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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 20, 2004

PPN No.:                                                              $2,100,000
No. R-1

                  CELGENE CORPORATION, a corporation duly organized and existing
under the laws of Delaware (the "Company") for value  received,  hereby promises
to pay to JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, or registered assigns, the
principal  sum of TWO MILLION  ONE  HUNDRED  THOUSAND  DOLLARS  ($2,100,000)  on
January 20, 2004 and to pay interest thereon, from January 20, 1999, or from the
most  recent  interest  payment  date to which  interest  has been  paid or duly
provided for,  semiannually  on January 20 and July 20 in each year,  commencing
July 20, 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

<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

<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

<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,

<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>

                  (i) 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 (c)
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  lA (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  right 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 right 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 maybe) 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 tile  expiration  of such
         stay; or

                  (7) a  default  under  all3,  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  $1,000,0003  when due and  payable  or shall  have
         resulted in such  indebtedness  (in whole or in any part  greater  than
         $1,000.0003  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)(183 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  wealthier  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)(l0) 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 (i) 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)(l 0) 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
                  width 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 o fall 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  (provided  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 9.00% Senior  Convertible  Note due January
20, 2004

                  1N WITNESS WHEREOF, the Company has caused this Security to be
         duly executed under its corporate seal.

         Dated: January 20, 1999
                                                            CELGENE CORPORATION

                                                               Name:
                                                               Title:
                    Attest:

<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  registered  in If only a  portion  of the
Securities  is to be the name of a person  other  than  the  holder,  converted,
please indicate: 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 anyEXHIBIT 10.24

                          REGISTRATION RIGHTS AGREEMENT

     REGISTRATION RIGHTS AGREEMENT, dated as of January 20, 1999, by and between
Celgene Corporation,  a Delaware  corporation (the "Company"),  and John Hancock
Mutual Life Insurance  Company,  John Hancock  Variable Life Insurance  Company,
Signature lA (Cayman) Ltd.,  Signature 3 Limited and Hancock Mezzanine  Partners
L.P. (collectively,  the "Purchasers" and singly, each "Purchaser") entered into
in  connection  with the  issuance  of a  Convertible  Note due January 20, 2004
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 January 20, 2004,
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 and the rules and regulations promulgated  thereunder,  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 and the rules and regulations promulgated  thereunder,  as the
same shall be amended from time to time.

<PAGE>

     (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.

     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  January  20,  2000,  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  Purchasers  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 each Purchaser that it has sold all Shares  issuable upon  conversion
of the  Convertible  Notes so owned by it, or (iii) such time as the  Purchasers
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 each 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 any
Purchaser reasonably objects.

     (b) Notwithstanding the foregoing, following the effectiveness of the Shelf
Registration,  the Company many, at any time,  suspend the effectiveness of such
Shelf Registration for up to 60 days, as appropriate (a "Suspension Period"), by
giving notice to each  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,  and no  Suspension
Period  shall be  effective  at any time the  Company  or any  affiliate  of the
Company is publicly  selling  shares of the capital stock of the Company  (other
than  pursuant  to a  registration  statement  on the  Securities  and  Exchange
Commission  Form  S-8).  The  period  of any  such  suspension  of  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). Each Purchaser agrees
that, upon receipt of any notice from the Company of a Suspension  Period,  such
Purchaser shall forthwith discontinue disposition of shares covered by the Shelf
Registration  until such Purchaser (i) is advised in writing by the Company that
the use of the

                                       2
<PAGE>

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  incorporation  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 Purchasers 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 each Purchaser;

     (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 each Purchaser set forth
in such registration statements;

     (iii) provide (A) each  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(11) 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 Purchasers 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 and clearly marked or otherwise adequately  identified by the Company as
being confidential  until such time as (A) such information  becomes a matter of
public record (whether by virtue of its inclusion in

                                       3
<PAGE>

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 or over
such party  (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 each 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 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 any 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 such  Purchaser  specify should be
included therein

                                       4
<PAGE>

relating to the terms of the sale of such Shares, including, without limitation,
information with respect to the number of Shares being sold by such Purchaser or
agent or to any underwriters,  the name and description of such 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  such  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 each  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 any 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 any Purchaser,
agent,  if any,  and  underwriter,  if any, may  reasonably  request in order to
facilitate the offering and  disposition of the Shares owned by such  Purchaser,
offered or sold by such agent or underwritten by such  underwriter and to permit
such  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 any  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 each 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 each  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 each
Purchaser, agent, if any, and underwriter, if any, to

                                       5
<PAGE>

consummate  the  disposition  in such  jurisdictions  of such Shares;  provided,
however,  that the  Company  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 each 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 any  Purchaser  shall
reasonably  request in order to expedite or facilitate  the  disposition  of the
Shares;

     (xiii)  notify each  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;

                                       6
<PAGE>

     (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 in subsidiaries
complying with Section 11 (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 each  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 each Purchaser,  to each placement or sales
agent, 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.
Each Purchaser  agrees that upon receipt of any notice from the Company pursuant
to Section  3(a)(v)(F)  hereof,  such Purchaser shall forthwith  discontinue the
disposition of Shares pursuant to the registration  statement applicable to such
Shares  until such  Purchaser  shall  have  received  copies of such  amended or
supplemented prospectus, and if so directed by the Company, such Purchaser shall
deliver  to the  Company  (at the  Company's  expense)  all  copies,  other than
permanent  file copies,  then in such  Purchaser's  possession of the prospectus
covering such Shares at the time of receipt of such notice.

     (c) The Company may require any  Purchaser  to furnish to the Company  such
information  regarding such Purchaser and such  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. Each  Purchaser  agrees to notify the
Company as promptly as  practicable  of any  inaccuracy or change in information
previously  furnished by such  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 such Purchaser or such Purchaser's  intended method of distribution of
such Shares or omits to state any material fact regarding such Purchaser or such
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 such 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.  Each Purchaser  agrees that upon  delivering any
notice to the Company  pursuant  to this  Section  3(c),  such  Purchaser  shall
forthwith  discontinue the  disposition of Shares  pursuant to the  registration
statement applicable to such Shares until such

                                       7
<PAGE>

Purchaser shall have received copies of such amended or supplemented prospectus,
and if so directed by the Company,  such Purchaser  shall deliver to the Company
(at the Company's expense) all copies,  other than permanent file copies then in
such 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  performance  and
compliance)  (collectively,  the "Registration  Expenses").  Notwithstanding the
foregoing,  such  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 such Purchaser in connection with the sale of its shares.

     5. Representations and Warranties.

     The Company represents and warrants to, and agrees with, each
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  case  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 give to such 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

                                       8
<PAGE>

(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 such 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 such 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
Purchasers  contained herein, and as an inducement to the Purchasers to purchase
the Convertible Notes, the Company shall, and it hereby agrees to, indemnify and
hold harmless each 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 such
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,  final or  summary  prospectus  contained
therein or furnished by the Company to such 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 such 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

                                       9
<PAGE>

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  each
participating  Purchaser and from each  underwriter,  if any,  named in any such
underwriting  agreement,  severally and not jointly or jointly and severally, 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  any  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  such
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.  Notwithstanding  the  above,  the  obligation  of such
Purchaser for indemnity  shall be limited to an amount equal to the net proceeds
received by such Purchaser in the applicable underwriting.

     (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
other expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of investigation
unless, in the case of an indemnification  obligation arising under Section (a),
(i) the employment of such additional  counsel has been authorized in writing by
the Company in connection with defending such action,

                                       10
<PAGE>

or (ii) the Company and the  Purchaser  are advised by such  additional  counsel
that the Purchaser has available  defenses  involving a potential  conflict with
the  interests  of the Company,  in which  event,  the fees and expenses of such
additional  counsel shall be borne by the Company.  No indemnifying  party shall
consent to entry of any judgment or enter into any settlement of a claim against
an indemnified party without the consent of the indemnified party which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such  indemnified  party of an  unconditional  release from all  liability in
respect to such claim or litigation.

     (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 each 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 such  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 any 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),  no Purchaser  shall be required to contribute
any amounts in excess of the amount by which the dollar  amount of the  proceeds
received by such  Purchaser  from the sale of any Shares  (after  deducting  any
fees,  discounts and commissions  applicable  thereto) exceeds the amount of any
damages which such  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

                                       11
<PAGE>

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  11 (f) of the
Securities  Act) shall be  entitled  to  contribute  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
each  Purchaser,  any agent and any  underwriter  and each  person,  if any, who
controls such  Purchaser or any agent or  underwriter  within the meaning of the
Securities  Act;  and the  obligations  of each  Purchaser  and any  agents  and
underwriters  contemplated  by  this  Section  6  shall  be in  addition  to any
liability which such 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 the 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

                                       12
<PAGE>

     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

     If to Purchasers,  to the Person designated by Purchaser and at the address
     as set forth on Schedule I in the Note  Purchase  Agreement  dated the date
     hereof between the Purchasers and the Company

     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.

     (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
each Purchaser, any director, officer or partner of such Purchaser, any agent or
underwriter  or any director,  officer or partner  thereof,  or any  controlling
person of any of the  foregoing  and shall survive the transfer of the Shares by
such Purchaser.

     (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

                                       13
<PAGE>

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 be a written  instrument duly
executed by the Company and each 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
$100,000  any  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 a Purchaser under
these  Registration  Rights, and all references to such "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.

     [the remainder of this page is intentionally left blank]

                                       14
<PAGE>

                 Signature Page of Registration Rights Agreement

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

CELGENE CORPORATION

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

     JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

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

     JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

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

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

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

<PAGE>

                 Signature Page of Registration Rights Agreement

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

     CELGENE CORPORATION

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

     JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

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

     JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

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

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

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

<PAGE>

                 Signature Page of Registration Rights Agreement

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

     CELGENE CORPORATION

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

     JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

     By:
        -----------------------------------
     Name:
          ---------------------------------
     Title: Senior Investment Officer
           --------------------------------

     JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

     By:
        -----------------------------------
     Name:
          ---------------------------------
     Title: Senior Investment Officer
           --------------------------------

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

     By:
        -----------------------------------
     Name:
          ---------------------------------
     Title: Senior Investment Officer
           --------------------------------

<PAGE>

            Signature Page of Registration Rights Agreement Continued

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

     By:
        -----------------------------------
     Name:
          ---------------------------------
     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:
        -----------------------------------
     Name:
          ---------------------------------
     Title: Senior Investment Officer
           --------------------------------

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