shall  include,  but not be  limited  to,
     financial   statements  and   certificates  of  compliance  with  financial
     covenants, shall be delivered or faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention: Bond and Corporate Finance Group, T-57
          Fax: 617-572-1605

5.   A copy of any  notices  relating  to change in  issuer's  name,  address or
     principal  place of business or  location of  collateral  and a copy of any
     legal opinions shall be delivered or faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention:    Investment Law Division, T-50
          Fax: 617-572-9268

6.   All  securities  shall be registered in the name of: John Hancock  Variable
     Life Insurance Company

7.   Tax I.D. No. 04-2664016

                                    4 of 12

<PAGE>

                   JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
                                    $500,000
                               SEPARATE ACCOUNT 18

1.   All payments on account of the  Convertible  Notes or other  obligations in
     accordance with the provisions  thereof shall be made by bank wire transfer
     of immediately  available funds for credit,  not later than 12 noon, Boston
     time, to:

         Investors Bank & Trust Company
         Boston, Massachusetts 02110 ABA No. 011001438
         Account Number: 79650-9107
         for further credit to Separate Account 18, Account 99266
         On Order of: Celgene Corporation [PPN No.]
         Celgene Corporation 9.00% Senior Convertible Notes due January 20, 2004

2.   Contemporaneous with the above wire transfer, advice setting forth:

          (1)  the full name, interest rate and maturity date of the Convertible
               Notes or other obligations;
          (2)  allocation  of payment  between  principal  and  interest and any
               special payment; and
          (3)  name and address of Bank (or  Trustee)  from which wire  transfer
               was sent shall be delivered or faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention: Manager
                     Investment Accounting Division, B-3
          Fax: 617-572-0628

3.   All notices with respect to  prepayments,  both scheduled and  unscheduled,
     whether  partial or in full,  and notice of maturity  shall be delivered or
     faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention: Manager
                     Investment Accounting Division, B-3
          Fax: 617-572-0628

                                     5 of 12

<PAGE>

4.   All other  communications  which  shall  include,  but not be  limited  to,
     financial   statements  and   certificates  of  compliance  with  financial
     covenants, shall be delivered or faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention:    Bond and Corporate Finance Group, T-57
          Fax: 617-572-1605

5.   A copy of any  notices  relating  to change in  issuer's  name,  address or
     principal  place of business or  location of  collateral  and a copy of any
     legal opinions shall be delivered or faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention:    Investment Law Division, T-50
          Fax: 617-572-9268

6.   All securities shall be registered in the name of: John Hancock Mutual Life
     Insurance Company

7.   Tax I.D. No. 04-1414660

                                     6 of 12

<PAGE>

                           SIGNATURE lA (CAYMAN), LTD.
                                    $500,000

1.   All payments on account of the  Convertible  Notes or other  obligations in
     accordance with the provisions  thereof shall be made by bank wire transfer
     of immediately  available funds for credit,  not later than 12 noon, Boston
     time, to:

          Bankers Trust Company
          ABA #021-001-033 Acct. #99-911-145
          For further credit to: Bankers Trust Company, as Indenture Trustee for
               Signature lA (Cayman), Ltd., Account #98016

2.   Contemporaneous with the above wire transfer, advice setting forth:

          (1)  the full name, interest rate and maturity date of the Convertible
               Notes or other obligations;
          (2)  allocation  of payment  between  principal  and  interest and any
               special payment; and
          (3)  name and address of Bank (or  Trustee)  from which wire  transfer
               was sent, shall be delivered or faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          Company, Portfolio Advisor
          200 Clarendon Street
          Boston, MA 02117
          Attention: George H. Braun
                     Bond and Corporate Finance Group, T-57
          Fax: 617-572-1605

          with a copy to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention: Manager
                     Investment Accounting Division, B-3
          Fax: 617-572-0628

3.   All notices with respect to  prepayments,  both scheduled and  unscheduled,
     whether  partial or in full,  and notice of maturity  shall be delivered or
     faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          Company, Portfolio Advisor
          200 Clarendon Street
          Boston, MA 02117

                                     7 of 12

<PAGE>

          Attention: George H. Braun
                     Bond and Corporate Finance Group, T-57
          Fax: 617-572-1605

          with a copy to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention: Manager
                     Investment Accounting Division, B-3
          Fax: 617-572-0628

4.   All other  communications  which  shall  include,  but not be  limited  to,
     financial   statements  and   certificates  of  compliance  with  financial
     covenants, shall be delivered or faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          Company, Portfolio Advisor
          200 Clarendon Street
          Boston, MA 02117
          Attention: George H. Braun
                     Bond and Corporate Finance Group, T-57
          Fax: 617-572-1605

5.   A copy of any  notices  relating  to change in  issuer's  name,  address or
     principal  place of business or  location of  collateral  and a copy of any
     legal opinions shall be delivered or faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention: Investment Law Division, T-50
          Fax: 617-572-9268

6.   Execution documents shall be executed as follows:

          SIGNATURE lA (CAYMAN), LTD.
          By: John Hancock Mutual Life Insurance
                   Company, Portfolio Advisor

          By:
             ----------------------------------------
          Title:
                -------------------------------------
                  [authorized John Hancock Officer]

7.   All securities shall be registered in the name of: BARNETT & CO.

                                     8 of 12

<PAGE>

                         SIGNATURE 3 LIMITED $2,000,000

1.   All payments on account of the  Convertible  Notes or other  obligations in
     accordance with the provisions  thereof shall be made by bank wire transfer
     of immediately  available funds for credit,  not later than 12 noon, Boston
     time, to:

         Investors Bank & Trust Company
         Boston, Massachusetts 02110
         ABA No. 011001438
         Account Number: 796509107
         for further credit to Signature 3 Limited, Account 99292
         On Order of: Celgene Corporation [PPN No.]
         Celgene Corporation 9.00% Senior Convertible Notes due January 20, 2004

2.   Contemporaneous with the above wire transfer, advice setting forth:

          (1)  the full name, interest rate and maturity date of the Convertible
               Notes or other obligations;
          (2)  allocation  of payment  between  principal  and  interest and any
               special payment; and
          (3)  name and address of Bank (or  Trustee)  from which wire  transfer
               was sent shall be delivered or faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention: Manager
                     Investment Accounting Division, B-3
          Fax: 617-572-0628

3.   All notices with respect to  prepayments,  both scheduled and  unscheduled,
     whether  partial or in full,  and notice of maturity  shall be delivered or
     faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention: Manager
                     Investment Accounting Division, B-3
          Fax: 617-572-0628

4.   All other  communications  which  shall  include,  but not be  limited  to,
     financial   statements  and   certificates  of  compliance  with  financial
     covenants, shall be delivered or faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street

                                     9 of 12

<PAGE>

          Boston, MA 02117
          Attention:    Bond and Corporate Finance Group, T-57
          Fax: 617-572-1605

5.   A copy of any  notices  relating  to change in  issuer's  name,  address or
     principal  place of business or  location of  collateral  and a copy of any
     legal opinions shall be delivered or faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention: Investment Law Division, T-50
          Fax: 617-572-9268

6.   Execution documents shall be executed as follows:

          Signature 3 Limited

          By: John Hancock Mutual Life Insurance Company,
                   as Portfolio Advisor

          By:
             ----------------------------------------
                   [authorized John Hancock Officer]

7.   All securities shall be registered in the name of: Hare & Co.

8.   Tax I.D. No.: Not Applicable.

                                    10 of 12

<PAGE>

                         HANCOCK MEZZANINE PARTNERS L.P.
                                   $7,500,000

1.   All  payments on account of the Notes or other  obligations  in  accordance
     with  the  provisions  thereof  shall  be  made by bank  wire  transfer  of
     immediately  available  funds for  credit,  not later than 12 noon,  Boston
     time, to:

         Investors Bank & Trust Company
         Boston, Massachusetts 02110
         ABA No. 011001438
         Account Number: 58215013
         for further credit to Hancock Mezzanine Partners L.P., Account 99274
         On Order of: Celgene Corporation [PNN No.]
         Celgene Corporation 9.00% Senior Convertible Notes due January 20, 2004

2.   Contemporaneous with the above wire transfer, advice setting forth:

          (1)  the full name,  interest  rate and maturity  date of the Notes or
               other obligations;
          (2)  allocation  of payment  between  principal  and  interest and any
               special payment; and
          (3)  name and address of bank (or  Trustee)  from which wire  transfer
               was sent shall be delivered or faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention: Manager
                     Investment Accounting Division, B-3
          Fax: 617-572-0628

3.   All notices with respect to  prepayments,  both scheduled and  unscheduled,
     whether  partial or in full,  and notice of maturity  shall be delivered or
     faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention: Manager
                     Investment Accounting Division, B-3
          Fax: 617-572-0628

4.   All other  communications  which  shall  include,  but not be  limited  to,
     financial   statements  and   certificates  of  compliance  with  financial
     covenants, shall be delivered or faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street

                                    11 of 12

<PAGE>

          Boston, MA 02117
          Attention:    Bond and Corporate Finance Group, T-57
          Fax: 617-572-1605

5.   A copy of any  notices  relating  to change in  issuer's  name,  address or
     principal  place of business or  location of  collateral  and a copy of any
     legal opinions shall be delivered or faxed and mailed to:

          John Hancock Mutual Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attention:    Investment Law Division, T-50
          Fax: 617-572-9268

6.   Execution documents shall be executed as follows:

          Hancock Mezzanine Partners L.P.
          By: Hancock Mezzanine Investments LLC, its General Partner
          By: John Hancock Mutual Life Insurance Company.
                  as Investment Manager

          By:
             ----------------------------------------
                 [authorized John Hancock Officer]

7.   All  securities  shall be  registered  in the name  of:  Hancock  Mezzanine
     Partners L.P.

8.   Tax I.D. No. 04-3428544

                                    12 of 12

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