Document:

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                                                                     Exhibit 4.1

                                 CEPHALON, INC.

                                    as Issuer

                                       AND

                       STATE STREET BANK AND TRUST COMPANY

                                   as Trustee

                                    INDENTURE

                             Dated as of May 7, 2001

                 5 1/4 % Convertible Subordinated Notes due 2006
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                                TABLE OF CONTENTS

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ARTICLE I.  DEFINITIONS......................................................................2

  Section 1.1.   Definitions.................................................................2

ARTICLE II.  ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES...............9

  Section 2.1.   Designation, Amount and Issue of Notes......................................9
  Section 2.2.   Form of Notes...............................................................9
  Section 2.3.   Date and Denomination of Notes; Payments of Interest.......................10
  Section 2.4.   Execution of Notes.........................................................11
  Section 2.5.   Exchange and Registration of Transfer of Notes; Restrictions on
                 Transfer; Depositary.......................................................12
  Section 2.6.   Mutilated, Destroyed, Lost or Stolen Notes.................................19
  Section 2.7.   Temporary Notes............................................................20
  Section 2.8.   Cancellation of Notes Paid, Etc............................................20
  Section 2.9.   CUSIP Numbers..............................................................21

ARTICLE III.  REDEMPTION OF NOTES...........................................................21

  Section 3.1.   Redemption Prices..........................................................21
  Section 3.2.   Notice of Redemption; Selection of Notes...................................21
  Section 3.3.   Payment of Notes Called for Redemption.....................................23
  Section 3.4.   Conversion Arrangement on Call for Redemption..............................24

ARTICLE IV.  SUBORDINATION OF NOTES.........................................................25

  Section 4.1.   Agreement of Subordination.................................................25
  Section 4.2.   Payments to Noteholders....................................................25
  Section 4.3.   Bankruptcy and Dissolution, Etc............................................26
  Section 4.4.   Subrogation of Notes.......................................................28
  Section 4.5.   Authorization by Noteholders...............................................29
  Section 4.6.   Notice to Trustee..........................................................29
  Section 4.7.   Trustee's Relation to Senior Indebtedness..................................30
  Section 4.8.   No Impairment of Subordination.............................................30
  Section 4.9.   Certain Conversions Deemed Payment.........................................30
  Section 4.10.  Article Applicable to Paying Agents........................................31
  Section 4.11   Senior Indebtedness Entitled to Rely.......................................31

ARTICLE V.  PARTICULAR COVENANTS OF THE COMPANY.............................................31

  Section 5.1.   Payment of Principal, Premium and Interest.................................31
  Section 5.2.   Maintenance of Office or Agency............................................31
  Section 5.3.   Appointments to Fill Vacancies in Trustee's Office.........................32
  Section 5.4.   Provisions as to Paying Agent..............................................32
  Section 5.5.   Existence..................................................................33
  Section 5.6.   Rule 144A Information Requirement..........................................33
  Section 5.7.   Stay, Extension and Usury Laws.............................................34
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  Section 5.8.   Compliance Certificate.....................................................34
  Section 5.9.   Liquidated Damages.........................................................34
  Section 5.10.  Further Instruments and Acts...............................................34

ARTICLE VI.  NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE..................34

  Section 6.1.   Noteholders' Lists.........................................................34
  Section 6.2.   Preservation and Disclosure of Lists.......................................35
  Section 6.3.   Reports by Trustee.........................................................35
  Section 6.4.   Reports by Company.........................................................35

ARTICLE VII.  DEFAULTS AND REMEDIES.........................................................36

  Section 7.1.   Events of Default..........................................................36
  Section 7.2.   Payments of Notes on Default; Suit Therefor................................38
  Section 7.3.   Application of Monies Collected by Trustee.................................40
  Section 7.4.   Proceedings by Noteholder..................................................41
  Section 7.5.   Proceedings by Trustee.....................................................42
  Section 7.6.   Remedies Cumulative and Continuing.........................................42
  Section 7.7.   Direction of Proceedings and Waiver of Defaults by Majority of
                 Noteholders................................................................42
  Section 7.8.   Notice of Defaults.........................................................43
  Section 7.9.   Undertaking to Pay Costs...................................................43
  Section 7.10.  Delay or Omission Not Waiver...............................................43

ARTICLE VIII.  CONCERNING THE TRUSTEE.......................................................44

  Section 8.1.   Duties and Responsibilities of Trustee.....................................44
  Section 8.2.   Reliance on Documents, Opinions, Etc.......................................45
  Section 8.3.   No Responsibility for Recitals, Etc........................................46
  Section 8.4.   Trustee, Paying Agents, Conversion Agents or Registrar May Own Notes.......46
  Section 8.5.   Monies to Be Held in Trust.................................................46
  Section 8.6.   Compensation and Expenses of Trustee.......................................46
  Section 8.7.   Officers' Certificate as Evidence..........................................47
  Section 8.8.   Conflicting Interests of Trustee...........................................47
  Section 8.9.   Eligibility of Trustee.....................................................47
  Section 8.10.  Resignation or Removal of Trustee..........................................48
  Section 8.11.  Acceptance by Successor Trustee............................................49
  Section 8.12.  Succession by Merger, Etc..................................................49
  Section 8.13.  Limitation on Rights of Trustee as Creditor................................50

ARTICLE IX.  CONCERNING THE NOTEHOLDERS.....................................................50

  Section 9.1.   Action by Noteholders......................................................50
  Section 9.2.   Proof of Execution by Noteholders..........................................50
  Section 9.3.   Who Are Deemed Absolute Owners.............................................50
  Section 9.4.   Company-Owned Notes Disregarded............................................51
  Section 9.5.   Revocation of Consents; Future Holders Bound...............................51

ARTICLE X.  NOTEHOLDERS' MEETINGS...........................................................52

  Section 10.1.  Purpose of Meetings........................................................52
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  Section 10.2.  Call of Meetings by Trustee................................................52
  Section 10.3.  Call of Meetings by Company or Noteholders.................................52
  Section 10.4.  Qualifications for Voting..................................................53
  Section 10.5.  Regulations................................................................53
  Section 10.6.  Voting.....................................................................53
  Section 10.7.  No Delay of Rights by Meeting..............................................54

ARTICLE XI.  SUPPLEMENTAL INDENTURES........................................................54

  Section 11.1.  Supplemental Indentures Without Consent of Noteholders.....................54
  Section 11.2.  Supplemental Indentures With Consent of Noteholders........................55
  Section 11.3.  Effect of Supplemental Indentures..........................................56
  Section 11.4.  Notation on Notes..........................................................56
  Section 11.5.  Evidence of Compliance of Supplemental Indenture to Be Furnished Trustee...56

ARTICLE XII.  CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE.............................57

  Section 12.1.  Company May Consolidate, Etc. on Certain Terms.............................57
  Section 12.2.  Successor Corporation to Be Substituted....................................57
  Section 12.3.  Opinion of Counsel to Be Given Trustee.....................................58

ARTICLE XIII.  SATISFACTION AND DISCHARGE OF INDENTURE......................................58

  Section 13.1.  Discharge of Indenture.....................................................58
  Section 13.2.  Deposited Monies to Be Held in Trust by Trustee............................59
  Section 13.3.  Paying Agent to Repay Monies Held..........................................59
  Section 13.4.  Return of Unclaimed Monies.................................................59
  Section 13.5.  Reinstatement..............................................................59

ARTICLE XIV.  IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS...............60

  Section 14.1.  Indenture and Notes Solely Corporate Obligations...........................60

ARTICLE XV.  CONVERSION OF NOTES............................................................60

  Section 15.1.  Right to Convert...........................................................60
  Section 15.2.  Exercise of Conversion Privilege; Issuance of Common Stock on
                 Conversion; No Adjustment for Interest or Dividends........................61
  Section 15.3.  Cash Payments in Lieu of Fractional Shares.................................62
  Section 15.4.  Conversion Price...........................................................62
  Section 15.5.  Adjustment of Conversion Price.............................................63
  Section 15.6.  Effect of Reclassification, Consolidation, Merger or Sale..................73
  Section 15.7.  Taxes on Shares Issued.....................................................74
  Section 15.8.  Reservation of Shares; Shares to Be Fully Paid; Listing of Common Stock....74
  Section 15.9.  Responsibility of Trustee..................................................74
  Section 15.10. Notice to Holders Prior to Certain Actions.................................75

ARTICLE XVI.  REPURCHASE UPON A REPURCHASE EVENT............................................76

  Section 16.1.  Repurchase Right...........................................................76
  Section 16.2.  Notices; Method of Exercising Repurchase Right, Etc........................76
  Section 16.3.  Conditions to the Company's Election to Pay the Repurchase Price in
                 Common Stock...............................................................79
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  Section 16.4.  Certain Definitions........................................................80

ARTICLE XVII.  MISCELLANEOUS PROVISIONS.....................................................81

  Section 17.1.  Provisions Binding on Company's Successors.................................81
  Section 17.2.  Official Acts by Successor Corporation.....................................81
  Section 17.3.  Addresses for Notices, Etc.................................................81
  Section 17.4.  Governing Law..............................................................82
  Section 17.5.  Evidence of Compliance with Conditions Precedent; Certificates
                 to Trustee.................................................................82
  Section 17.6.  Legal Holidays.............................................................82
  Section 17.7.  No Security Interest Created...............................................82
  Section 17.8.  Trust Indenture Act........................................................83
  Section 17.9.  Benefits of Indenture......................................................83
  Section 17.10. Table of Contents, Headings, Etc...........................................83
  Section 17.11. Authenticating Agent.......................................................83
  Section 17.12. Execution in Counterparts..................................................84
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        INDENTURE dated as of May 7, 2001 between Cephalon, Inc., a Delaware
corporation as issuer (hereinafter sometimes called the "Company", as more fully
set forth in Section 1.1), and State Street Bank and Trust Company, a trust
company organized under the laws of the Commonwealth of Massachusetts as trustee
(hereinafter sometimes called the "Trustee," as more fully set forth in Section
1.1).

                              W I T N E S S E T H:

        WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issue of its 5-1/4 % Convertible Subordinated Notes due 2006
(hereinafter sometimes called the "Notes"), in an aggregate principal amount not
to exceed $300,000,000 ($400,000,000 if the option to purchase additional Notes
granted to the Initial Purchasers (as defined herein) pursuant to the Purchase
Agreement (as defined herein) is exercised in full) and in order to provide the
terms and conditions upon which the Notes are to be authenticated, issued and
delivered, the Company has duly authorized the execution and delivery of this
Indenture; and

        WHEREAS, the Notes, the certificate of authentication to be borne by the
Notes, a form of assignment, a form of option to elect repayment upon a
Repurchase Event (as defined herein), a form of conversion notice and a
certificate of transfer to be borne by the Notes are to be substantially in the
forms hereinafter provided for; and

        WHEREAS, all acts and things necessary to make the Notes, when executed
by the Company and authenticated and delivered by the Trustee or a duly
authorized authenticating agent, as in this Indenture provided, the valid,
binding and legal obligations of the Company, and to constitute these presents a
valid agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes have in all
respects been duly authorized.

        NOW, THEREFORE, THIS INDENTURE WITNESSETH:

        That in order to declare the terms and conditions upon which the Notes
are, and are to be, authenticated, issued and delivered, and in consideration of
the premises and of the purchase and acceptance of the Notes by the holders
thereof, the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time of the Notes
(except as otherwise provided below), as follows:
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                                    ARTICLE I

                                   DEFINITIONS

        Section 1.1. Definitions. The terms defined in this Section 1.1 (except
as herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section 1.1. All other
terms used in this Indenture, which are defined in the Trust Indenture Act or
which are by reference therein defined in the Securities Act (except as herein
otherwise expressly provided or unless the context otherwise requires) shall
have the meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of the execution of this Indenture. The
words "herein," "hereof," "hereunder," and words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
Subdivision. The terms defined in this Article include the plural as well as the
singular.

        Affiliate: The term "Affiliate" of any specified person shall mean 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 or cause the direction of 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.

        Board of Directors: The term "Board of Directors" shall mean the Board
of Directors of the Company or a committee of such Board duly authorized to act
for it hereunder.

        Board Resolution: The term "Board Resolution" means a copy of a
resolution certified by the Secretary or an Assistant Secretary of the Company
to have been duly adopted by the Board of Directors, or duly authorized
committee thereof (to the extent permitted by applicable law), and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.

        Business Day: The term "Business Day" means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which the banking
institutions in The City of New York or the city in which the Corporate Trust
Office is located are authorized or obligated by law or executive order to close
or be closed.

        Change in Control: The term "Change in Control" shall have the meaning
specified in Section 16.4.

        close of business: The term "close of business" means 5:00 p.m. (New
York City time).

        Commission: The term "Commission" shall mean the Securities and Exchange
Commission.

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        Common Stock: The term "Common Stock" shall mean any stock of any class
of the Company which has no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which is not subject to redemption by the Company.
Subject to the provisions of Section 15.6, however, shares issuable on
conversion of Notes shall include only shares of the class designated as common
stock of the Company at the date of this Indenture or shares of any class or
classes resulting from any reclassification or reclassifications thereof and
which have no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which are not subject to redemption by the Company; provided
that if at any time there shall be more than one such resulting class, the
shares of each such class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.

        Company: The term "Company" shall mean Cephalon, Inc., a Delaware
corporation, and subject to the provisions of Article XII, shall include its
successors and assigns.

        Company Notice: The term "Company Notice" shall have the meaning
specified in Section 16.2.

        Conversion Price: The term "Conversion Price" shall have the meaning
specified in Section 15.4.

        Corporate Trust Office: The term "Corporate Trust Office," or other
similar term, shall mean the office of the Trustee at which at any particular
time its corporate trust business shall be principally administered, which
office is, at the date as of which this Indenture is dated, located at 2 Avenue
de Lafayette, Boston, MA 02111, Attention: Corporate Trust Department (Cephalon,
Inc. 5-1/4 % Convertible Subordinated Notes due 2006).

        Custodian: The term "Custodian" means State Street Bank and Trust
Company with respect to the Notes in global form, or any successor entity
thereto.

        Default: The term "default" shall mean any event that is, or after
notice or passage of time, or both, would be, an Event of Default.

        Defaulted Interest: The term "Defaulted Interest" shall have the meaning
specified in Section 2.3.

        Depositary: The term "Depositary" means, with respect to the Notes
issuable or issued in whole or in part in global form, the person specified in
Section 2.5(d) as the Depositary with respect to such Notes, until a successor
shall have been appointed and become such pursuant to the applicable provisions
of this Indenture, and thereafter, "Depositary" shall mean or include such
successor.

        Designated Senior Indebtedness: The term "Designated Senior
Indebtedness" means (i) the Company's obligations in respect of money now or
hereafter borrowed from any commercial

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bank and (ii) the Company's obligations under any particular Senior Indebtedness
in which the instrument creating or evidencing the same or the assumption or
guarantee thereof (or related agreements or documents to which the Company is a
party) expressly provides that such Senior Indebtedness shall be "Designated
Senior Indebtedness" for purposes of this Indenture (provided that such
instrument, agreement or other document may place limitations and conditions on
the right of such Senior Indebtedness to exercise the rights of Designated
Senior Indebtedness).

        Event of Default: The term "Event of Default" shall mean any event
specified in Section 7.1, continued for the period of time, if any, and after
the giving of notice, if any, therein designated.

        Exchange Act: The term "Exchange Act" means the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder.

        Expiration Time: The term "Expiration Time" shall have the meaning
specified in Section 15.5(f) or 15.5(g).

        Global Note: The term "Global Note" shall have the meaning specified in
Section 2.5(b).

        Indebtedness: The term "Indebtedness" shall mean any obligations of, or
guaranteed or assumed by, the Company or any Significant Subsidiary for borrowed
money.

        Indenture: The term "Indenture" shall mean this instrument as originally
executed or, if amended or supplemented as herein provided, as so amended or
supplemented.

        Initial Purchasers: The term "Initial Purchasers" means Robertson
Stephens, Inc., Adams, Harkness & Hill, Inc., Banc of America Securities LLC,
CIBC World Markets Corp., SG Cowen Securities Corporation, UBS Warburg LLC and
U.S. Bancorp Piper Jaffray Inc.

        Liquidated Damages: The term "Liquidated Damages" means all liquidated
damages then owing pursuant to Section 3 of the Registration Rights Agreement.

        Make-Whole Payment: The term "Make-Whole Payment" shall have the meaning
specified in Section 3.1.

        Note or Notes: The terms "Note" or "Notes" shall mean any Note or Notes,
as the case may be, authenticated and delivered under this Indenture.

        Noteholder or holder: The terms "Noteholder" or "holder" as applied to
any Note, or other similar terms (but excluding the term "beneficial holder"),
shall mean any person in whose name at the time a particular Note is registered
on the Note register.

        Note registrar: The term "Note registrar" shall have the meaning
specified in Section 2.5(a).

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        Note register: The term "Note register" shall have the meaning specified
in Section 2.5.

        Officers' Certificate: The term "Officers' Certificate," when used with
respect to the Company, shall mean a certificate signed by (a) one of the
President, the Chief Executive Officer, any Executive or Senior Vice President
or any Vice President (whether or not designated by a number or numbers or word
added before or after the title "Vice President") and (b) by one of the
Treasurer or any Assistant Treasurer, Secretary or any Assistant Secretary or
Controller of the Company, which is delivered to the Trustee. Each such
certificate shall include the statements provided for in Section 17.5 if and to
the extent required by the provisions of such Section.

        Opinion of Counsel: The term "Opinion of Counsel" shall mean an opinion
in writing signed by legal counsel, who may be an employee of or counsel to the
Company, or other counsel acceptable to the Trustee, which is delivered to the
Trustee. Each such opinion shall include the statements provided for in Section
17.5 if and to the extent required by the provisions of such Section.

        outstanding: The term "outstanding," when used with reference to Notes,
shall, subject to the provisions of Section 9.4, mean, as of any particular
time, all Notes authenticated and delivered by the Trustee under this Indenture,
except:

               (a) Notes theretofore canceled by the Trustee or delivered to
        the Trustee for cancellation;

               (b) Notes, or portions thereof, for the payment, or redemption of
        which monies in the necessary amount shall have been deposited in trust
        with the Trustee or with any paying agent (other than the Company) or
        shall have been set aside and segregated in trust by the Company (if the
        Company shall act as its own paying agent); provided that if such Notes
        are to be redeemed, as the case may be, prior to the maturity thereof,
        notice of such redemption shall have been given as provided in Section
        3.2, or provision satisfactory to the Trustee shall have been made for
        giving such notice;

               (c) Notes in lieu of which, or in substitution for which, other
        Notes shall have been authenticated and delivered pursuant to the terms
        of Section 2.6 unless proof satisfactory to the Trustee is presented
        that any such Notes are held by bona fide holders in due course; and

               (d) Notes converted into Common Stock pursuant to Article XV and
        Notes deemed not outstanding pursuant to Section 3.2.

        Payment Blockage Notice: The term "Payment Blockage Notice" shall have
the meaning specified in Section 4.2(b).

        person: The term "person" shall mean an individual, a corporation, a
limited liability company, an association, a partnership, an individual, a joint
venture, a joint stock company, a

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trust, an unincorporated organization or a government or an agency or a
political subdivision thereof.

        Portal Market: The term "Portal Market" shall mean The Portal Market
operated by the National Association of Securities Dealers, Inc. or any
successor thereto.

        Predecessor Note: The term "Predecessor Note" of any particular Note
shall mean every previous Note evidencing all or a portion of the same debt as
that evidenced by such particular Note; and, for the purposes of this
definition, any Note authenticated and delivered under Section 2.6 in lieu of a
lost, destroyed or stolen Note shall be deemed to evidence the same debt as the
lost, destroyed or stolen Note that it replaces.

        Purchase Agreement: The term "Purchase Agreement" means that certain
Purchase Agreement, dated as of May 2, 2001, by and among the Company and the
Initial Purchasers (as amended from time to time by the parties thereto).

        Purchased Shares: The term "Purchased Shares" shall have the meaning
specified in Sections 15.5(f) and 15.5(g).

        QIB: The term "QIB" shall mean a "qualified institutional buyer" as
defined in Rule 144A.

        record date: The term "record date" shall have the meaning specified in
Section 2.3.

        Registration Rights Agreement: The term "Registration Rights Agreement"
means that certain Registration Rights Agreement, dated as of May 7, 2001,
between the Company and the Initial Purchasers, (as may be amended from time to
time by the parties thereto).

        Repurchase Event: The term "Repurchase Event" shall have the meaning
specified in Section 16.4.

        Repurchase Price: The term "Repurchase Price" has the meaning specified
in Section 16.1.

        Responsible Officer: The term "Responsible Officer", when used with
respect to the Trustee, shall mean an officer of the Trustee in the Corporate
Trust Office assigned and duly authorized by the Trustee to administer its
obligations under this Indenture.

        Restricted Securities: The term "Restricted Securities" has the meaning
specified in Section 2.5(d).

        Rule 144A: The term "Rule 144A" shall mean Rule 144A as promulgated
under the Securities Act.

        Securities Act: The term "Securities Act" means the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.

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        Senior Indebtedness: The term "Senior Indebtedness" means the principal
of, premium, if any, interest on (including any interest accruing after the
filing of a petition by or against the Company under any bankruptcy law, whether
or not allowed as a claim after such filing in any proceeding under such
bankruptcy law) and any other payment due pursuant to, any of the following,
whether outstanding on the date of this Indenture or thereafter incurred or
created:

               (a) all indebtedness of the Company for money borrowed that is
        evidenced by notes, debentures, bonds or other securities (including,
        but not limited to, those which are convertible or exchangeable for
        securities of the Company);

               (b) all indebtedness of the Company due and owing with respect to
        letters of credit, bank guarantees or bankers' acceptances (including,
        but not limited to, reimbursement obligations with respect thereto);

               (c) all indebtedness or other obligations of the Company due and
        owing with respect to interest rate and currency swap agreements, cap,
        floor and collar agreements, currency spot and forward contracts and
        other similar agreements and arrangements;

               (d) all indebtedness consisting of commitment or standby fees due
        and payable to lending institutions with respect to credit facilities or
        letters of credit available to the Company;

               (e) all obligations of the Company under leases required or
        permitted to be capitalized under generally accepted accounting
        principles;

               (f) all indebtedness or obligations of others of the kinds
        described in any of the preceding clauses (a), (b), (c), (d) or (e)
        assumed by or guaranteed in any manner by the Company or in effect
        guaranteed (directly or indirectly) by the Company through an agreement
        to purchase, contingent or otherwise, and all obligations of the Company
        under any such guarantee or other arrangements; and

               (g) all renewals, extensions, refundings, deferrals, amendments
        or modifications of indebtedness or obligations of the kinds described
        in any of the preceding clauses (a), (b), (c), (d), (e) or (f);

unless in the case of any particular indebtedness, obligation, renewal,
extension, refunding, amendment, modification or supplement, the instrument or
other document creating or evidencing the same or the assumption or guarantee of
the same expressly provides that such indebtedness, obligation, renewal,
extension, refunding, amendment, modification or supplement is subordinate to,
or is not superior to, or is pari passu with, the Notes; provided that Senior
Indebtedness shall not include (i) any indebtedness of any kind of the Company
to any Subsidiary of the Company, a majority of the voting stock of which is
owned, directly or indirectly, by the Company, (ii) indebtedness for (a) trade
payables or (b) constituting the deferred purchase price of assets or services
incurred in the ordinary course of business which for purposes of this Indenture
shall exclude, for example, indebtedness under agreements related

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to product acquisition or licenses and that would otherwise constitute Senior
Indebtedness under subparagraphs (a) through (g) above, or (iii) the Notes.

        Significant Subsidiary: The term "Significant Subsidiary" means, with
respect to any person, a Subsidiary of such person that would constitute a
"significant subsidiary" as such term is defined under Rule 1-02 of Regulation
S-X of the Securities and Exchange Commission.

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

        Trading Day: The term "Trading Day" has the meaning specified in Section
15.5(h)(5).

        transfer: The term "transfer" shall have the meaning specified in
Section 2.5(d).

        Trigger Event: The term "Trigger Event" shall have the meaning specified
in Section 15.5(d).

        Trust Indenture Act: The term "Trust Indenture Act" shall mean the Trust
Indenture Act of 1939, as amended, as it was in force at the date of execution
of this Indenture, except as provided in Sections 11.3 and 15.6; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after the
date hereof, the term "Trust Indenture Act" shall mean, to the extent required
by such amendment, the Trust Indenture Act of 1939 as so amended.

        Trustee: The term "Trustee" shall mean State Street Bank and Trust
Company, and its successors and any corporation resulting from or surviving any
consolidation or merger to which it or its successors may be a party and any
successor trustee at the time serving as successor trustee hereunder.

        The definitions of certain other terms are as specified in Article XV
and Article XVI.

                                      -8-
<PAGE>   14
                                   ARTICLE II
                   ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
                             AND EXCHANGE OF NOTES

        Section 2.1. Designation, Amount and Issue of Notes. The Notes shall be
designated as "5-1/4 % Convertible Subordinated Notes due 2006." Notes not to
exceed the aggregate principal amount of $300,000,000 (or $400,000,000 if the
option set forth in Section 2(b) of the Purchase Agreement is exercised in full)
upon the execution of this Indenture, or (except pursuant to Sections 2.5, 2.6,
3.3, 15.2 and 16.2) from time to time thereafter, may be executed by the Company
and delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Notes upon the written order of the Company,
signed by the Company's (a) President, Executive or Senior Vice President or any
Vice President (whether or not designated by a number or numbers or word or
words added before or after the title "Vice President") and (b) Treasurer or
Assistant Treasurer or its Secretary or any Assistant Secretary, without any
further action by the Company hereunder, provided, however, that said Notes may
not be executed, delivered or authenticated unless and until the Trustee shall
have received an Officers' Certificate and opinion of counsel.

        Section 2.2. Form of Notes. The Notes and the Trustee's certificate of
authentication to be borne by such Notes shall be substantially in the form set
forth in Exhibit A, which is incorporated in and made a part of this Indenture.

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

        The Global Note shall represent such of the outstanding Notes as shall
be specified therein and shall provide that it shall represent the aggregate
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Notes represented thereby may from time to time
be increased or reduced to reflect transfers or exchanges permitted hereby. Any
endorsement of the Global Note to reflect the amount of any increase or decrease
in the amount of outstanding Notes represented thereby shall be made by the
Trustee or the Custodian, at the direction of the Trustee, in such manner and
upon instructions given by the holder of such Notes in accordance with this
Indenture. Payment of principal of and interest and premium, if any (including
any redemption price), on the Global Note shall be made to the holder of such
Note.

        The terms and provisions contained in the form of Note attached as
Exhibit A hereto shall constitute, and is hereby expressly made, a part of this
Indenture and to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.

                                      -9-
<PAGE>   15
        Section 2.3. Date and Denomination of Notes; Payments of Interest. The
Notes shall be issuable in registered form without coupons in denominations of
$1,000 principal amount and integral multiples thereof. Every Note shall be
dated the date of its authentication, and shall bear interest from the
applicable date and accrued interest shall be payable semiannually on May 1 and
November 1, of each year, commencing November 1, 2001 as specified on the face
of the form of Note, attached as Exhibit A hereto.

        The person in whose name any Note (or its Predecessor Note) is
registered at the close of business on any record date with respect to any
interest payment date (including any Note that is converted after the record
date and on or before the interest payment date) shall be entitled to receive
the interest payable on such interest payment date notwithstanding the
cancellation of such Note upon any transfer, exchange or conversion subsequent
to the record date and on or prior to such interest payment date; provided that,
in the case of any Note, or portion thereof, called for redemption pursuant to
Article III on a redemption date, or repurchased by the Company pursuant to
Article XVI on a repurchase date, during the period from the close of business
on the record date to the close of business on the Business Day next preceding
the following interest payment date, interest shall not be paid to the person in
whose name the Note, or portion thereof, is registered on the close of business
on such record date, and the Company shall have no obligation to pay interest on
such Note or portion thereof except to the extent required to be paid upon such
redemption or repurchase in accordance with Article III or Article XVI. Interest
may, at the option of the Company, be paid by check mailed to the address of
such person on the Note registry; provided that, with respect to any holder of
Notes with an aggregate principal amount equal to or in excess of $2,000,000, at
the request of such holder in writing to the Company, interest on such holder's
Notes shall be paid by wire transfer in immediately available funds in
accordance with the wire transfer instruction supplied by such holder from time
to time to the Trustee and paying agent (if different from Trustee) at least two
days prior to the applicable record date. The term "record date" with respect to
any interest payment date shall mean the April 15 or October 15 preceding said
May 1 or November 1, respectively.

        Interest on the Notes shall be computed on the basis of a 360-day year
comprised of twelve 30-day months compounded semi-annually.

        Any interest on any Note which is payable, but is not punctually paid or
duly provided for, on any said May 1 or November 1 (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Noteholder on the relevant
record date by virtue of his having been such Noteholder; and such Defaulted
Interest shall be paid by the Company, at its election in each case, as provided
in clause (1) or (2) below:

               (1) The Company may elect to make payment of any Defaulted
        Interest to the persons in whose names the Notes (or their respective
        Predecessor Notes) are registered at the close of business on a special
        record date for the payment of such Defaulted Interest, which shall be
        fixed in the following manner. The Company shall notify the Trustee in
        writing of the amount of Defaulted Interest to be paid on each Note and
        the date of the payment (which shall be not less than twenty-five (25)
        days after the receipt

                                      -10-
<PAGE>   16
        by the Trustee of such notice, unless the Trustee shall consent to an
        earlier date), and at the same time the Company shall deposit with the
        Trustee an amount of money equal to the aggregate amount to be paid in
        respect of such Defaulted Interest or shall make arrangements
        satisfactory to the Trustee for such deposit prior to the date of the
        proposed payment, such money when deposited to be held in trust for the
        benefit of the persons entitled to such Defaulted Interest as in this
        clause provided. Thereupon the Trustee shall fix a special record date
        for the payment of such Defaulted Interest which shall be not more than
        fifteen (15) days and not less than ten (10) days prior to the date of
        the proposed payment and not less than ten (10) days after the receipt
        by the Trustee of the notice of the proposed payment. The Trustee shall
        promptly notify the Company of such special record date and, in the name
        and at the expense of the Company, shall cause notice of the proposed
        payment of such Defaulted Interest and the special record date therefor
        to be mailed, first-class postage prepaid, to each Noteholder as of such
        special record date at his address as it appears in the Note register,
        not less than ten (10) days prior to such special record date. Notice of
        the proposed payment of such Defaulted Interest and the special record
        date therefor having been so mailed, such Defaulted Interest shall be
        paid to the persons in whose names the Notes (or their respective
        Predecessor Notes) were registered at the close of business on such
        special record date and shall no longer be payable pursuant to the
        following clause (2).

               (2) The Company may make payment of any Defaulted Interest in any
        other lawful manner not inconsistent with the requirements of any
        securities exchange or automated quotation system on which the Notes may
        be listed or designated for issuance, and upon such notice as may be
        required by such exchange or automated quotation system, if, after
        notice given by the Company to the Trustee of the proposed payment
        pursuant to this clause, such manner of payment shall be deemed
        practicable by the Trustee.

        Section 2.4. Execution of Notes. The Notes shall be signed in the name
and on behalf of the Company by the facsimile signature of its President, its
Chief Executive Officer, any of its Executive or Senior Vice Presidents, or any
of its Vice Presidents (whether or not designated by a number or numbers or word
or words added before or after the title "Vice President") and attested by the
facsimile signature of its Secretary or any of its Assistant Secretaries (which
may be printed, engraved or otherwise reproduced thereon, by facsimile or
otherwise). Only such Notes as shall bear thereon a certificate of
authentication substantially in the form set forth on the form of Note attached
as Exhibit A hereto, manually executed by the Trustee (or an authenticating
agent appointed by the Trustee as provided by Section 17.11), shall be entitled
to the benefits of this Indenture or be valid or obligatory for any purpose.
Such certificate by the Trustee (or such an authenticating agent) upon any Note
executed by the Company shall be conclusive evidence that the Note so
authenticated has been duly authenticated and delivered hereunder and that the
holder is entitled to the benefits of this Indenture.

        In case any officer of the Company who shall have signed any of the
Notes shall cease to be such officer before the Notes so signed shall have been
authenticated and delivered by the Trustee, or disposed of by the Company, such
Notes nevertheless may be authenticated and delivered or disposed of as though
the person who signed such Notes had not ceased to be such

                                      -11-
<PAGE>   17
officer of the Company; and any Note may be signed on behalf of the Company by
such persons as, at the actual date of the execution of such Note, shall be the
proper officers of the Company, although at the date of the execution of this
Indenture any such person was not such an officer.

        Section 2.5. Exchange and Registration of Transfer of Notes;
Restrictions on Transfer; Depositary.

               (a) The Company shall cause to be kept at the Corporate Trust
        Office a register (the register maintained in such office and in any
        other office or agency of the Company designated pursuant to Section 5.2
        being herein sometimes collectively referred to as the "Note register")
        in which, subject to such reasonable regulations as it may prescribe,
        the Company shall provide for the registration of Notes and of transfers
        of Notes. Such register shall be in written form or in any form capable
        of being converted into written form within a reasonable period of time.
        The Trustee is hereby appointed "Note registrar" for the purpose of
        registering Notes and transfers of Notes as herein provided. The Company
        may appoint one or more co-registrars in accordance with Section 5.2.

               Upon surrender for registration of transfer of any Note to the
        Note registrar or any co-registrar, and satisfaction of the requirements
        for such transfer set forth in this Section 2.5, the Company shall
        execute, and the Trustee shall authenticate and deliver, in the name of
        the designated transferee or transferees, one or more new Notes of any
        authorized denominations and of a like aggregate principal amount and
        bearing such restrictive legends as may be required by this Indenture.

               Notes may be exchanged for other Notes of any authorized
        denominations and of a like aggregate principal amount, upon surrender
        of the Notes to be exchanged at any such office or agency. Whenever any
        Notes are so surrendered for exchange, the Company shall execute, and
        the Trustee shall authenticate and deliver, the Notes which the
        Noteholder making the exchange is entitled to receive, bearing
        registration numbers not contemporaneously outstanding.

               All Notes presented or surrendered for registration of transfer
        or for exchange shall (if so required by the Company, the Trustee, the
        Note registrar or any co-registrar) be duly endorsed, or be accompanied
        by a written instrument or instruments of transfer in form satisfactory
        to the Company and duly executed, by the Noteholder thereof or his
        attorney-in-fact duly authorized in writing.

               No service charge shall be charged to the Noteholder for any
        exchange or registration of transfer of Notes, but the Company may
        require payment of a sum sufficient to cover any tax, assessments or
        other governmental charges that may be imposed in connection therewith.

               None of the Company, the Trustee, the Note registrar or any
        co-registrar shall be required to exchange or register a transfer of (a)
        any Notes for a period of fifteen (15) days next preceding any selection
        of Notes to be redeemed or (b) any Notes called for

                                      -12-
<PAGE>   18
        redemption or, if a portion of any Note is selected or called for
        redemption, such portion thereof selected or called for redemption or
        (c) any Notes surrendered for conversion or, if a portion of any Note is
        surrendered for conversion, such portion thereof surrendered for
        conversion or (d) any Notes, or a portion of any Note, surrendered for
        repurchase (and not withdrawn) in connection with a Repurchase Event.

               All Notes issued upon any transfer or exchange of Notes in
        accordance with this Indenture shall be the valid obligations of the
        Company, evidencing the same debt, and entitled to the same benefits
        under this Indenture as the Notes surrendered upon such registration of
        transfer or exchange.

               (b) So long as the Notes are eligible for book-entry settlement
        with the Depositary, unless otherwise required by law, all Notes issued
        to QIBs pursuant to Rule 144A of the Securities Act to be traded on The
        Portal Market shall be represented by a Note in global form (the "Global
        Note") registered in the name of the Depositary or the nominee of the
        Depositary. The transfer and exchange of beneficial interests in the
        Global Note, which does not involve the issuance of a definitive Note,
        shall be effected through the Depositary (but not the Trustee or the
        Custodian) in accordance with this Indenture (including the restrictions
        on transfer set forth herein) and the procedures of the Depositary
        therefor.

               Notes resold to persons who are not QIBs will be issued in
        definitive registered form and may not be represented by the Global
        Note. In addition, at any time at the request of a QIB that is a
        beneficial holder of an interest in the Global Note, such beneficial
        holder shall be entitled to obtain a definitive Note upon written
        request to the Trustee and the Custodian in accordance with the standing
        instructions and procedures existing between the Depositary and the
        Custodian for the issuance thereof. Upon receipt of any such request,
        the Trustee or the Custodian, at the direction of the Trustee, will
        cause, in accordance with the standing instructions and procedures
        existing between the Depositary and the Custodian, the aggregate
        principal amount of the Global Note to be reduced by the principal
        amount of the definitive Note issued upon such request to such
        beneficial holder and, following such reduction, the Company will
        execute and the Trustee will authenticate and deliver to such beneficial
        holder (or its nominee) a definitive Note or Notes in the appropriate
        aggregate principal amount in the name of such beneficial holder (or its
        nominee) and bearing such restrictive legends as may be required by this
        Indenture.

               Any transfer of a beneficial interest in the Global Note which
        cannot be effected through book-entry settlement must be effected by the
        delivery to the transferee (or its nominee) of a definitive Note or
        Notes registered in the name of the transferee (or its nominee) on the
        books maintained by the Trustee in accordance with the transfer
        restrictions set forth herein. With respect to any such transfer, the
        Trustee or the Custodian, at the direction of the Trustee, will cause,
        in accordance with the standing instructions and procedures existing
        between the Depositary and the Custodian, the aggregate principal amount
        of the Global Note to be reduced by the principal amount of the
        beneficial interest in the Global Note being transferred and, following
        such reduction,

                                      -13-
<PAGE>   19
        the Company will execute and the Trustee will authenticate and deliver
        to the transferee (or such transferee's nominee, as the case may be), a
        Note or Notes in the appropriate aggregate principal amount in the name
        of such transferee (or its nominee) and bearing such restrictive legends
        as may be required by this Indenture.

               (c) So long as the Notes are eligible for book-entry settlement,
        unless otherwise required by law, upon any transfer of a definitive Note
        to a QIB in accordance with Rule 144A, unless otherwise requested by the
        transferor, and upon receipt of the definitive Note or Notes being so
        transferred, together with a certification from the transferor that the
        transferee is a QIB (or other evidence satisfactory to the Trustee), the
        Trustee shall make or direct the Custodian to make, an endorsement on
        the Global Note to reflect an increase in the aggregate principal amount
        of the Notes represented by the Global Note by the principal amount of
        the Note being transferred to the QIB, the Trustee shall cancel such
        definitive Note or Notes and cause, or direct the Custodian to cause, in
        accordance with the standing instructions and procedures existing
        between the Depositary and the Custodian, the aggregate principal amount
        of Notes represented by the Global Note to be increased accordingly;
        provided that no definitive Note, or portion thereof, in respect of
        which the Company or an Affiliate of the Company held any beneficial
        interest shall be included in the Global Note until such definitive Note
        is freely tradable in accordance with Rule 144(k); provided further that
        the Trustee shall authenticate and deliver Notes in definitive form upon
        any transfer of a beneficial interest in the Global Note to the Company
        or any Affiliate of the Company.

               Any Global Note may be endorsed with or have incorporated in the
        text thereof such legends or recitals or changes not inconsistent with
        the provisions of this Indenture as may be required by the Custodian,
        the Depositary or by the National Association of Securities Dealers,
        Inc. in order for the Notes to be tradeable on The Portal Market or as
        may be required for the Notes to be tradeable on any other market
        developed for trading of securities pursuant to Rule 144A or required to
        comply with any applicable law or any regulation thereunder or with the
        rules and regulations of any securities exchange or automated quotation
        system upon which the Notes may be listed or traded or designated for
        issuance or to conform with any usage with respect thereto, or to
        indicate any special limitations or restrictions to which any particular
        Notes are subject.

               (d) Every Note that bears or is required under this Section
        2.5(d) to bear either of the legends set forth in this Section 2.5(d)
        (together with any Common Stock issued upon conversion of the Notes and
        required to bear either of the legends set forth in Section 2.5(e),
        collectively, the "Restricted Securities") shall be subject to the
        restrictions on transfer set forth in this Section 2.5(d) (including one
        of the legends set forth below), unless such restrictions on transfer
        shall be waived by written consent of the Company, and the holder of
        each such Restricted Security, by such holder's acceptance thereof,
        agrees to be bound by all such restrictions on transfer. As used in
        Sections 2.5(d) and 2.5(e), the term "transfer" encompasses any sale,
        pledge, transfer or other disposition whatsoever of any Restricted
        Security.

                                      -14-
<PAGE>   20
               Until two (2) years after the original issuance date of any Note,
        any certificate evidencing such Note (and all securities issued in
        exchange therefor or substitution thereof, other than Common Stock, if
        any, issued upon conversion thereof which shall bear the legend set
        forth in Section 2.5(e), if applicable) shall bear a legend in
        substantially the following form (unless such Notes have been
        transferred pursuant to a registration statement that has been declared
        effective under the Securities Acts and which continues to be effective
        at the time of such transfer, pursuant to the exemption from
        registration provided by Rule 144 under the Securities Act, or unless
        otherwise agreed by the Company in writing, with notice thereof to the
        Trustee):

               THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
               SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY
               STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD EXCEPT AS
               SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF,
               THE HOLDER (1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL
               BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT); (2)
               AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL
               ISSUANCE OF THE NOTE EVIDENCED HEREBY RESELL OR OTHERWISE
               TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE
               UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO THE COMPANY OR ANY
               SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
               COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) PURSUANT
               TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
               SECURITIES ACT (IF AVAILABLE) OR (D) PURSUANT TO A REGISTRATION
               STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
               ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
               TRANSFER); AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
               WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A
               TRANSFER PURSUANT TO CLAUSE 2(D) ABOVE) A NOTICE SUBSTANTIALLY TO
               THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE
               NOTE EVIDENCED HEREBY WITHIN TWO YEARS AFTER THE ORIGINAL
               ISSUANCE OF SUCH NOTE (OTHER THAN A TRANSFER PURSUANT TO CLAUSE
               2(D) ABOVE), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH
               ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
               SUBMIT THIS CERTIFICATE TO STATE STREET BANK AND TRUST COMPANY,
               AS TRUSTEE. IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE 2(C)
               ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO STATE
               STREET BANK AND TRUST COMPANY, AS TRUSTEE, SUCH CERTIFICATIONS,
               LEGAL OPINIONS OR OTHER

                                      -15-
<PAGE>   21
                INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM
                THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM,
                OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
                REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED
                UPON THE EARLIER OF THE TRANSFER OF THE NOTE EVIDENCED HEREBY
                PURSUANT TO CLAUSE 2(C) OR 2(D) ABOVE OR THE EXPIRATION OF TWO
                YEARS FROM THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY.

               Any Note (or security issued in exchange or substitution
        therefor) as to which such restrictions on transfer shall have expired
        in accordance with their terms may, upon surrender of such Note for
        exchange to the Note registrar in accordance with the provisions of this
        Section 2.5, be exchanged for a new Note or Notes, of like tenor and
        aggregate principal amount, which shall not bear the restrictive legend
        required by this Section 2.5(d).

               Notwithstanding any other provisions of this Indenture (other
        than the provisions set forth in this Section 2.5(d)), the Global Note
        may not be transferred as a whole or in part except by the Depositary to
        a nominee of the Depositary or by a nominee of the Depositary to the
        Depositary or another nominee of the Depositary or by the Depositary or
        any such nominee to a successor Depositary or a nominee of such
        successor Depositary.

               The Depositary shall be a clearing agency registered under the
        Exchange Act. The Company initially appoints The Depository Trust
        Company to act as Depositary with respect to the Global Note. Initially,
        the Global Note shall be issued to the Depositary, registered in the
        name of Cede & Co., as the nominee of the Depositary, and deposited with
        the Trustee as custodian for Cede & Co.

               If at any time the Depositary for the Global Note notifies the
        Company that it is unwilling or unable to continue as Depositary for
        such Note, the Company may appoint a successor Depositary with respect
        to such Note. If a successor Depositary for the Global Note is not
        appointed by the Company within ninety (90) days after the Company
        receives such notice, the Company will execute, and the Trustee, upon
        receipt of an Officers' Certificate for the authentication and delivery
        of Notes, will authenticate and deliver, Notes in definitive form, in an
        aggregate principal amount equal to the principal amount of the Global
        Note, in exchange for the Global Note, and upon delivery of the Global
        Note to the Trustee the Global Note shall be canceled.

               If a Note in certificated form is issued in exchange for any
        portion of a Global Note after the close of business on any record date
        at the office or agency where such exchange occurs and before the
        opening of business at such office or agency on the next succeeding
        interest payment date, interest will not be payable on such interest
        payment date in respect of such certificated Note, but will be payable
        on such interest payment

                                      -16-
<PAGE>   22
        date only with respect to the exchanged portion of the Global Note in
        accordance with the provisions of this Indenture.

               Definitive Notes issued in exchange for all or a part of the
        Global Note pursuant to this Section 2.5(d) shall be registered in such
        names and in such authorized denominations as the Depositary, pursuant
        to instructions from its direct or indirect participants or otherwise,
        shall instruct the Trustee. Upon execution and authentication, the
        Trustee shall deliver such definitive Notes to the persons in whose
        names such definitive Notes are so registered.

               At such time as all interests in the Global Note have been
        redeemed, converted, canceled, repurchased or transferred, the Global
        Note shall be, upon receipt thereof, canceled by the Trustee in
        accordance with standing procedures and instructions existing between
        the Depositary and the Custodian. At any time prior to such
        cancellation, if any interest in the Global Note is exchanged for
        definitive Notes, redeemed, converted, canceled, repurchased or
        transferred to a transferee who receives definitive Notes therefor or
        any definitive Note is exchanged or transferred for part of the Global
        Note, the principal amount of the Global Note shall, in accordance with
        the standing procedures and instructions existing between the Depositary
        and the Custodian, be appropriately reduced or increased, as the case
        may be, and an endorsement shall be made on the Global Note, by the
        Trustee or the Custodian, at the direction of the Trustee, to reflect
        such reduction or increase.

               (e) Until two (2) years after the original issuance date of any
        Note, any stock certificate representing Common Stock issued upon
        conversion of such Note shall bear a legend in substantially the
        following form (unless the Note or such Common Stock has been sold
        pursuant to the exemption from registration provided by Rule 144 under
        the Securities Act or pursuant to a registration statement that has been
        declared effective under the Securities Act, and which continues to be
        effective at the time of such transfer, or such Common Stock has been
        issued upon conversion of Notes that have been transferred pursuant to a
        registration statement that has been declared effective under the
        Securities Act or pursuant to the exemption from registration provided
        by Rule 144 under the Securities Act, or unless otherwise agreed by the
        Company with written notice thereof to the Trustee and any transfer
        agent for the Common Stock):

               THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER
               THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
               ACT") OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR
               SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER
               HEREOF AGREES THAT UNTIL THE EXPIRATION OF TWO YEARS AFTER THE
               ORIGINAL ISSUANCE OF THE NOTE UPON THE CONVERSION OF WHICH THE
               COMMON STOCK EVIDENCED HEREBY WAS ISSUED, (1) IT WILL NOT RESELL
               OR OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY EXCEPT
               (A) TO THE COMPANY OR ANY SUBSIDIARY

                                      -17-
<PAGE>   23
               THEREOF, (B) TO A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
               RULE 144A UNDER THE SECURITIES ACT) IN COMPLIANCE WITH RULE
               144A, (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED
               BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (D)
               PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
               EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE
               EFFECTIVE AT THE TIME OF SUCH TRANSFER); (2) PRIOR TO ANY SUCH
               TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(D) ABOVE),
               IT WILL FURNISH TO STOCKTRANS, INC., AS TRANSFER AGENT, SUCH
               CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE
               COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
               BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
               NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
               ACT; AND (3) IT WILL DELIVER TO EACH PERSON TO WHOM THE COMMON
               STOCK EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER
               PURSUANT TO CLAUSE 1(D) ABOVE) A NOTICE SUBSTANTIALLY TO THE
               EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE
               EARLIER OF THE TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY
               PURSUANT TO CLAUSE 1(C) OR 1(D) ABOVE OR THE EXPIRATION OF TWO
               YEARS FROM THE ORIGINAL ISSUANCE OF THE NOTE UPON THE CONVERSION
               OF WHICH THE COMMON STOCK EVIDENCED HEREBY WAS ISSUED.

               Any such Common Stock as to which such restrictions on transfer
        shall have expired in accordance with their terms may, upon surrender of
        the certificates representing such shares of Common Stock for exchange
        in accordance with the procedures of the transfer agent for the Common
        Stock, be exchanged for a new certificate or certificates for a like
        aggregate number of shares of Common Stock, which shall not bear the
        restrictive legend required by this Section 2.5(e).

               (f) Any Note or Common Stock issued upon the conversion or
        exchange of a Note that, prior to the expiration of the holding period
        applicable to sales thereof under Rule 144(k) under the Securities Act
        (or any successor provision), is purchased or owned by the Company or
        any Affiliate thereof may not be resold by the Company or such Affiliate
        unless registered under the Securities Act or resold pursuant to an
        exemption from the registration requirements of the Securities Act in a
        transaction that results in such Notes or Common Stock, as the case may
        be, no longer being "restricted securities" (as defined under Rule 144).

               (g) Notwithstanding any provision of Section 2.5 to the contrary,
        in the event Rule 144(k) as promulgated under the Securities Act (or any
        successor rule) is amended

                                      -18-
<PAGE>   24
        to change the two-year period under Rule 144(k) (or the corresponding
        period under any successor rule), from and after receipt by the Trustee
        of the Officers' Certificate and Opinion of Counsel provided for in this
        Section 2.5(g), (i) each reference in Section 2.5(d) to "two (2) years"
        and in the restrictive legend set forth in such paragraph to "TWO YEARS"
        shall be deemed for all purposes hereof to be references to such changed
        period, (ii) each reference in Section 2.5(e) to "two (2) years" and in
        the restrictive legend set forth in such paragraph to "TWO YEARS" shall
        be deemed for all purposes hereof to be references to such changed
        period and (iii) all corresponding references in the Notes and the
        restrictive legends thereon shall be deemed for all purposes hereof to
        be references to such changed period, provided that such changes shall
        not become effective if they are otherwise prohibited by, or would
        otherwise cause a violation of, the then-applicable federal securities
        laws. As soon as practicable after the Company has knowledge of the
        effectiveness of any such amendment to change the two-year period under
        Rule 144(k) (or the corresponding period under any successor rule),
        unless such changes would otherwise be prohibited by, or would otherwise
        cause a violation of, the then-applicable securities law, the Company
        shall provide to the Trustee an Officers' Certificate and Opinion of
        Counsel informing the Trustee of the effectiveness of such amendment and
        the effectiveness of the foregoing changes to Sections 2.5(d) and 2.5(e)
        and the Notes. The provisions of this Section 2.5(g) will not be
        effective until such time as the Opinion of Counsel and Officers'
        Certificate have been received by the Trustee hereunder. This Section
        2.5(g) shall apply to successive amendments to Rule 144(k) (or any
        successor rule) changing the holding period thereunder.

        Section 2.6. Mutilated, Destroyed, Lost or Stolen Notes. In case any
Note shall become mutilated or be destroyed, lost or stolen, the Company in its
discretion may execute, and upon its request the Trustee or an authenticating
agent appointed by the Trustee shall authenticate and deliver, a new Note,
bearing a number not contemporaneously outstanding, in exchange and substitution
for the mutilated Note, or in lieu of and in substitution for the Note so
destroyed, lost or stolen. In every case the applicant for a substituted Note
shall furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent such security or indemnity as may be required by them to
save each of them harmless from any loss, liability, cost or expense caused by
or connected with such substitution, and, in every case of destruction, loss or
theft, the applicant shall also furnish to the Company, to the Trustee and, if
applicable, to such authenticating agent evidence to their satisfaction of the
destruction, loss or theft of such Note and of the ownership thereof.

        The Trustee or such authenticating agent may authenticate any such
substituted Note and deliver the same upon the receipt of such security or
indemnity as the Trustee, the Company and, if applicable, such authenticating
agent may require. Upon the issuance of any substituted Note, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith. In case any Note which has matured or is about to mature or has been
called for redemption or is about to be converted into Common Stock shall become
mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a
substitute Note, pay or authorize the payment of or convert or authorize the
conversion of the same (without surrender thereof except in the case of a
mutilated Note), as the case may be, if the applicant for such payment or

                                      -19-
<PAGE>   25
conversion shall furnish to the Company, to the Trustee and, if applicable, to
such authenticating agent such security or indemnity as may be required by them
to save each of them harmless for any loss, liability, cost or expense caused by
or connected with such substitution, and, in case of destruction, loss or theft,
evidence satisfactory to the Company, the Trustee and, if applicable, any paying
agent or conversion agent of the destruction, loss or theft of such Note and of
the ownership thereof.

        Every substitute Note issued pursuant to the provisions of this Section
2.6 by virtue of the fact that any Note is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Note shall be found at any time, and shall be
entitled to all the benefits of (but shall be subject to all the limitations set
forth in) this Indenture equally and proportionately with any and all other
Notes duly issued hereunder. To the extent permitted by law, all Notes shall be
held and owned upon the express condition that the foregoing provisions are
exclusive with respect to the replacement or payment or conversion of mutilated,
destroyed, lost or stolen Notes and shall preclude any and all other rights or
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment or conversion of negotiable
instruments or other securities without their surrender.

        Section 2.7. Temporary Notes. Pending the preparation of definitive
Notes, the Company may execute and the Trustee or an authenticating agent
appointed by the Trustee shall, upon written request of the Company,
authenticate and deliver temporary Notes (printed or lithographed). Temporary
Notes shall be issuable in any authorized denomination, and substantially in the
form of the definitive Notes but with such omissions, insertions and variations
as may be appropriate for temporary Notes, all as may be determined by the
Company. Every such temporary Note shall be executed by the Company and
authenticated by the Trustee or such authenticating agent upon the same
conditions and in substantially the same manner, and with the same effect, as
the definitive Notes. Without unreasonable delay the Company will execute and
deliver to the Trustee or such authenticating agent definitive Notes (other than
in the case of Notes in global form) and thereupon any or all temporary Notes
(other than any the Global Note) may be surrendered in exchange therefor, at
each office or agency maintained by the Company pursuant to Section 5.2 and the
Trustee or such authenticating agent shall authenticate and deliver in exchange
for such temporary Notes an equal aggregate principal amount of definitive
Notes. Such exchange shall be made by the Company at its own expense and without
any charge therefor. Until so exchanged, the temporary Notes shall in all
respects be entitled to the same benefits and subject to the same limitations
under this Indenture as definitive Notes authenticated and delivered hereunder.

        Section 2.8. Cancellation of Notes Paid, Etc. All Notes surrendered for
the purpose of payment, redemption, repurchase, conversion, exchange or
registration of transfer, shall, if surrendered to the Company or any paying
agent or any Note registrar or any conversion agent, be surrendered to the
Trustee and promptly canceled by it, or, if surrendered to the Trustee, shall be
promptly canceled by it, and no Notes shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Indenture. Upon written
instructions of the Company, the Trustee shall destroy canceled Notes and, after
such destruction, shall deliver a certificate of such destruction to the
Company. If the Company shall acquire any of the Notes, such

                                      -20-
<PAGE>   26
acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Notes unless and until the same are delivered
to the Trustee for cancellation.

        Section 2.9. CUSIP Numbers. The Company in issuing the Notes may use
"CUSIP" numbers (if then generally in use), and, if so, the trustee shall use
"CUSIP" numbers in notices of redemption and Company Notices as a convenience to
holders of the Notes; provided, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Notes or as contained in any notice of a redemption or Company Notice and
that reliance may be placed only on the other identification numbers printed on
the Notes, and any redemption or offer to purchase pursuant to Article XVI shall
not be affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the "CUSIP" numbers.

                                  ARTICLE III.
                               REDEMPTION OF NOTES

        Section 3.1. Redemption Prices. The Company may, at its option, redeem
all or from time to time any part of the Notes on any date prior to maturity,
upon notice as set forth in Section 3.2, and at the optional redemption prices
set forth in the form of Note attached as Exhibit A hereto, together with
accrued interest, if any, to, but excluding, the date fixed for redemption,
provided, however, that no such redemption shall be effected before May 5, 2003.

        The Company may, at its option, redeem all or from time to time any part
of the Notes at any time prior to May 5, 2003, upon notice as set forth in
Section 3.2, and at the provisional redemption price equal to $1,000 per $1,000
principal amount of the Notes redeemed, together with accrued interest, if any,
to, but excluding, the date fixed for provisional redemption if (i) the Closing
Price has exceeded 150% of the Conversion Price (as such may be adjusted from
time to time) then in effect for at least 20 Trading Days in any consecutive
30-Trading Day period ending on the Trading Day immediately prior to the date of
mailing of the provisional notice of redemption pursuant to Section 3.2 and (ii)
a shelf registration statement covering resales of the Notes and the Common
Stock issuable upon conversion thereof is effective and available for use and is
expected to remain effective for the 30 days following the provisional
redemption date.

        Upon any such provisional redemption which occurs prior to May 5, 2003,
the Company shall also make an additional payment in cash (the "Make-Whole
Payment") with respect to the Notes called for redemption to Holders on the date
the provisional redemption notice is sent pursuant to Section 3.2 in an amount
equal to $100.27 per $1,000 principal amount of the Notes, less the amount of
any interest actually paid on such Notes prior to the provisional redemption
notice date. The Company shall make the Make-Whole Payment on all Notes called
for provisional redemption, including those Notes converted into Common Stock
between the provisional notice date and the provisional redemption date.

        Section 3.2. Notice of Redemption; Selection of Notes. In case the
Company shall desire to exercise the right to redeem all or, as the case may be,
any part of the Notes pursuant to

                                      -21-
<PAGE>   27
Section 3.1, it shall fix a date for redemption, and it, or at its request
(which must be received by the Trustee at least ten (10) Business Days prior to
the date the Trustee is requested to give notice as described below unless a
shorter period is agreed to by the Trustee), the Trustee in the name of and at
the expense of the Company, shall mail or cause to be mailed a notice of such
redemption (a) at least ten (10) Trading Days and not more than twenty (20)
Trading Days prior to the date fixed for provisional redemption and (b) at least
twenty (20) and not more than sixty (60) days prior to the date fixed for
optional redemption, to the holders of Notes so to be redeemed as a whole or in
part at their last addresses as the same appear on the Note register (provided
that if the Company shall give such notice, it shall also give such notice, and
notice of the Notes to be redeemed, to the Trustee). Such mailing shall be by
first class mail. The notice if mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the holder
receives such notice. In any case, failure to give such notice by mail or any
defect in the notice to the holder of any Note designated for redemption as a
whole or in part shall not affect the validity of the proceedings for the
redemption of any other Note.

        Each such notice of redemption shall specify the aggregate principal
amount of Notes to be redeemed, the date fixed for redemption, the redemption
price at which Notes are to be redeemed, the place or places of payment, that
payment will be made upon presentation and surrender of such Notes, that
interest accrued to, but excluding, the date fixed for redemption will be paid
as specified in said notice, and that on and after said date interest thereon or
on the portion thereof to be redeemed will cease to accrue. Such notice shall
also state the Make-Whole Payment, if any, and the current Conversion Price and
the date on which the right to convert such Notes or portions thereof into
Common Stock will expire. If fewer than all the Notes are to be redeemed, the
notice of redemption shall identify the Notes to be redeemed. In case any Note
is to be redeemed in part only, the notice of redemption shall state the portion
of the principal amount thereof to be redeemed and shall state that on and after
the date fixed for redemption, upon surrender of such Note, a new Note or Notes
in principal amount equal to the unredeemed portion thereof will be issued.

        On or prior to the redemption date specified in the notice of redemption
given as provided in this Section, the Company will deposit with the Trustee or
with one or more paying agents (or, if the Company is acting as its own paying
agent, set aside, segregate and hold in trust as provided in Section 5.4) an
amount of money sufficient to redeem on the redemption date all the Notes (or
portions thereof) so called for redemption (other than those theretofore
surrendered for conversion into Common Stock) at the appropriate redemption
price, together with accrued interest to, but excluding, the date fixed for
redemption; provided that if such payment is made on the redemption date it must
be received by the Trustee or paying agent, as the case may be, by 10:00 a.m.
New York City time, on such date. If any Note called for redemption is converted
pursuant hereto, any money deposited with the Trustee or any paying agent or so
segregated and held in trust for the redemption of such Note shall be paid to
the Company upon its request, or, if then held by the Company shall be
discharged from such trust.

        If fewer than all the Notes are to be redeemed, the Company will give
the Trustee written notice in the form of an Officers' Certificate not fewer
than thirty-five (35) days (or such shorter period of time as may be acceptable
to the Trustee) prior to the redemption date as to the aggregate principal
amount of Notes to be redeemed. If fewer than all the Notes are to be

                                      -22-
<PAGE>   28
redeemed, the Trustee shall select the Notes or portions thereof to be redeemed
(in principal amounts of $1,000 or integral multiples thereof), by lot, or by a
method the Trustee considers fair and appropriate (as long as such method is not
prohibited by the rules of any United States national securities exchange or of
an established automated over-the-counter trading market in the United States on
which the Notes are then listed). If any Note selected for partial redemption is
converted in part after such selection, the converted portion of such Note shall
be deemed (so far as is possible) to be the portion to be selected for
redemption. The Notes (or portions thereof) so selected shall be deemed duly
selected for redemption for all purposes hereof, notwithstanding that any such
Note is converted as a whole or in part before the mailing of the notice of
redemption.

        Upon any redemption of less than all Notes, the Company and the Trustee
may (but need not) treat as outstanding any Notes surrendered for conversion
during the period of fifteen (15) days next preceding the mailing of a notice of
redemption and may (but need not) treat as not outstanding any Note
authenticated and delivered during such period in exchange for the unconverted
portion of any Note converted in part during such period.

        Section 3.3. Payment of Notes Called for Redemption. If notice of
redemption has been given as above provided, the Notes or portion of Notes with
respect to which such notice has been given shall, unless converted into Common
Stock pursuant to the terms hereof, become due and payable on the date and at
the place or places stated in such notice at the applicable redemption price,
together with interest accrued to, but excluding, the date fixed for redemption,
and on and after said date (unless the Company shall default in the payment of
such Notes at the redemption price, together with interest accrued to, but
excluding, said date) interest on the Notes or portion of Notes so called for
redemption shall cease to accrue and such Notes shall cease after the close of
business on the Business Day next preceding the date fixed for redemption to be
convertible into Common Stock and, except as provided in Sections 8.5 and 13.4,
to be entitled to any benefit or security under this Indenture, and the holders
thereof shall have no right in respect of such Notes except the right to receive
the redemption price thereof and unpaid interest to, but excluding, the date
fixed for redemption. On presentation and surrender of such Notes at a place of
payment in said notice specified, the said Notes or the specified portions
thereof to be redeemed shall be paid and redeemed by the Company at the
applicable redemption price, together with interest accrued thereon to, but
excluding, the date fixed for redemption; provided that, if the applicable
redemption date is an interest payment date, the semi-annual payment of interest
becoming due on such date shall be payable to the holders of such Notes
registered as such on the relevant record date subject to the terms and
provisions of Section 2.3 hereof, and with respect to a provisional redemption,
the holder of any Notes converted into Common Stock pursuant to the terms hereof
after the provisional redemption notice date and prior to the provisional
redemption date shall have the right to the Make-Whole Payment regardless of the
conversion.

        Upon presentation of any Note redeemed in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the holder thereof, at
the expense of the Company, a new Note or Notes, of authorized denominations, in
principal amount equal to the unredeemed portion of the Notes so presented.

                                      -23-
<PAGE>   29
        Notwithstanding the foregoing, the Trustee shall not redeem any Notes or
mail any notice of optional redemption during the continuance of a default in
payment of interest or premium on the Notes or of any Event of Default of which,
in the case of any Event of Default other than under Section 7.1(a), (b) or (d),
a Responsible Officer of the Trustee has knowledge. If any Note called for
redemption shall not be so paid upon surrender thereof for redemption, the
principal and premium, if any, shall, until paid or duly provided for, bear
interest from the date fixed for redemption at the rate borne by the Note and
such Note shall remain convertible into Common Stock until the principal and
premium, if any, shall have been paid or duly provided for.

        Section 3.4. Conversion Arrangement on Call for Redemption. In
connection with any redemption of Notes, the Company may arrange for the
purchase and conversion of any Notes not converted prior to the expiration of
such conversion right by an agreement with one or more investment bankers or
other purchasers to purchase such Notes by paying to the Trustee in trust for
the Noteholders, on or before the date fixed for redemption, an amount not less
than the applicable redemption price, together with interest accrued to the date
fixed for redemption, of such Notes. Notwithstanding anything to the contrary
contained in this Article III, the obligation of the Company to pay the
redemption price of such Notes, together with interest accrued to, but
excluding, the date fixed for redemption, shall be deemed to be satisfied and
discharged to the extent such amount is so paid by such purchasers. If such an
agreement is entered into, a copy of which, certified as true and correct by the
Secretary or Assistant Secretary of the Company will be filed with the Trustee
prior to the date fixed for redemption, any Notes not duly surrendered for
conversion by the holders thereof may, at the option of the Company, be deemed,
to the fullest extent permitted by law, acquired by such purchasers from such
holders and (notwithstanding anything to the contrary contained in Article XV)
surrendered by such purchasers for conversion, all as of immediately prior to
the close of business on the date fixed for redemption (and the right to convert
any such Notes shall be deemed to have been extended through such time), subject
to payment of the above amount as aforesaid. At the direction of the Company,
the Trustee shall hold and dispose of any such amount paid to it in the same
manner as it would monies deposited with it by the Company for the redemption of
Notes. Without the Trustee's prior written consent, no arrangement between the
Company and such purchasers for the purchase and conversion of any Notes shall
increase or otherwise affect any of the powers, duties, responsibilities or
obligations of the Trustee as set forth in this Indenture, and the Company
agrees to indemnify the Trustee from, and hold it harmless against, any loss,
liability or expense arising out of or in connection with any such arrangement
for the purchase and conversion of any Notes between the Company and such
purchasers, including the costs and expenses incurred by the Trustee in the
defense of any claim or liability arising out of or in connection with the
exercise or performance of any of its powers, duties, responsibilities or
obligations under this Indenture.

                                      -24-
<PAGE>   30
                                   ARTICLE IV
                             SUBORDINATION OF NOTES

        Section 4.1. Agreement of Subordination. The Company covenants and
agrees, and each holder of Notes issued hereunder by his acceptance thereof
likewise covenants and agrees, that all Notes shall be issued subject to the
provisions of this Article IV; and each person holding any Note, whether upon
original issue or upon transfer, assignment or exchange thereof, accepts and
agrees to be bound by such provisions.

        The payment of the principal of, premium, if any, and interest on all
Notes (including, but not limited to, the redemption price or repurchase price
with respect to the Notes to be redeemed or repurchased, as provided in this
Indenture) issued hereunder shall, to the extent and in the manner hereinafter
set forth, be subordinated to the prior payment in full, in cash or in such
other form of payment as may be acceptable to the holders of Senior
Indebtedness, of all Senior Indebtedness, whether outstanding at the date of
this Indenture or thereafter incurred or created.

        No provision of this Article IV shall prevent the occurrence of any
default or Event of Default hereunder.

        Section 4.2. Payments to Noteholders. No payment (including pursuant to
any redemption or repurchase of Notes) shall be made with respect to the
principal of, or premium, if any, or interest (including Liquidated Damages, if
any) on the Notes, except payments and distributions made by the Trustee as
permitted by Section 4.6, if:

               (a) a default in the payment of principal, premium, if any, or
        interest or other payment due on Senior Indebtedness occurs and is
        continuing beyond any applicable period of grace; or

               (b) any other default occurs and is continuing with respect to
        Designated Senior Indebtedness that then permits holders of the
        Designated Senior Indebtedness as to which such default related to
        accelerate its maturity and the Trustee and the Company receive a notice
        of such default (a "Payment Blockage Notice") from a representative of
        Designated Senior Indebtedness or a holder of Designated Senior
        Indebtedness or the Company.

        The Company may and shall resume payments on the Notes (1) in the case
of a payment default, on the date upon which such default is cured or waived or
ceases to exist, and (2) in the case of a nonpayment default with respect to
Designated Senior Indebtedness, on the earlier of the date on which the
nonpayment default is cured or waived or ceases to exist or 179 days pass after
the date on which the applicable Payment Blockage Notice is received.

        No new period of payment blockage may be commenced pursuant to a Payment
Blockage Notice unless (A) at least 365 days shall have elapsed since the first
day of effectiveness of the immediately prior Payment Blockage Notice and (B)
all scheduled payments

                                      -25-
<PAGE>   31
of principal, premium, if any, and interest on the Notes that have come due have
been paid in full in cash, or in such other form of payment as may be acceptable
to the holders of the Notes or the Trustee or the Noteholders shall not have
begun proceedings to enforce the right of the Noteholders to receive payment. No
default (whether or not such event of default is on the same issue of Designated
Senior Indebtedness) that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice.

        In addition, in the event of any acceleration of the Notes because of an
Event of Default, no payment or distribution (including with respect to any
redemption or repurchase of the Notes) shall be made to the Trustee or any
holder of Notes with respect to the principal of, premium, if any, or interest
(including Liquidated Damages, if any) on the Notes, except payments and
distributions made by the Trustee as permitted by Section 4.6, until all Senior
Indebtedness has been paid in full in cash or other payment satisfactory to the
holders of Senior Indebtedness or such acceleration is rescinded in accordance
with the terms of this Indenture. If payment of the Notes is accelerated because
of an Event of Default, the Company shall promptly notify holders of Senior
Indebtedness of the acceleration.

        Notwithstanding the foregoing, in the event that the Trustee or any
holder of Notes receives any payment or distribution of assets of the Company of
any kind in contravention of any term of this Indenture, whether in cash,
property or securities, including, without limitation, by way of setoff or
otherwise, before all Senior Indebtedness is paid in full, in cash or such other
form of payment as may be acceptable to the holders of Senior Indebtedness, then
such payment or distribution shall be held by the recipient or recipients in
trust for the benefit of, and shall immediately be paid over or delivered to,
the holders of Senior Indebtedness or their respective representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Indebtedness may have been issued,
as their respective interests may appear, as calculated by the Company, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to make payment in full, in cash or such other form of payment
as may be acceptable to the holders of Senior Indebtedness, of all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution, or provision therefor, to or for the holders of such Senior
Indebtedness.

        Nothing in this Section 4.2 shall apply to claims of, or payments to,
the Trustee pursuant to Section 8.6. This Section 4.2 shall be subject to the
further provisions of Section 4.6.

        Section 4.3. Bankruptcy and Dissolution, Etc. Upon any payment by the
Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to creditors upon any dissolution,
winding-up, liquidation or reorganization of the Company, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
amounts due or to become due upon all Senior Indebtedness shall first be paid in
full, in cash or in such other form of payment as may be acceptable to the
holders of Senior Indebtedness, before any payment is made on account of the
principal or premium, if any, and interest on the Notes (except payments made
pursuant to Article XIII from monies deposited with the Trustee pursuant thereto
prior to the happening of such dissolution, winding-up, liquidation or
reorganization or bankruptcy, insolvency, receivership or other such
proceedings);

                                      -26-
<PAGE>   32
and upon any such dissolution, winding-up, liquidation or reorganization or
bankruptcy, insolvency, receivership or other such proceedings, any payment by
the Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the holders of the Notes or
the Trustee under this Indenture would be entitled, except for the provisions of
this Article IV, shall (except as aforesaid) be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, or by the holders of the Notes or by the
Trustee under this Indenture if received by them or it, directly to the holders
of Senior Indebtedness (pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders, or as otherwise required by
law or a court order) or their respective representative or representatives, or
to the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all Senior Indebtedness in
full in cash or in such other form of payment as may be acceptable to the
holders of Senior Indebtedness after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness, before any payment or
distribution is made to the holders of the Notes or to the Trustee under this
Indenture.

        Notwithstanding the foregoing, in the event that the Trustee or any
holder of Notes receives any payment or distribution of assets of the Company of
any kind in contravention of any term of this Indenture, whether in cash,
property or securities, including, without limitation, by way of setoff or
otherwise, before all Senior Indebtedness is paid in full, in cash or such other
form of payment as may be acceptable to the holders of Senior Indebtedness, then
such payment or distribution shall be held by the recipient or recipients in
trust for the benefit of, and shall immediately be paid over or delivered to,
the holders of Senior Indebtedness or their respective representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Indebtedness may have been issued,
as their respective interests may appear, as calculated by the Company, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to make payment in full, in cash or such other form of payment
as may be acceptable to the holders of Senior Indebtedness, of all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution, or provision therefor, to or for the holders of such Senior
Indebtedness.

        For purposes of Section 4.2 hereof and this Section 4.3, the words
"cash, property or securities" shall not be deemed to include shares of stock of
the Company as reorganized or readjusted, or securities of the Company or any
other corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated (at least to the extent provided in this
Article IV with respect to the Notes) to the payment of all Senior Indebtedness
which may at the time be outstanding; provided that (i) the Senior Indebtedness
is assumed by the new corporation, if any, resulting from such reorganization or
adjustment, and (ii) the rights of the holders of Senior Indebtedness (other
than leases which are not assumed by the Company or by the new corporation, as
the case may be) are not, without the consent of such holders, altered by such
reorganization or readjustment. The consolidation of the Company with, or the
merger of the Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided for in Article XII shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this

                                      -27-
<PAGE>   33
Section 4.3 if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article
XII.

        Nothing in this Section 4.3 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 8.6. This Section 4.3 shall be subject
to the further provisions of Section 4.6.

        Section 4.4. Subrogation of Notes. Subject to the payment in full in
cash or in such other form of payment as may be acceptable to the holders of
Senior Indebtedness of all Senior Indebtedness, the rights of the holders of the
Notes shall be subrogated to the extent of the payments or distributions made to
the holders of such Senior Indebtedness pursuant to the provisions of this
Article IV (equally and ratably with the holders of all indebtedness of the
Company which by its express terms is subordinated to other indebtedness of the
Company to substantially the same extent as the Notes are subordinated and is
entitled to like rights of subrogation) to the rights of the holders of Senior
Indebtedness to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Indebtedness until the
principal of, and premium, if any, and interest on the Notes shall be paid in
full; and, for the purposes of such subrogation, no payments or distributions to
the holders of the Senior Indebtedness of any cash, property or securities to
which the holders of the Notes or the Trustee would be entitled except for the
provisions of this Article IV, and no payment over pursuant to the provisions of
this Article IV, to or for the benefit of the holders of Senior Indebtedness by
holders of the Notes or the Trustee, shall, as between the Company, its
creditors other than holders of Senior Indebtedness, and the holders of the
Notes, be deemed to be a payment by the Company to or on account of the Senior
Indebtedness; and no payments or distributions of cash, property or securities
to or for the benefit of the holders of the Notes pursuant to the subrogation
provisions of this Article IV, which would otherwise have been paid to the
holders of Senior Indebtedness shall be deemed to be a payment by the Company to
or for the account of the Notes. It is understood that the provisions of this
Article IV are and are intended solely for the purposes of defining the relative
rights of the holders of the Notes, on the one hand, and the holders of the
Senior Indebtedness, on the other hand.

        Nothing contained in this Article IV or elsewhere in this Indenture or
in the Notes is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the holders of the Notes, the
obligation of the Company, which is absolute and unconditional, to pay to the
holders of the Notes the principal of, and premium, if any, and interest on the
Notes as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the holders of
the Notes and creditors of the Company other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or the
holder of any Note from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article IV of the holders of Senior Indebtedness in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy.

        Upon any payment or distribution of assets of the Company referred to in
this Article IV, the Trustee, subject to the provisions of Section 8.1, and the
holders of the Notes shall be entitled to rely upon any order or decree made by
any court of competent jurisdiction in which such bankruptcy, dissolution,
winding-up, liquidation or reorganization proceedings are pending, or a

                                      -28-
<PAGE>   34
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other person making such payment or distribution, delivered to the Trustee or
to the holders of the Notes, for the purpose of ascertaining the persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article IV.

        Section 4.5. Authorization by Noteholders. Each holder of a Note by his
acceptance thereof authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article IV and appoints the Trustee his attorney-in-fact for
any and all such purposes.

        Section 4.6. Notice to Trustee. The Company shall give written notice
to the Trustee of the issuance of any Designated Senior Indebtedness. In
addition, the Company shall give prompt written notice in the form of an
Officers' Certificate to a Responsible Officer of the Trustee and to any paying
agent of any fact known to the Company which would prohibit the making of any
payment of monies to or by the Trustee or any paying agent in respect of the
Notes pursuant to the provisions of this Article IV. Notwithstanding the
provisions of this Article IV or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any Senior
Indebtedness or of any default or event of default with respect to any Senior
Indebtedness or of any other facts which would prohibit the making of any
payment of monies to or by the Trustee in respect of the Notes pursuant to the
provisions of this Article IV, unless and until a Responsible Officer of the
Trustee shall have received written notice thereof at the Corporate Trust Office
from the Company (in the form of an Officers' Certificate) or a holder or
holders of Senior Indebtedness or from any trustee thereof who shall have been
certified by the Company or otherwise established to the reasonable satisfaction
of the Trustee to be such holder or trustee; and before the receipt of any such
written notice, the Trustee, subject to the provisions of Section 8.1, shall be
entitled in all respects to assume that no such facts exist; provided that if on
a date at least two (2) Business Days prior to the date upon which by the terms
hereof any such monies may become payable for any purpose (including, without
limitation, the payment of the principal of, or premium, if any, or interest on
any Note), the Trustee shall not have received with respect to such monies the
notice provided for in this Section 4.6, then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such monies and to apply the same to the purpose for which they were
received, and shall not be affected by any notice to the contrary which may be
received by it on or after such prior date.

        Notwithstanding anything to the contrary hereinbefore set forth, nothing
shall prevent (a) any payment by the Company or the Trustee to the Noteholders
of amounts in connection with a redemption of Notes if (i) notice of such
redemption has been given to the Noteholders pursuant to Article III prior to
the receipt by the Trustee of written notice as aforesaid, and (ii) such notice
of redemption is given not earlier than sixty (60) days before the redemption
date, (b) any payment by the Company or the Trustee to the Noteholders of
amounts in connection with a repurchase of Notes if (i) notice of such
repurchase has been given pursuant to Article XVI prior to the receipt by the
Trustee of written notice as aforesaid, and (ii) such notice of repurchase is

                                      -29-
<PAGE>   35
given not earlier than forty (40) days before the repurchase date, or (c) any
payment by the Trustee to the Noteholders of monies deposited with it pursuant
to Section 13.1.

        The Trustee, subject to the provisions of Section 8.1, shall be entitled
to rely on the delivery to it of a written notice by a person representing
himself to be a holder of Senior Indebtedness (or a trustee on behalf of such
holder) to establish that such notice has been given by a holder of Senior
Indebtedness or a trustee on behalf of any such holder or holders. In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any person as a holder of Senior Indebtedness to
participate in any payment or distribution pursuant to this Article IV, the
Trustee may request such person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness held by such
person, the extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
person under this Article IV, and if such evidence is not furnished the Trustee
may defer any payment to such person pending judicial determination as to the
right of such person to receive such payment.

        Section 4.7. Trustee's Relation to Senior Indebtedness. The Trustee and
any agent of the Company or the Trustee in its individual capacity shall be
entitled to all the rights set forth in this Article IV in respect of any Senior
Indebtedness at any time held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in Section 8.13 or elsewhere in this Indenture
shall deprive the Trustee or any such agent of any of its rights as such holder.
Nothing in this Article IV shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 8.6.

        With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article IV, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and, subject to the
provisions of Section 4.2 and Section 8.1, the Trustee shall not be liable to
any holder of Senior Indebtedness if it shall pay over or deliver to holders of
Notes, the Company or any other person money or assets to which any holder of
Senior Indebtedness shall be entitled by virtue of this Article IV or otherwise.

        Section 4.8. No Impairment of Subordination. No right of any present or
future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.

        Section 4.9. Certain Conversions Deemed Payment. For the purposes of
this Article IV only, (1) the issuance and delivery of junior securities upon
conversion of Notes in accordance with Article XV shall not be deemed to
constitute a payment or distribution on account of the principal of (or premium,
if any) or interest on Notes or on account of the purchase or other acquisition
of Notes, and (2) the payment, issuance or delivery of cash (except

                                      -30-
<PAGE>   36
in satisfaction of fractional shares pursuant to Section 15.3), property or
securities (other than junior securities) upon conversion of a Note shall be
deemed to constitute payment on account of the principal of such Note. For the
purposes of this Section, the term "junior securities" means (a) shares of any
stock of any class of the Company and (b) securities of the Company which are
subordinated in right of payment to all Senior Indebtedness which may be
outstanding at the time of issuance or delivery of such securities to
substantially the same extent as, or to a greater extent than, the Notes are so
subordinated as provided in this Article. Nothing contained in this Article or
elsewhere in this Indenture or in the Notes is intended to or shall impair, as
among the Company, its creditors other than holders of Senior Indebtedness and
the holders of the Notes, the right, which is absolute and unconditional, of the
holder of any Note to convert such Note in accordance with Article XV.

        Section 4.10. Article Applicable to Paying Agents. If at any time any
paying agent other than the Trustee shall have been appointed by the Company and
be then acting hereunder, the term Trustee as used in this Article IV shall
(unless the context shall otherwise require) be construed as extending to and
including such paying agent within its meaning as fully for all intents and
purposes as if such paying agent were named in this Article in addition to or in
place of the Trustee; provided, however, that the first sentence of Section 4.5
shall not apply to the Company or any Affiliate of the Company if it or such
Affiliate acts as paying agent.

        Section 4.11. Senior Indebtedness Entitled to Rely. The holders of
Senior Indebtedness (including, without limitation, Designated Senior
Indebtedness) shall have the right to rely upon this Article IV, and no
amendment or modification of the provisions contained herein shall diminish the
rights of such holders unless such holders shall have agreed in writing thereto.

                                    ARTICLE V
                      PARTICULAR COVENANTS OF THE COMPANY

        Section 5.1. Payment of Principal, Premium and Interest. The Company
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any, and interest on each of the Notes at the
places, at the respective times and in the manner provided herein and in the
Notes. Each installment of interest on the Notes due on any semi-annual interest
payment date may be paid by mailing checks for the interest payable to or upon
the written order of the holders of Notes entitled thereto as they shall appear
on the registry books of the Company, provided that, with respect to any holder
of Notes with an aggregate principal amount equal to or in excess of $2,000,000,
at the request of such holder in writing to the Company, interest on such
holder's Notes shall be paid by wire transfer in immediately available funds in
accordance with the wire transfer instructions supplied by such holder from time
to time to the Trustee and paying agent (if different from Trustee) at least two
days prior to the applicable record date.

        Section 5.2. Maintenance of Office or Agency. The Company will maintain
in the Borough of Manhattan, The City of New York, an office or agency where the
Notes may be surrendered for registration of transfer or exchange or for
presentation for payment or for

                                      -31-
<PAGE>   37
conversion, redemption or repurchase and where notices and demands to or upon
the Company in respect of the Notes and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency not designated or appointed by
the Trustee. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office or the office or agency of the Trustee in the Borough of
Manhattan, The City of New York.

        The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York, for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.

        The Company hereby initially designates the Trustee as paying agent,
Note registrar, Custodian and conversion agent and the Corporate Trust Office
and the office or agency of the Trustee in the Borough of Manhattan, The City of
New York (which initially shall be State Street Bank and Trust Company, N.A., an
Affiliate of the Trustee located at 61 Broadway, 15th Floor, New York, New York
10006) as one such office or agency of the Company for each of the aforesaid
purposes.

        So long as the Trustee is the Note registrar, the Trustee agrees to
mail, or cause to be mailed, the notices set forth in Section 8.10(a) and the
third paragraph of Section 8.11.

        Section 5.3. Appointments to Fill Vacancies in Trustee's Office. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 8.10, a Trustee, so that there
shall at all times be a Trustee hereunder.

        Section 5.4. Provisions as to Paying Agent.

               (a) If the Company shall appoint a paying agent other than the
        Trustee or if the Trustee shall appoint such a paying agent, it will
        cause such paying agent to execute and deliver to the Trustee an
        instrument in which such agent shall agree with the Trustee, subject to
        the provisions of this Section 5.4:

                             (1) that it will hold all sums held by it as such
               agent for the payment of the principal of and premium, if any, or
               interest on the Notes (whether such sums have been paid to it by
               the Company or by any other obligor on the Notes) in trust for
               the benefit of the holders of the Notes;

                             (2) that it will give the Trustee notice of any
               failure by the Company (or by any other obligor on the Notes) to
               make any payment of the

                                      -32-
<PAGE>   38
               principal of and premium, if any, or interest on the Notes when
               the same shall be due and payable; and

                             (3) that at any time during the continuance of an
               Event of Default, upon request of the Trustee, it will forthwith
               pay to the Trustee all sums so held in trust.

               The Company shall, on or before each due date of the principal
        of, premium, if any, or interest on the Notes, deposit with the paying
        agent a sum sufficient to pay such principal, premium, if any, or
        interest, and (unless such paying agent is the Trustee) the Company will
        promptly notify the Trustee of any failure to take such action, provided
        that if such deposit is made on the due date, such deposit must be
        received by the paying agent by 10:00 a.m., New York City time, on such
        date.

               (b) If the Company shall act as its own paying agent, it will, on
        or before each due date of the principal of, premium, if any, or
        interest on the Notes, set aside, segregate and hold in trust for the
        benefit of the holders of the Notes a sum sufficient to pay such
        principal, premium, if any, or interest so becoming due and will notify
        the Trustee of any failure to take such action and of any failure by the
        Company (or any other obligor under the Notes) to make any payment of
        the principal of, premium, if any, or interest on the Notes when the
        same shall become due and payable.

               (c) Anything in this Section 5.4 to the contrary notwithstanding,
        the Company may, at any time, for the purpose of obtaining a
        satisfaction and discharge of this Indenture, or for any other reason,
        pay or cause to be paid to the Trustee all sums held in trust by the
        Company or any paying agent hereunder as required by this Section 5.4,
        such sums to be held by the Trustee upon the trusts herein contained and
        upon such payment by the Company or any paying agent to the Trustee, the
        Company or such paying agent shall be released from all further
        liability with respect to such sums.

               (d) Anything in this Section 5.4 to the contrary notwithstanding,
        the agreement to hold sums in trust as provided in this Section 5.4 is
        subject to Sections 13.3 and 13.4.

        Section 5.5. Existence. Subject to Article XII, the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence.

        Section 5.6. Rule 144A Information Requirement. Within the period prior
to the expiration of the holding period applicable to sales thereof under Rule
144(k) under the Securities Act (or any successor provision), the Company
covenants and agrees that it shall, during any period in which it is not subject
to Section 13 or 15(d) under the Exchange Act, make available to any holder or
beneficial holder of Notes or any Common Stock issued upon conversion thereof,
in each case which continue to be Restricted Securities, in connection with any
sale thereof and any prospective purchaser of Notes or such Common Stock from
such holder or beneficial holder, the information required pursuant to Rule
144A(d)(4) under the Securities Act upon the request of any holder or beneficial
holder of the Notes or such Common Stock and it will take such further action as
any holder or beneficial holder of such Notes or such

                                      -33-
<PAGE>   39
Common Stock may reasonably request, all to the extent required from time to
time to enable such holder or beneficial holder to sell its Notes or Common
Stock without registration under the Securities Act within the limitation of the
exemption provided by Rule 144A, as such rule may be amended from time to time.
Upon the request of any holder or any beneficial holder of the Notes or such
Common Stock, the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.

        Section 5.7. Stay, Extension and Usury Laws. The Company covenants (to
the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal of or
interest on the Notes as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of
this Indenture; and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law has been enacted.

        Section 5.8. Compliance Certificate. The Company shall deliver to the
Trustee within 120 days after the end of each fiscal year of the Company
(beginning with the fiscal year ending on December 31, 2002) an Officers'
Certificate stating whether or not to the best of their knowledge the signers
know of any default or Event of Default that occurred during such period. If
they do, such Officers' Certificate shall describe the default or Event of
Default and its status.

        Section 5.9. Liquidated Damages. If Liquidated Damages are payable by
the Company pursuant to the Registration Rights Agreement, the Company shall
deliver to the Trustee a certificate to that effect stating (i) the amount of
such Liquidated Damages that are payable and (ii) the date on which such damages
are payable. Unless and until a Responsible Officer of the Trustee receives at
the Corporate Trust Office such a certificate, the Trustee may assume without
inquiry that no such Liquidated Damages are payable. If the Company has paid
Liquidated Damages directly to the persons entitled to them, the Company shall
deliver to the Trustee a certificate setting forth the particulars of such
payment.

        Section 5.10. Further Instruments and Acts. Upon request of the Trustee,
the Company will execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.

                                   ARTICLE VI
         NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

        Section 6.1. Noteholders' Lists. The Company covenants and agrees that
it will furnish or cause to be furnished to the Trustee, semi-annually, not more
than fifteen (15) days after each April 15 and October 15 in each year beginning
with October 15, 2001, and at such other times as the Trustee may request in
writing, within thirty (30) days after receipt by the Company of any

                                      -34-
<PAGE>   40
such request (or such lesser time as the Trustee may reasonably request in order
to enable it to timely provide any notice to be provided by it hereunder), a
list in such form as the Trustee may reasonably require of the names and
addresses of the holders of Notes as of a date not more than fifteen (15) days
(or such other date as the Trustee may reasonably request in order to so provide
any such notices) prior to the time such information is furnished, except that
no such list need be furnished so long as the Trustee is acting as Note
registrar.

        Section 6.2. Preservation and Disclosure of Lists.

               (a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of the
holders of Notes contained in the most recent list furnished to it as provided
in Section 6.1 or maintained by the Trustee in its capacity as Note registrar,
if so acting. The Trustee may destroy any list furnished to it as provided in
Section 6.1 upon receipt of a new list so furnished.

               (b) The rights of Noteholders to communicate with other
holders of Notes with respect to their rights under this Indenture or under the
Notes and the corresponding rights and duties of the Trustee, shall be as
provided by the Trust Indenture Act.

               (c) Every Noteholder, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of holders of Notes made
pursuant to the Trust Indenture Act.

        Section 6.3. Reports by Trustee.

               (a) After this Indenture has been qualified under the Trust
Indenture Act, the Trustee shall transmit to holders of Notes such reports
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto.

               (b) A copy of such report shall, at the time of such
transmission to holders of Notes, be filed by the Trustee with each stock
exchange and automated quotation system upon which the Notes are listed and with
the Company. The Company will notify the Trustee when the Notes are listed on
any stock exchange or automated quotation system and when any such listing is
discontinued.

        Section 6.4. Reports by Company.

               (a) After this Indenture has been qualified under the Trust
Indenture Act, the Company shall file with the Trustee and the Commission, and
transmit to holders of Notes, such information, documents and other reports and
such summaries thereof, as may be required pursuant to the Trust Indenture Act
at the times and in the manner provided pursuant to such Act; provided that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission.

                                      -35-
<PAGE>   41

                  (b)      The Company will deliver to the Trustee (a) as soon
as available and in any event within ninety (90) days after the end of each
fiscal year of the Company (i) a consolidated balance sheet of the Company and
its Subsidiaries as of the end of such fiscal year and the related consolidated
statements of operations, stockholders' equity and cash flows for such fiscal
year, all reported on by an independent public accountant of nationally
recognized standing and (ii) a report containing a management's discussion and
analysis of the financial condition and results of operations and a description
of the business and properties of the Company and (b) as soon as available and
in any event within forty-five (45) days after the end of each of the first
three quarters of each fiscal year of the Company (i) an unaudited consolidated
management's discussion and analysis of the financial condition and results of
operations of the Company for such quarter; provided that the foregoing
statements and reports shall not be required for any fiscal year or quarter, as
the case may be, with respect to which the Company files or expects to file with
the Trustee an annual report or quarterly report, as the case may be, pursuant
to the preceding paragraph of this Section 6.4. The Trustee shall have no
liability as regards the substance of the information provided by the Company or
its agents pursuant to this Section 6.4.

                                  ARTICLE VII
                             DEFAULTS AND REMEDIES

         Section 7.1       Events of Default. In case one or more of the
following Events of Default (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) shall have occurred and
be continuing:

                  (a) default in the payment of the principal of and premium, if
         any, on any of the Notes as and when the same shall become due and
         payable either at maturity or in connection with any redemption, by
         declaration or otherwise, whether or not such payment is prohibited by
         the provisions of Article IV; or

                  (b) default for thirty (30) days in the payment of any
         installment of interest or Liquidated Damages, if any, upon any of the
         Notes as and when the same shall become due and payable, whether or not
         such payment is prohibited by the provisions of Article IV; or

                  (c) failure on the part of the Company duly to observe or
         perform any other of the covenants on the part of the Company in the
         Notes or in this Indenture (other than a covenant default in whose
         performance or whose breach is elsewhere in this Section specifically
         dealt with) and the continuance of such failure for a period of
         forty-five (45) days after the date on which written notice of such
         failure, requiring the Company to remedy the same, shall have been
         given to the Company by the Trustee, or to the Company and a
         Responsible Officer of the Trustee by the holders of at least 25%

                                      -36-
<PAGE>   42
         in aggregate principal amount of the outstanding Notes at the time
         outstanding determined in accordance with Section 9.4; or

                  (d) a default in the payment of the Repurchase Price in
         respect of any Note on the repurchase date therefor in accordance with
         the provisions of Article XVI, whether or not such payment in cash of
         the Repurchase Price is prohibited by the provisions of Article IV; or

                  (e) failure on the part of the Company to provide a written
         notice of a Repurchase Event in accordance with Section 16.2; or

                  (f) failure on the part of the Company or any Significant
         Subsidiary to make any payment at maturity, including any applicable
         grace period, in respect of Indebtedness of, or guaranteed or assumed
         by, the Company or any Significant Subsidiary, in a principal amount
         then outstanding in excess of U.S. $10,000,000, and the continuance of
         such failure for a period of thirty (30) days after there shall have
         been given, by registered or certified mail, to the Company by the
         Trustee or to the Company and the Trustee by the holders of not less
         than 25% in aggregate principal amount of the Notes then outstanding, a
         written notice specifying such default and requiring the Company to
         cause such default to be cured or waived and stating that such notice
         is a "Notice of Default" hereunder; or

                  (g) default on the part of the Company or any Significant
         Subsidiary with respect to any Indebtedness of, or guaranteed or
         assumed by, the Company or any Significant Subsidiary, which default
         results in the acceleration of Indebtedness in a principal amount then
         outstanding in excess of U.S. $10,000,000, and such Indebtedness shall
         not have been discharged or such acceleration shall not have been
         rescinded or annulled for a period of thirty (30) days after there
         shall have been given, by registered or certified mail, to the Company
         by the Trustee or to the Company and the Trustee by the holders of not
         less than 25% in aggregate principal amount of the Notes then
         outstanding, a written notice specifying such default and requiring the
         Company to cause such Indebtedness to be discharged or cause such
         default to be cured or waived or such acceleration to be rescinded or
         annulled and stating that such notice is a "Notice of Default"
         hereunder; or

                  (h) the Company or any Significant Subsidiary shall commence a
         voluntary case or other proceeding seeking liquidation, reorganization
         or other relief with respect to itself or its debts under any
         bankruptcy, insolvency or other similar law now or hereafter in effect
         or seeking the appointment of a trustee, receiver, liquidator,
         custodian or other similar official of it or any substantial part of
         its property, or shall consent to any such relief or to the appointment
         of or taking possession by any such official in an involuntary case or
         other proceeding commenced against it, or shall make a general
         assignment for the benefit of creditors, or shall fail generally to pay
         its debts as they become due; or

                  (i) an involuntary case or other proceeding shall be commenced
         against the Company or any Significant Subsidiary seeking liquidation,
         reorganization or other relief

                                      -37-
<PAGE>   43
         with respect to it or its debts under any bankruptcy, insolvency or
         other similar law now or hereafter in effect or seeking the appointment
         of a trustee, receiver, liquidator, custodian or other similar official
         of it or any substantial part of its property, and such involuntary
         case or other proceeding shall remain undismissed and unstayed for a
         period of ninety (90) consecutive days;

then, and in each and every such case (other than an Event of Default specified
in Section 7.1(h) or 7.1(i) with respect to the Company), unless the principal
of all of the Notes shall have already become due and payable, either the
Trustee or the holders of not less than 25% in aggregate principal amount of the
Notes then outstanding hereunder determined in accordance with Section 9.4, by
notice in writing to the Company (and to the Trustee if given by Noteholders),
may declare the principal of and premium, if any, on all the Notes and the
interest accrued thereon to be due and payable immediately, and upon any such
declaration the same shall become and shall be immediately due and payable,
anything in this Indenture or in the Notes contained to the contrary
notwithstanding. If an Event of Default specified in Section 7.1(h) or 7.1(i)
occurs and is continuing with respect to the Company, the principal of all the
Notes and the interest accrued thereon shall be immediately due and payable.
This provision, however, is subject to the conditions that if, at any time after
the principal of the Notes shall have been so declared due and payable, and
before any judgment or decree for the payment of the monies due shall have been
obtained or entered as hereinafter provided, the Company shall pay or shall
deposit with the Trustee a sum sufficient to pay all matured installments of
interest upon all Notes and the principal of and premium, if any, on any and all
Notes which shall have become due otherwise than by acceleration (with interest
on overdue installments of interest (to the extent that payment of such interest
is enforceable under applicable law) and on such principal and premium, if any,
at the rate borne by the Notes, to the date of such payment or deposit) and
amounts due to the Trustee pursuant to Section 8.6, and if any and all defaults
under this Indenture, other than the nonpayment of principal of and premium, if
any, and accrued interest on Notes which shall have become due by acceleration,
shall have been cured or waived pursuant to Section 7.7, then and in every such
case the holders of a majority in aggregate principal amount of the Notes then
outstanding, by written notice to the Company and to the Trustee, may waive all
defaults or Events of Default and rescind and annul such declaration and its
consequences; but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent default or Event of Default, or shall impair any
right consequent thereon. The Company shall notify the Responsible Officer of
the Trustee, promptly upon becoming aware thereof, of any default or Event of
Default.

         In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such waiver or rescission and annulment or for any other reason or
shall have been determined adversely to the Trustee, then and in every such case
the Company, the holders of Notes, and the Trustee shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the holders of Notes, and the Trustee shall
continue as though no such proceeding had been instituted.

         Section 7.2       Payments of Notes on Default; Suit Therefor. The
Company covenants that (a) in case default shall be made in the payment by the
Company of any installment of

                                      -38-
<PAGE>   44
interest upon any of the Notes as and when the same shall become due and
payable, and such default shall have continued for a period of thirty (30) days,
or (b) in case default shall be made in the payment of the principal of or
premium, if any, on any of the Notes as and when the same shall have become due
and payable, whether at maturity of the Notes or in connection with any
redemption or repurchase, by declaration under this Indenture or otherwise,
then, upon demand of the Trustee, the Company will pay to the Trustee, for the
benefit of the holders of the Notes, the whole amount that then shall have
become due and payable on all such Notes for principal and premium, if any, or
interest, or both, as the case may be, with interest upon the overdue principal
and premium, if any, and (to the extent that payment of such interest is
enforceable under applicable law) upon the overdue installments of interest at
the rate borne by the Notes; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
any expenses or liabilities incurred by the Trustee hereunder other than through
its negligence or bad faith. Until such demand by the Trustee, the Company may
pay the principal of and premium, if any, and interest on the Notes to the
registered holders, whether or not the Notes are overdue.

         In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable.

         In the case there shall be pending proceedings for the bankruptcy or
for the reorganization of the Company or any other obligor on the Notes under
Title 11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company or
such other obligor, or in the case of any other judicial proceedings relative to
the Company or such other obligor upon the Notes, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 7.2, shall
be entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal, premium, if
any, and interest owing and unpaid in respect of the Notes, and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
and to take such other actions as it may deem necessary or advisable in order to
have the claims of the Trustee and of the Noteholders allowed in such judicial
proceedings relative to the Company or any other obligor on the Notes, its or
their creditors, or its or their property, and to collect and receive any monies
or other property payable or deliverable on any such claims, and to distribute
the same after the deduction of any amounts due the Trustee under Section 8.6;
and any receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, custodian or similar official is hereby authorized by each of the
Noteholders to make such payments to the Trustee, and, in the event that the
Trustee shall

                                      -39-
<PAGE>   45
consent to the making of such payments directly to the Noteholders, to pay to
the Trustee any amount due it for reasonable compensation, expenses, advances
and disbursements, including agents and counsel fees incurred by it up to the
date of such distribution. To the extent that such payment of reasonable
compensation, expenses, advances and disbursements out of the estate in any such
proceedings shall be denied for any reason, payment of the same shall be secured
by a lien on, and shall be paid out of, any and all distributions, dividends,
monies, securities and other property which the holders of the Notes may be
entitled to receive in such proceedings, whether in liquidation or under any
plan of reorganization or arrangement or otherwise.

         Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or adopt on behalf of any Noteholder any plan of
reorganization or arrangement affecting the Notes or the rights of any
Noteholder, or to authorize the Trustee to vote in respect of the claim of any
Noteholder in any such proceeding; provided, however, that the Trustee may, on
behalf of the Noteholders, vote for the election of a trustee in bankruptcy or
similar official and may be a member of the creditor's committee established
with respect to such bankruptcy.

         All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Trustee without the possession of
any of the Notes, or the production thereof on any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the holders of the Notes.

         In any proceedings brought by the Trustee (and in any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Notes, and it shall not be necessary to make any holders of the Notes
parties to any such proceedings.

         Section 7.3       Application of Monies Collected by Trustee. Any
monies collected by the Trustee pursuant to this Article VII shall be applied in
the order following, at the date or dates fixed by the Trustee for the
distribution of such monies, upon presentation of the several Notes, and
stamping thereon the payment, if only partially paid, and upon surrender
thereof, if fully paid:

                  First: To the payment of all amounts due the Trustee under
         Section 8.6;

                  Second: Subject to the provisions of Article IV, in case the
         principal of the outstanding Notes shall not have become due and be
         unpaid, to the payment of interest on the Notes in default in the order
         of the maturity of the installments of such interest, with interest (to
         the extent that such interest has been collected by the Trustee) upon
         the overdue installments of interest at the rate borne by the Notes,
         such payments to be made ratably to the persons entitled thereto;

                  Third: Subject to the provisions of Article IV, in case the
         principal of the outstanding Notes shall have become due, by
         declaration or otherwise, and be unpaid, to

                                      -40-
<PAGE>   46
         the payment of the whole amount then owing and unpaid upon the Notes
         for principal and premium, if any, and interest, with interest on the
         overdue principal and premium, if any, and (to the extent that such
         interest has been collected by the Trustee) upon overdue installments
         of interest at the rate borne by the Notes; and in case such monies
         shall be insufficient to pay in full the whole amounts so due and
         unpaid upon the Notes, then to the payment of such principal and
         premium, if any, and interest without preference or priority of
         principal and premium, if any, over interest, or of interest over
         principal and premium, if any, or of any installment of interest over
         any other installment of interest, or of any Note over any other Note,
         ratably to the aggregate of such principal and premium, if any, and
         accrued and unpaid interest; and

                  Fourth: Subject to the provisions of Article IV, to the
         payment of the remainder, if any, to the Company or any other person
         lawfully entitled thereto.

         Section 7.4       Proceedings by Noteholder. No holder of any Note
shall have any right by virtue of or by availing of any provision of this
Indenture to institute any suit, action or proceeding in equity or at law upon
or under or with respect to this Indenture, or for the appointment of a
receiver, trustee, liquidator, custodian or other similar official, or for any
other remedy hereunder, unless such holder previously shall have given to the
Trustee written notice of an Event of Default and of the continuance thereof, as
hereinbefore provided, and unless also the holders of not less than 25% in
aggregate principal amount of the Notes then outstanding shall have made written
request upon the Trustee to institute such action, suit or proceeding in its own
name as Trustee hereunder and shall have offered to the Trustee such indemnity
as may be reasonably satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee for sixty (60)
days after its receipt of such notice, request and offer of indemnity, shall
have neglected or refused to institute any such action, suit or proceeding and
no direction inconsistent with such written request shall have been given to the
Trustee pursuant to Section 7.7; it being understood and intended, and being
expressly covenanted by the taker and holder of every Note with every other
taker and holder and the Trustee, that no one or more holders of Notes shall
have any right in any manner whatever by virtue of or by availing of any
provision of this Indenture to affect, disturb or prejudice the rights of any
other holder of Notes, or to obtain or seek to obtain priority over or
preference to any other such holder, or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all holders of Notes (except as otherwise provided herein).
For the protection and enforcement of this Section 7.4, each and every
Noteholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.

         Notwithstanding any other provision of this Indenture and any provision
of any Note, the right of any holder of any Note to receive payment of the
principal of and premium, if any, and interest on such Note, on or after the
respective due dates expressed in such Note, or to institute suit for the
enforcement of any such payment on or after such respective dates against the
Company shall not be impaired or affected without the consent of such holder.

         Anything in this Indenture or the Notes to the contrary
notwithstanding, the holder of any Note, without the consent of either the
Trustee or the holder of any other Note, in his own behalf

                                      -41-
<PAGE>   47
and for his own benefit, may enforce, and may institute and maintain any
proceeding suitable to enforce, his rights of conversion as provided herein.

         Section 7.5       Proceedings by Trustee. In case of an Event of
Default the Trustee may in its discretion proceed to protect and enforce the
rights vested in it by this Indenture by such appropriate judicial proceedings
as the Trustee shall deem most effectual to protect and enforce any of such
rights, either by suit in equity or by action at law or by proceeding in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.

         Section 7.6       Remedies Cumulative and Continuing. Except as
provided in the last paragraph of Section 2.6, all powers and remedies given by
this Article VII to the Trustee or to the Noteholders shall, to the extent
permitted by law, be deemed cumulative and not exclusive of any thereof or of
any other powers and remedies available to the Trustee or the holders of the
Notes, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Indenture, and no
delay or omission of the Trustee or of any holder of any of the Notes to
exercise any right or power accruing upon any default or Event of Default
occurring and continuing as aforesaid shall impair any such right or power, or
shall be construed to be a waiver of any such default or any acquiescence
therein; and, subject to the provisions of Section 7.4, every power and remedy
given by this Article VII or by law to the Trustee or to the Noteholders may be
exercised from time to time, and as often as shall be deemed expedient, by the
Trustee or by the Noteholders.

         Section 7.7       Direction of Proceedings and Waiver of Defaults by
Majority of Noteholders. The holders of a majority in aggregate principal amount
of the Notes at the time outstanding determined in accordance with Section 9.4
shall have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee; provided, however, that (a) such direction shall
not be in conflict with any rule of law or with this Indenture, and (b) the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction. The holders of a majority in aggregate
principal amount of the Notes at the time outstanding determined in accordance
with Section 9.4 may on behalf of the holders of all of the Notes waive any past
default or Event of Default hereunder and its consequences except (i) a default
in the payment of interest or premium, if any, on, or the principal of, the
Notes when due, (ii) a failure by the Company to convert any Notes into Common
Stock or (iii) a default in respect of a covenant or provisions hereof which
under Article XI cannot be modified or amended without the consent of the
holders of all Notes then outstanding. Upon any such waiver the Company, the
Trustee and the holders of the Notes shall be restored to their former positions
and rights hereunder; but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon. Whenever any
default or Event of Default hereunder shall have been waived as permitted by
this Section 7.7, said default or Event of Default shall for all purposes of the
Notes and this Indenture be deemed to have been cured and to be not continuing;
but no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon.

                                      -42-
<PAGE>   48
         Section 7.8       Notice of Defaults. The Trustee shall, within ninety
(90) days after the occurrence of a default, mail to all Noteholders, as the
names and addresses of such holders appear upon the Note register, notice of all
defaults known to a Responsible Officer, unless such defaults shall have been
cured or waived before the giving of such notice; and provided that, except in
the case of default in the payment of the principal of, or premium, if any, or
interest on any of the Notes, including without limiting the generality of the
foregoing any default in the payment of any Repurchase Price or in the payment
of any amount due in connection with any redemption of Notes, then in any such
event the Trustee shall be protected in withholding such notice if and so long
as a trust committee of directors and/or Responsible Officers of the Trustee in
good faith determines that the withholding of such notice is in the best
interests of the Noteholders.

         Section 7.9       Undertaking to Pay Costs. All parties to this
Indenture agree, and each holder of any Note by his acceptance thereof shall be
deemed to have agreed, that any court may, in its discretion, require, in any
suit for the enforcement of any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; provided that the provisions of this Section 7.9 shall not
apply to any suit instituted by the Trustee, to any suit instituted by any
Noteholder, or group of Noteholders, holding in the aggregate more than 10% in
principal amount of the Notes at the time outstanding determined in accordance
with Section 9.4, or to any suit instituted by any Noteholder for the
enforcement of the payment of the principal of or premium, if any, or interest
on any Note (including, but not limited to, the redemption price or repurchase
price with respect to the Notes being redeemed or repurchased as provided in
this Indenture) on or after the due date expressed in such Note or to any suit
for the enforcement of the right to convert any Note in accordance with the
provisions of Article XV.

         Section 7.10      Delay or Omission Not Waiver. No delay or omission of
the Trustee or of any holder of any Note to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or any acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
holders of Notes may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the holders of Notes, as the case may be.

                                      -43-
<PAGE>   49
                                  ARTICLE VIII

                             CONCERNING THE TRUSTEE

         Section 8.1       Duties and Responsibilities of Trustee. The Trustee,
prior to the occurrence of an Event of Default and after the curing or waiver of
all Events of Default which may have occurred, undertakes to perform such duties
and only such duties as are specifically set forth in this Indenture. In case an
Event of Default has occurred (which has not been cured or waived) the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.

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

                  (a) prior to the occurrence of an Event of Default and after
         the curing or waiving of all Events of Default which may have occurred:

                                    (1) the duties and obligations of the
                  Trustee shall be determined solely by the express provisions
                  of this Indenture and, after it has been qualified thereunder,
                  the Trust Indenture Act, and the Trustee shall not be liable
                  except for the performance of such duties and obligations as
                  are specifically set forth in this Indenture and no implied
                  covenants or obligations shall be read into this Indenture and
                  the Trust Indenture Act against the Trustee; and

                                    (2) in the absence of bad faith and willful
                  misconduct on the part of the Trustee, the Trustee may
                  conclusively rely, as to the truth of the statements and the
                  correctness of the opinions expressed therein, upon any
                  certificates or opinions furnished to the Trustee and
                  conforming to the requirements of this Indenture; but, in the
                  case of any such certificates or opinions which by any
                  provisions hereof are specifically required to be furnished to
                  the Trustee, the Trustee shall be under a duty to examine the
                  same to determine whether or not they conform to the
                  requirements of this Indenture;

                  (b) the Trustee shall not be liable for any error of judgment
         made in good faith by a Responsible Officer or Officers of the Trustee,
         unless it shall be established that the Trustee was negligent in
         ascertaining the pertinent facts;

                  (c) the Trustee shall not be liable to any Noteholder with
         respect to any action taken or omitted to be taken by it in good faith
         in accordance with the direction of the holders of not less than a
         majority in principal amount of the Notes at the time outstanding
         determined as provided in Section 9.4 relating to the time, method and
         place of conducting any proceeding for any remedy available to the
         Trustee, or exercising any trust or power conferred upon the Trustee,
         under this Indenture; and

                                      -44-
<PAGE>   50
                  (d) whether or not therein provided, every provision of this
         Indenture relating to the conduct or affecting the liability of, or
         affording protection to, the Trustee shall be subject to the provisions
         of this Section.

                  None of the provisions contained in this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if there is reasonable ground for believing that
the repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.

         Section 8.2 Reliance on Documents, Opinions, Etc. Except as otherwise
provided in Section 8.1:

                  (a) the Trustee may rely and shall be protected in acting upon
         any resolution, certificate, statement, instrument, opinion, report,
         notice, request, consent, order, bond, note, coupon or other paper or
         document believed by it in good faith to be genuine and to have been
         signed or presented by the proper party or parties;

                  (b) any request, direction, order or demand of the Company
         mentioned herein shall be sufficiently evidenced by an Officers'
         Certificate (unless other evidence in respect thereof be herein
         specifically prescribed); and any resolution of the Board of Directors
         may be evidenced to the Trustee by a copy thereof certified by the
         Secretary or an Assistant Secretary of the Company;

                  (c) the Trustee may consult with counsel and any advice of
         such counsel or Opinion of Counsel shall be full and complete
         authorization and protection in respect of any action taken or omitted
         by it hereunder in good faith and in accordance with such advice or
         Opinion of Counsel;

                  (d) the Trustee shall be under no obligation to exercise any
         of the rights or powers vested in it by this Indenture at the request,
         order or direction of any of the Noteholders pursuant to the provisions
         of this Indenture, unless such Noteholders shall have offered to the
         Trustee reasonable security or indemnity against the costs, expenses
         and liabilities which may be incurred therein or thereby;

                  (e) the Trustee shall not be bound to make any investigation
         into the facts or matters stated in any resolution, certificate,
         statement, instrument, opinion, report, notice, request, direction,
         consent, order, bond, debenture or other paper or document, but the
         Trustee, in its discretion, may make such further inquiry or
         investigation into such facts or matters as it may see fit, and, if the
         Trustee shall determine to make such further inquiry or investigation,
         it shall be entitled to examine the books, records and premises of the
         Company, personally or by agent or attorney; provided, however, that if
         the payment within a reasonable time to the Trustee of the costs,
         expenses or liabilities likely to be incurred by it in the making of
         such investigation is, in the opinion of the Trustee, not reasonably
         assured to the Trustee by the security afforded to it by the terms of
         this

                                      -45-
<PAGE>   51
         Indenture, the Trustee may require indemnity reasonably satisfactory to
         the Trustee from the Noteholders against such expenses or liability as
         a condition to so proceeding; the reasonable expenses of every such
         examination shall be paid by the Company or, if paid by the Trustee or
         any predecessor Trustee, shall be repaid by the Company upon demand;
         and

                  (f) the Trustee may execute any of the trusts or powers
         hereunder or perform any duties hereunder either directly or by or
         through agents or attorneys and the Trustee shall not be responsible
         for any misconduct or negligence on the part of any agent or attorney
         appointed by it with due care hereunder.

In no event shall the Trustee be liable for any consequential loss or damage of
any kind whatsoever (including but not limited to lost profits), even if the
Trustee has been advised of the likelihood of such loss or damage and regardless
of the form of action other than through the Trustee's willful misconduct or
gross negligence.

         Section 8.3       No Responsibility for Recitals, Etc. The recitals
contained herein and in the Notes (except in the Trustee's certificate of
authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes. The Trustee shall not be accountable for the use or application by the
Company of any Notes or the proceeds of any Notes authenticated and delivered by
the Trustee in conformity with the provisions of this Indenture.

         Section 8.4       Trustee, Paying Agents, Conversion Agents or
Registrar May Own Notes. The Trustee, any paying agent, any conversion agent or
Note registrar, in its individual or any other capacity, may become the owner or
pledgee of Notes with the same rights it would have if it were not Trustee,
paying agent, conversion agent or Note registrar.

         Section 8.5       Monies to Be Held in Trust. Subject to the provisions
of Section 13.4, all monies received by the Trustee shall, until used or applied
as herein provided, be held in trust for the purposes for which they were
received. Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
may be agreed from time to time by the Company and the Trustee.

         Section 8.6       Compensation and Expenses of Trustee. The Company
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, reasonable compensation for all services rendered by it
hereunder in any capacity (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust), and the Company
will pay or reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances reasonably incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its agents and
counsel and of all persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence, willful misconduct or
bad faith. The Company also covenants to indemnify the Trustee in any capacity
under this

                                      -46-
<PAGE>   52
Indenture and its agents and any authenticating agent for, and to hold them
harmless against, any loss, liability or expense incurred without negligence,
willful misconduct or bad faith on the part of the Trustee or such agent or
authenticating agent, as the case may be, and arising out of or in connection
with the acceptance or administration of this trust or in any other capacity
hereunder, including the costs and expenses of defending themselves against any
claim of liability in the premises. The obligations of the Company under this
Section 8.6 to compensate or indemnify the Trustee and to pay or reimburse the
Trustee for expenses, disbursements and advances shall be secured by a lien
prior to that of the Notes upon all property and funds held or collected by the
Trustee as such, except, subject to the effect of Sections 4.3 and 7.6, funds
held in trust herewith for the benefit of the holders of particular Notes prior
to the date of the accrual of such unpaid compensation or indemnifiable claim.
The obligation of the Company under this Section shall survive the satisfaction
and discharge of this Indenture. The indemnification provided in this Section
8.6 shall extend to the officers, directors, agents and employees of the
Trustee.

         When the Trustee and its agents and any authenticating agent incur
expenses or render services after an Event of Default specified in Section
7.1(h) or (i) occurs, the expenses and the compensation for the services are
intended to constitute expenses of administration under any bankruptcy,
insolvency or similar laws.

         Section 8.7       Officers' Certificate as Evidence. Except as
otherwise provided in Section 8.1, whenever in the administration of the
provisions of this Indenture the Trustee shall deem it necessary or desirable
that a matter be proved or established prior to taking or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence, willful misconduct,
recklessness and bad faith on the part of the Trustee, be deemed to be
conclusively proved and established by an Officers' Certificate delivered to the
Trustee, and such Officers' Certificate, in the absence of negligence, willful
misconduct, recklessness and bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken or omitted by it under the
provisions of this Indenture upon the faith thereof.

         Section 8.8       Conflicting Interests of Trustee. After qualification
under the Trust Indenture Act, if the Trustee has or shall acquire a conflicting
interest within the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Indenture.

         Section 8.9       Eligibility of Trustee. There shall at all times be a
Trustee hereunder which shall be a person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus (together
with its corporate parent) of at least $50,000,000. If such person publishes
reports of condition at least annually, pursuant to law or to the requirements
of any supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.

                                      -47-
<PAGE>   53
         Section 8.10      Resignation or Removal of Trustee.

                  (a) The Trustee may at any time resign by giving written
         notice of such resignation to the Company and by mailing notice thereof
         to the holders of Notes at their addresses as they shall appear on the
         Note register. Upon receiving such notice of resignation, the Company
         shall promptly appoint a successor trustee by written instrument, in
         duplicate, executed by order of the Board of Directors, one copy of
         which instrument shall be delivered to the resigning Trustee and one
         copy to the successor trustee. If no successor trustee shall have been
         so appointed and have accepted appointment sixty (60) days after the
         mailing of such notice of resignation to the Noteholders, the resigning
         Trustee may petition any court of competent jurisdiction for the
         appointment of a successor trustee, or any Noteholder who has been a
         bona fide holder of a Note or Notes for at least six months may,
         subject to the provisions of Section 7.9, on behalf of himself and all
         others similarly situated, petition any such court for the appointment
         of a successor trustee. Such court may thereupon, after such notice, if
         any, as it may deem proper and prescribe, appoint a successor trustee.

                  (b)      In case at any time any of the following shall occur:

                           (1) the Trustee shall fail to comply with Section 8.8
                  within a reasonable time after written request therefor by the
                  Company or by any Noteholder who has been a bona fide holder
                  of a Note or Notes for at least six months, or

                           (2) the Trustee shall cease to be eligible in
                  accordance with the provisions of Section 8.9 and shall fail
                  to resign after written request therefor by the Company or by
                  any such Noteholder, or

                           (3) the Trustee shall become incapable of acting, or
                  shall be adjudged a bankrupt or insolvent, or a receiver of
                  the Trustee or of its property shall be appointed, or any
                  public officer shall take charge or control of the Trustee or
                  of its property or affairs for the purpose of rehabilitation,
                  conservation or liquidation,

         then, in any such case, the Company may by a Board resolution remove
         the Trustee and appoint a successor trustee by written instrument, in
         duplicate, executed by order of the Board of Directors, one copy of
         which instrument shall be delivered to the Trustee so removed and one
         copy to the successor trustee, or, subject to the provisions of Section
         7.9, any Noteholder who has been a bona fide holder of a Note or Notes
         for at least six months may, on behalf of himself and all others
         similarly situated, petition any court of competent jurisdiction for
         the removal of the Trustee and the appointment of a successor trustee.
         Such court may thereupon, after such notice, if any, as it may deem
         proper and prescribe, remove the Trustee and appoint a successor
         trustee.

                  (c) The holders of a majority in aggregate principal amount of
         the Notes at the time outstanding may at any time remove the Trustee
         and nominate a successor trustee which shall be deemed appointed as
         successor trustee unless within ten (10) days after

                                      -48-
<PAGE>   54
         notice to the Company of such nomination the Company objects thereto,
         in which case the Trustee so removed or any Noteholder, upon the terms
         and conditions and otherwise as in Section 8.10(a) provided, may
         petition any court of competent jurisdiction for an appointment of a
         successor trustee.

                  (d) Any resignation or removal of the Trustee and appointment
         of a successor trustee pursuant to any of the provisions of this
         Section 8.10 shall become effective upon acceptance of appointment by
         the successor trustee as provided in Section 8.11.

         Section 8.11      Acceptance by Successor Trustee. Any successor
trustee appointed as provided in Section 8.10 shall execute, acknowledge and
deliver to the Company and to its predecessor trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written request
of the Company or of the successor trustee, the trustee ceasing to act shall,
upon payment of any amounts then due it pursuant to the provisions of Section
8.6, execute and deliver an instrument transferring to such successor trustee
all the rights and powers of the trustee so ceasing to act. Upon request of any
such successor trustee, the Company shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such successor
trustee all such rights and powers. Any trustee ceasing to act shall,
nevertheless, retain a lien upon all property and funds held or collected by
such trustee as such, except for funds held in trust for the benefit of holders
of particular Notes, to secure any amounts then due it pursuant to the
provisions of Section 8.6.

         No successor trustee shall accept appointment as provided in this
Section 8.11 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 8.8 and be eligible under the
provisions of Section 8.9.

         Upon acceptance of appointment by a successor trustee as provided in
this Section 8.11, each of the Company and the former trustee shall mail or
cause to be mailed notice of the succession of such trustee hereunder to the
holders of Notes at their addresses as they shall appear on the Note register.
If the Company fails to mail such notice within ten (10) days after acceptance
of appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Company.

         Section 8.12      Succession by Merger, Etc. Any corporation or other
entity into which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation or other
entity succeeding to all or substantially all of the corporate trust business of
the Trustee (including the administration of this Indenture), shall be the
successor to the Trustee hereunder without the execution or filing of any paper
or any further act on the part of any of the parties hereto, provided that in
the case of any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee such corporation shall be qualified
under the provisions of Section 8.8 and eligible under the provisions of Section
8.9.

                                      -49-
<PAGE>   55
         In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture, any of the Notes shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the certificate
of authentication of any predecessor trustee or authenticating agent appointed
by such predecessor trustee, and deliver such Notes so authenticated; and in
case at that time any of the Notes shall not have been authenticated, any
successor to the Trustee or an authenticating agent appointed by such successor
trustee may authenticate such Notes either in the name of any predecessor
trustee hereunder or in the name of the successor trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have;
provided, however, that the right to adopt the certificate of authentication of
any predecessor Trustee or to authenticate Notes in the name of any predecessor
Trustee shall apply only to its successor or successors by merger, conversion or
consolidation.

         Section 8.13      Limitation on Rights of Trustee as Creditor. If and
when the Trustee shall be or become a creditor of the Company (or any other
obligor upon the Notes), after qualification under the Trust Indenture Act, the
Trustee shall be subject to the provisions of the Trust Indenture Act regarding
the collection of the claims against the Company (or any such other obligor).

                                   ARTICLE IX

                           CONCERNING THE NOTEHOLDERS

         Section 9.1       Action by Noteholders. Whenever in this Indenture it
is provided that the holders of a specified percentage in aggregate principal
amount of the Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action, the holders of
such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by Noteholders
in person or by agent or proxy appointed in writing, or (b) by the record of the
holders of Notes voting in favor thereof at any meeting of Noteholders duly
called and held in accordance with the provisions of Article X, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of Noteholders. Whenever the Company or the Trustee solicits the taking
of any action by the holders of the Notes, the Company or the Trustee may fix in
advance of such solicitation, a date as the record date for determining holders
entitled to take such action. The record date shall be not more than fifteen
(15) days prior to the date of commencement of solicitation of such action.

         Section 9.2       Proof of Execution by Noteholders. Subject to the
provisions of Sections 8.1, 8.2 and 10.5, proof of the execution of any
instrument by a Noteholder or his agent or proxy shall be sufficient if made in
accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in such manner as shall be satisfactory to the Trustee. The
holding of Notes shall be proved by the Note register or by a certificate of the
Note registrar. The record of any Noteholders' meeting shall be proved in the
manner provided in Section 10.6.

         Section 9.3       Who Are Deemed Absolute Owners. The Company, the
Trustee, any authenticating agent, any paying agent, any conversion agent and
any Note registrar may deem

                                      -50-
<PAGE>   56
the person in whose name such Note shall be registered upon the Note register to
be, and may treat him as, the absolute owner of such Note (whether or not such
Note shall be overdue and notwithstanding any notation of ownership or other
writing thereon) for the purpose of receiving payment of or on account of the
principal of, premium, if any, and interest on such Note, for conversion of such
Note and for all other purposes; and neither the Company nor the Trustee nor any
paying agent nor any conversion agent nor any Note registrar shall be affected
by any notice to the contrary. All such payments so made to any holder for the
time being, or upon his order, shall be valid, and, to the extent of the sum or
sums so paid, effectual to satisfy and discharge the liability for monies
payable upon any such Note.

         Section 9.4       Company-Owned Notes Disregarded. In determining
whether the holders of the requisite aggregate principal amount of Notes have
concurred in any direction, consent, waiver or other action under this
Indenture, Notes which are owned by the Company or any other obligor on the
Notes or by any person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company or any other obligor on
the Notes shall be disregarded and deemed not to be outstanding for the purpose
of any such determination; provided that for the purposes of determining whether
the Trustee shall be protected in relying on any such direction, consent, waiver
or other action only Notes which a Responsible Officer knows are so owned shall
be so disregarded. Notes so owned which have been pledged in good faith may be
regarded as outstanding for the purposes of this Section 9.4 if the pledgee
shall establish to the satisfaction of the Trustee the pledgee's right to vote
such Notes and that the pledgee is not the Company, any other obligor on the
Notes or a person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any such other obligor. In
the case of a dispute as to such right, any decision by the Trustee taken upon
the advice of counsel shall be full protection to the Trustee. Upon request of
the Trustee, the Company shall furnish to the Trustee promptly an Officers'
Certificate listing and identifying all Notes, if any, known by the Company to
be owned or held by or for the account of any of the above described persons;
and, subject to Section 8.1, the Trustee shall be entitled to accept such
Officers' Certificate as conclusive evidence of the facts therein set forth and
of the fact that all Notes not listed therein are outstanding for the purpose of
any such determination.

         Section 9.5       Revocation of Consents; Future Holders Bound. At any
time prior to (but not after) the evidencing to the Trustee, as provided in
Section 9.1, of the taking of any action by the holders of the percentage in
aggregate principal amount of the Notes specified in this Indenture in
connection with such action, any holder of a Note which is shown by the evidence
to be included in the Notes the holders of which have consented to such action
may, by filing written notice with the Trustee at its Corporate Trust Office and
upon proof of holding as provided in Section 9.2, revoke such action so far as
concerns such Note. Except as aforesaid, any such action taken by the holder of
any Note shall be conclusive and binding upon such holder and upon all future
holders and owners of such Note and of any Notes issued in exchange or
substitution therefor, irrespective of whether any notation in regard thereto is
made upon such Note or any Note issued in exchange or substitution therefor.

                                      -51-
<PAGE>   57
                                   ARTICLE X

                             NOTEHOLDERS' MEETINGS

         Section 10.1      Purpose of Meetings. A meeting of Noteholders may be
called at any time and from time to time pursuant to the provisions of this
Article X for any of the following purposes:

                  (1) to give any notice to the Company or to the Trustee or to
         give any directions to the Trustee permitted under this Indenture, or
         to consent to the waiving of any default or Event of Default hereunder
         and its consequences, or to take any other action authorized to be
         taken by Noteholders pursuant to any of the provisions of Article VII;

                  (2) to remove the Trustee and nominate a successor trustee
         pursuant to the provisions of Article VIII;

                  (3) to consent to the execution of an indenture or indentures
         supplemental hereto pursuant to the provisions of Section 11.2;

                  (4) to take any other action authorized to be taken by or on
         behalf of the holders of any specified aggregate principal amount of
         the Notes under any other provision of this Indenture or under
         applicable law; or

                  (5) to take any other action authorized by this Indenture or
         under applicable law.

         Section 10.2      Call of Meetings by Trustee. The Trustee may at any
time call a meeting of Noteholders to take any action specified in Section 10.1,
to be held at such time and at such place in the Borough of Manhattan, The City
of New York, as the Trustee shall determine. Notice of every meeting of the
Noteholders, setting forth the time and the place of such meeting and in general
terms the action proposed to be taken at such meeting and the establishment of
any record date pursuant to Section 9.1, shall be mailed to holders of Notes at
their addresses as they shall appear on the Note register. Such notice shall
also be mailed to the Company. Such notices shall be mailed not less than twenty
(20) nor more than ninety (90) days prior to the date fixed for the meeting.

         Any meeting of Noteholders shall be valid without notice if the holders
of all Notes then outstanding are present in person or by proxy or if notice is
waived before or after the meeting by the holders of all Notes outstanding, and
if the Company and the Trustee are either present by duly authorized
representatives or have, before or after the meeting, waived notice.

         Section 10.3      Call of Meetings by Company or Noteholders. In case
at any time the Company, pursuant to a resolution of its Board of Directors, or
the holders of at least 10% in aggregate principal amount of the Notes then
outstanding, shall have requested the Trustee to

                                      -52-
<PAGE>   58
call a meeting of Noteholders, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee shall not
have mailed the notice of such meeting within twenty (20) days after receipt of
such request, then the Company or such Noteholders may determine the time and
the place for such meeting and may call such meeting to take any action
authorized in Section 10.1, by mailing notice thereof as provided in Section
10.2.

         Section 10.4      Qualifications for Voting. To be entitled to vote at
any meeting of Noteholders a person shall (a) be a holder of one or more Notes
on the record date pertaining to such meeting or (b) be a person appointed by an
instrument in writing as proxy by a holder of one or more Notes. The only
persons who shall be entitled to be present or to speak at any meeting of
Noteholders shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.

         Section 10.5      Regulations. Notwithstanding any other provisions of
this Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Noteholders, in regard to proof of the holding of
Notes and of the appointment of proxies, and in regard to the appointment and
duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think fit.

         The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Noteholders as provided in Section 10.3, in which case the Company
or the Noteholders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the holders of a majority in principal
amount of the Notes represented at the meeting and entitled to vote at the
meeting.

         Subject to the provisions of Section 9.4, at any meeting each
Noteholder or proxyholder shall be entitled to one vote for each $1,000
principal amount of Notes held or represented by him; provided, however, that no
vote shall be cast or counted at any meeting in respect of any Note challenged
as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of Notes held by him or instruments in writing as aforesaid duly
designating him as the proxy to vote on behalf of other Noteholders. Any meeting
of Noteholders duly called pursuant to the provisions of Section 10.2 or 10.3
may be adjourned from time to time by the holders of a majority of the aggregate
principal amount of Notes represented at the meeting, whether or not
constituting a quorum, and the meeting may be held as so adjourned without
further notice.

         Section 10.6      Voting. The vote upon any resolution submitted to any
meeting of Noteholders shall be by written ballot on which shall be subscribed
the signatures of the holders of Notes or of their representatives by proxy and
the principal amount of the Notes held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all

                                      -53-
<PAGE>   59
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Noteholders shall be prepared by the secretary of the meeting and
there shall be attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one or more persons
having knowledge of the facts setting forth a copy of the notice of the meeting
and showing that said notice was mailed as provided in Section 10.2. The record
shall show the principal amount of the Notes voting in favor of or against any
resolution. The record shall be signed and verified by the affidavits of the
permanent chairman and secretary of the meeting and one of the duplicates shall
be delivered to the Company and the other to the Trustee to be preserved by the
Trustee, the latter to have attached thereto the ballots voted at the meeting.

         Any record so signed and verified shall be conclusive evidence of the
matters therein stated.

         Section 10.7      No Delay of Rights by Meeting. Nothing in this
Article X contained shall be deemed or construed to authorize or permit, by
reason of any call of a meeting of Noteholders or any rights expressly or
impliedly conferred hereunder to make such call, any hindrance or delay in the
exercise of any right or rights conferred upon or reserved to the Trustee or to
the Noteholders under any of the provisions of this Indenture or of the Notes.

                                   ARTICLE XI

                            SUPPLEMENTAL INDENTURES

         Section 11.1      Supplemental Indentures Without Consent of
Noteholders. The Company, when authorized by the resolutions of the Board of
Directors, and the Trustee may from time to time and at any time enter into an
indenture or indentures supplemental hereto for one or more of the following
purposes:

                  (a) to make provision with respect to the conversion rights of
         the holders of Notes pursuant to the requirements of Section 15.6;

                  (b) subject to Article IV, to convey, transfer, assign,
         mortgage or pledge to the Trustee as security for the Notes, any
         property or assets;

                  (c) to evidence the succession of another corporation to the
         Company, or successive successions, and the assumption by the successor
         corporation of the covenants, agreements and obligations of the Company
         pursuant to Article XII;

                  (d) to add to the covenants of the Company such further
         covenants, restrictions or conditions for the benefit of the holders of
         Notes, and to make the occurrence, or the occurrence and continuance,
         of a default in any such additional covenants, restrictions or
         conditions a default or an Event of Default permitting the enforcement
         of all or any of the several remedies provided in this Indenture as
         herein set forth; provided, however, that in respect of any such
         additional covenant, restriction or

                                      -54-
<PAGE>   60
         condition such supplemental indenture may provide for a particular
         period of grace after default (which period may be shorter or longer
         than that allowed in the case of other defaults) or may provide for an
         immediate enforcement upon such default or may limit the remedies
         available to the Trustee upon such default;

                  (e) to provide for the issuance under this Indenture of Notes
         in coupon form (including Notes registrable as to principal only) and
         to provide for exchangeability of such Notes with the Notes issued
         hereunder in fully registered form and to make all appropriate changes
         for such purpose;

                  (f) to cure any ambiguity or to correct or supplement any
         provision contained herein or in any supplemental indenture which may
         be defective or inconsistent with any other provision contained herein
         or in any supplemental indenture, or to make such other provisions in
         regard to matters or questions arising under this Indenture which shall
         not materially adversely affect the interests of the holders of the
         Notes;

                  (g) to evidence and provide for the acceptance of appointment
         hereunder by a successor Trustee with respect to the Notes; or

                  (h) to modify, eliminate or add to the provisions of this
         Indenture to such extent as shall be necessary to effect the
         qualifications of this Indenture under the Trust Indenture Act, or
         under any similar federal statute hereafter enacted.

          The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations which may be therein contained and to accept the
conveyance, transfer and assignment of any property thereunder, but the Trustee
shall not be obligated to, but may in its discretion, enter into any
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.

         Any supplemental indenture authorized by the provisions of this Section
11.1 may be executed by the Company and the Trustee without the consent of the
holders of any of the Notes at the time outstanding, notwithstanding any of the
provisions of Section
11.2.

         Section 11.2      Supplemental Indentures With Consent of Noteholders.
With the consent (evidenced as provided in Article IX) of the holders of not
less than a majority in aggregate principal amount of the Notes at the time
outstanding (determined in accordance with Section 9.4), the Company, when
authorized by the resolutions of the Board of Directors, and the Trustee may
from time to time and at any time enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or any
supplemental indenture or of modifying in any manner the rights of the holders
of the Notes; provided, however, that no such supplemental indenture shall (i)
extend the fixed maturity of any Note, or reduce the rate or extend the time of
payment of interest thereon, or reduce the principal amount thereof or premium,
if any, thereon, or reduce any amount payable on redemption or repurchase
thereof, impair, or change in any respect adverse to the holder of Notes, the
obligation of the Company to repurchase any Note at the

                                      -55-
<PAGE>   61
option of the holder upon the happening of a Repurchase Event, or impair or
adversely affect the right of any Noteholder to institute suit for the payment
thereof, or change the currency in which the Notes are payable, or impair or
change in any respect adverse to the Noteholders the right to convert the Notes
into Common Stock subject to the terms set forth herein, including Section 15.6,
or modify the provisions of this Indenture with respect to the subordination of
the Notes in a manner adverse to the Noteholders, without the consent of the
holder of each Note so affected, or (ii) reduce the aforesaid percentage of
Notes, the holders of which are required to consent to any such supplemental
indenture, without the consent of the holders of all Notes then outstanding.

         Upon the request of the Company, accompanied by a copy of the Board
Resolutions authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of Noteholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in is discretion, but shall not be obligated to, enter into
such supplemental indenture.

         It shall not be necessary for the consent of the Noteholders under this
Section 11.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.

         Section 11.3      Effect of Supplemental Indentures. Any supplemental
indenture executed pursuant to the provisions of this Article XI shall comply
with the Trust Indenture Act, as then in effect. Upon the execution of any
supplemental indenture pursuant to the provisions of this Article XI, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitation of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company and the holders
of Notes shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.

         Section 11.4      Notation on Notes. Notes authenticated and delivered
after the execution of any supplemental indenture pursuant to the provisions of
this Article XI may bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company or the
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Trustee and the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may, at the Company's expense, be
prepared and executed by the Company, authenticated by the Trustee (or an
authenticating agent duly appointed by the Trustee pursuant to Section 17.11)
and delivered in exchange for the Notes then outstanding, upon surrender of such
Notes then outstanding.

         Section 11.5      Evidence of Compliance of Supplemental Indenture to
Be Furnished Trustee. The Trustee, subject to the provisions of Sections 8.1 and
8.2, may receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article XI.

                                      -56-
<PAGE>   62
                                  ARTICLE XII

               CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

         Section 12.1      Company May Consolidate, Etc. on Certain Terms. The
Company shall not, directly or indirectly, consolidate with or merge with or
into any other Person or sell, lease, convey or transfer all its properties and
assets substantially as an entirety, whether in a single transaction or a series
of related transactions, to any Person or group of affiliated Persons unless:

                  (a)      either (i) in the case of a merger or consolidation
that does not involve a transfer of all or substantially all of the Company's
properties and assets, the Company is the surviving entity or (ii) in case the
Company shall consolidate with or merge into another Person or sell, lease,
convey or transfer all its properties and assets substantially as an entirety,
whether in a single transaction or a series of related transactions, to any
Person, the Person formed by such consolidation or into which the Company is
merged, or the Person which acquires by sale, conveyance or transfer, or which
leases the properties and assets of the Company substantially as an entirety,
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 indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and punctual payment of
the principal of, premium, if any, and interest (including Liquidated Damages,
if any) on all of the Notes as applicable, and the performance or observance of
every covenant of this Indenture on the part of the Company to be performed or
observed and shall have provided for the applicable conversion rights set forth
in Section 15.6 and the repurchase rights set forth in Article XVI;

                  (b)      immediately after giving effect to such transaction,
no Event of Default, and no event that after notice or lapse of time or both,
would become an Event of Default, shall have happened and be continuing; and

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

         Section 12.2      Successor Corporation to Be Substituted. In case of
any such consolidation, merger, sale, conveyance or lease in accordance with
Section 12.1, and, where required in accordance with Section 12.1(a) upon the
assumption by the successor corporation, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the due and
punctual payment of the principal of and premium, if any, and interest on all of
the Notes and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such successor
corporation shall succeed to and

                                      -57-
<PAGE>   63
be substituted for the Company, with the same effect as if it had been named
herein as the party of the first part. Such successor corporation thereupon may
cause to be signed, and may issue either in its own name or in the name of
Cephalon, Inc. any or all of the Notes issuable hereunder which theretofore
shall not have been signed by the Company and delivered to the Trustee; and,
upon the order of such successor corporation instead of the Company and subject
to all the terms, conditions and limitations in this Indenture prescribed, the
Trustee shall authenticate and shall deliver, or cause to be authenticated and
delivered, any Notes which previously shall have been signed and delivered by
the officers of the Company to the Trustee for authentication, and any Notes
which such successor corporation thereafter shall cause to be signed and
delivered to the Trustee for that purpose. All the Notes so issued shall in all
respects have the same legal rank and benefit under this Indenture as the Notes
theretofore or thereafter issued in accordance with the terms of this Indenture
as though all of such Notes had been issued at the date of the execution hereof.
In the event of any such consolidation, merger, sale, conveyance or lease, the
person named as the "Company" in the first paragraph of this Indenture or any
successor which shall thereafter have become such in the manner prescribed in
this Article XII may be dissolved, wound up and liquidated at any time
thereafter and such person shall be released from its liabilities as obligor and
maker of the Notes and from its obligations under this Indenture.

         In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form (but not in substance) may be made in the
Notes thereafter to be issued as may be appropriate.

         Section 12.3      Opinion of Counsel to Be Given Trustee. The Trustee,
subject to Sections 8.1 and 8.2, shall receive an Officers' Certificate and an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale, conveyance or lease and any such assumption complies with the provisions
of this Article XII.

                                  ARTICLE XIII

                    SATISFACTION AND DISCHARGE OF INDENTURE

         Section 13.1      Discharge of Indenture. When (a) the Company shall
deliver to the Trustee for cancellation all Notes theretofore authenticated
(other than any Notes which have been destroyed, lost or stolen and in lieu of
or in substitution for which other Notes shall have been authenticated and
delivered) and not theretofore canceled, or (b) all the Notes not theretofore
canceled or delivered to the Trustee for cancellation shall have become due and
payable, or are by their terms to become due and payable within one year or are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption, and the Company shall
deposit with the Trustee, in trust, funds sufficient to pay at maturity or upon
redemption of all of the Notes (other than any Notes which shall have been
mutilated, destroyed, lost or stolen and in lieu of or in substitution for which
other Notes shall have been authenticated and delivered) not theretofore
canceled or delivered to the Trustee for cancellation, including principal and
premium, if any, and interest due or to become due to such date of maturity or
redemption date, as the case may be, and if in either case the Company shall
also pay or cause to be paid all other sums payable hereunder by the Company,
then this

                                      -58-
<PAGE>   64
Indenture shall cease to be of further effect (except as to (i) remaining rights
of registration of transfer, substitution and exchange and conversion of Notes,
(ii) rights hereunder of Noteholders to receive payments of principal of and
premium, if any, and interest on, the Notes and the other rights, duties and
obligations of Noteholders, as beneficiaries hereof with respect to the amounts,
if any, so deposited with the Trustee and (iii) the rights, obligations and
immunities of the Trustee hereunder), and the Trustee, on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel as required by
Section 17.5 and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture; the
Company, however, hereby agreeing to reimburse the Trustee for any costs or
expenses thereafter reasonably and properly incurred by the Trustee and to
compensate the Trustee for any services thereafter reasonably and properly
rendered by the Trustee in connection with this Indenture or the Notes.

         Section 13.2      Deposited Monies to Be Held in Trust by Trustee.
Subject to Section 13.4, all monies deposited with the Trustee pursuant to
Section 13.1 shall be held in trust and applied by it to the payment,
notwithstanding the provisions of Article IV, either directly or through any
paying agent (including the Company if acting as its own paying agent), to the
holders of the particular Notes for the payment or redemption of which such
monies have been deposited with the Trustee, of all sums due and to become due
thereon for principal and interest and premium, if any.

         Section 13.3      Paying Agent to Repay Monies Held. Upon the
satisfaction and discharge of this Indenture, all monies then held by any paying
agent of the Notes (other than the Trustee) shall, upon demand of the Company,
be repaid to it or paid to the Trustee, and thereupon such paying agent shall be
released from all further liability with respect to such monies.

         Section 13.4      Return of Unclaimed Monies. Subject to the
requirements of applicable law, any monies deposited with or paid to the Trustee
for payment of the principal of, premium, if any, or interest on Notes and not
applied but remaining unclaimed by the holders of Notes for two years after the
date upon which the principal of, premium, if any, or interest on such Notes, as
the case may be, shall have become due and payable, shall be repaid to the
Company by the Trustee on demand and all liability of the Trustee shall
thereupon cease with respect to such monies; and the holder of any of the Notes
shall thereafter look only to the Company for any payment which such holder may
be entitled to collect unless an applicable abandoned property law designates
another person.

         Section 13.5      Reinstatement. If (i) the Trustee or the paying agent
is unable to apply any money in accordance with Section 13.2 by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application and (ii) the holders of at least a
majority in principal amount of the then outstanding Notes so request by written
notice to the Trustee, the Company's obligations under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to Section 13.1 until such time as the Trustee or the paying agent is permitted
to apply all such money in accordance with Section 13.2; provided, however, that
if the Company makes any payment of interest on or principal of any Note
following the reinstatement of its obligations, the Company shall be

                                      -59-
<PAGE>   65
subrogated to the rights of the holders of such Notes to receive such payment
from the money held by the Trustee or paying agent.

                                  ARTICLE XIV

                    IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
                             OFFICERS AND DIRECTORS

         Section 14.1      Indenture and Notes Solely Corporate Obligations. No
recourse for the payment of the principal of or premium, if any, or interest on
any Note, or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
this Indenture or in any supplemental indenture or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, employee, agent, officer or director or Subsidiary,
as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Notes.

                                   ARTICLE XV

                              CONVERSION OF NOTES

         Section 15.1      Right to Convert. Subject to and upon compliance with
the provisions of this Indenture, the holder of any Note shall have the right,
at his option, at any time following the date of original issuance of the Notes
and prior to the close of business on May 1, 2006 (except that, with respect to
any Note or portion of a Note which shall be called for redemption, such right
shall terminate, except as provided in the fifth paragraph of Section 15.2 and
Section 3.4, at the close of business on the Business Day preceding the date
fixed for redemption of such Note or portion of a Note unless the Company shall
default in payment due upon redemption thereof) to convert the principal amount
of any such Note, or any portion of such principal amount which is $1,000 or an
integral multiple thereof, into that number of fully paid and non-assessable
shares of Common Stock (as such shares shall then be constituted) obtained by
dividing the principal amount of the Note or portion thereof surrendered for
conversion by the Conversion Price in effect at such time, by surrender of the
Note so to be converted in whole or in part in the manner provided in Section
15.2. A holder of Notes is not entitled to any rights of a holder of Common
Stock until such holder has converted his Notes to Common Stock, and only to the
extent such Notes are deemed to have been converted to Common Stock under this
Article XV. A Note with respect to which a holder has delivered a notice in
accordance with Section 16.2 regarding such holder's election to require the
Company to repurchase such holder's Notes following the occurrence of a
Repurchase Event may be converted in accordance with this Article XV only if
such holder withdraws such notice by delivering a written notice of withdrawal
to the Company prior to the close of business on last Business Day prior to the
day fixed for repurchase.

                                      -60-
<PAGE>   66
         Section 15.2      Exercise of Conversion Privilege; Issuance of Common
Stock on Conversion; No Adjustment for Interest or Dividends. In order to
exercise the conversion privilege with respect to any Note in definitive form,
the holder of any such Note to be converted in whole or in part shall surrender
such Note, duly endorsed, at an office or agency maintained by the Company
pursuant to Section 5.2, accompanied by the funds, if any, required by the fifth
paragraph of this Section 15.2, and shall give written notice of conversion in
the form provided on the Notes (or such other notice which is acceptable to the
Company) to the office or agency that the holder elects to convert such Note or
such portion thereof specified in said notice. Such notice shall also state the
name or names (with address) in which the certificate or certificates for shares
of Common Stock which shall be issuable on such conversion shall be issued, and
shall be accompanied by transfer taxes, if required pursuant to Section 15.7.
Each such Note surrendered for conversion shall, unless the shares issuable on
conversion are to be issued in the same name as the registration of such Note,
be duly endorsed by, or be accompanied by instruments of transfer in form
satisfactory to the Company duly executed by, the holder or his duly authorized
attorney.

         In order to exercise the conversion privilege with respect to any
interest in the Global Note, the beneficial holder must complete the appropriate
instruction form for conversion pursuant to the Depositary's book-entry
conversion program, deliver by book-entry delivery an interest in the Global
Note, furnish appropriate endorsements and transfer documents if required by the
Company or the Trustee or conversion agent, and pay the funds, if any, required
by the fifth paragraph of this Section 15.2 and any transfer taxes, if required
pursuant to Section 15.7.

         As promptly as practicable after satisfaction of the requirements for
conversion set forth above, but no later than three Business Days after the
conversion date, subject to compliance with any restrictions on transfer if
shares issuable on conversion are to be issued in a name other than that of the
Noteholder (as if such transfer were a transfer of the Note or Notes (or portion
thereof) so converted), the Company shall issue and shall deliver to such holder
at the office or agency maintained by the Company for such purpose pursuant to
Section 5.2, a certificate or certificates for the number of full shares of
Common Stock issuable upon the conversion of such Note or portion thereof in
accordance with the provisions of this Article and a check or cash in respect of
any fractional interest in respect of a share of Common Stock arising upon such
conversion, as provided in Section 15.3 (which payment, if any, shall be paid no
later than five Business Days after satisfaction of the requirements for
conversion set forth above). In case any Note of a denomination greater than
$1,000 shall be surrendered for partial conversion, and subject to Section 2.3,
the Company shall execute and the Trustee shall authenticate and deliver to the
holder of the Note so surrendered, without charge to him, a new Note or Notes in
authorized denominations in an aggregate principal amount equal to the
unconverted portion of the surrendered Note.

         Each conversion shall be deemed to have been effected as to any such
Note (or portion thereof) on the date on which the requirements set forth above
in this Section 15.2 have been satisfied as to such Note (or portion thereof),
and the person in whose name any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder of record of the shares represented thereby;
provided, however, that any such surrender on any date when the stock transfer
books of the Company

                                      -61-
<PAGE>   67
shall be closed shall constitute the person in whose name the certificates are
to be issued as the record holder thereof for all purposes on the next
succeeding day on which such stock transfer books are open, but such conversion
shall be at the Conversion Price in effect on the date upon which such Note
shall be surrendered.

         Any Note or portion thereof surrendered for conversion during the
period from the close of business on the record date for any interest payment
date through the close of business on the Business Day preceding such interest
payment date shall (unless such Note or portion thereof being converted shall
have been called for redemption pursuant to a redemption notice mailed to the
Noteholders in accordance with Section 3.2) be accompanied by payment, in New
York Clearing House funds or other funds acceptable to the Company, of an amount
equal to the interest otherwise payable on such interest payment date on the
principal amount being converted; provided, however, that no such payment need
be made if there shall exist at the time of conversion a default in the payment
of interest on the Notes. Except as provided above in this Section 15.2, no
adjustment shall be made for interest accrued on any Note converted or for
dividends on any shares issued upon the conversion of such Note as provided in
this Article.

         Upon the conversion of an interest in the Global Note, the Trustee, or
the Custodian at the direction of the Trustee, shall make a notation on the
Global Note as to the reduction in the principal amount represented thereby.

         Section 15.3      Cash Payments in Lieu of Fractional Shares. No
fractional shares of Common Stock or scrip representing fractional shares shall
be issued upon conversion of Notes. If more than one Note shall be surrendered
for conversion at one time by the same holder, the number of full shares which
shall be issuable upon conversion shall be computed on the basis of the
aggregate principal amount of the Notes (or specified portions thereof to the
extent permitted hereby) so surrendered for conversion. If any fractional share
of stock otherwise would be issuable upon the conversion of any Note or Notes,
the Company shall make an adjustment therefor in cash at the current market
value thereof to the holder of Notes. The current market value of a share of
Common Stock shall be the Closing Price on the first Trading Day immediately
preceding the day on which the Notes (or specified portions thereof) are deemed
to have been converted and such Closing Price shall be determined as provided in
Section 15.5(h).

         Section 15.4      Conversion Price. The conversion price shall be as
specified in the form of Note (herein called the "Conversion Price") attached as
Exhibit A hereto, subject to adjustment as provided in this Article XV.

                                      -62-
<PAGE>   68
         Section 15.5      Adjustment of Conversion Price. The Conversion Price
shall be adjusted from time to time by the Company as follows:

                  (a) In case the Company shall hereafter pay a dividend or make
         a distribution to all holders of the outstanding Common Stock in shares
         of Common Stock, the Conversion Price in effect at the opening of
         business on the date following the date fixed for the determination of
         stockholders entitled to receive such dividend or other distribution
         shall be reduced by multiplying such Conversion Price by a fraction of
         which the numerator shall be the number of shares of Common Stock
         outstanding at the close of business on the Record Date (as defined in
         Section 15.5(h)) fixed for such determination 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 reduction to
         become effective immediately after the opening of business on the day
         following the Record Date. If any dividend or distribution of the type
         described in this Section 15.5(a) is declared but not so paid or made,
         the Conversion Price shall again be adjusted to the Conversion Price
         which would then be in effect if such dividend or distribution had not
         been declared.

                  (b) In case the Company shall issue rights or warrants to all
         holders of its outstanding shares of Common Stock entitling them (for a
         period expiring within forty-five (45) days after the date fixed for
         the determination of stockholders entitled to receive such rights or
         warrants) to subscribe for or purchase shares of Common Stock at a
         price per share less than the Current Market Price (as defined in
         Section 15.5(h)) on the Record Date fixed for the determination of
         stockholders entitled to receive such rights or warrants, the
         Conversion Price shall be adjusted so that the same shall equal the
         price determined by multiplying the Conversion Price in effect at the
         opening of business on the date after such Record Date by a fraction of
         which the numerator shall be the number of shares of Common Stock
         outstanding at the close of business on the Record Date plus the number
         of shares which the aggregate offering price of the total number of
         shares so offered for subscription or purchase would purchase at such
         Current Market Price, and of which the denominator shall be the number
         of shares of Common Stock outstanding on the close of business on the
         Record Date plus the total number of additional shares of Common Stock
         so offered for subscription or purchase. Such adjustment shall become
         effective immediately after the opening of business on the day
         following the Record Date fixed for determination of stockholders
         entitled to receive such rights or warrants. To the extent that shares
         of Common Stock are not delivered pursuant to such rights or warrants,
         upon the expiration or termination of such rights or warrants the
         Conversion Price shall be readjusted to the Conversion Price which
         would then be in effect had the adjustments made upon the issuance of
         such rights or warrants been made on the basis of delivery of only the
         number of shares of Common Stock actually delivered. In the event that
         such rights or warrants are not so issued, the Conversion Price shall
         again be adjusted to be the Conversion Price which would then be in
         effect if such date fixed for the determination of stockholders
         entitled to receive such rights or warrants had not been fixed. In
         determining whether any rights or warrants entitle the holders to
         subscribe for or purchase shares of Common Stock at less than such
         Current Market Price, and in

                                      -63-
<PAGE>   69
         determining the aggregate offering price of such shares of Common
         Stock, there shall be taken into account any consideration received for
         such rights or warrants, the value of such consideration, if other than
         cash, to be determined by the Board of Directors.

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

                  (d) In case the Company shall, by dividend or otherwise,
         distribute to all holders of its Common Stock shares of any class of
         capital stock of the Company (other than any dividends or distributions
         to which Section 15.5(a) applies) or evidences of its indebtedness,
         cash or other assets (including securities, but excluding (1) any
         rights or warrants referred to in Section 15.5(b) and, (2) dividends
         and distributions (A) in connection with the liquidation, dissolution
         or winding up of the Company or paid (B) exclusively in cash and (3)
         any capital stock, evidences of indebtedness, cash or assets
         distributed upon a merger or consolidation to which Section 15.6
         applies) (the foregoing hereinafter in this Section 15.5(d) called the
         "Securities")), unless the Company elects to reserve such Securities
         for distribution to the Noteholders upon conversion of the Notes so
         that any such holder converting Notes will receive upon such
         conversion, in addition to the shares of Common Stock to which such
         holder is entitled, the amount and kind of such Securities which such
         holder would have received if such holder had converted its Notes into
         Common Stock immediately prior to the Record Date (as defined in
         Section 15.5(h) for such distribution of the Securities) then, in each
         such case, the Conversion Price shall be reduced so that the same shall
         be equal to the price determined by multiplying the Conversion Price in
         effect immediately prior to the close of business on the Record Date
         (as defined in Section 15.5(h)) with respect to such distribution by a
         fraction of which the numerator shall be the Current Market Price
         (determined as provided in Section 15.5(h)) on such date less the fair
         market value (as determined by the Board of Directors, whose
         determination shall be conclusive and described in a Board Resolution)
         on such date of the portion of the Securities so distributed applicable
         to one share of Common Stock and the denominator shall be such Current
         Market Price, such reduction to become effective immediately prior to
         the opening of business on the day following the Record Date; provided,
         however, that in the event the then fair market value (as so
         determined) of the portion of the Securities so distributed applicable
         to one share of Common Stock is equal to or greater than the Current
         Market Price on the Record Date, in lieu of the foregoing adjustment,
         adequate provision shall be made so that each Noteholder shall have the
         right to receive upon conversion of a Note (or any portion thereof) the
         amount of Securities such holder would have received had such holder
         converted such Note (or portion thereof) immediately prior to such
         Record Date.

                                      -64-
<PAGE>   70
         In the event that such dividend or distribution is not so paid or made,
         the Conversion Price shall again be adjusted to be the Conversion Price
         which would then be in effect if such dividend or distribution had not
         been declared. If the Board of Directors determines the fair market
         value of any distribution for purposes of this Section 15.5(d) by
         reference to the actual or when issued trading market for any
         securities comprising all or part of such distribution, it must in
         doing so consider the prices in such market over the same period (the
         "Reference Period") used in computing the Current Market Price pursuant
         to Section 15.5(h) to the extent possible, unless the Board of
         Directors in a board resolution determines in good faith that
         determining the fair market value during the Reference Period would not
         be in the best interest of the Noteholder.

                  In the event that the Company implements a stockholder rights
         plan, (a "New Rights Plan") or amends any existing stockholder rights
         plan (as amended, an "Amended Rights Plan" and together with any New
         Rights Plan, a "Rights Plan"), such Rights Plan shall provide that upon
         conversion of the Notes the holders will receive, in addition to the
         Common Stock issuable upon such conversion, the rights issued under
         such Rights Plan (notwithstanding the occurrence of an event causing
         such rights to separate from the Common Stock at or prior to the time
         of conversion). Any distribution of rights or warrants pursuant to a
         the Rights Plan complying with the requirements set forth in the
         immediately preceding sentence of this paragraph shall not constitute a
         distribution of rights or warrants for the purposes of this Section
         15.5(d).

                  Rights or warrants distributed by the Company to all holders
         of Common Stock entitling the holders thereof to subscribe for or
         purchase shares of the Company's capital stock (either initially or
         under certain circumstances), which rights or warrants, until the
         occurrence of a specified event or events ("Trigger Event"): (i) are
         deemed to be transferred with such shares of Common Stock; (ii) are not
         exercisable; and (iii) are also issued in respect of future issuances
         of Common Stock, shall be deemed not to have been distributed for
         purposes of this Section 15.5(d) (and no adjustment to the Conversion
         Price under this Section 15.5(d) will be required) until the occurrence
         of the earliest Trigger Event. If such right or warrant is subject to
         subsequent events, upon the occurrence of which such right or warrant
         shall become exercisable to purchase different securities, evidences of
         indebtedness or other assets or entitle the holder to purchase a
         different number or amount of the foregoing or to purchase any of the
         foregoing at a different purchase price, then the occurrence of each
         such event shall be deemed to be the date of issuance and record date
         with respect to a new right or warrant (and a termination or expiration
         of the existing right or warrant without exercise by the holder
         thereof). In addition, in the event of any distribution (or deemed
         distribution) of rights or warrants, or any Trigger Event or other
         event (of the type described in the preceding sentence) with respect
         thereto, that resulted in an adjustment to the Conversion Price under
         this Section 15.5(d), (1) in the case of any such rights or warrants
         which shall all have been redeemed or repurchased without exercise by
         any holders thereof, the Conversion Price shall be readjusted upon such
         final redemption or repurchase to give effect to such distribution or
         Trigger Event, as the case may be, as though it were a cash
         distribution, equal to the per share redemption or repurchase price
         received by a holder of Common Stock with respect to such rights or
         warrants (assuming such holder had retained such

                                      -65-
<PAGE>   71
         rights or warrants), made to all holders of Common Stock as of the date
         of such redemption or repurchase, and (2) in the case of such rights or
         warrants all of which shall have expired or been terminated without
         exercise, the Conversion Price shall be readjusted as if such rights
         and warrants had never been issued.

                  For purposes of this Section 15.5(d) and Sections 15.5(a) and
         (b), any dividend or distribution to which this Section 15.5(d) is
         applicable that also includes shares of Common Stock, or rights or
         warrants to subscribe for or purchase shares of Common Stock to which
         Section 15.5(b) applies (or both), shall be deemed instead to be (1) a
         dividend or distribution of the evidences of indebtedness, assets,
         shares of capital stock, rights or warrants other than such shares of
         Common Stock or rights or warrants to which Section 15.5(b) applies
         (and any Conversion Price reduction required by this Section 15.5(d)
         with respect to such dividend or distribution shall then be made)
         immediately followed by (2) a dividend or distribution of such shares
         of Common Stock or such rights or warrants (and any further Conversion
         Price reduction required by Sections 15.5(a) and (b) with respect to
         such dividend or distribution shall then be made, except (A) the Record
         Date of such dividend or distribution shall be substituted as "the date
         fixed for the determination of stockholders entitled to receive such
         dividend or other distribution", "Record Date fixed for such
         determination" and "Record Date" within the meaning of Section 15.5(a)
         and as "the date fixed for the determination of stockholders entitled
         to receive such rights or warrants", "the Record Date fixed for the
         determination of the stockholders entitled to receive such rights or
         warrants" and "such Record Date" within the meaning of Section 15.5(b)
         and (B) any shares of Common Stock included in such dividend or
         distribution shall not be deemed "outstanding at the close of business
         on the date fixed for such determination" within the meaning of Section
         15.5(a).

                  (e) In case the Company shall, by dividend or otherwise,
         distribute to all holders of its Common Stock cash (excluding any cash
         that is distributed upon a merger or consolidation to which Section
         15.6 applies or as part of a distribution referred to in Section
         15.5(d)), in an aggregate amount that, combined together with (1) the
         aggregate amount of any other such distributions to all holders of its
         Common Stock made exclusively in cash within the twelve (12) months
         preceding the date of payment of such distribution, and in respect of
         which no adjustment pursuant to this Section 15.5(e) has been made, and
         (2) the aggregate of any cash plus the fair market value (as determined
         by the Board of Directors, whose determination shall be conclusive and
         described in a Board Resolution) of consideration payable in respect of
         any tender offer by the Company or any of its Subsidiaries for all or
         any portion of the Common Stock concluded within the twelve (12) months
         preceding the date of payment of such distribution, and in respect of
         which no adjustment pursuant to Section 15.5(f) has been made, exceeds
         10% of the product of the Current Market Price (determined as provided
         in Section 15.5(h)) on the Record Date with respect to such
         distribution times the number of shares of Common Stock outstanding on
         such date, then, and in each such case, immediately after the close of
         business on such date, the Conversion Price shall be reduced so that
         the same shall equal the price determined by multiplying the Conversion
         Price in effect immediately prior to the close of business on such
         Record Date by a fraction (i) the numerator of which shall be equal to
         the Current Market Price on the Record Date less an amount

                                      -66-
<PAGE>   72
         equal to the quotient of (x) the excess of such combined amount over
         such 10% and (y) the number of shares of Common Stock outstanding on
         the Record Date and (ii) the denominator of which shall be equal to the
         Current Market Price on such date; provided, however, that in the event
         the portion of the cash so distributed applicable to one share of
         Common Stock is equal to or greater than the Current Market Price of
         the Common Stock on the Record Date, in lieu of the foregoing
         adjustment, adequate provision shall be made so that each Noteholder
         shall have the right to receive upon conversion of a Note (or any
         portion thereof) the amount of cash such holder would have received had
         such holder converted such Note (or portion thereof) immediately prior
         to such Record Date. In the event that such dividend or distribution is
         not so paid or made, the Conversion Price shall again be adjusted to be
         the Conversion Price which would then be in effect if such dividend or
         distribution had not been declared. Any cash distribution to all
         holders of Common Stock as to which the Company makes the election
         permitted by Section 15.5(n) and as to which the Company has complied
         with the requirements of such Section shall be treated as not having
         been made for all purposes of this Section 15.5(e)).

                  (f) In case a tender offer made by the Company or any
         Subsidiary for all or any portion of the Common Stock shall expire and
         such tender offer (as amended upon the expiration thereof) shall
         require the payment to shareholders (based on the acceptance (up to any
         maximum specified in the terms of the tender offer) of Purchased Shares
         (as defined below)) of an aggregate consideration having a fair market
         value (as determined by the Board of Directors, whose determination
         shall be conclusive and described in a Board Resolution) that combined
         together with (1) the aggregate of the cash plus the fair market value
         (as determined by the Board of Directors, whose determination shall be
         conclusive and described in a Board Resolution), as of the expiration
         of such tender offer, of consideration payable in respect of any other
         tender offers, by the Company or any of its Subsidiaries for all or any
         portion of the Common Stock expiring within the twelve (12) months
         preceding the expiration of such tender offer and in respect of which
         no adjustment pursuant to this Section 15.5(f) has been made and (2)
         the aggregate amount of any distributions to all holders of the
         Company's Common Stock made exclusively in cash within twelve (12)
         months preceding the expiration of such tender offer and in respect of
         which no adjustment pursuant to Section 15.5(e) has been made, exceeds
         10% of the product of the Current Market Price (determined as provided
         in Section 15.5(h)) as of the last time (the "Expiration Time") tenders
         could have been made pursuant to such tender offer (as it may be
         amended) times the number of shares of Common Stock outstanding
         (including any tendered shares) on the Expiration Time, then, and in
         each such case, immediately prior to the opening of business on the day
         after the date of the Expiration Time, the Conversion Price shall be
         adjusted so that the same shall equal the price determined by
         multiplying the Conversion Price in effect immediately prior to close
         of business on the date of the Expiration Time by a fraction of which
         the numerator shall be the number of shares of Common Stock outstanding
         (including any tendered shares) on the Expiration Time multiplied by
         the Current Market Price of the Common Stock on the Trading Day next
         succeeding the Expiration Time and the denominator shall be the sum of
         (x) the fair market value (determined as aforesaid) of the aggregate
         consideration payable to stockholders based on the acceptance (up to
         any maximum specified in the terms of the tender offer) of all shares
         validly tendered and not withdrawn as of the

                                      -67-
<PAGE>   73
         Expiration Time (the shares deemed so accepted, up to any such maximum,
         being referred to as the "Purchased Shares") and (y) the product of the
         number of shares of Common Stock outstanding (less any Purchased
         Shares) on the Expiration Time and the Current Market Price of the
         Common Stock on the Trading Day next succeeding the Expiration Time,
         such reduction (if any) to become effective immediately prior to the
         opening of business on the day following the Expiration Time. In the
         event that the Company is obligated to purchase shares pursuant to any
         such tender offer, but the Company is permanently prevented by
         applicable law from effecting any such purchases or all such purchases
         are rescinded, the Conversion Price shall again be adjusted to be the
         Conversion Price which would then be in effect if such tender offer had
         not been made. If the application of this Section 15.5(f) to any tender
         offer would result in an increase in the Conversion Price, no
         adjustment shall be made for such tender offer under this Section
         15.5(f). Any cash distribution to all holders of Common Stock as to
         which the Company has made the election permitted by Section 15.5(n)
         and as to which the Company has complied with the requirements of such
         Section shall be treated as not having been made for all purposes of
         this Section 15.5(f).

                 (g) In case of a tender or exchange offer made by a person
         other than the Company or any Subsidiary for an amount which increases
         the offeror's ownership of Common Stock to more than 25% of the Common
         Stock outstanding and shall involve the payment by such person of
         consideration per share of Common Stock having a fair market value (as
         determined by the Board of Directors), whose determination shall be
         conclusive, and described in a resolution of the Board of Directors at
         the last time (the "Expiration Time") tenders or exchanges may be made
         pursuant to such tender or exchange offer (as it shall have been
         amended) that exceeds the Current Market Price of the Common Stock on
         the Trading Day next succeeding the Expiration Time, and in which, as
         of the Expiration Time the Board of Directors is not recommending
         rejection of the offer, the Conversion Price shall be reduced so that
         the same shall equal the price determined by multiplying the Conversion
         Price in effect immediately prior to the Expiration Time by a fraction
         of which the numerator shall be the number of shares of Common Stock
         outstanding (including any tendered or exchanged shares) on the
         Expiration Time multiplied by the current Market Price of the Common
         Stock on the Trading Day next succeeding the Expiration Time and the
         denominator shall be the sum of (x) the fair market value (determined
         as aforesaid) of the aggregate consideration payable to stockholders
         based on the acceptance (up to any maximum specified in the terms of
         the tender or exchange offer) of all shares validly tendered or
         exchanged and not withdrawn as of the Expiration Time (the shares
         deemed so accepted, up to any such maximum, being referred to as the
         "Purchased Shares") and (y) the product of the number of shares of
         Common Stock outstanding (less any Purchased Shares) on the Expiration
         Time and the Current Market Price of the Common Stock on the Trading
         Day next succeeding the Expiration Time, such reduction to become
         effective immediately prior to the opening of business on the day
         following the Expiration Time. In the event that such person is
         obligated to purchase shares pursuant to any such tender or exchange
         offer, but such person is permanently prevented by applicable law from
         effecting any such purchases or all such purchases are rescinded, the
         Conversion Price shall again be adjusted to be the Conversion Price
         which would then be in effect if such tender or

                                      -68-
<PAGE>   74
         exchange offer had not been made. Notwithstanding the foregoing, the
         adjustment described in this Section 15.5(g) shall not be made if, as
         of the Expiration Time, the offering documents with respect to such
         offer disclose a plan or intention to cause the Company to engage in
         any transaction described in Article XII.

                  (h) For purposes of this Section 15.5, the following terms
         shall have the meaning indicated:

                                    (1) "Closing Price" with respect to any
                  securities on any day shall mean the closing sale price
                  regular way on such day or, in case no such sale takes place
                  on such day, the average of the reported closing bid and asked
                  prices, regular way, in each case on the Nasdaq National
                  Market or New York Stock Exchange, as applicable, or, if such
                  security is not listed or admitted to trading on such Nasdaq
                  National Market or New York Stock Exchange, on the principal
                  national security exchange or quotation system on which such
                  security is quoted or listed or admitted to trading, or, if
                  not quoted or listed or admitted to trading on any national
                  securities exchange or quotation system, the average of the
                  closing bid and asked prices of such security on the
                  over-the-counter market on the day in question as reported by
                  the National Quotation Bureau Incorporated, or a similar
                  generally accepted reporting service, or if not so available,
                  in such manner as furnished by any New York Stock Exchange
                  member firm selected from time to time by the Board of
                  Directors for that purpose, or a price determined in good
                  faith by the Board of Directors, whose determination shall be
                  conclusive and described in a Board Resolution.

                                    (2) "Current Market Price" shall mean the
                  average of the daily Closing Prices per share of Common Stock
                  for the ten (10) consecutive Trading Days immediately prior to
                  the date in question; provided, however, that (1) if the "ex"
                  date (as hereinafter defined) for any event (other than the
                  issuance or distribution requiring such computation) that
                  requires an adjustment to the Conversion Price pursuant to
                  Section 15.5(a), (b), (c), (d), (e), (f) or (g) occurs during
                  such ten (10) consecutive Trading Days, the Closing Price for
                  each Trading Day prior to the "ex" date for such other event
                  shall be adjusted by multiplying such Closing Price by the
                  same fraction by which the Conversion Price is so required to
                  be adjusted as a result of such other event, (2) if the "ex"
                  date for any event (other than the issuance or distribution
                  requiring such computation) that requires an adjustment to the
                  Conversion Price pursuant to Section 15.5(a), (b), (c), (d),
                  (e), (f) or (g) occurs on or after the "ex" date for the
                  issuance or distribution requiring such computation and prior
                  to the day in question, the Closing Price for each Trading Day
                  on and after the "ex" date for such other event shall be
                  adjusted by multiplying such Closing Price by the reciprocal
                  of the fraction by which the Conversion Price is so required
                  to be adjusted as a result of such other event, and (3) if the
                  "ex" date for the issuance or distribution requiring such
                  computation is prior to the day in question, after taking into
                  account any adjustment required pursuant to clause (1) or (2)
                  of this proviso, the Closing Price for each Trading Day on or
                  after such "ex" date shall be

                                      -69-
<PAGE>   75
                  adjusted by adding thereto the amount of any cash and the fair
                  market value (as determined by the Board of Directors in a
                  manner consistent with any determination of such value for
                  purposes of Section 15.5(d), (f) or (g), whose determination
                  shall be conclusive and described in a Board Resolution) of
                  the evidences of indebtedness, shares of capital stock or
                  assets being distributed applicable to one share of Common
                  Stock as of the close of business on the day before such "ex"
                  date. For purposes of any computation under Sections 15.5(f)
                  or (g), the Current Market Price of the Common Stock on any
                  date shall be deemed to be the average of the daily Closing
                  Prices per share of Common Stock for such day and the next two
                  succeeding Trading Days; provided, however, that if the "ex"
                  date for any event (other than the tender offer requiring such
                  computation) that requires an adjustment to the Conversion
                  Price pursuant to Section 15.5(a), (b), (c), (d), (e), (f) and
                  (g) occurs on or after the Expiration Time for the tender or
                  exchange offer requiring such computation and prior to the day
                  in question, the Closing Price for each Trading Day on and
                  after the "ex" date for such other event shall be adjusted by
                  multiplying such Closing Price by the reciprocal of the
                  fraction by which the Conversion Price is so required to be
                  adjusted as a result of such other event. For purposes of this
                  paragraph, the term "ex" date, (1) when used with respect to
                  any issuance or distribution, means the first date on which
                  the Common Stock trades regular way on the relevant exchange
                  or in the relevant market from which the Closing Price was
                  obtained without the right to receive such issuance or
                  distribution, (2) when used with respect to any subdivision or
                  combination of shares of Common Stock, means the first date on
                  which the Common Stock trades regular way on such exchange or
                  in such market after the time at which such subdivision or
                  combination becomes effective, and (3) when used with respect
                  to any tender or exchange offer means the first date on which
                  the Common Stock trades regular way on such exchange or in
                  such market after the Expiration Time of such offer.
                  Notwithstanding the foregoing, whenever successive adjustments
                  to the Conversion Price are called for pursuant to this
                  Section 15.5, such adjustments shall be made to the Current
                  Market Price as may be necessary or appropriate to effectuate
                  the intent of this Section 15.5 and to avoid unjust or
                  inequitable results as determined in good faith by the Board
                  of Directors.

                           (3) "fair market value" shall mean the amount which a
                  willing buyer would pay a willing seller in an arm's length
                  transaction.

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

                                      -70-
<PAGE>   76
                                    (5) "Trading Day" shall mean (x) if the
                  applicable security is listed or admitted for trading on the
                  New York Stock Exchange or another national security exchange,
                  a day on which the New York Stock Exchange or another national
                  security exchange is open for business or (y) if the
                  applicable security is quoted on the Nasdaq National Market, a
                  day on which trades may be made thereon or (z) if the
                  applicable security is not so listed, admitted for trading or
                  quoted, any day other than a Saturday or Sunday or a day on
                  which banking institutions in the State of New York are
                  authorized or obligated by law or executive order to close.

                  (i) The Company may make such reductions in the Conversion
         Price, in addition to those required by Sections 15.5(a), (b), (c),
         (d), (e), (f) and (g), as the Board of Directors considers to be
         advisable to avoid or diminish any income tax to holders of Common
         Stock or rights to purchase Common Stock resulting from any dividend or
         distribution of stock (or rights to acquire stock) or from any event
         treated as such for income tax purposes.

                  To the extent permitted by applicable law, the Company from
         time to time may reduce the Conversion Price by any amount for any
         period of time if the period is at least twenty (20) days, the
         reduction is irrevocable during the period and the Board of Directors
         shall have made a determination that such reduction would be in the
         best interests of the Company, which determination shall be conclusive
         and described in a Board Resolution. Whenever the Conversion Price is
         reduced pursuant to the preceding sentence, the Company shall mail to
         the holder of each Note at his last address appearing on the Note
         register provided for in Section 2.5 a notice of the reduction at least
         fifteen (15) days prior to the date the reduced Conversion Price takes
         effect, and such notice shall state the reduced Conversion Price and
         the period during which it will be in effect.

                  (j) No adjustment in the Conversion Price shall be required
         unless such adjustment would require an increase or decrease of at
         least 1% in such price; provided, however, that any adjustments which
         by reason of this Section 15.5(j) are not required to be made shall be
         carried forward and taken into account in any subsequent adjustment.
         All calculations under this Article XV shall be made by the Company and
         shall be made to the nearest cent or to the nearest one hundredth of a
         share, as the case may be. No adjustment need be made for a change in
         the par value or no par value of the Common Stock.

                  (k) Whenever the Conversion Price is adjusted as herein
         provided, the Company shall promptly file with the Trustee, and any
         conversion agent other than the Trustee, an Officers' Certificate
         setting forth the Conversion Price after such adjustment and setting
         forth a brief statement of the facts requiring such adjustment. Unless
         and until a Responsible Officer of the Trustee shall have received such
         Officers' Certificate, the Trustee shall not be deemed to have
         knowledge of any adjustment of the Conversion Price and may assume
         without inquiry that the last Conversion Price of which it has
         knowledge remains in effect. Promptly after delivery of such
         certificate, the Company shall prepare a notice of such adjustment of
         the Conversion Price setting forth the adjusted Conversion Price and
         the date on which each adjustment becomes effective and

                                      -71-
<PAGE>   77
         shall mail such notice of such adjustment of the Conversion Price to
         the holder of each Note at his last address appearing on the Note
         register provided for in Section 2.5, within twenty (20) days of the
         effective date of such adjustment. Failure to deliver such notice shall
         not effect the legality or validity of any such adjustment.

                  (l) In any case in which this Section 15.5 provides that an
         adjustment shall become effective immediately after a Record Date for
         an event, the Company may defer until the occurrence of such event (i)
         issuing to the holder of any Note converted after such Record Date and
         before the occurrence of such event the additional shares of Common
         Stock issuable upon such conversion by reason of the adjustment
         required by such event over and above the Common Stock issuable upon
         such conversion before giving effect to such adjustment and (ii) paying
         to such holder any amount in cash in lieu of any fraction pursuant to
         Section 15.3.

                  (m) For purposes of this Section 15.5, 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.

                  (n) In lieu of making any adjustment to the Conversion Price
         pursuant to Section 15.5(e), the Company may elect to reserve an amount
         of cash for distribution to the holders of the Notes upon the
         conversion of the Notes so that any such holder converting Notes will
         receive upon such conversion, in addition to the shares of Common Stock
         and other items to which such holder is entitled, the full amount of
         cash which such holder would have received if such holder had,
         immediately prior to the Record Date for such distribution of cash,
         converted its Notes into Common Stock, together with any interest
         accrued with respect to such amount, in accordance with this Section
         15.5(n). The Company may make such election by providing an Officers'
         Certificate to the Trustee to such effect on or prior to the payment
         date for any such distribution and depositing with the Trustee on or
         prior to such date an amount of cash equal to the aggregate amount the
         holders of the Notes would have received if such holders had,
         immediately prior to the Record Date for such distribution, converted
         all of the Notes into Common Stock. Any such funds so deposited by the
         Company with the Trustee shall be invested by the Trustee in marketable
         obligations issued or fully guaranteed by the United States government
         with a maturity not more than three (3) months from the date of
         issuance. Upon conversion of Notes by a holder, the holder will be
         entitled to receive, in addition to the Common Stock issuable upon
         conversion, an amount of cash equal to the amount such holder would
         have received if such holder had, immediately prior to the Record Date
         for such distribution, converted its Note into Common Stock, along with
         such holder's pro rata share of any accrued interest earned as a
         consequence of the investment of such funds. Promptly after making an
         election pursuant to this Section 15.5(n), the Company shall give or
         shall cause to be given notice to all Noteholders of such election,
         which notice shall state the amount of cash per $1,000 principal amount
         of Notes such holders shall be entitled to receive (excluding interest)

                                      -72-
<PAGE>   78
         upon conversion of the Notes as a consequence of the Company having
         made such election.

         Section 15.6      Effect of Reclassification, Consolidation, Merger or
Sale. If any of the following events occur, namely (i) any reclassification or
change of the outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, then the Company or the successor or purchasing corporation, as
the case may be, shall execute with the Trustee a supplemental indenture (which
shall comply with the Trust Indenture Act as in force at the date of execution
of such supplemental indenture if such supplemental indenture is then required
to so comply) providing that such Note shall be convertible into the kind and
amount of shares of stock and other securities or property or assets (including
cash) receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance by a holder of a number of shares of Common
Stock issuable upon conversion of such Notes (assuming, for such purposes, a
sufficient number of authorized shares of Common Stock available to convert all
such Notes) immediately prior to such reclassification, change, consolidation,
merger, combination, sale or conveyance assuming such holder of Common Stock did
not exercise his rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon such consolidation, merger,
statutory exchange, sale or conveyance (provided that, if the kind or amount of
securities, cash or other property receivable upon such consolidation, merger,
statutory exchange, sale or conveyance is not the same for each share of Common
Stock in respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purposes of this Section 15.6 the kind and
amount of securities, cash or other property receivable upon such consolidation,
merger, statutory exchange, sale or conveyance for each non-electing share shall
be deemed to be the kind and amount so receivable per share by a plurality of
the non-electing shares). Such supplemental indenture shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article. If, in the case of any such
reclassification, change, consolidation, merger, combination, sale or
conveyance, the stock or other securities and assets receivable thereupon by a
holder of shares of Common Stock include shares of stock or other securities and
assets of a corporation other than the successor or purchasing corporation, as
the case may be, in such reclassification, change, consolidation, merger,
combination, sale or conveyance, then such supplemental indenture shall also be
executed by such other corporation and shall contain such additional provisions
to protect the interests of the holders of the Notes as the Board of Directors
shall reasonably consider necessary by reason of the foregoing, including to the
extent practicable the provisions providing for the repurchase rights set forth
in Article XVI herein.

         The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Notes, at his address appearing on the
Note register provided for in

                                      -73-
<PAGE>   79
Section 2.5 of this Indenture, within twenty (20) days after execution thereof.
Failure to deliver such notice shall not affect the legality or validity of such
supplemental indenture.

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

         If this Section 15.6 applies to any event or occurrence, Section 15.5
shall not apply.

         Section 15.7      Taxes on Shares Issued. The issue of stock
certificates on conversions of Notes shall be made without charge to the
converting Noteholder for any tax in respect of the issue thereof. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of stock in any name other
than that of the holder of any Note converted, and the Company shall not be
required to issue or deliver any such stock certificate unless and until the
person or persons requesting the issue thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.

         Section 15.8      Reservation of Shares; Shares to Be Fully Paid;
Listing of Common Stock. The Company shall provide, free from preemptive rights,
out of its authorized but unissued shares or shares held in treasury, sufficient
shares to provide for the conversion of the Notes from time to time as such
Notes are presented for conversion.

         Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Notes, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted Conversion Price.

         The Company covenants that all shares of Common Stock issued upon
conversion of Notes will be fully paid and non-assessable by the Company and
free from all taxes, liens and charges with respect to the issue thereof.

         The Company further covenants that if at any time the Common Stock
shall be listed on any other national securities exchange or automated quotation
system the Company will, if permitted and required by the rules of such exchange
or automated quotation system, list and keep listed, so long as the Common Stock
shall be so listed on such exchange or automated quotation system, all Common
Stock issuable upon conversion of the Notes.

         Section 15.9      Responsibility of Trustee. The Trustee and any other
conversion agent shall not at any time be under any duty or responsibility to
any holder of Notes to determine whether any facts exist which may require any
adjustment of the Conversion Price, or with respect to the nature or extent or
calculation of any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to be employed, in
making the same. The Trustee and any other conversion agent shall not be
accountable with respect to the validity or value (or the kind or amount) of any
shares of Common Stock, or of any securities or property, which may at any time
be issued or delivered upon the conversion of any

                                      -74-
<PAGE>   80
Note; and the Trustee and any other conversion agent make no representations
with respect thereto. Subject to the provisions of Section 8.1, neither the
Trustee nor any conversion agent shall be responsible for any failure of the
Company to issue, transfer or deliver any shares of Common Stock or stock
certificates or other securities or property or cash upon the surrender of any
note for the purpose of conversion or to comply with any of the duties,
responsibilities or covenants of the Company contained in this Article. Without
limiting the generality of the foregoing, neither the Trustee nor any conversion
agent shall be under any responsibility to determine the correctness of any
provisions contained in any supplemental indenture entered into pursuant to
Section 15.6 relating either to the kind or amount of shares of stock or
securities or property (including cash) receivable by Noteholders upon the
conversion of their Notes after any event referred to in such Section 15.6 or to
any adjustment to be made with respect thereto, but, subject to the provisions
of Section 8.1, may accept as conclusive evidence of the correctness of any such
provisions, and shall be protected in relying upon, the Officers' Certificate
(which the Company shall be obligated to file with the Trustee prior to the
execution of any such supplemental indenture) with respect thereto.

         Section 15.10     Notice to Holders Prior to Certain Actions.  In case:

                  (a) the Company shall declare a dividend (or any other
         distribution) on its Common Stock (that would require an adjustment in
         the Conversion Price pursuant to Section 15.5); or

                  (b) the Company shall authorize the granting to the holders of
         its Common Stock of rights or warrants to subscribe for or purchase any
         share of any class or any other rights or warrants; or

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

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

the Company shall cause to be filed with the Trustee and to be mailed to each
holder of Notes at his address appearing on the Note register, provided for in
Section 2.5 of this Indenture, as promptly as possible but in any event at least
fifteen days prior to the applicable date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up is expected to become effective or occur,
and the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such

                                      -75-
<PAGE>   81
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up. Failure to give such notice, or any defect therein,
shall not affect the legality or validity of such dividend, distribution,
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up.

                                  ARTICLE XVI

                       REPURCHASE UPON A REPURCHASE EVENT

         Section 16.1      Repurchase Right. If, at any time prior to May 1,
2006 there shall occur a Repurchase Event, then each Noteholder shall have the
right, at such holder's option, to require the Company to repurchase all of such
holder's Notes, or any portion thereof (in principal amounts of $1,000 or
integral multiples thereof), on the date (the "repurchase date") that is forty
(40) calendar days after the date of the Company Notice (as defined in Section
16.2 below) of such Repurchase Event (or, if such 40th day is not a Business
Day, the next succeeding Business Day). Such repurchase shall be made in cash at
a price equal to 105% of the principal amount of Notes such holder elects to
require the Company to repurchase, together with accrued interest, if any, to
but excluding the repurchase date (the "Repurchase Price") (or, at the option of
the Company, by delivery of Common Stock in accordance with the provisions of
Section 16.3); provided, however, that if such repurchase date is May 1 or
November 1 then the interest payable on such date shall be paid to the holder of
record of the Note as of the immediately preceding April 15 or October 15,
respectively. No Notes may be redeemed at the option of holders upon a
Repurchase Event if there has occurred and is continuing an Event of Default,
other than a default in the payment of the Repurchase Price with respect to such
Notes on the repurchase date.

         Section 16.2      Notices; Method of Exercising Repurchase Right, Etc.

                  (a) [intentionally omitted]

                  (b) Unless the Company shall have theretofore called for
         redemption all of the outstanding Notes, on or before the fifteenth
         (15th) calendar day after the occurrence of a Repurchase Event, the
         Company or, at the written request of the Company, the Trustee, shall
         mail to all holders of record of the Notes a notice (the "Company
         Notice") in the form as prepared by the Company of the occurrence of
         the Repurchase Event and of the repurchase right set forth herein
         arising as a result thereof. The Company shall also deliver a copy of
         such Company Notice to the Trustee and cause a copy of such Company
         Notice, or a summary of the information contained therein, to be
         published once in a newspaper of general circulation in The City of New
         York. The Company Notice shall contain the following information:

                           (1) the repurchase date;

                           (2) the date by which the repurchase right must be
                  exercised;

                                      -76-
<PAGE>   82
                           (3) the last date by which the election to require
                  repurchase, if submitted, must be revoked;

                           (4) the Repurchase Price and whether the Repurchase
                  Price shall be payable in cash or Common Stock and, if payable
                  in Common Stock, the method of calculating the amount of the
                  Common Stock to be delivered upon the repurchase as provided
                  in Section 16.3(a);

                           (5) a description of the procedure which a holder
                  must follow to exercise a repurchase right;

                           (6) the Conversion Price then in effect, the date on
                  which the right to convert the principal amount of the Notes
                  to be repurchased will terminate and the place or places where
                  Notes may be surrendered for conversion; and

                           (7) the CUSIP numbers of the Notes.

                  No failure of the Company to give the foregoing notices or
         defect therein shall limit any holder's right to exercise a repurchase
         right or affect the validity of the proceedings for the repurchase of
         Notes.

                  If any of the foregoing provisions are inconsistent with
         applicable law, such law shall govern.

                  (c) To exercise a repurchase right, a holder shall deliver to
         the Trustee on or before the thirty-fifth (35th) day after the Company
         Notice was delivered (i) written notice to the Company (or agent
         designated by the Company for such purpose) of the holder's exercise of
         such right, which notice shall set forth the name of the holder, the
         principal amount of the Notes to be repurchased, 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 shares of
         Common Stock, the name or names (with addresses) in which the
         certificate or certificates for shares of Common Stock shall be issued,
         and (ii) the Notes with respect to which the repurchase right is being
         exercised, duly endorsed for transfer to the Company. Election of
         repurchase by a holder shall be revocable at any time prior to, but
         excluding, the repurchase date, by delivering written notice to that
         effect to the Trustee prior to the close of business on the Business
         Day prior to the repurchase date.

                  (d) If the Company fails to repurchase on the repurchase date
         any Notes (or portions thereof) as to which the repurchase right has
         been properly exercised, then the principal of such Notes shall, until
         paid, bear interest to the extent permitted by applicable law from the
         repurchase date at the rate borne by the Note and each such Note shall
         be convertible into Common Stock in accordance with this Indenture
         (without giving effect to Section 16.2(b)) until the principal of such
         Note shall have been paid or duly provided for.

                                      -77-
<PAGE>   83
                  (e) Any Note which is to be repurchased only in part shall be
         surrendered to the Trustee duly endorsed for transfer to the Company
         and accompanied by appropriate evidence of genuineness and authority
         satisfactory to the Company and the Trustee duly executed by, the
         holder thereof (or his attorney duly authorized in writing), and the
         Company shall execute, and the Trustee shall authenticate and deliver
         to the holder of such Note without service charge, a new Note or Notes,
         containing identical terms and conditions, of any authorized
         denomination as requested by such holder in aggregate principal amount
         equal to and in exchange for the unrepurchased portion of the principal
         of the Note so surrendered.

                  (f) On or prior to the repurchase date, the Company shall
         deposit with the Trustee or with a paying agent (or, if the Company is
         acting as its own paying agent, segregate and hold in trust as provided
         in Section 5.4) the Repurchase Price in cash for payment to the holder
         on the repurchase date; provided that if payment is to be made in cash,
         such cash payment is made on the repurchase date it must be received by
         the Trustee or paying agent, as the case may be, by 10:00 a.m., New
         York City time, on such date; provided further that if the Repurchase
         Price is to be paid in shares of Common Stock, such shares of Common
         Stock are to be paid as promptly after the repurchase date as
         practicable.

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

                  (h) No fractions of shares shall be issued upon repurchase of
         Notes. If more than one Note shall be repurchased from the same holder
         and the Repurchase Price shall be payable in shares of Common Stock,
         the number of full shares which shall be issuable upon such repurchase
         shall be computed on the basis of the aggregate principal amount of the
         Notes so repurchased. Instead of any fractional share of Common Stock
         which would otherwise be issuable on the repurchase of any Note or
         Notes, the Company will deliver to the applicable holder its check for
         the current market value of such fractional share. The current market
         value of a fraction of a share is determined by multiplying the current
         market price of a full share by the fraction, and rounding the result
         to the nearest cent. For purposes of this Section, the current market
         price of a share of Common Stock is the Closing Price of the Common
         Stock on the Trading Day immediately preceding the repurchase date.

                                      -78-
<PAGE>   84
                  (i) Any issuance and delivery of certificates for shares of
         Common Stock on repurchase of Notes shall be made without charge to the
         holder of Notes being repurchased for such certificates or for any tax
         or duty in respect of the issuance or delivery of such certificates or
         the securities represented thereby; provided, however, that the Company
         shall not be required to pay any tax or duty which may be payable in
         respect of (i) income of the holder or (ii) any transfer involved in
         the issuance or delivery of certificates for shares of Common Stock in
         a name other than that of the holder of the Notes being repurchased,
         and no such issuance or delivery shall be made unless and until the
         person requesting such issuance or delivery has paid to the Company the
         amount of any such tax or duty or has established, to the satisfaction
         of the Company, that such tax or duty has been paid.

                  (j) All Notes delivered for repurchase shall be delivered to
         the Trustee to be canceled in accordance with the provisions of Section
         2.8.

         Section 16.3 Conditions to the Company's Election to Pay the Repurchase
Price in Common Stock.

         The Company may elect to pay the Repurchase Price by delivery of shares
of Common Stock pursuant to Section 16.1 if and only if the following conditions
shall have been satisfied:

         (a)      the shares of Common Stock deliverable in payment of the
Repurchase Price shall have a fair market value as of the repurchase date of not
less than the Repurchase Price. For purposes of Section 16.1 and this Section
16.3, the fair market value of shares of Common Stock shall be determined by the
Company and shall be equal to 95% of the average of the Closing Prices of the
Common Stock for the five consecutive Trading Days immediately preceding and
including the third Trading Day prior to the repurchase date;

         (b)      the Repurchase Price shall be paid only in cash in the event
any shares of Common Stock to be issued upon repurchase of Notes hereunder (i)
require registration under any federal securities law before such shares may be
freely transferable without being subject to any transfer restrictions under
the Securities Act upon repurchase and if such registration is not completed or
does not become effective prior to the repurchase date, and/or (ii) 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 repurchase and if such registration is not completed or does not become
effective or such approval is not obtained prior to the repurchase date;

         (c)      payment of the Repurchase Price may not be made in Common
Stock unless such stock is, or shall have been, or approved for quotation on the
Nasdaq National Market or listed on a national securities exchange, in either
case, prior to the repurchase date; and

         (d)      all shares of Common Stock which may be issued upon repurchase
of the Notes will be issued out of the Company's authorized but unissued Common
Stock and, will upon issue, be duly and validly issued and fully paid and
non-assessable and free of any preemptive rights.

                                      -79-
<PAGE>   85
         If all of the conditions set forth in this Section 16.3 are not
satisfied in accordance with the terms thereof, the Repurchase Price shall be
paid by the Company only in cash.

         Section 16.4 Certain Definitions. For purposes of this Article XVI:

                  (a) the term "beneficial owner" shall be determined in
         accordance with Rule 13d-3 and 13d-5, as in effect on the date of the
         original execution of this Indenture, promulgated by the Securities and
         Exchange Commission pursuant to the Exchange Act;

                  (b) the term "person" or "group" shall include any syndicate
         or group which would be deemed to be a "person" under Section 13(d) and
         14(d) of the Exchange Act as in effect on the date of the original
         execution of this Indenture; and

                  (c) the term "Continuing Director" means at any date a member
         of the Company's Board of Directors (i) who was a member of such board
         on December 31, 2000 or (ii) who was nominated or elected by at least a
         majority of the directors who were Continuing Directors at the time of
         such nomination or election or whose election to the Company's Board of
         Directors was recommended or endorsed by at least a majority of the
         directors who were Continuing Directors at the time of such nomination
         or election or such lesser number comprising a majority of a nominating
         committee if authority for such nominations or elections has been
         delegated to a nominating committee whose authority and composition
         have been approved by at least a majority of the directors who were
         continuing directors at the time such committee was formed. (Under this
         definition, if the Board of Directors of the Company as of the date of
         this Indenture were to approve a new director or directors and then
         resign, no Change in Control would occur even though the current Board
         of Directors would thereafter cease to be in office).

                  (d) the term "Repurchase Event" means a Change in Control or a
         Termination of Trading.

                  (e) a "Change in Control" shall be deemed to have occurred
         when (i) any "person" or "group" (as such terms are used in Sections
         13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
         owner" (as defined in Rules 13-d3 and 13-d5 under the Exchange Act) of
         shares representing more than 50% of the combined voting power of the
         then outstanding securities entitled to vote generally in elections of
         directors of the Company (the "Voting Stock"); (ii) approval by
         stockholders of the Company of any plan or proposal for the
         liquidation, dissolution or winding up of the Company; (iii) the
         Company (A) consolidates with or merges into any other corporation or
         any other corporation merges into the Company, and in the case of any
         such transaction, the outstanding Common Stock of the Company is
         changed or exchanged into other assets or securities as a result,
         unless the stockholders of the Company immediately before such
         transaction own, directly or indirectly immediately following such
         transaction, at least 51% of the combined voting power of the
         outstanding voting securities of the corporation resulting from such
         transaction in substantially the same proportion as their ownership of
         the Voting Stock immediately before such transaction, or (B) conveys,
         transfers or leases all or substantially all of its assets to any
         person; or (iv) any time Continuing Directors do

                                      -80-
<PAGE>   86
         not constitute a majority of the Board of Directors of the Company (or,
         if applicable, a successor corporation to the Company); provided that a
         Change in Control shall not be deemed to have occurred if either (x)
         the Closing Price (as defined in Section 15.5(h)(1) hereof) of the
         Common Stock for any five (5) Trading Days during the ten (10) Trading
         Days immediately preceding the Change in Control is at least equal to
         105% of the Conversion Price in effect on the date on which the Change
         in Control occurs or (y) in the case of a merger or consolidation
         otherwise constituting a Change in Control, all of the consideration
         (excluding cash payments for fractional shares) in such merger or
         consolidation constituting the Change in Control consists of common
         stock traded on a United States national securities exchange or quoted
         on the Nasdaq National Market (or which will be so traded or quoted
         when issued or exchanged in connection with such Change in Control) and
         as a result of such transaction or transactions such Notes become
         convertible solely into such common stock.

                  (f) a "Termination of Trading" shall have occurred if the
         Common Stock (or other common stock into which the Notes are then
         convertible) is neither listed for trading on a United States national
         securities exchange nor approved for trading on an established
         automated over-the-counter trading market in the United States.

                                  ARTICLE XVII

                            MISCELLANEOUS PROVISIONS

         Section 17.1      Provisions Binding on Company's Successors. All the
covenants, stipulations, promises and agreements of the Company in this
Indenture contained shall bind its successors and assigns whether so expressed
or not.

         Section 17.2      Official Acts by Successor Corporation. Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.

         Section 17.3      Addresses for Notices, Etc. Any notice or demand
which by any provision of this Indenture is required or permitted to be given or
served by the Trustee or by the holders of Notes on the Company shall be deemed
to have been sufficiently given or made, for all purposes if given or served by
being deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company with the
Trustee) to Cephalon, Inc., 145 Brandywine Parkway, West Chester, PA 19380,
Attention: Chief Financial Officer. Any notice, direction, request or demand
hereunder to or upon the Trustee shall be deemed to have been sufficiently given
or made, for all purposes, if given or served by being deposited postage prepaid
by registered or certified mail in a post office letter box addressed to the
Corporate Trust Office.

                                      -81-
<PAGE>   87
         The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.

         Any notice or communication mailed to a Noteholder shall be mailed to
him by first class mail, postage prepaid, at his address as it appears on the
Note register and shall be sufficiently given to him if so mailed within the
time prescribed.

         Failure to mail a notice or communication to a Noteholder or any defect
in it shall not affect its sufficiency with respect to other Noteholders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.

         Section 17.4      GOVERNING LAW. THIS INDENTURE AND EACH NOTE SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF NEW YORK, AND FOR ALL PURPOSES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK (WITHOUT REGARD TO
THE CONFLICT OF LAWS PROVISIONS THEREOF).

         Section 17.5      Evidence of Compliance with Conditions Precedent;
Certificates to Trustee. Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions precedent have been complied
with.

         Each certificate or opinion provided for by or on behalf of the Company
in this Indenture and delivered to the Trustee with respect to compliance with a
condition or covenant provided for in this Indenture shall include (1) a
statement that the person making such certificate or opinion has read such
covenant or condition; (2) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion contained in
such certificate or opinion is based; (3) a statement that, in the opinion of
such person, he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and (4) a statement as to whether or not, in
the opinion of such person, such condition or covenant has been complied with.

         Section 17.6      Legal Holidays. In any case where the date of
maturity of interest on or principal of the Notes or the date fixed for
redemption of any Note will not be a Business Day, then payment of such interest
on or principal of the Notes need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the date of maturity or the date fixed for redemption, and no interest shall
accrue for the period from and after such date.

         Section 17.7      No Security Interest Created. Nothing in this
Indenture or in the Notes, expressed or implied, shall be construed to
constitute a security interest under the Uniform Commercial Code or similar
legislation, as now or hereafter enacted and in effect, in any jurisdiction.

                                      -82-
<PAGE>   88
         Section 17.8      Trust Indenture Act. This Indenture is hereby made
subject to, and shall be governed by, the provisions of the Trust Indenture Act
required to be part of and to govern indentures qualified under the Trust
Indenture Act; provided, however, that, unless otherwise required by law,
notwithstanding the foregoing, this Indenture and the Notes issued hereunder
shall not be subject to the provisions of subsections (a)(1), (a)(2), and (a)(3)
of Section 314 of the Trust Indenture Act as now in effect as hereafter amended
or modified; provided further that this Section 17.8 shall not require that this
Indenture or the Trustee be qualified under the Trust Indenture Act prior to the
time such qualification is in fact required under the terms of the Trust
Indenture Act, nor shall it constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time such
qualification is in fact required under the terms of the Trust Indenture Act. If
any provision hereof limits, qualifies or conflicts with another provision
hereof which is required to be included in an indenture qualified under the
Trust Indenture Act, such required provision shall control.

         Section 17.9      Benefits of Indenture. Nothing in this Indenture or
in the Notes, expressed or implied, shall give to any person, other than the
parties hereto, any paying agent, any authenticating agent, any Note registrar
and their successors hereunder, the holders of Notes and the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim under
this Indenture.

         Section 17.10     Table of Contents, Headings, Etc. The table of
contents and the titles and headings of the articles and sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.

         Section 17.11     Authenticating Agent. The Trustee may appoint an
authenticating agent which shall be authorized to act on its behalf and subject
to its direction in the authentication and delivery of Notes in connection with
the original issuance thereof and transfers and exchanges of Notes hereunder,
including under Sections 2.4, 2.5, 2.6, 2.7 and 3.3, as fully to all intents and
purposes as though the authenticating agent had been expressly authorized by
this Indenture and those Sections to authenticate and deliver Notes. For all
purposes of this Indenture, the authentication and delivery of Notes by the
authenticating agent shall be deemed to be authentication and delivery of such
Notes "by the Trustee" and a certificate of authentication executed on behalf of
the Trustee by an authenticating agent shall be deemed to satisfy any
requirement hereunder or in the Notes for the Trustee's certificate of
authentication. Such authenticating agent shall at all times be a person
eligible to serve as trustee hereunder pursuant to Section 8.9.

         Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section, without the execution or filing of any paper or any further act on the
part of the parties hereto or the authenticating agent or such successor
corporation.

                                      -83-
<PAGE>   89
         Any authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any authenticating agent by giving written notice
of termination to such authenticating agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any authenticating agent shall cease to be eligible under this Section, the
Trustee shall promptly appoint a successor authenticating agent (which may be
the Trustee), shall give written notice of such appointment to the Company and
shall mail notice of such appointment to all holders of Notes as the names and
addresses of such holders appear on the Note register.

         The Trustee agrees to pay to the authenticating agent from time to time
reasonable compensation for its services (to the extent pre-approved by the
Company in writing), and the Trustee shall be entitled to be reimbursed for such
pre-approved payments, subject to Section 8.6.

         The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section 17.11
shall be applicable to any authenticating agent.

         Section 17.12     Execution in Counterparts. This Indenture may be
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.

         State Street Bank and Trust Company hereby accepts the trusts in this
Indenture declared and provided, upon the terms and conditions hereinabove set
forth.

                                      -84-
<PAGE>   90
         IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly signed all as of the date first written above.

                        CEPHALON, INC.

                         By:      /s/ J. Kevin Buchi
                             -------------------------------------------------
                              Name:   J. Kevin Buchi
                                   -------------------------------------------
                              Title:  Senior VP and CFO
                                    ------------------------------------------

                         STATE STREET BANK AND TRUST COMPANY
                         as Trustee

                         By:          /s/ Philip G. Kane Jr.
                             -------------------------------------------------
                              Name:    Philip G. Kane Jr.
                                   -------------------------------------------
                              Title:   Vice President
                                    ------------------------------------------
<PAGE>   91
                      EXHIBIT A - FORM OF SUBORDINATED NOTE

                       [FORM OF FACE OF SUBORDINATED NOTE]

FORM OF LEGEND FOR GLOBAL NOTE: UNLESS THIS CERTIFICATE IS RESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND
MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT); (2)
AGREES THAT IT WILL NOT, WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE
NOTE EVIDENCED HEREBY, RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR
THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO THE COMPANY
OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (D)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
TRANSFER); AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE
EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(D)
ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH
ANY TRANSFER OF THE NOTE EVIDENCED HEREBY WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF SUCH NOTE (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(D) ABOVE), THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING
TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO STATE STREET BANK
AND TRUST COMPANY, AS TRUSTEE. IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE
2(C) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO STATE STREET
BANK AND TRUST COMPANY, AS TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS
<PAGE>   92
THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED
UPON THE EARLIER OF THE TRANSFER OF THE NOTE EVIDENCED HEREBY PURSUANT TO CLAUSE
2(C) or 2(D) ABOVE OR THE EXPIRATION OF TWO YEARS FROM THE ORIGINAL ISSUANCE
NOTE EVIDENCED HEREBY.

No. ____________                                                    $300,000,000

                                CEPHALON, INC.                CUSIP: 156708 AB 5

                 5 -1/4 % Convertible Subordinated Note due 2006

         Cephalon, Inc., a corporation duly organized and validly existing under
the laws of the State of Delaware (herein called the "Company," which term
includes any successor corporation under the Indenture referred to on the
reverse hereof), for value received hereby promises to pay to Cede & Co., or
registered assigns, the principal sum of Three Hundred Million Dollars
($300,000,000) on May 1, 2006, and to pay interest on said principal sum
semi-annually on May 1 and November 1 of each year, commencing on November 1,
2001, at the rate per annum specified in the title of this Note. The interest so
payable on any May 1 or November 1 will be paid to the person in whose name this
Note (or one or more Predecessor Notes) is registered at the close of business
on the record date, which shall be the April 15 or October 15 (whether or not a
Business Day) next preceding such May 1 or November 1, respectively, as provided
in the Indenture; provided that any such interest not punctually paid or duly
provided for shall be payable as provided in the Indenture. Payment of the
principal of and interest accrued on this Note shall be made at the office or
agency of the Company maintained for that purpose in the Borough of Manhattan,
The City of New York, which shall initially be the office or agency of the
Trustee, 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;
provided, however, that at the option of the Company, payment of interest may be
made by check mailed to the registered address of the person entitled thereto;
provided further that, with respect to any holder of Notes with an aggregate
principal amount equal to or in excess of $2,000,000, at the request of such
holder in writing to the Company, interest on such holder's Notes shall be paid
by wire transfer in immediately available funds in accordance with the wire
transfer instruction supplied by such holder to the Trustee and paying agent (if
different from the Trustee).

         Reference is made to the further provisions of this Note set forth on
the reverse hereof, including, without limitation, provisions subordinating the
payment of principal of and premium, if any, and interest on this Note to the
prior payment in full of all Senior Indebtedness as defined in the Indenture and
provisions giving the holder of this Note the right to convert this Note into
Common Stock of the Company on the terms and subject to the limitations referred
to on the reverse hereof and as more fully specified in the Indenture. Such
further provisions shall for all purposes have the same effect as though fully
set forth at this place.
<PAGE>   93
                  THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS
                  OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE
                  CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID
                  STATE.

         This Note shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been manually signed by the
Trustee or a duly authorized authenticating agent under the Indenture.

         IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed under its corporate seal.

                                         CEPHALON, INC.

Dated:  May 7, 2001                      By:
                                            ------------------------------------
                                             Name:
                                                  ------------------------------
                                             Title:
                                                   -----------------------------

                                         Attest:

                                         ---------------------------------------
                                         Secretary
<PAGE>   94
                     [FORM OF CERTIFICATE OF AUTHENTICATION]

TRUSTEE'S CERTIFICATE OF AUTHENTICATION

       This is one of the Notes described in the within-named Indenture.

                                        State Street Bank and Trust Company,
                                        as Trustee

                                        By:__________________________
                                           Authorized Signatory
<PAGE>   95
                     [FORM OF REVERSE OF SUBORDINATED NOTE]

                                 CEPHALON, INC.

                 5 -1/4 % Convertible Subordinated Note due 2006

         This Note is one of a duly authorized issue of Notes of the Company,
designated as its 5 -1/4 % Convertible Subordinated Notes due 2006 (herein
called the "Notes"), limited to the aggregate principal amount of $300,000,000
all issued or to be issued under and pursuant to an Indenture, dated as of May
7, 2001 (herein called the "Indenture"), between the Company and State Street
Bank and Trust Company (herein called the "Trustee"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Trustee, the Company and the holders of the Notes.

         In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of and accrued interest on all Notes
may be declared, and upon said declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.

         The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority of the
aggregate principal amount of the Notes at the time outstanding, evidenced as in
the Indenture provided, to execute supplemental indentures adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Indenture or of any supplemental indenture or modifying in any manner the rights
of the holders of the Notes; provided, however, that no such supplemental
indenture shall (i) extend the fixed maturity of any Note, or reduce the rate or
extend the time of payment of interest thereon, or reduce the principal amount
thereof or premium, if any, thereon, or reduce any amount payable on redemption
or repurchase thereof, or impair or change in any respect adverse to the holders
of the Notes, the obligation of the Company to repurchase any Note at the option
of the holder upon the happening of a Repurchase Event, or impair or adversely
affect the right of any Noteholder to institute suit for the payment thereof,
change the currency in which the Notes are payable, or impair or change in any
respect adverse to the Noteholders, the right to convert the Notes into Common
Stock subject to the terms set forth in the Indenture, including Section 15.6
thereof, or modify the provisions of the Indenture with respect to the
subordination of the Notes in a manner adverse to the Noteholders without the
consent of the holder of each Note so affected or (ii) reduce the aforesaid
percentage of Notes, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of all Notes then
outstanding. It is also provided in the Indenture that, prior to any declaration
accelerating the maturity of the Notes, the holders of a majority in aggregate
principal amount of the Notes at the time outstanding may on behalf of the
holders of all of the Notes waive any past default or Event of Default under the
Indenture and its consequences except a default in the payment of interest or
any premium on or the principal of or any redemption price of any of the Notes
or a failure by the Company to convert any Notes into Common Stock of the
Company. Any such consent or waiver by the holder of this Note (unless revoked
as provided in the
<PAGE>   96
Indenture) shall be conclusive and binding upon such holder and upon all future
holders and owners of this Note and any Notes which may be issued in exchange or
substitution hereof, irrespective of whether or not any notation thereof is made
upon this Note or such other Notes.

         The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, expressly subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness of the Company,
as defined in the Indenture, whether outstanding at the date of the Indenture or
thereafter incurred, and this Note is issued subject to the provisions of the
Indenture with respect to such subordination. Each holder of this Note, by
accepting the same, agrees to and shall be bound by such provisions and
authorizes the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and appoints the Trustee
his attorney in fact for such purpose.

         No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Note at the place, at the respective times, at the rate and in the coin
or currency herein prescribed.

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

         The Notes are issuable in registered form without coupons in
denominations of $1,000 principal amount and integral multiples thereof. At the
office or agency of the Company referred to on the face hereof, and in the
manner and subject to the limitations provided in the Indenture, without payment
of any service charge but with payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any
registration or exchange of Notes, Notes may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations.

         The Company may, at its option, redeem some or all of the principal of
this Note at any time prior to May 5, 2003, at a redemption price equal to the
principal amount of this Note (or any portion of such principal amount which is
$1,000 or an integral multiple thereof) plus accrued and unpaid interest on the
portion of the principal redeemed to the redemption date if (1) the closing
price of the Common Stock has exceeded 150% of the Conversion Price for at least
20 Trading Days in the consecutive 30-Trading Day period ending on the Trading
Day immediately prior to the mailing of the notice of redemption and (2) the
shelf registration statement covering resale of this Note and the Common Stock
underlying this Note is effective and expected to remain effective and available
for use for the 30 days following the redemption date.

         If the Company redeems some or all of this Note prior to May 5, 2003,
the Company will also make an additional payment in cash on the redeemed portion
of this Note in an amount equal to $100.27 per $1,000 principal amount of the
Notes redeemed, less the amount of any interest the Company actually paid on
this Note (or such portion hereof) prior to the date it mailed the notice. The
Company must make these additional payments on any Note called for redemption,
including Notes converted after the date the notice is mailed.
<PAGE>   97
         At any time on or after May 5, 2003, and prior to May 1, 2006, the
Notes may be redeemed at the option of the Company as a whole, or from time to
time in part, upon mailing a notice of such redemption not less than 20 nor more
than 60 days before the date fixed for redemption to the holders of Notes at
their last registered addresses, all as provided in the Indenture, at the
following optional redemption prices (expressed as percentages of the principal
amount), together in each case with accrued interest to, but excluding, the date
fixed for redemption.

         If redeemed during the 12-month period beginning May 1 (beginning May
5, 2003 through April 30, 2004, in the case of the first such period):

<TABLE>
<CAPTION>
                        YEAR                        REDEMPTION PRICE

                        <S>                         <C>
                        2003........................     103.15%
                        2004........................     102.10%
                        2005........................     101.05%
</TABLE>

and 100% at May 1, 2006 and thereafter; provided, that if the date fixed for
redemption is a May 1 or November 1, then the interest payable on such date
shall be paid to the holder of record on the next preceding April 15 or October
15.

         The Notes are not subject to redemption through the operation of any
sinking fund.

         Subject to the provisions of the Indenture, the holder hereof has, at
its option, the right, at any time or on or prior to the close of business on
May 1, 2006 (except that, with respect to all or any portion hereof called for
redemption, such right shall terminate except as provided in the fifth paragraph
of Section 15.2 and Section 3.4 of the Indenture at the close of business on the
Business Day preceding the date fixed for redemption (unless the Company shall
default in payment due upon redemption)), to convert the principal hereof or any
portion of such principal which is $1,000 or an integral multiple thereof, into
that number of fully paid and non-assessable shares of Company's Common Stock,
as said shares shall be constituted at the date of conversion, obtained by
dividing the principal amount of this Note or portion hereof to be converted by
the Conversion Price then in effect at such time, upon surrender of this Note,
together with a conversion notice as provided in the Indenture and this Note, to
the Company at the office or agency of the Company maintained for that purpose
in the Borough of Manhattan, The City of New York, or such other office
maintained by the Company pursuant to Section 15.2 under the Indenture, and,
unless the shares issuable on conversion are to be issued in the same name as
this Note, duly endorsed by, or accompanied by instruments of transfer in form
satisfactory to the Company duly executed by, the holder or by his duly
authorized attorney. If the holder if this Note has delivered a notice in
accordance with Section 16.2 of the Indenture regarding such holder's election
to require the Company to repurchase such holder's Notes following the
occurrence of a Repurchase Event then this Note may be converted only if such
holder withdraws such notice by delivering a written notice of withdrawal to the
Company prior to the close of business on last Business Day prior to the day
fixed for repurchase. The initial Conversion Price shall be $74.00 (equivalent
to 13.5315 shares of Common Stock for each $1,000 principal amount of the
Notes). The Conversion Price of the Note is subject to
<PAGE>   98
adjustment as provided in the Indenture under certain circumstances. No
adjustment in respect of interest or dividends will be made upon any conversion;
provided, however, that if this Note shall be surrendered for conversion during
the period from the close of business on any record date for the payment of
interest through the close of business on the Business Day preceding the
following interest payment date, this Note (unless it or the portion being
converted shall have been called for redemption and a notice of redemption has
been mailed to the holders of the Notes pursuant to Section 3.2 of the
Indenture) must be accompanied by payment, in New York Clearing House funds, or
other funds acceptable to the Company, equal to the interest otherwise payable
on such interest payment date on the principal amount being converted; provided
however, that no such payment need be made if there shall exist at the time of
conversion a default in the payment of interest on the Notes. No fractional
shares of Common Stock will be issued upon any conversion, but an adjustment in
cash will be paid to the holder, as provided in the Indenture, in respect of any
fraction of a share which would otherwise be issuable upon the surrender of any
Note or Notes for conversion.

         Any Notes called for redemption, unless surrendered for conversion on
or before the close of business on the date fixed for redemption, may be deemed
to be purchased from the holder of such Notes at an amount equal to the
applicable redemption price, together with accrued interest to the date fixed
for redemption, by one or more investment bankers or other purchasers who may
agree with the Company to purchase such Notes from the holders thereof and
convert them into Common Stock of the Company and to make payment for such Notes
as aforesaid to the Trustee in trust for such holders.

         If, at any time prior to May 1, 2006 there shall occur a Repurchase
Event, then the holder of this Note shall have the right, at such holder's
option, to require the Company to repurchase all or any portion of the Notes (in
principal amounts of $1,000 or integral multiples thereof) on the date that is
forty (40) calendar days after the date of the Company Notice (or, if such 40th
day is not a Business Day, the next succeeding Business Day). A "Repurchase
Event" means either (a) a termination of trading of the Common Stock on a
national securities exchange or established automated over-the-counter trading
market in the United States or (b) a "change in control" of the Company pursuant
to one of the events set forth in the Indenture. If the holder of this Note
elects to require the Company to repurchase this Note, such repurchase shall be
made in cash at a price equal to 105% of the principal amount of this Note
redeemed, together with accrued interest, if any, applicable to such portion, to
but excluding the repurchase date (or, at the option of the Company, by delivery
of Common Stock in accordance with the provisions of Section 16.3 of the
Indenture). If the repurchase date is May 1 or November 1 then the interest
payable on such date shall be paid to the holder of record of the Note as of the
immediately preceding April 15 or October 15, respectively. This Note may not be
redeemed upon a Repurchase Event if there has occurred and is continuing an
Event of Default, other than a default in the payment of the Repurchase Price
with respect to the Note on the repurchase date.

         To exercise a repurchase right, the holder of this Note must deliver to
the Trustee on or before the thirty-fifth (35th) day after the Company Notice
was delivered (i) written notice to the Company (or agent designated by the
Company for such purpose) of the holder's exercise of such right, which notice
shall set forth the name of the holder, the principal amount of this Note to be
repurchased, a statement that an election to exercise the repurchase right is
being made
<PAGE>   99
thereby, and, in the event that the Repurchase Price shall be paid in shares of
Common Stock, the name or names (with addresses) in which the certificate or
certificates for shares of Common Stock shall be issued, and (ii) this Note,
duly endorsed for transfer to the Company. Election of repurchase by the holder
of this Note shall be revocable at any time prior to, but excluding, the
repurchase date, by delivering written notice to that effect to the Trustee
prior to the close of business on the Business Day prior to the repurchase date.

         If this Note is to be repurchased only in part it shall be surrendered
to the Trustee duly endorsed for transfer to the Company and accompanied by
appropriate evidence of genuineness and authority satisfactory to the Company
and the Trustee duly executed by, the holder hereof (or his attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the holder of this Note without service charge, a
new Note or Notes, containing identical terms and conditions, of any authorized
denomination as requested by the holder hereof in aggregate principal amount
equal to and in exchange for the unrepurchased portion of the principal of this
Note.

         Upon due presentment for registration of transfer of this Note at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, or its paying agent which shall initially be State Street Bank and Trust
Company, N.A., an Affiliate of the Trustee, a new Note or Notes of authorized
denominations for an equal aggregate principal amount will be issued to the
transferee in exchange thereof, subject to the limitations provided in the
Indenture, without charge except for any tax or other governmental charge
imposed in connection therewith, and bearing restrictive legends required by the
Indenture.

         The Company, the Trustee, any authenticating agent, any paying agent,
any conversion agent and any Note registrar may deem and treat the registered
holder hereof as the absolute owner of this Note (whether or not this Note shall
be overdue and notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Note registrar), for the purpose of
receiving payment hereof, or on account hereof, for the conversion hereof and
for all other purposes, and neither the Company nor the Trustee nor any other
authenticating agent nor any paying agent nor any other conversion agent nor any
Note registrar shall be affected by any notice to the contrary. All payments
made to or upon the order of such registered holder shall, to the extent of the
sum or sums paid, satisfy and discharge liability for monies payable on this
Note.

         No recourse for the payment of the principal of or any premium or
interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any indenture supplemental thereto or in any
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, shareholder, employee, agent, officer, director
or subsidiary, as such, past, present or future, of the Company or of any
successor corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
<PAGE>   100
         Terms used in this Note and defined in the Indenture are used herein as
therein defined.

ABBREVIATIONS

         The following abbreviations, when used in the inscription of the face
of this Note, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common    UNIF GIFT MIN ACT _______ Custodian _______
TEN ENT - as tenants by the                         (Cust)            (Minor)
          entireties                    under Uniform Gifts to Minors
JT TEN  - as joint tenants with
          right of survivorship and           _____________________
          not as tenants in Common                   (State)
          Act

         Additional abbreviations may also be used though not in the above list.
<PAGE>   101
                           [FORM OF CONVERSION NOTICE]

CONVERSION NOTICE

To:      Cephalon, Inc.

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

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

                                                  -----------------------------

                                                  -----------------------------
                                                  Signature(s)

Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks,
stockbrokers, savings and loan associations
and credit unions) with membership in an
approved signature guarantee medallion
program pursuant to Securities and Exchange
Commission Rule 17Ad-15 if shares of Common
Stock are to be issued, or Notes to be
delivered, other than to and in the name of
the registered holder.

-----------------------------------
Signature Guarantee
<PAGE>   102
Fill in for registration of shares if to be
issued, and Notes if to be delivered, other
than to and in the name of the registered
holder:

----------------------------------------
(Name)

----------------------------------------
(Street Address)

----------------------------------------
(City, State and Zip Code)

----------------------------------------
Please print name and address

                                            Principal amount to be converted (if
                                            less than all):  $______,000

                                            -----------------------------------
                                            Social Security or Other Taxpayer
                                            Identification Number
<PAGE>   103
                           [FORM OF REPURCHASE NOTICE]

REPURCHASE NOTICE

To:  Cephalon, Inc.

         The undersigned registered owner of this Note hereby acknowledges
receipt of the Company Notice of a Repurchase Event and hereby exercises the
option to have the Company repurchase this Note, or the portion hereof (which is
$1,000 principal amount or an integral multiple thereof) below designated for
cash, or, at the option of the Company as set forth in the Company Notice, into
shares of Common Stock in accordance with the terms of the Indenture referred to
in this Note. If the consideration to be received consists of cash, it shall be
delivered to the registered holder hereof. If the consideration to be received
consists of shares of Common Stock, the undersigned directs that the shares
issuable and deliverable upon such repurchase, together with any check in
payment for fractional shares and any Notes representing any unconverted
principal amount hereof, be issued and delivered to the registered holder hereof
unless a different name has been indicated below. If shares or any portion of
this Note not repurchased are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto. Any amount required to be paid to the undersigned on account of
interest accompanies this Note.

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

                                               --------------------------------

                                               --------------------------------
                                               Signature(s)

Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks,
stockbrokers, savings and loan associations
and credit unions) with membership in an
approved signature guarantee medallion
program pursuant to Securities and Exchange
Commission Rule 17Ad-15 if shares of Common
Stock are to be issued, or Notes to be
delivered, other than to and in the name of
the registered holder.

--------------------------------------
Signature Guarantee
<PAGE>   104
Fill in for registration of shares if to be
issued, and Notes if to be delivered, other
than to and in the name of the registered
holder:

----------------------------------------
(Name)

----------------------------------------
(Street Address)

----------------------------------------
(City, State and Zip Code)

Please print name and address

         Principal amount to be repurchased (if less than all):  $______,000

                                           ------------------------------------
                                           Social Security or Other Taxpayer
                                           Identification Number
<PAGE>   105
                              [FORM OF ASSIGNMENT]

         For value received_____________________________ hereby sell(s),
assign(s) and transfer(s) unto____________________________ (Please insert social
security or Taxpayer Identification Number of assignee) the Note, and hereby
irrevocably constitutes and appoints
________________________________________________ attorney to transfer the said
Note on the books of the Company, with full power of substitution in the
premises.

         In connection with any transfer of the Note occurring within two years
of the original issuance of such Note (unless such Note is being transferred
pursuant to a registration statement that has been declared effective under the
Securities Act), the undersigned confirms that such Note is being transferred:

         [  ] To Cephalon, Inc. or a subsidiary thereof; or

         [  ] Pursuant to and in compliance with Rule 144A under the Securities
              Act of 1933, as amended; or

         [  ] Pursuant to and in compliance with Rule 144 under the Securities
              Act of 1933, as amended;

and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate").

         [ ] The transferee is an Affiliate of the Company.

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

----------------------------------------

----------------------------------------
Signature(s)
<PAGE>   106
Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks, stock
brokers, savings and loan associations and
credit unions) with membership in an
approved signature guarantee medallion
program pursuant to Securities and Exchange
Commission Rule 17AD-15 if shares of Common
Stock are to be issued, or Notes are to be
delivered, other than to and in the name of
the registered holder.

-------------------------------------------
Signature Guarantee

NOTICE: The signature on the conversion notice, the repurchase notice or the
assignment must correspond with the name as written upon the face of the Note in
every particular without alteration or enlargement or any change whatever.<PAGE>   1
                                                                     Exhibit 4.2

                             REGISTRATION RIGHTS AGREEMENT

      This Registration Rights Agreement is made and entered into as of May 7,
2001 between Cephalon, Inc., a Delaware corporation (the "Company"), and
Robertson Stephens, Inc., Adams, Harkness & Hill, Inc., Banc of America
Securities LLC, CIBC World Markets Corp., SG Cowen Securities Corporation, UBS
Warburg LLC, U.S. Bancorp Piper Jaffray Inc. (the "Purchasers") who have
purchased or have the right to purchase up to $300,000,000 in aggregate
principal amount of 5-1/4% Convertible Subordinated Notes due 2006 (or up to
$400,000,000 if the option set forth in Section 2(b) of the Purchase Agreement
(as defined below) is exercised in full by the Purchasers) of the Company
pursuant to the Purchase Agreement and each Holder (as defined below) by
participating in a Registration Statement agrees to be bound by this Agreement.

      This Agreement is made pursuant to the Purchase Agreement, dated May 2,
2001 among the Company and the Purchasers (the "Purchase Agreement"). In order
to induce the Purchasers to enter into the Purchase Agreement, the Company has
agreed to provide the registration rights provided for in this Agreement to the
Purchasers and their respective direct and indirect transferees (i) for the
benefit of the Purchasers, (ii) for the benefit of the holders from time to time
of the Notes (as such term is defined in Section 1 hereof) (including the
Purchasers) and the holders from time to time of the Common Stock (as such term
is defined in Section 1 hereof) issuable or issued upon conversion of the Notes
and (iii) for the benefit of the securities constituting the Transfer Restricted
Securities (as such term is defined in Section 1 hereof). The execution of this
Agreement is a condition to the closing of the transactions contemplated by the
Purchase Agreement.

      The parties hereby agree as follows:

      1.    Definitions. As used in this Agreement, the following terms shall
have the following meanings:

            Act: As defined in the last paragraph of this Section 1.

            Advice: As defined in Section 2(d) hereof.

            Affiliate: An affiliate of any specified person shall mean 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 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 "affiliated," "controlling" and "controlled" have meanings correlative
to the foregoing.

            Agreement: This Registration Rights Agreement, as the same may be
amended, supplemented or modified from time to time in accordance with the terms
hereof.
<PAGE>   2
            Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.

            Closing Date: May 7, 2001.

            Common Stock: Common Stock, $.01 par value per share, of the Company
and any other shares of common stock as may constitute "Common Stock" for
purposes of the Indenture, in each case, as issuable or issued upon conversion
of the Notes.

            Company: Cephalon, Inc., a Delaware corporation, and any successor
corporation thereto.

            Company Indemnified Person: As defined in Section 6(c) hereof.

            Controlling person: As defined in Section 6(a) hereof.

            Damages Payment Date: Each of the semi-annual interest payment dates
provided in the Indenture.

            Effectiveness Period: As defined in Section 2(a) hereof.

            Effectiveness Target Date: The 180th day following the Closing Date.

            Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.

            Filing Date: The 45th day after the Closing Date.

            Holder: Each owner of any Transfer Restricted Securities.

            Indemnified Person: As defined in Section 6(a) hereof.

            Indemnified Party: As defined in Section 6(c) hereof.

            Indemnifying Party: The Company, on one hand or any Holder (or
predecessor Holder), on the other hand, as applicable in accordance with Section
6 hereof.

            Indenture: The Indenture, dated as of the date hereof, between the
Company and the Trustee, pursuant to which the Notes are being issued, as the
same may be amended, modified or supplemented from time to time in accordance
with the terms thereof.

            Liquidated Damages: As defined in Section 3(a) hereof.

                                      -2-
<PAGE>   3
            Notes: The $300,000,000 aggregate principal amount of 5-1/4%
Convertible Subordinated Notes due 2006 of the Company being issued pursuant to
the Indenture (or $400,000,000 if the option set forth in Section 2(b) of the
Purchase Agreement is exercised in full by the Initial Purchasers).

            Notice and Questionnaire: A written notice completed by the Holder
and delivered to the Company containing substantially the information called for
by the Selling Securityholder Notice and Questionnaire attached as Annex A to
the Offering Circular of the Company dated May 2, 2001 relating to the Notes.

            Proceeding: An action, claim, suit or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.

            Prospectus: The prospectus included in any Registration Statement,
as amended or supplemented by any prospectus supplement, with respect to the
resale of any of the Transfer Restricted Securities covered by such Registration
Statement, and all other amendments and supplements to any such prospectus,
including post-effective amendments, and all materials incorporated by reference
or deemed to be incorporated by reference, if any, in such prospectus.

            Purchase Agreement: As defined in the second paragraph hereof.

            Purchasers: As defined in the first paragraph hereof.

            Record Holder: (i) with respect to any Damages Payment Date relating
to any Note as to which any such Liquidated Damages have accrued, the registered
Holder of such Note on the record date with respect to the interest payment date
under the Indenture on which such Damages Payment Date shall occur and (ii) with
respect to any Damages Payment Date relating to any shares of Common Stock as to
which any such Liquidated Damages have accrued, the registered Holder of such
shares 15 days prior to the next succeeding Damages Payment Date.

            Registration Default: As defined in Section 3(a) hereof.

            Registration Statement: Any registration statement of the Company
filed with the SEC pursuant to the Securities Act that covers the resale of any
of the Transfer Restricted Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference, if any, in such registration statement.

            Requisite Information: As defined in Section 2(c) hereof.

            Restricted Notes: Notes required pursuant to the Indenture to bear
the legend set forth in Section 2.5(d) of the Indenture.

                                      -3-
<PAGE>   4
            Rule 144: Rule 144 promulgated by the SEC pursuant to the Securities
Act, as such rule may be amended from time to time, or any successor rule or
regulation.

            Rule 144A: Rule 144A promulgated by the SEC pursuant to the
Securities Act, as such rule may be amended from time to time, or any successor
rule or regulation.

            Rule 415: Rule 415 promulgated by the SEC pursuant to the Securities
Act, as such rule may be amended from time to time, or any successor rule or
regulation.

            Rule 424: Rule 424 promulgated by the SEC pursuant to the Securities
Act, as such rule may be amended from time to time, or any successor rule or
regulation.

            SEC: The Securities and Exchange Commission.

            Securities Act: The Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.

            Shelf Registration Statement: As defined in Section 2(a) hereof.

            Special Counsel: The special counsel to the Holders.

            TIA: The Trust Indenture Act of 1939, as amended, and the rules and
regulations promulgated by the SEC thereunder.

            Transfer Restricted Securities: The Restricted Notes and the shares
of Common Stock into which such Restricted Notes are converted or convertible
(including any shares of Common Stock issued or issuable thereon upon any stock
split, stock combination, stock dividend or the like) upon original issuance
thereof, and at all times subsequent thereto, and associated related rights, if
any, until, in the case of any such Restricted Note or shares of Common Stock
(and associated rights) (i) the date on which the resale thereof has been
effectively registered under the Securities Act and disposed of in accordance
with the Registration Statement relating thereto, (ii) the date on which such
security has been distributed to the public pursuant to Rule 144 or is saleable
pursuant to paragraph (k) of Rule 144 or (iii) the date on which such security
ceases to be outstanding, whichever date is earliest.

            Trustee: The trustee under the Indenture.

            underwritten registration or underwritten offering: A registration
in connection with which securities of the Company are sold to one or more
underwriters for reoffering to the public pursuant to an effective Registration
Statement and an executed underwriting agreement.

            References herein to the term "Holders of a majority in aggregate
principal amount of Transfer Restricted Securities" or words to a similar effect
shall mean, with respect to any request, notice, demand, objection or other
action by the Holders hereunder or pursuant hereto (each, an "Act"), registered
Holders of a number of shares of then-outstanding Common Stock constituting

                                      -4-
<PAGE>   5
Transfer Restricted Securities and an aggregate principal amount of then
outstanding Notes constituting Transfer Restricted Securities, such that the sum
of such shares of Common Stock and the shares of Common Stock issuable upon
conversion of such Notes constitutes in excess of 50% of the sum of all of the
then-outstanding shares of Common Stock constituting Transfer Restricted
Securities and the number of shares of Common Stock issuable upon conversion of
then-outstanding Notes constituting Transfer Restricted Securities. For purposes
of the preceding sentence, Transfer Restricted Securities owned, directly or
indirectly, by the Company or its Affiliates shall be deemed not to be
outstanding.

      2.    Shelf Registration Statement

            (a)   The Company agrees to file with the SEC as soon as reasonably
practicable after the Closing Date, but in no event later than the Filing Date,
a Registration Statement for an offering to be made on a continuous basis
pursuant to Rule 415, covering all of the Transfer Restricted Securities or
separate Registration Statements for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the Notes constituting Transfer
Restricted Securities and all of the Common Stock constituting Transfer
Restricted Securities, respectively (such Registration Statement or Statements,
collectively, the "Shelf Registration Statement"). The Shelf Registration
Statement shall be on Form S-3 under the Securities Act or another appropriate
form selected by the Company permitting registration of such Transfer Restricted
Securities for resale by the Holders in the manner or manners reasonably
designated by Holders of a majority in aggregate principal amount of Transfer
Restricted Securities being sold (including, without limitation, up to three
underwritten offerings). The Company shall not permit any securities other than
the Transfer Restricted Securities to be included in the Shelf Registration
Statement. The Company shall use its reasonable best efforts to cause the Shelf
Registration Statement to be declared effective pursuant to the Securities Act
as soon as reasonably practicable following the filing thereof and to keep the
Shelf Registration Statement continuously effective under the Securities Act for
two years after the latest date of original issuance of any of the Notes
(subject to extension pursuant to Sections 2(d) hereof) (the "Effectiveness
Period"), or such shorter period ending when there cease to be any Transfer
Restricted Securities outstanding.

            (b)   Supplements and Amendments. The Company shall use its
reasonable best efforts to keep the Shelf Registration Statement continuously
effective by supplementing and amending the Shelf Registration Statement if
required by the rules, regulations or instructions applicable to the
registration form used for the Shelf Registration Statement, if required by the
Securities Act or if reasonably requested by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities or by any
underwriter of such Transfer Restricted Securities; provided, however, that the
Effectiveness Period shall be extended as provided in Section 2(d) hereof.

            (c)   Selling Securityholder Information. Each Holder of Transfer
Restricted Securities agrees that if such Holder wishes to sell Transfer
Restricted Securities pursuant to the Shelf Registration Statement and related
Prospectus, it will do so only in accordance with this

                                      -5-
<PAGE>   6
Section 2. Each Holder of Transfer Restricted Securities wishing to sell
Transfer Restricted Securities pursuant to the Shelf Registration Statement and
related Prospectus agrees to deliver a Notice and Questionnaire that includes
such information regarding the distribution of its Transfer Restricted
Securities as is required by law to be disclosed by the Holder in the Shelf
Registration Statement (the "Requisite Information") to the Company prior to any
intended distribution of Transfer Restricted Securities under the Shelf
Registration Statement. From and after the date the Shelf Registration Statement
becomes effective, the Company shall, as promptly as is practicable after the
date a Notice and Questionnaire is delivered, and in any event within five (5)
Business Days after such date, (i) if required by applicable law, file with the
SEC a post-effective amendment to the Shelf Registration Statement or prepare
and, if required by applicable law, file a supplement to the related Prospectus
or a supplement or amendment to any document incorporated therein by reference
or file any other required document so that the Holder delivering such Notice
and Questionnaire is named as a selling securityholder in the Shelf Registration
Statement and the related Prospectus in such a manner as to permit such Holder
to deliver such Prospectus to purchasers of the Transfer Restricted Securities
in accordance with applicable law and, if the Company shall file a
post-effective amendment to the Shelf Registration Statement, use its reasonable
best efforts to cause such post-effective amendment to be declared effective
under the Securities Act as promptly as is practicable, (ii) provide such Holder
copies of any documents filed pursuant to Section 2(c)(i); and (iii) notify such
Holder as promptly as practicable after the effectiveness under the Securities
Act of any post-effective amendment filed pursuant to Section 2(c)(i); provided,
that if such Notice and Questionnaire is delivered during a time that the use of
the Prospectus is suspended pursuant to Section 2(d), the Company shall so
inform the Holder delivering such Notice and Questionnaire and shall take the
actions set forth in clauses (i), (ii) and (iii) above upon such time the use of
the Prospectus may be resumed.

            If any such Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require, in the event that such reference to such Holder by
name or otherwise is not required by the Securities Act or any similar Federal
statute then in force, the deletion of the reference to such Holder in such
Registration Statement.

            (d)   Certain Notices; Suspension of Sales. Each Holder agrees by
acquisition of such Transfer Restricted Securities that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Sections 4(c)(ii), 4(c)(iii), 4(c)(v) or 4(c)(vi) hereof, such Holder will
forthwith discontinue disposition of such Transfer Restricted Securities covered
by the Registration Statement and Prospectus (other than in transactions exempt
from the registration requirements under the Securities Act) until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Sections 4(c)(i) and 4(k) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus. If the Company shall give any such notice, the
Effectiveness Period shall be extended by the number of days during such period
from and including the date of the giving of such notice to and including the
date when each Holder shall

                                      -6-
<PAGE>   7
have received (x) the copies of the supplemented or amended Prospectus
contemplated by Sections 4(c)(i) and 4(k) hereof or (y) the Advice, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus.

            (e)   Material Events; Suspension of Sales. Notwithstanding the
provisions contained in this Section 2, in the event that, in the judgment of
the Company's Board of Directors, it is advisable to suspend use of the
Prospectus due to pending corporate developments, public filings with the SEC or
similar events, the Company shall promptly deliver a written certificate to each
registered Holder, the Special Counsel and the managing underwriters, if any, to
the effect that the use of the Prospectus is to be suspended until the Company
shall deliver a written notice that the use of the Prospectus may be resumed.
Thereafter, the use of the Prospectus shall be suspended, and the Company shall
not be required to maintain the effectiveness of, or amend or update the Shelf
Registration Statement, or amend or supplement the Prospectus; provided,
however, that the Company shall only be permitted to suspend the use of the
Prospectus for a period not to exceed 30 days in any six-month period or two
periods not to exceed an aggregate of 60 days in any 12-month period. The
Company will use its best efforts to ensure that the use of the Prospectus may
be resumed as soon as, in the judgment of the Company's Board of Directors,
disclosure of the material relating to such pending development, filing or event
would not have a materially adverse effect on the Company. If the Company shall
give any such suspension notice pursuant to this Section 2(e), the Effectiveness
Period shall be extended by the number of days during such period from and
including the date of giving such notice to and including the date when each
Holder shall have received notice that use of the Prospectus may be resumed.

      3.    Liquidated Damages

            (a)   The Company and the Purchasers agree that the Holders will
suffer damages if the Company fails to fulfill its obligations pursuant to
Section 2 hereof and that it would not be possible to ascertain the extent of
such damages. Accordingly, the Company hereby agrees to pay liquidated damages
("Liquidated Damages") under the circumstances and to the extent set forth
below:

                  (i)   to each Holder if the Shelf Registration Statement has
            not been filed with the SEC on or prior to the Filing Date; or

                  (ii)  to each Holder if the Shelf Registration Statement is
            not declared effective by the SEC on or prior to the applicable
            Effectiveness Target Date; or

                  (iii) to each Holder if the Shelf Registration Statement
            ceases to be effective or usable at any time during the
            Effectiveness Period (without being succeeded on the same day
            immediately by a post-effective amendment or supplement to the Shelf
            Registration Statement that cures such failure and that is itself,
            in the case of post-effective amendment, immediately declared
            effective) for a period of time which shall exceed 90 days in the
            aggregate in any period of 365 consecutive days.

                                      -7-
<PAGE>   8
(any of the foregoing, a "Registration Default"); provided that if a Shelf
Registration Statement is not usable by a particular Holder at any given time
solely as a result of the failure of such Holder to provide Requisite
Information with respect to it, a Registration Default under clause (iii) above
shall not be deemed to have occurred unless such Holder shall have provided such
information to the Company and the Company shall have failed to file an
appropriate Prospectus supplement or post-effective amendment to the Shelf
Registration Statement. In the event of any such Registration Default, the
Company shall accrue Liquidated Damages to each applicable Holder during the
first 90-day period immediately in an amount equal to $.05 per week per $1,000
principal amount of Notes held by such Holder and, if applicable, on an
equivalent basis per share (subject to adjustment in the event of any stock
split, stock combination, stock dividends and the like) of Common Stock
constituting Transfer Restricted Securities held by such Holder for each week or
portion thereof that the Registration Default continues. The weekly rate at
which such Liquidated Damages accrue shall increase by an additional $.05 per
$1,000 principal amount of Notes and, if applicable, an equivalent amount per
week per share (subject to adjustment as set forth above) of Common Stock
constituting Transfer Restricted Securities for each subsequent continuing
90-day period following the occurrence of such Registration Default until all
Registration Defaults have been cured; provided, however, that Liquidated
Damages shall not at any time exceed $.25 per week per $1,000 principal amount
of Notes or, as applicable, an equivalent amount per week per share (subject to
adjustment as set forth above) of Common Stock constituting Transfer Restricted
Securities. In no event shall the Company be required to pay Liquidated Damages
in excess of the applicable maximum weekly amount, regardless of whether one or
multiple Registration Defaults shall exist. Following the cure of all
Registration Defaults, the accrual of Liquidated Damages shall cease (without in
any way limiting the effect of any subsequent Registration Default). A
Registration Default under clause (i) above shall be cured on the date that the
applicable Shelf Registration Statement is filed with the SEC; a Registration
Default under clause (ii) above shall be cured on the date that the applicable
Shelf Registration Statement is declared effective by the SEC; a Registration
Default under clause (iii) above shall be cured on the date the applicable Shelf
Registration Statement is declared effective or otherwise usable; and a
Registration Default under clause (iv) above shall be cured on the date the
applicable prospectus supplement to the Shelf Registration Statement is filed or
the post-effective amendment with respect to such Shelf Registration Statement
is declared effective.

            (b)   The Company shall notify the Trustee within one Business Day
after each and every date on which a Registration Default first occurs.
Liquidated Damages shall be paid by the Company to the Record Holders on each
Damages Payment Date in the same manner as interest is paid under the Indenture,
in the case of the Notes, and by mailing checks to their registered addresses in
the register of the Company for the Common Stock, in the case of shares of
Common Stock; provided, however, that any Liquidated Damages accrued with
respect to any Note or portion thereof called for redemption on a redemption
date, repurchased in connection with a Repurchase Event (as defined in the
Indenture) on a repurchase date, or converted into shares of Common Stock on a
conversion date prior to the Damages Payment Date, shall, in any such event, be
paid instead to the Holder who submitted such Note or portion thereof for
redemption, repurchase or conversion on the applicable redemption date,
repurchase date or conversion date, as the case may be, on such date (promptly
following the conversion date, in the case of conversion of a Note).

                                      -8-
<PAGE>   9
            (c)   All of the Company's obligations set forth in this Section 3
which are unsatisfied to any extent with respect to any Transfer Restricted
Securities at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
security have been satisfied in full (notwithstanding the earlier termination of
this Agreement).

            (d)   Any payments due and payable pursuant to this Section 3 with
respect to any Notes shall be subject to the provisions of Article IV of the
Indenture as if such payments were additional interest on the Notes.

      4.    Registration Procedures. In connection with the Company's
registration obligations hereunder, the Company shall effect such registrations
on the appropriate form selected by the Company to permit the resale of Transfer
Restricted Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall as expeditiously as
reasonably possible:

            (a)   No fewer than five Business Days prior to the initial filing
of a Registration Statement or Prospectus and no fewer than two Business Days
prior to the filing of any amendment or supplement thereto, furnish to the
registered Holders (determined as of the most recent reasonably practicable date
which shall not be more than two Business Days prior to the date such document
is personally delivered, delivered to a next-day courier, deposited in the mail
or telecopied, as the case may be), Special Counsel and the managing
underwriters, if any, copies of all such documents proposed to be filed
(excluding, unless requested, those incorporated or deemed to be incorporated by
reference and then only to the Holder who so requested) and cause the officers
and directors of the Company, counsel to the Company and independent certified
public accountants to the Company to respond to such inquiries as shall be
necessary in connection with such Registration Statement, in the opinion of
Special Counsel and counsel to such underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file any such Registration Statement or related Prospectus or any amendments or
supplements thereto to which the Holders of a majority in aggregate principal
amount of the Transfer Restricted Securities, Special Counsel, or the managing
underwriters, if any, shall reasonably object on a timely basis;

            (b)   Prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement as may be necessary to
keep such Registration Statement continuously effective for the applicable time
period set forth in Section 2(a) hereof in case of the Shelf Registration
Statement and in case of any underwritten offering the period of distribution of
Transfer Restricted Securities covered by such Registration Statement; cause the
related Prospectus to be supplemented by any required Prospectus supplement, and
as so supplemented to be filed pursuant to Rule 424 under the Securities Act
with respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended method or methods
of disposition by the Holder set forth in such Registration Statement as so
amended or in such Prospectus as so supplemented (including, without limitation,
the filing of any Prospectus supplement pursuant to Rule 424 in order to add or
change any selling

                                      -9-
<PAGE>   10
security holder information (including any such supplements or amendments
pursuant to Section 2(c) hereof, provided such Holder to which such change
applies complies with the Requisite Information requirements of Section 2(c)
hereof));

            (c)   Notify the registered (as of the most recent reasonably
practicable date which shall not be more than two Business Days prior to the
date such notice is personally delivered, delivered to a next-day courier,
deposited in the mail or telecopied, as the case may be) Holders, Special
Counsel and the managing underwriters, if any, promptly (and in the case of an
event specified by clause (i)(A) of this paragraph in no event fewer than two
Business Days prior to such filing), and (if requested by any such person),
confirm such notice in writing, (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment is proposed to be filed, and, (B) with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request of the SEC or any other Federal
or state governmental authority for amendments or supplements to such
Registration Statement or related Prospectus or for additional information
related thereto, (iii) of the issuance by the SEC, any state securities
commission, any other governmental agency or any court of any stop order, order
or injunction suspending or enjoining the use or the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose,
(iv) if at any time any of the representations and warranties of the Company
contained in any agreement (including any underwriting agreement) contemplated
by Section 4(m) hereof are not true and correct in all material respects during
the effectiveness of such agreement, (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Transfer Restricted Securities for sale in any
jurisdiction, or the initiation or threatening of any proceeding for such
purpose, and (vi) of the existence of any fact and the happening of any event
that makes any statement made in such Registration Statement or related
Prospectus untrue in any material respect, or that requires the making of any
changes in such Registration Statement or Prospectus so that in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and that, in the case of
the Prospectus, such Prospectus will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;

            (d)   Use its reasonable best efforts to avoid the issuance of, or,
if issued, obtain the withdrawal of any stop order or order enjoining or
suspending the use or effectiveness of a Registration Statement or the lifting
of any suspension of the qualification (or exemption from qualification) of any
of the Transfer Restricted Securities for sale in any jurisdiction, at the
earliest practicable moment;

            (e)   If requested by the Special Counsel, the managing
underwriters, if any, or the Holders of a majority in aggregate principal amount
of the Transfer Restricted Securities being sold in connection with such
offering, (i) promptly include in a Prospectus supplement or post-effective
amendment such information as the Special Counsel, the managing underwriters, if
any, and such Holders agree should, in their reasonable judgment, be included
therein, and (ii) make all required

                                      -10-
<PAGE>   11
filings of such Prospectus supplement or such post-effective amendment as soon
as reasonably practicable after the Company has received notification of the
matters to be included in such Prospectus supplement or post-effective
amendment; provided, however, that the Company shall not be required to take any
action pursuant to this Section 4(e) that would, in the opinion of counsel for
the Company, violate applicable law or which is not reasonably required to
comply with applicable securities laws;

            (f)   Furnish to each Holder who so requests, Special Counsel and
each managing underwriter, if any, without charge, at least one conformed copy
of each Registration Statement and each amendment thereto, including financial
statements (but excluding schedules, all documents incorporated or deemed to be
incorporated therein by reference and all exhibits, unless requested in writing
by such Holder, Special Counsel or managing underwriter);

            (g)   Deliver to each Holder, the Special Counsel, and the
underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each form of Prospectus) and each amendment or
supplement thereto as such persons may reasonably request; and, unless the
Company shall have given notice to such Holder pursuant to Section 4(c), the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders of Transfer Restricted
Securities and the underwriters, if any, in connection with the offering and
sale of the Transfer Restricted Securities covered by such Prospectus and any
amendment or supplement thereto, provided, however, that no Holder shall be
entitled to use the Prospectus unless and until such Holder shall have furnished
to the Company any and all Requisite Information pursuant to Section 2(c)
hereof;

            (h)   Use its reasonable best efforts to register or qualify, or
cooperate with the Holders of Transfer Restricted Securities to be sold or
tendered for, the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of, such Transfer Restricted Securities for offer
and sale under the securities or Blue Sky laws of such jurisdictions within the
United States as any Holder or underwriter reasonably requests in writing, keep
each such registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be kept effective
and do any and all other acts or things necessary legally to enable the
disposition in such jurisdictions of the Transfer Restricted Securities covered
by the applicable Registration Statement; provided, however, that the Company
shall not be required to qualify generally to do business in any jurisdiction
where it is not then so qualified, take any action that would subject it to
general service of process in any such jurisdiction where it is not then so
subject or subject the Company to any tax in any such jurisdiction where it is
not then so subject;

            (i)   In connection with any sale or transfer of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the Holders and the managing underwriters,
if any, to (A) facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold, which certificates shall
not bear any restrictive legends, for the Notes shall bear a CUSIP number
different from the CUSIP number

                                      -11-
<PAGE>   12
for the Transfer Restricted Securities and for any Transfer Restricted
Securities shall be in a form eligible for deposit with The Depository Trust
Company and (B) enable such Transfer Restricted Securities to be in such
denominations and registered in such names as the managing underwriters, if any,
or Holders may reasonably request at least two Business Days prior to any sale
of Transfer Restricted Securities;

            (j)   Use its reasonable best efforts to cause the offering of the
Transfer Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or authorities
within the United States, except as may be reasonably required as a consequence
of the nature of a Holder's business, in which case the Company will cooperate
in all reasonable respects with the filing of such Registration Statement and
the granting of such approvals as may be reasonably necessary to enable the
seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such Transfer Restricted Securities; provided, however, that the
Company shall not be required to register the Transfer Restricted Securities in
any jurisdiction that would require the Company to qualify to do business in any
jurisdiction where it is not then so qualified, subject it to general service of
process in any such jurisdiction where it is not then so subject or subject the
Company to any tax in any such jurisdiction where it is not then so subject or
to;

            (k)   Upon the occurrence of any event contemplated by Section
4(c)(vi) hereof, as promptly as reasonably practicable, prepare a supplement or
amendment, including, if appropriate, a post-effective amendment, to each
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, such Prospectus 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,
in light of the circumstances under which they were made, not misleading;

            (l)   Prior to the effective date of the first Registration
Statement relating to the Transfer Restricted Securities, to provide a CUSIP
number for the Transfer Restricted Securities to be sold pursuant to the
Registration Statement;

            (m)   Enter into such agreements (including an underwriting
agreement in form, scope and substance as are customary in underwritten
offerings) reasonably satisfactory to the Company and take all such other
reasonable actions in connection therewith (including those reasonably requested
by the managing underwriters, if any, or the Holders of a majority in aggregate
principal amount of the Transfer Restricted Securities being sold) in order to
expedite or facilitate the sale of such Transfer Restricted Securities;
provided, however, that the Company is required to facilitate no more than two
underwritten offerings. In such connection, whether or not an underwriting
agreement is entered into and whether or not the registration is an underwritten
registration, (i) make such representations and warranties to the Holders of
such Transfer Restricted Securities and the underwriters, if any, with respect
to the business of the Company and its subsidiaries (including with respect to
businesses or assets acquired or to be acquired by any of

                                      -12-
<PAGE>   13
them), and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each case, in
form, substance and scope as are customarily made by issuers to underwriters in
underwritten offerings and reasonably acceptable to the Company, and confirm the
same if and when requested; (ii) seek to obtain opinions of counsel to the
Company and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing underwriters, if
any, and Special Counsel to the Holders of the Transfer Restricted Securities
being sold) addressed to each selling Holder of Transfer Restricted Securities
and each of the underwriters, if any, covering the matters customarily covered
in opinions requested in underwritten offerings (including any such matters as
may be reasonably requested by such Special Counsel and underwriters); (iii) use
all reasonable efforts to obtain customary "cold comfort" letters and updates
thereof from the independent certified public accountants of the Company (and,
if necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for which
financial statements and financial data is, or is required to be, included in
the Registration Statement), addressed (where reasonably possible) to each
selling Holder of Transfer Restricted Securities and each of the underwriters,
if any, such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with underwritten
offerings; (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable to the
selling Holders of Transfer Restricted Securities and the underwriters, if any,
than those set forth in Section 6 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal amount of
the Transfer Restricted Securities covered by such Registration Statement and
the managing underwriters); and (v) deliver such documents and certificates as
may be reasonably requested by the Holders of majority in aggregate principal
amount of the Transfer Restricted Securities being sold, their Special Counsel
or the managing underwriters, if any, to evidence the continued validity of the
representations and warranties made pursuant to clause (i) of this Section 4(m)
and to evidence compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company;

            (n)   Make available for inspection by a representative of the
Holders of Transfer Restricted Securities being sold, any underwriter
participating in any such disposition of Transfer Restricted Securities, if any,
and any attorney, consultant or accountant retained by such selling Holders or
underwriter, at the offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries as they may reasonably request,
and cause the officers, directors, agents and employees of the Company and its
subsidiaries to supply all information in each case reasonably requested by any
such representative, underwriter, attorney, consultant or accountant in
connection with such Registration Statement, provided, however, that such
persons shall first agree in writing with the Company that any information that
is reasonably and in good faith designated by the Company in writing as
confidential at the time of delivery or inspection (as the case may be) of such
information shall be kept confidential by such persons, unless (i) disclosure of
such information is required by court or administrative order or is necessary to
respond to inquiries of regulatory authorities, (ii) disclosure of such
information is required by law (including any disclosure requirements pursuant
to Federal securities laws in connection with the filing of any Registration
Statement or the

                                      -13-
<PAGE>   14
use of any Prospectus), (iii) such information becomes generally available to
the public other than as a result of a disclosure or failure to safeguard by any
such person or (iv) such information becomes available to any such person from a
source other than the Company and such source is not bound by a confidentiality
agreement.

            (o)   Use its reasonable best efforts to cause the Indenture to be
qualified under the TIA not later than the effective date of the first
Registration Statement relating to the Transfer Restricted Securities; and in
connection therewith, cooperate with the Trustee and the Holders of Notes
constituting Transfer Restricted Securities to effect such changes to the
Indenture, if any, as may be required for such Indenture to be so qualified in
accordance with the terms of the TIA; and execute, and use its best efforts to
cause the Trustee to execute, all customary documents as may be required to
effect such changes, and all other forms and documents (including Form T-1)
required to be filed with the SEC to enable the Indenture to be so qualified
under the TIA in a timely manner.

            (p)   Comply with applicable rules and regulations of the SEC and
make generally available to its security holders earning statements satisfying
the provisions of Section 11(a) of the Securities Act or Rule 158 of the
Securities Act (or any similar rule promulgated under the Securities Act), no
later than 45 days after the end of any 12-month period (or 90 days after the
end of any 12-month period if such period is a fiscal year) (i) commencing at
the end of any fiscal quarter in which Transfer Restricted Securities are sold
to underwriters in a firm commitment or best efforts underwritten offering and
(ii) if not sold to underwriters in such an offering, commencing on the first
day of the first fiscal quarter after the effective date of a Registration
Statement, which statement shall cover said period, consistent with the
requirements of Rule 158 of the Securities Act; and

            (q)   (i) list all shares of Common Stock covered by such
Registration Statement on any securities exchange on which the Common Stock is
then listed or (ii) if required by the applicable rules, authorize for quotation
on the National Association of Securities Dealers Automated Quotation System
("Nasdaq") or the National Market of Nasdaq all Common Stock covered by such
Registration Statement if the Common Stock is then so authorized for quotation.

      5.    Registration Expenses

            (a)   All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by it whether or
not any Registration Statement is filed or becomes effective and whether or not
any securities are offered or sold pursuant to any Registration Statement. The
fees and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filings fees (including, without
limitation, fees and expenses (A) with respect to filings required to be made
with the National Association of Securities Dealers, Inc. and (B) in compliance
with securities or Blue Sky laws (including, without limitation and in addition
to that provided for in (b) below, fees and disbursements of counsel for the
underwriters or the Special Counsel in connection with Blue Sky qualifications
of the Transfer Restricted Securities and determination of the eligibility of
the Transfer Restricted Securities for investment under the laws of such
jurisdictions as the managing underwriters, if any, or Holders of a majority in
aggregate principal amount of Transfer Restricted Securities, may designate)),
(ii) printing expenses (including,

                                      -14-
<PAGE>   15
without limitation, expenses of printing certificates for Transfer Restricted
Securities in a form eligible for deposit with The Depository Trust Company and
of printing Prospectuses if the printing of Prospectuses is required by the
managing underwriters, if any, or by the Holders of a majority in aggregate
principal amount of the Transfer Restricted Securities included), (iii)
messenger, telephone and delivery expenses of the Company, (iv) fees and
disbursements of counsel for the Company and the Special Counsel (plus any local
counsel deemed appropriate by the Holders of a majority in aggregate principal
amount of the Transfer Restricted Securities) in accordance with the provisions
of Section 5(b) hereof, (v) fees and disbursements of all independent certified
public accountants referred to in Section 4(m)(iii) (including, without
limitation, the expenses of any special audit and "comfort" letters required by
or incident to such performance), (vi) Securities Act liability insurance, if
the Company so desires such insurance, and (vii) fees and expenses of all other
persons retained by the Company. In addition, the Company shall pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of an
annual audit and the fees and expenses incurred in connection with the listing
of the securities to be registered on any securities exchange or the Nasdaq
National Market. Notwithstanding anything in this Agreement to the contrary,
each Holder shall pay all underwriting discounts and brokerage commissions with
respect to any Transfer Restricted Securities sold by it.

            (b)   In connection with any registration hereunder, the Company
shall reimburse the Holders of the Transfer Restricted Securities being
registered or tendered for in such registration for the reasonable fees and
disbursements of not more than one firm of attorneys representing the selling
Holders (in addition to any local counsel) as Special Counsel, which firm shall
initially be chosen by the Holders of a majority in aggregate principal amount
of the Transfer Restricted Securities. Testa, Hurwitz & Thibeault, LLP shall be
Special Counsel for all purposes hereof, but which may, with the written consent
of the Purchasers (which shall not be unreasonably withheld), be another
nationally recognized law firm experienced in securities law matters designated
by the Company unless and until another Special Counsel shall have been selected
by a majority in aggregate principal amount of the Transfer Restricted
Securities and notice hereof shall have been given to the Company.

      6.    Indemnification

            (a)   The Company agrees to indemnify and hold harmless (i) the
Purchasers, (ii) each Holder, (iii) each person, if any, who controls (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) any of the foregoing (any of the persons referred to in this clause (iii)
being hereinafter referred to as a "Controlling Person"), and (iv) the
respective officers, directors, partners, employees, representatives and agents
of the Purchasers, the Holders (including predecessor Holders), or any
Controlling Person (any person referred to in clause (i), (ii), (iii) or (iv)
may hereinafter be referred to as an "Indemnified Person"), from and against any
and all losses, claims, damages, liabilities, expenses and judgments caused by
any untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement or Prospectus or in any amendment or supplement
thereto or in any preliminary Prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary

                                      -15-
<PAGE>   16
to make the statements therein (in the case of any Prospectus or supplement
thereto, in light of the circumstances under which they were made) not
misleading, except insofar as such losses, claims, damages, liabilities,
expenses or judgments are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to any
Indemnified Person furnished to the Company by or on behalf of such Indemnified
Person expressly for use therein; (which shall include without limitation, the
Requisite Information in the Notice and Questionnaire provided to the Company by
such Indemnified Person) provided, however, that the foregoing indemnity with
respect to any preliminary Prospectus shall not inure to the benefit of any
Indemnified Person from whom the person asserting such losses, claims, damages,
liabilities, expenses and judgments purchased securities if such untrue
statement or omission or alleged untrue statement or omission made in such
preliminary Prospectus is eliminated or remedied in the Prospectus and a copy of
the Prospectus shall not have been furnished to such person in a timely manner
due to the wrongful action or wrongful inaction of such Indemnified Person,
whether as a result of negligence or otherwise.

            (b)   In case any action shall be brought against any Indemnified
Person, based upon any Registration Statement or any such Prospectus or any
amendment or supplement thereto and with respect to which indemnity may be
sought against the Company, such Indemnified Person shall promptly notify the
Company in writing and the Company shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Person and
payment of all fees and expenses. Any Indemnified Person shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person, unless (i) the employment of such counsel shall have
been specifically authorized in writing by the Company, (ii) the Company shall
have failed to assume the defense and employ counsel or (iii) such Indemnified
Person or Persons shall have been advised by counsel that there may be a
conflict between the positions of the indemnifying party or parties and of the
indemnified party or parties in conducting the defense of such action or
proceeding or that there may be legal defenses available to such Indemnified
Person or Persons different from or in addition to those available to the
indemnifying party or parties (in which case the Company shall not have the
right to assume the defense of such action on behalf of such Indemnified
Person), it being understood, however, that the Company shall not, in connection
with any one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all such Indemnified
Persons, which firm shall be designated in writing by such Indemnified Persons,
and that all such fees and expenses shall be reimbursed as they are incurred.
The Company shall not be liable for any settlement of any such action effected
without its written consent but if settled with the written consent of the
Company, the Company agrees to indemnify and hold harmless, in accordance with
this Section 6, any Indemnified Person from and against any loss or liability by
reason of such settlement. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any pending
or threatened proceeding in respect of which any Indemnified Party is or could
have been a party and indemnity could have been sought hereunder by such

                                      -16-
<PAGE>   17
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability on claims that are the subject matter
of such proceeding.

            (c)   In connection with any Registration Statement pursuant to
which any Holder (or predecessor Holder) sold or offered for resale Transfer
Restricted Securities, such Holder (or predecessor Holder) agrees, severally and
not jointly, to indemnify and hold harmless the Company, its directors, its
officers, employees, representatives, agents and any person controlling the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act (any such person referred to as a "Company Indemnified Person"
and collectively with the Indemnified Persons, any such person referred to as an
"Indemnified Party"), to the same extent as the foregoing indemnity from the
Company to each Indemnified Person but only with reference to information
relating to such Indemnified Person furnished by or on behalf of such
Indemnified Person expressly for use in such Registration Statement (which shall
include, without limitation, the Requisite Information in the Notice and
Questionnaire provided to the Company by such Indemnified Person). In case any
action shall be brought against any Company Indemnified Person, based on such
Registration Statement and in respect of which indemnity may be sought against
any Indemnifying Party, the Indemnifying Party shall have the rights and duties
given to the Company (except that if the Company shall have assumed the defense
thereof, such Indemnifying Party shall not be required to do so, but may employ
separate counsel therein and participate in defense thereof but the fees and
expenses of such counsel shall be at the expense of such Indemnifying Party),
and the Company Indemnified Person shall have the rights and duties given to the
Indemnified Person by Section 6(b) hereof.

            (d)   If the indemnification provided for in this Section 6 is
unavailable to an Indemnified Party in respect of any losses, claims, damages,
liabilities, expenses or judgments referred to therein, then each Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages, liabilities, expenses and judgments (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and each Indemnified Person on the other hand pursuant to the Purchase
Agreement or from the offering for resale of the Transfer Restricted Securities
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and each such Indemnified Person in connection with the statements
or omissions which resulted in such losses, claims, damages, liabilities,
expenses or judgments, as well as any other relevant equitable considerations.
The relative fault of the Company and each such Indemnified Person shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Company or such Indemnified Person and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.

            The Company, the Holders and the Purchasers agree that it would not
be just and equitable if contribution pursuant to this Section 6(d) were
determined by pro rata allocation (even if

                                      -17-
<PAGE>   18
the Indemnified Person 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 the immediately preceding paragraph. The amount
paid or payable by an Indemnified Party as a result of the losses, claims,
damages, liabilities, expenses or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other 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, no Indemnified Person shall be
required to contribute any amount in excess of the amount by which the total net
profit received by it in connection with the sale of the Transfer Restricted
Securities pursuant to this Agreement exceeds the amount of any damages which
such Indemnified Person 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 contribution from any person who was
not guilty of such fraudulent misrepresentation. The Indemnified Persons'
obligations to contribute pursuant to this Section 6(d) are several in
proportion to the respective amount of Transfer Restricted Securities included
in and sold pursuant to any such Registration Statement by each Indemnified
Person and not joint.

      7.    Rules 144 and 144A

            The Company shall file the reports required to be filed by it under
the Securities Act and the Exchange Act in a timely manner and, if at any time
it is not required to file such reports but in the past had been required to or
did file such reports, it will, upon the request of any Holder, make available
other information as required by, and so long as necessary, to permit sales of
its Transfer Restricted Securities pursuant to Rule 144 and Rule 144A.
Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.

      8.    Underwritten Registrations

            If any of the Transfer Restricted Securities covered by the Shelf
Registration Statement are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be investment bankers of recognized national
standing selected by the Holders of a majority in aggregate principal amount of
such the Notes (or the proportional amount of Common Stock held as Transfer
Restricted Securities) included in such offering, subject to the consent of the
Company (which will not be unreasonably withheld or delayed).

            No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities
underwriting agreements, lock-up agreements and other documents reasonably
required under the terms of such underwriting arrangements.

                                      -18-
<PAGE>   19
      9.    Miscellaneous

            (a)   Remedies. In the event of a breach by the Company or by a
Holder of any of their respective obligations under this Agreement, each Holder
or the Company, in addition to being entitled to exercise all rights granted by
law, including, without limitation, recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agree that, in the event of any action for specific
performance in respect of such breach, they shall waive the defense that a
remedy at law would be adequate. This Section 9(a) shall not apply to Section 3.

            (b)   No Inconsistent Agreements. The Company shall not enter into
any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. The Company is not currently a party to any agreement
granting any registration rights with respect to any of its securities to any
person which conflicts with the Company's obligations hereunder or gives any
other party the right to include any securities in any Registration Statement
filed pursuant hereto, except for such rights and conflicts as have been
irrevocably waived. Without limiting the generality of the foregoing until the
date at which the Securities (as defined in the Purchase Agreement) cease to be
Transfer Restricted Securities, without the written consent of the Holders of a
majority in aggregate principal amount of the Transfer Restricted Securities,
the Company shall not grant to any person the right to request it to register
any of its securities under the Securities Act unless the rights so granted are
subject in all respect to the prior rights of the Holders set forth herein, and
are not otherwise in conflict or inconsistent with the provisions of this
Agreement.

            (c)   No Adverse Action Affecting the Transfer Restricted
Securities. The Company will not take any action with respect to the Transfer
Restricted Securities which would adversely affect the ability of any of the
Holders to include such Transfer Restricted Securities in a registration
undertaken pursuant to this Agreement.

            (d)   No Piggyback on Registrations. After the date hereof, the
Company shall not grant to any of its security holders (other than the Holders
in such capacity) the right to include any of its securities in the Shelf
Registration Statement.

            (e)   Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof,
may not be given, without the written consent of the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities; provided,
however, that, for the purposes of this Agreement, Transfer Restricted
Securities that are owned, directly or indirectly, by either the Company or an
Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders whose Transfer
Restricted Securities are being sold pursuant to an underwritten offering and
that does not directly or indirectly affect the rights of other Holders may be
given by Holders of a majority in aggregate

                                      -19-
<PAGE>   20
principal amount of the Transfer Restricted Securities being sold by such
Holders pursuant to such an underwritten offering; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding sentence.

            (f)   Notices. All notices and other communications provided for
herein shall be made in writing by hand-delivery, next day air courier,
certified first-class mail, return receipt requested or telecopy; provided a
copy of any such telecopy is immediately followed up by next day courier:

                  (i)   if to a Holder, to the address of such Holder as it
                        appears in the Note or Common Stock register of the
                        Company, as applicable;

                  (ii)  if to the Company, to:
                        Cephalon, Inc.
                        145 Brandywine Parkway
                        West Chester, PA 19380
                        Attn:  General Counsel
                        Telecopy No.: (610) 344-7563

                        with a copy to:
                        Morgan, Lewis & Bockius LLP
                        1701 Market Street
                        Philadelphia, PA  19103
                        Attn:  Richard A. Silfen, Esq.
                        Telecopy No.: (215) 963-5299

                  (iii) if to the Special Counsel, to:

                        Testa, Hurwitz & Thibeault, LLP
                        125 High Street
                        Boston, MA 02110
                        Attn: Mitchell S. Bloom, Esq.
                        Telecopy No.: (617) 248-7100

or such other Special Counsel at such other address and telecopy number as a
majority in aggregate principal amount of the Transfer Restricted Securities
shall have given notice to the Company as contemplated by Section 5(b) hereof.

            Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given, when delivered by hand,
if personally delivered; one Business Day after being timely delivered to a
next-day air courier, five Business Days after being deposited in the mail,
postage prepaid, if mailed; and when receipt is acknowledged by the recipient's
telecopier

                                      -20-
<PAGE>   21
machine, if telecopied; provided a copy of any such telecopy is immediately
followed up by next day courier.

            (g)   Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each existing and future Holder.
The Company may not assign its rights or obligations hereunder without the prior
written consent of the Holders of a majority in aggregate principal amount of
the Transfer Restricted Securities, other than by operation of law pursuant to a
merger or consolidation to which the Company is a party. In the event the Notes
constituting Transfer Restricted Securities become convertible into common stock
of another person pursuant to Section 15.6 of the Indenture, the Company shall
cause such person to assume the Company's obligations hereunder.

            (h)   Counterparts. This Agreement may be executed in any number of
counterparts by the parties hereto, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.

            (i)   GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.

            (j)   Severability. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.

            (k)   Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
All references made in this Agreement to "Section" and "paragraph" refer to such
Section or paragraph of this Agreement, unless expressly stated otherwise.

            (l)   Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the prevailing party, as determined by the court,
shall be entitled to recover its reasonable attorneys' fees in addition to any
other available remedy.

                                      -21-
<PAGE>   22
      IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first written above.

                                          CEPHALON, INC.

                                          By:    /s/   J. Kevin Buchi
                                               ---------------------------------

                                          Name:    J. Kevin Buchi
                                                 -------------------------------
                                          -

                                          Title:    Senior VP and CFO
                                                  ------------------------------

The foregoing Registration Rights
Agreement is hereby confirmed and
agreed to as of the date first
written above:

ROBERTSON STEPHENS, INC.
ADAMS, HARKNESS & HILL, INC.
BANC OF AMERICA SECURITIES LLC
CIBC WORLD MARKETS CORP.
SG COWEN SECURITIES CORPORATION
UBS WARBURG LLC
U.S. BANCORP PIPER JAFFRAY INC.

By:   ROBERTSON STEPHENS, INC.

      By:______________________________
         Authorized Signatory
<PAGE>   23
                 5-1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2006

                          REGISTRATION RIGHTS AGREEMENT

                             Dated as of May 7, 2001

                                     between

                                 CEPHALON, INC.
                                 as the Company,

                                       and
                            ROBERTSON STEPHENS, INC.
                          ADAMS, HARKNESS & HILL, INC.
                         BANC OF AMERICA SECURITIES LLC
                            CIBC WORLD MARKETS CORP.
                         SG COWEN SECURITIES CORPORATION
                                 UBS WARBURG LLC
                         U.S. BANCORP PIPER JAFFRAY INC.

                                  as Purchasers

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