-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KdMiHzIus7MD5hYVUFZTOsAXRB2+KtKZKX1J9ImmX0nPZcetvhTq5eB+Q+cRSfH4 U8StKo1c/D4G7kN3DO37lQ== 0000912057-02-020725.txt : 20020515 0000912057-02-020725.hdr.sgml : 20020515 20020515151941 ACCESSION NUMBER: 0000912057-02-020725 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ABGENIX INC CENTRAL INDEX KEY: 0001052837 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 943248826 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24207 FILM NUMBER: 02651612 BUSINESS ADDRESS: STREET 1: 7601 DUMBARTON CIRCLE CITY: FREMONT STATE: CA ZIP: 94555 BUSINESS PHONE: 5106086500 MAIL ADDRESS: STREET 1: 7601 DUMBARTON CIRCLE CITY: FREMONT STATE: CA ZIP: 94555 10-Q 1 a2078956z10-q.htm FORM 10-Q
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2002

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number: 000-24207

ABGENIX, INC.
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		94-3248826 (IRS employer Identification number)
6701 Kaiser Drive, Fremont, CA (Address of principal executive office)		94555 (Zip Code)

(510) 608-6500
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding in 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

As of April 30, 2002 there were 87,061,634 shares of the Registrant's Common Stock outstanding.

TABLE OF CONTENTS

			Page No.
PART I. Financial Information
	ITEM 1.	Financial Statements
		Condensed Consolidated Balance Sheets at March 31, 2002 and December 31, 2001	3
		Condensed Consolidated Statements of Operations for the three months ended March 31, 2002 and March 31, 2001	4
		Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2002 and March 31, 2001	5
		Notes to Condensed Consolidated Financial Statements	6
	ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	10
	ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	39
PART II. Other Information
	ITEM 1.	Legal Proceedings	40
	ITEM 2.	Changes in Securities and Use of Proceeds	40
	ITEM 3.	Defaults upon Senior Securities	43
	ITEM 4.	Submission of Matters to a Vote of Security Holders	43
	ITEM 5.	Other Information	43
	ITEM 6.	Exhibits and Reports on Form 8-K	43
SIGNATURES			45

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

ABGENIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

			March 31, 2002			December 31, 2001
			(unaudited)
ASSETS
Current assets:
	Cash and cash equivalents		$	256,842		$	99,663
	Marketable securities			404,194			458,150
	Interest receivable			4,398			3,977
	Accounts receivable, net			2,931			3,454
	Prepaid expenses and other current assets			18,291			14,474

		Total current assets		686,656			579,718
Property and equipment, net				119,283			86,467
Long-term investments				15,039			15,039
Goodwill, net				34,780			34,780
Identified intangible assets, net				97,793			99,526
Deposits and other assets				29,718			22,346

			$	983,269		$	837,876

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$	12,432		$	17,446
	Deferred revenue			3,503			11,751
	Accrued liabilities			14,636			13,473
	Acquisition liabilities			2,028			2,158

		Total current liabilities		32,599			44,828
Deferred rent				2,571			2,078
Convertible subordinated notes				200,000			—
Commitments
Stockholders' equity:
	Preferred stock, $0.0001 par value; 5,000,000 shares authorized; none issued or outstanding			—			—
	Common stock, $0.0001 par value; 220,000,000 shares authorized; 86,940,086 and 86,835,165 shares issued and outstanding at March 31, 2002 and December 31, 2001, respectively			9			9
	Additional paid-in capital			961,908			961,456
	Accumulated other comprehensive income (loss)			2,082			(11,046	)
	Accumulated deficit			(215,900	)		(159,449	)

		Total stockholders' equity		748,099			790,970

			$	983,269		$	837,876

See accompanying notes.

ABGENIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

			Three Months Ended March 31,
			2002			2001
Revenues:
	Contract revenue		$	10,998		$	4,176
	Interest and other income			5,271			10,306

		Total revenues		16,269			14,482
Costs and expenses:
	Research and development			28,979			16,027
	Amortization of goodwill			—			629
	Amortization of identified intangible assets, related to research and development			1,807			1,417
	General and administrative			6,707			3,798
	Impairment of investments			34,653			—
	Interest expense			574			255

		Total costs and expenses		72,720			22,126

Net loss			$	(56,451	)	$	(7,644	)

Basic and diluted net loss per share			$	(0.65	)	$	(0.09	)

Shares used in computing basic and diluted net loss per share				86,725			85,661

See accompanying notes.

ABGENIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

			Three Months Ended March 31,
			2002			2001
Operating activities
Net loss			$	(56,451	)	$	(7,644	)
Adjustments to reconcile net loss to net cash used in operating activities:
	Depreciation and other amortization			2,149			943
	Amortization of goodwill			—			629
	Amortization of identified intangible assets			1,806			1,417
	Impairment of investments			34,653			—
	Changes for certain assets and liabilities:
		Interest receivable		(421	)		2,680
		Accounts receivable		523			1,754
		Prepaid expenses and other current assets		(3,817	)		(892	)
		Deposits and other assets		(1,528	)		(3,263	)
		Accounts payable		(5,014	)		(4,021	)
		Deferred revenue		(8,248	)		(1,424	)
		Accrued liabilities		1,163			(424	)
		Deferred rent		493			155

Net cash used in operating activities				(34,692	)		(10,090	)

Investing activities
Purchases of marketable securities				(25,755	)		(295,017	)
Maturities of marketable securities				30,353			371,091
Sales of marketable securities				27,833			—
Purchases of property and equipment				(34,882	)		(8,449	)
Payments for acquisition liabilities				(130	)		(43,858	)

Net cash provided by (used in) investing activities				(2,581	)		23,767

Financing activities
Net proceeds from issuances of common stock				452			826
Net proceeds from issuance of convertible subordinated notes				194,000			—

Net cash provided by financing activities				194,452			826

Net increase in cash and cash equivalents				157,179			14,503
Cash and cash equivalents at beginning of period				99,663			167,242

Cash and cash equivalents at end of period			$	256,842		$	181,745

See accompanying notes.

ABGENIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002

1. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation—The unaudited condensed consolidated financial statements of Abgenix, Inc. (the "Company" or "Abgenix") included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information or footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial information included therein. These financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2001, and accompanying notes included in the Company's Annual Report as filed on Form 10-K with the Securities and Exchange Commission. The results of operations for the three months ended March 31, 2002, are not necessarily indicative of the results to be expected for the full year or for any other future period.

Revenue Recognition—The Company receives payments from customers for license, option, service and milestone fees. These payments are generally non-refundable but are reported as deferred revenue until they are recognizable as revenue. The Company has followed the following principles in recognizing revenue:

•: Research license fees: Fees to license the use of the Company's proprietary technologies in research performed by the customer are generally recognized only after both the license period has commenced and the technology has been delivered. If Abgenix is obligated to provide significant assistance to enable the customer to practice the license, then the revenue is recognized over the period of such obligation.
•: Product license fees: Fees to license the production, use and sale of an antibody generated by the Company's proprietary technologies are generally recognized only after both the license period has commenced and the technology has been delivered. If Abgenix is obligated to provide significant assistance to enable the customer to practice the license, then the revenue is recognized over the period of such obligation.
•: Option fees: Fees for granting options to obtain product licenses to develop a product are recognized as revenue when the option is exercised or when the option period expires, whichever occurs first. If the option fee is commingled with the license fee in the contract, and if the fees related to the license are recognized as revenue up-front, the Company estimates the relative fair values of the option component and recognizes the revenue attributed to the option component separately in accordance with its revenue recognition policy.
•: Fees for research services performed by Abgenix are recognized ratably over the entire period the services are performed. In the case of co-development arrangements, fees received for research services provided are recorded as contract revenues in the period the services are rendered.
•: Milestone payments are recognized as revenue when the milestone is achieved.

Net Loss Per Share—Basic earnings per share is calculated based on the weighted average number of shares outstanding during the period. The impact of common stock options and warrants was

excluded from the computation of diluted earnings per share, as their effect is antidilutive for the periods presented.

Accounting Change—Effective January 1, 2002, the company completed the adoption of Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires all business combinations initiated after June 30, 2001, to be accounted for using the purchase method of accounting. As required by SFAS No. 142, the company discontinued amortizing the remaining balances of goodwill as of January 1, 2002. All remaining and future acquired goodwill will be subject to impairment tests annually, or earlier if indicators of potential impairment exist, using a fair-value-based approach. All other intangible assets will continue to be amortized over their estimated useful lives and assessed for impairment under SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." In conjunction with the implementation of SFAS No. 142, the company has completed a goodwill impairment review as of the beginning of 2002 and found no impairment.

Upon adoption of the new Business Combination rules, acquired workforce no longer meets the definition of an identified intangible asset. As a result, the net balance of $120,000 has been reclassified to goodwill in 2002. During the three months ended March 31, 2002, no goodwill was acquired, impaired or written off.

A reconciliation of previously reported net income and earnings per share to the amounts adjusted for the exclusion of goodwill amortization is as follows (in thousands, except per share amounts):

	Three Months Ended March 31,
	2002			2001
Reported net loss	$	(56,451	)	$	(7,644	)
Goodwill and workforce amortization		—			629

Adjusted net loss	$	(56,451	)	$	(7,015	)

Reported basic and diluted loss per share	$	(0.65	)	$	(0.09	)
Goodwill and workforce amortization		—			0.01

Adjusted basic and diluted loss per share	$	(0.65	)	$	(0.08	)

2. Comprehensive Income (Loss)

Other comprehensive income (loss) consists of unrealized gains or losses on available-for-sale securities. The components of comprehensive loss were as follows (in thousands):

		March 31,
		2002			2001
		(in thousands)
Net loss		$	(56,451	)	$	(7,644	)

Unrealized losses on securities:
	Unrealized holding losses arising during period		(21,525	)		(14,831	)
	Less: reclassification adjustment for losses recognized in net loss		34,653			—

Decrease (increase) in net unrealized loss on securities			13,128			(14,831	)

Comprehensive loss		$	(43,323	)	$	(22,475	)

3. Identified Intangible Assets

During the three months ended March 31, 2002, no identified intangible assets were acquired, impaired or written off.

Identified intangible assets as of March 31, 2002 and 2001, consisted of the following:

	Gross Assets		Accumulated Amortization		Net
	(in thousands)
As of March 31, 2002:
Acquisition-related developed technology	$	106,183	$	11,305	$	94,878
Other intangible assets		3,016		101		2,915

Identified intangible assets	$	109,199	$	11,406	$	97,793

As of March 31, 2001:
Acquisition-related developed technology	$	85,142	$	4,961	$	80,181
Other intangible assets		—		—		—

Identified intangible assets	$	85,142	$	4,961	$	80,181

Amortization of acquisition-related intangibles was $1.8 million for the three months ended March 31, 2002. Amortization of other intangible assets was $48,000 for the three months ended March 31, 2002. All of the company's acquired identified intangibles other than goodwill are subject to amortization.

Expected amortization expense related to identified intangible assets for the nine-month period from April 1, 2002, to December 31, 2002, and each of the fiscal years thereafter is as follows:

	Periods Ending December 31,
	2002		2003		2004		2005		2006		Thereafter		Total
	(in thousands)
Acquisition-related intangibles	$	5,307	$	7,076	$	7,076	$	7,077	$	7,077	$	61,265	$	94,878
Other intangible assets	$	137	$	182	$	182	$	183	$	183	$	2,048	$	2,915

4. Convertible Subordinated Notes

In March 2002, the Company issued $200.0 million principal amount of convertible subordinated notes in a private placement. The notes are convertible into shares of Abgenix common stock at a conversion price of $27.58 per share subject to certain adjustments. The notes accrue interest at an annual rate of 3.5% and the Company is obligated to pay interest on March 15 and September 15 of each year, beginning on September 15, 2002. The notes will mature on March 15, 2007, and are redeemable at the Company's option on or after March 20, 2005, or earlier if the price of the Company's common stock exceeds specified levels. In addition, the holders of the notes may require the Company to repurchase the notes if the Company undergoes a change in control.

5. Impairment of Investments

In March 2002, the Company recorded an impairment charge of $34.7 million related to the Company's strategic investments in CuraGen Corporation and ImmunoGen, Inc. Under SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," the CuraGen and ImmunoGen investments are designated as available-for-sale and are reported at fair value on the Company's balance sheet. Unrealized holding gains and losses for available-for-sale securities generally are excluded from earnings and reported as a component of stockholders' equity. However, if a decline in the fair value of available-for-sale securities is judged to be other than temporary, the cost basis of the

security is written down to fair value as a new cost basis and the amount of the write-down is included in earnings as an impairment charge. Under the Company's accounting policy, marketable equity securities are presumed to be impaired if their fair value is less than their cost basis for more than six months, absent compelling evidence to the contrary. At March 31, 2002, the Company's investments in CuraGen and ImmunoGen common stock had traded below their original cost basis for more than six months. Accordingly, the Company recorded an impairment charge of $34.7 million in the Company's results of operations, and the new cost basis of these investments now reflects the public trading prices on March 31, 2002. The amount of the charge was based on the difference between the market price of the securities, as of March 31, 2002, and the Company's original cost basis.

6. Segment Information

The operations of the Company and its wholly owned subsidiaries constitute one business segment.

Revenues from two customers represented 77% and 10%, respectively, of contract revenues for the three months ended March 31, 2002. Revenues from three customers represented 41%, 21%, and 19%, respectively, of contract revenues for the three months ended March 31, 2001.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements based upon current expectations that involve risks and uncertainties. In this Quarterly Report on Form 10-Q, the words "intend," "anticipate," "believe," "estimate," "plan" and "expect" and similar expressions as they relate to Abgenix are included to identify forward-looking statements. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below and under the heading "Additional Factors that Might Affect Future Results".

Overview

We are a biopharmaceutical company that develops and intends to commercialize antibody therapeutic products for the treatment of a variety of disease conditions, including cancer, inflammatory and autoimmune disorders, transplant-related diseases, cardiovascular disease and infectious diseases. We have proprietary technologies that facilitate rapid generation of highly specific, antibody therapeutic product candidates that contain fully human protein sequences and that bind to disease targets appropriate for antibody therapy. In this Quarterly Report on Form 10-Q we refer to these candidates as fully human antibody therapeutic candidates. We developed our XenoMouse® technology, a technology using genetically modified mice to generate fully human antibodies. We also own a technology that enables the rapid identification of antibodies with desired function and characteristics, referred to as SLAM™ technology. In our XenoMax™ technology, we use SLAM technology to select and isolate antibodies with particular function and characteristics from antibody-producing cells generated by XenoMouse animals. We believe XenoMax technology enhances our capabilities in product development and flexibility in manufacturing. We intend to use our technologies to build a large and diversified product portfolio that we expect to develop and commercialize through licensing arrangements with pharmaceutical companies and others, through joint development and through internal product development programs. We have entered into a variety of contractual arrangements with multiple pharmaceutical, biotechnology and genomics companies involving our XenoMouse technology. Two of our customers, Pfizer, Inc. and Amgen, Inc., have initiated clinical trials with fully human antibodies generated from XenoMouse animals. In addition, as of March 31, 2002, we had four proprietary antibody product candidates in clinical trials, one of which we had agreed to co-develop and commercialize with Immunex Corporation and one of which we had agreed to co-develop and commercialize with SangStat Medical Corporation.

As of March 31, 2002, we had entered into contracts covering numerous antigen targets with twenty-eight customers to use our XenoMouse technology to generate and/or develop the resulting fully human antibodies. As of March 31, 2002, we had also entered into one agreement in which we licensed our SLAM technology to one party on a non-exclusive basis for the purpose of generating and using antibodies other than antibodies derived from XenoMouse technology or other technology that involves the use of non-human animals, and on a co-exclusive basis for the purpose of antigen discovery. We do not currently intend to license our SLAM technology for use by any other parties. Pursuant to our XenoMouse contracts, we and our customers intend to generate antibody product candidates for the treatment of cancer, inflammation, autoimmune diseases, transplant rejection, cardiovascular disease, growth factor modulation, neurological diseases and infectious diseases. We expect that substantially all of our revenues for the foreseeable future will result from payments under these and other contracts. We have also licensed technology from third-parties for use in conjunction with our proprietary technology. The terms of our contractual arrangements vary, but can generally be categorized as follows:

•: Antigen Target Sourcing Contracts—We have entered into several target sourcing contracts with genomics and biopharmaceutical companies that may enable us to generate a pipeline of proprietary fully human antibody product candidates. Typically, these contracts provide for us to

make fully human antibodies to the antigen targets provided or identified by our collaborators. The contracts typically contain provisions that allow either Abgenix or our collaborator to evaluate and select particular antibodies from the pool of generated antibodies for further development and commercialization. The party selecting an antibody for further development or commercialization will generally pay to the other party license fees, milestone payments and royalty payments on any eventual product sales, in exchange for rights to develop and commercialize the product. In connection with these arrangements, we may also agree to make a strategic purchase of the common stock of a collaborator to enhance the strength of our relationship. For example, we have made equity investments in the common stock of CuraGen and MDS Proteomics in connection with our collaborations with these parties.

•: Proprietary Product Development—In July and August 2000, we entered into two joint development and commercialization agreements. One of these agreements is with Immunex for ABX-EGF, a fully human antibody we created. Under the agreement, Immunex paid us an initial license fee at signing and a second license fee in May 2001. We and Immunex will share equally in all development costs and any profits from sales of collaboration products. We and Immunex also share responsibility for product development. We will be responsible for completing the ongoing Phase I trial and any additional Phase I trials that are initiated, and both companies share responsibility for the execution of Phase II trials across a variety of indications. Immunex will have primary responsibility for Phase III clinical trials and will market any potential products, while we will retain co-promotion rights. The other agreement is with SangStat Medical Corporation for ABX-CBL, an antibody we developed. Under that agreement, SangStat paid us an initial license fee in 2000 and a second milestone payment in June 2001, and has agreed to make a final milestone payment in 2002. We and SangStat will share equally in all development costs and any profits from sales of collaboration products. We and SangStat also share responsibility for product development, including the ongoing Phase II/III clinical trials. SangStat will market any potential product and we will be responsible for manufacturing ABX-CBL.

We intend to build our product portfolio by using our XenoMouse and XenoMax technologies to generate antibodies to antigen targets that we source, self-funding clinical activities to determine preliminary safety and efficacy, and entering into additional development and commercialization agreements with pharmaceutical and biotechnology companies. We plan to enter into agreements to use our XenoMax technology to assist our licensees and collaborators in isolating antibodies with desired function and characteristics. These arrangements may involve joint sharing of costs and profits.
•: Technology Out-Licensing—We have licensed our XenoMouse technology to third parties for the purpose of generating antibody product candidates to one or more specific antigen targets provided by the customer. We have also licensed our SLAM technology for use by one party. In some cases in which we license XenoMouse technology, we provide our mice to the customers who then carry out immunizations with their specific antigen targets. In other cases, we immunize the mice with the customers' antigen targets for additional compensation. The customer generally has an option for a period of time to acquire a product license for any antibody identified using XenoMouse technology that the customer wishes to develop and commercialize. The financial terms of these agreements may include license fees, option fees and milestone payments paid to us by the customers. Based on our agreements, these payments and fees would average $7.0 million to $10.0 million per antigen target if our customer takes the antibody into development and ultimately to commercialization. Additionally, our license agreements entitle us to receive royalties on any future product sales by the customer. We may also agree to purchase the common stock of some of our customers, or they may agree to purchase our common stock, in connection with these licensing arrangements.

•: Technology In-Licensing—We also license technology from third parties that we use in conjunction with our proprietary technology to develop, manufacture and commercialize therapeutic antibody candidates. The third party may also agree to produce antibody therapeutic candidates for us using its own technology. For example, Gliatech, Inc. has granted us a license to develop and commercialize fully human antibody therapeutic candidates against the complement protein properdin. These agreements often also obligate us to pay license fees, and milestone payments and royalty fees to the counterparty upon the occurrence of specified conditions, including upon our sale of products derived from use of the licensed technology. We may also agree to purchase common stock of the third party for strategic reasons in connection with these arrangements. For example, we purchased shares of common stock of ImmunoGen, Inc. in connection with our agreement with that party.

As of March 31, 2002, we had four proprietary antibody therapeutic product candidates that were in clinical trials, two of which were being co-developed with collaborators, as follows:

•

ABX-EGF—Generated using XenoMouse technology, ABX-EGF is a fully human antibody therapeutic product candidate for the treatment of a variety of cancers. In July 2000, we entered into a joint development and commercialization agreement with Immunex for ABX-EGF. The status of clinical trials for ABX-EGF is as follows:

•: Various cancers—We initiated a Phase I clinical trial for ABX-EGF in cancer in July 1999 and enrollment is ongoing.
•: Renal cell cancer—We initiated a Phase II clinical trial evaluating the effect of ABX-EGF as monotherapy in patients with renal cell cancer in April 2001 and enrollment is ongoing.
•: Non-small cell lung cancer—Immunex initiated a Phase II clinical trial for ABX-EGF in non-small cell lung cancer in combination with standard chemotherapy, compared to standard chemotherapy alone, in July 2001 and enrollment is ongoing.
•: Colorectal cancer—Immunex initiated a Phase II clinical trial evaluating the effect of ABX-EGF as monotherapy in patients with metastatic colorectal cancer who have previously failed chemotherapy in December 2001 and enrollment is ongoing. Immunex initiated a separate Phase II clinical trial evaluating the effect of ABX-EGF in combination with standard chemotherapy, as first-line treatment in patients with metastatic colorectal cancer in January 2002, in which enrollment is expected to begin in the second quarter of 2002.
•: Prostate cancer—We initiated a Phase II clinical trial evaluating the effect of ABX-EGF in patients with hormone resistant prostate cancer without metastasis in January 2002, in which enrollment is expected to begin in the second quarter of 2002.

•: ABX-CBL—We developed ABX-CBL, an in-licensed mouse antibody, for the treatment of a transplant-related disease known as graft versus host disease, or GVHD. We have completed a Phase II clinical trial for ABX-CBL and initiated a Phase II/III clinical trial in December 1999, in which enrollment is ongoing. In August 2000, we entered into a joint development and commercialization agreement with SangStat for ABX-CBL.
•: ABX-MA1—Generated using XenoMouse technology, ABX-MA1 is a fully human antibody therapeutic product candidate for the treatment of a variety of cancers. We filed an Investigational New Drug Application, or IND, in December 2001 and initiated a Phase I clinical trial for ABX-MA1 in metastatic melanoma in February 2002, in which enrollment is expected to begin in the second quarter of 2002.
•: ABX-IL8—Generated using XenoMouse technology, ABX-IL8 is a fully human antibody therapeutic product candidate for the treatment of inflammatory diseases and cancer, including

psoriasis, chronic obstructive pulmonary disease, or COPD, and metastatic melanoma. The status of clinical trials for ABX-IL8 is as follows:

•: Psoriasis—We have completed Phase I, Phase I/II and Phase IIa clinical trials, and, in May 2002, a Phase IIb clinical trial. After analyzing the results of the Phase IIb trial, we reached the conclusion that the results did not warrant continuing to develop ABX-IL8 as a treatment for psoriasis. Accordingly, we have terminated this program.
•: Chronic obstructive pulmonary disease—We initiated a Phase IIa clinical trial in September 2001 and enrollment is ongoing. After analyzing the results of the psoriasis Phase IIb trial, we decided that we will wind down this trial.
•: Metastatic melanoma—We filed an IND in December 2001 and initiated a Phase II clinical trial in February 2002, in which enrollment was expected to begin in the second quarter of 2002. After analyzing the results of the psoriasis Phase IIb trial, we decided that we will not proceed with this study.

We will expend significant capital to conduct clinical trials for our proprietary product candidates, including several Phase I and II clinical trials we plan to initiate in 2002. We believe that more extensive clinical data will enable us to enter into additional contractual arrangements related to those proprietary product candidates. We expect that this will substantially increase our capital needs over the next few years and increase our operating losses. However, we believe that we will be able to receive more favorable terms from our contract parties if we have completed significant development of these products.

In addition to our proprietary antibody therapeutic product candidates in clinical trials, there are two customer-developed antibodies generated with XenoMouse technology in clinical trials as follows:

•: Pfizer—We generated a XenoMouse-derived fully human antibody therapeutic product candidate for treating cancer, which Pfizer has advanced into clinical trials.
•: Amgen—We generated a XenoMouse-derived fully human antibody therapeutic product candidate that binds to an undisclosed antigen target, which Amgen has advanced into clinical trials.

Results of Operations

Three Months Ended March 31, 2002 and 2001

Contract Revenues.

Contract revenues increased to $11.0 million in the three months ended March 31, 2002, from $4.2 million in the three months ended March 31, 2001. The primary components of contract revenues for both periods were as follows:

•: Proprietary Product Development

We recognized a total of $1.5 million and $2.6 million in the three months ended March 31, 2002 and 2001, respectively, pursuant to our joint development and commercialization agreements with Immunex and SangStat for the development of ABX-EGF and ABX-CBL, respectively. In both periods, these revenues included reimbursement of development costs. In 2001 this revenue also included license fees which were recognized ratably over the contractual performance periods. Under the Immunex agreement, this was the 17-month period ended December 31, 2001. Under the SangStat agreement, this was the 6-month period ended January 31, 2001.

•

Technology Licensing

We recognized a total of $9.5 million and $1.6 million in the three months ended March 31, 2002 and 2001, respectively, from licensing our proprietary technologies. Revenues including license fees, research fees and milestone fees, consisted primarily of the following:

•: CellTech R&D Ltd.—In the three months ended March 31, 2002, we recognized $8.4 million under an agreement with CellTech in which we granted a license of our SLAM technology. We received payments totaling $16.8 million in the fourth quarter of 2001 representing a research license fee and service fees for the transfer of technology, net of $0.2 million in shared closing costs. We recognized these fees over the six-month period ended March 31, 2002, during which we fulfilled our obligations to provide CellTech with the applicable protocols, technical information, and training to enable CellTech to effectively utilize the SLAM technology.
•: Additionally, in the three months ended March 31, 2002 and 2001, we recognized various fees under agreements related to the licensing of our XenoMouse technology, primarily from Pfizer, CuraGen, Chiron Corporation and Amgen. In both periods these fees consisted primarily of research license and funding fees. In the three months ended March 31, 2001, this revenue also included milestone fees from Pfizer for completion of certain research milestones by Abgenix.

Interest and Other Income.

Interest and other income consist primarily of interest from cash, cash equivalents and marketable securities. Interest and other income decreased to $5.3 million in the three months ended March 31, 2002, compared to $10.3 million in the same period in 2001. The decrease was due to lower interest rates and lower average cash, marketable securities and cash equivalent balances.

Research and Development Expenses.

Research and development expenses increased to $29.0 million in the three months ended March 31, 2002 from $16.0 million in the same period in 2001. Management separates research and development expenditures into amounts related to preclinical research and development, amounts related to clinical development programs and amounts related to facilities as follows:

•

Preclinical Research and Development Costs

Preclinical research and development costs include costs associated with preclinical research, development and testing of our product candidates, such as the costs of Abgenix personnel and the costs of technology in-licensing. Research costs increased to $10.2 million in the three months ended March 31, 2002, from $6.5 million in the same period in 2001. The increase was due to the increased level of product development activities, including new target validation, process sciences and bioinformatics. Additionally, the increase was due to development of new technology including our SLAM technology. We expect preclinical research and development costs to increase further as we continue to build our organization and as we enhance our preclinical activities to further support the design of clinical trials. Major components of the increase in the three months ended March 31, 2002, from the same period in 2001 were as follows:

•: Costs of Abgenix Personnel—Costs of Abgenix personnel to support preclinical research and development activities increased 71% in the three months ended March 31, 2002, from the same period in 2001. Personnel costs include salary, fringe benefits, recruiting and relocation costs.

•: Third-Party Development—We paid fees to Gliatech, Inc. related to pre-clinical studies Gliatech is performing to develop and commercialize fully human antibody therapeutic candidates against the complement protein properdin.

•

Clinical Costs

As of March 31, 2002, we were conducting clinical trials for four product candidates. Clinical costs include costs of conducting clinical trials, such as research fees and drug supply costs charged by outside contractors and costs of Abgenix personnel. Clinical costs increased to $11.2 million in the three months ended March 31, 2002, from $6.7 million in the same period in 2001. The increase in the first quarter of 2002 compared to the first quarter of 2001 was primarily due to activities associated with new clinical trials for ABX-IL8 and ABX-EGF initiated after the first quarter of 2001, and the progression of these same product candidates to later stage clinical trials. Pursuant to our July 2000 agreement with Immunex and our August 2000 agreement with SangStat, we share equally in the costs of developing and commercializing ABX-EGF and ABX-CBL, respectively. We expect costs associated with conducting clinical trials to increase further as we add new product candidates such as ABX-MA1 into clinical trials and our product candidates progress into more expensive later stage clinical trials. Major components of the increase in the three months ended March 31, 2002, were as follows:

•: Clinical Research Fees and Drug Supply Costs—Clinical research fees, including clinical investigator site fees, monitoring costs and data management costs, and drug supply costs increased 77% in the three months ended March 31, 2002, from the same period in 2001.
•: Costs of Abgenix Personnel—Costs of Abgenix personnel to support clinical activities increased 107% in the three months ended March 31, 2002, from the same period in 2001. Personnel costs include salary, fringe benefits, recruiting and relocation costs.

•: Facility Costs

Facility costs allocated to research and development increased to $7.6 million in the three months ended March 31, 2002, from $2.8 million in the same period in 2001. In order to accommodate our increased personnel and research and development activities, we acquired new facilities and related leasehold improvements, furniture and fixtures. As a result, all of our facility-related costs, primarily rent, repairs and maintenance, depreciation and utilities, increased from the three month period ended March 31, 2002, from the same period in 2001. We expect facility costs to increase in future periods as a result of our capital expansion plans to accommodate future growth.

We generally do not track our historical research and development costs by project; rather, we track such costs by the type of cost incurred, including costs in the categories discussed above: preclinical research and development costs, clinical costs and facility costs. For this reason, we cannot accurately estimate with any degree of certainty our historical costs for any particular research and development project.

Goodwill and Amortization of Identified Intangible Assets.

Our identified intangible assets primarily consist of existing technology (including patents and certain royalty rights) that we acquired through the acquisitions of Hesed Biomed in November 2001, Abgenix Biopharma and IntraImmune in November 2000, and the acquisition of JT America's interest in Xenotech in December 1999. Amortization of intangible assets increased to $1.8 million in the three months ended March 31, 2002, compared to $1.4 million in the same period ended March 31, 2001. The increase was due to the amortization of the new technology acquired in our acquisition of Hesed Biomed. Beginning January 1, 2002, upon the adoption of Statement of Financial Accounting Standards

(SFAS) No. 141, "Business Combinations" and No. 142, "Goodwill and Other Intangible Assets," we no longer amortize goodwill, but will perform impairment tests annually, or earlier if indications of impairment exist. We have conducted an initial impairment test on our goodwill and concluded that no impairment charge was required. In the three months ended March 31, 2001, the amortization of goodwill was $629,000. All other intangible assets will continue to be amortized over their estimated useful lives.

General and Administrative Expenses.

General and administrative expenses include compensation, professional services, consulting and other expenses related to information systems, legal, finance and human resources and an allocation of facility costs. General and administrative expenses increased to $6.7 million in the three months ended March 31, 2002, compared to $3.8 million in the same period ended March 31, 2001. The primary reason for the increase in the first quarter of 2002 as compared to the same period in 2001, is the increase in consulting and personnel expenses related to our information systems, including the implementation of a new enterprise resource planning system. Another significant reason for this increase is the rise in legal costs to support the increased activities of the Company, including activities related to intellectual property, securities filings and licensing and other contractual matters. We expect personnel, consulting, professional services and other administrative costs to increase further as we continue to build our organization.

Impairment of Investments.

In the three months ended March 31, 2002, we recorded an impairment charge of $34.7 million related to our strategic investments in CuraGen and ImmunoGen. Under SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," the CuraGen and ImmunoGen investments are designated as available-for-sale and are reported at fair value on our balance sheet. Unrealized holding gains and losses for available-for-sale securities generally are excluded from earnings and reported as a component of stockholders' equity. However, if a decline in the fair value of available-for-sale securities is judged to be other than temporary, the cost basis of the security is written down to fair value as a new cost basis and the amount of the write-down is included in earnings as an impairment charge. Under our accounting policy, marketable equity securities are presumed to be impaired if their fair value is less than their cost basis for more than six months, absent compelling evidence to the contrary. At March 31, 2002, our investments in CuraGen and ImmunoGen common stock had traded below their original cost basis for more than six months. Accordingly, we recorded an impairment charge of $34.7 million in our results of operations, and the new cost basis of these investments now reflects the public trading prices on March 31, 2002. The amount of the charge was based on the difference between the market price of the securities, as of March 31, 2002, and our original cost basis.

Interest Expense.

Interest expense consists of interest and amortization of issuance costs on our convertible debt, and interest on our equipment leaseline financing. Interest expense increased to $0.6 million in the three months ended March 31, 2002, compared to $0.3 million in the same period ended March 31, 2001. The increase was primarily due to our issuance of $200.0 million of convertible debt in March 2002, which accrues interest at an annual rate of 3.5%. For each future quarterly period, we expect to accrue approximately $1.8 million of interest expense related to our convertible debt until the debt matures, until we redeem or repurchase the debt or until all or part of the debt is converted into shares of our common stock.

Liquidity and Capital Resources

At March 31, 2002, we had cash, cash equivalents and marketable securities of approximately $661.0 million. In March 2002, we received proceeds of approximately $193.6 million, net of commissions and estimated offering expenses, from our issuance of $200.0 million of convertible debt. We invest our cash equivalents and marketable securities primarily in highly liquid, interest bearing, investment grade and government securities in order to preserve principal. We have also invested in certain marketable equity securities of ImmunoGen and CuraGen for strategic reasons. These securities had a fair value of $45.3 million at March 31, 2002.

Cash Used in Operating Activities. Net cash used in operating activities was $34.7 million and $10.1 million in the three months ended March 31, 2002 and 2001, respectively. The increase in cash used in operating activities in the three months ended March 31, 2002, compared to the same period in 2001 reflects primarily the following:

•: An increase of $13.0 million in funding of research and development and manufacturing costs related to the development of new products.
•: An increase of $2.9 million in general and administrative expenses primarily related to the support of our increased research and development activities.
•: A decrease of $8.1 million in cash from interest income due to lower interest rates and lower average cash balances, and a decrease of $1.2 million in customer payments due to the timing of contracts.
•: An increase of $2.9 million in prepaid expenses and other current assets, primarily related to the increase in drug inventory for use in clinical trials.

Cash Provided by (Used in) Investing Activities. Net cash used in investing activities was $2.6 million in the three months ended March 31, 2002. Net cash provided by investing activities was $23.8 million in the three months ended March 31, 2001. Cash was provided by and used in investing activities as follows:

•: Investments of $34.9 million and $8.4 million in capital expenditures in the three months ended March 31, 2002 and 2001, respectively. The investments in 2002 reflect primarily investment in leasehold improvements in our new office facility and construction in progress for the new manufacturing facility and process science laboratory. Additionally, they reflect investments in computer hardware and software, including the acquisition of a new enterprise resource planning system. The investments in 2001 reflect primarily investment in leasehold improvements related to our office space and computer equipment.
•: Maturities and sales, net of purchases, of marketable securities of $32.4 million and $76.1 million during the three months ended March 31, 2002 and 2001, respectively.
•: Payments of $0.1 million and $43.9 million to the holders of Abgenix Biopharma special shares in connection with our acquisition of Abgenix Biopharma during the three months ended March 31, 2002 and 2001, respectively.

Cash Provided by Financing Activities. During the three months ended March 31, 2002, net cash provided by financing activities was $194.5 million, consisting of $194.0 million net proceeds from our issuance of convertible subordinated notes, as described below, and $0.5 million proceeds from the exercise of stock options and the issuance of stock under our employee stock purchase plan. During the three months ended March 31, 2001, net cash provided by financing activities was $0.8 million, consisting of proceeds from the exercise of stock options and the issuance of stock under our employee stock purchase plan.

In March 2002, we issued $200.0 million principal amount of convertible subordinated notes in a private placement. The notes are convertible into shares of our common stock at a conversion price of $27.58 per share subject to certain adjustments. The notes accrue interest at an annual rate of 3.5% and we are obligated to pay interest on March 15 and September 15 of each year, beginning on September 15, 2002. The notes will mature on March 15, 2007, and are redeemable at our option on or after March 20, 2005, or earlier if the price of our common stock exceeds specified levels. In addition, the holders of the notes may require us to repurchase the notes if we undergo a change in control. Proceeds from the sale of the notes, net of commissions payable to the initial purchasers of the notes but before subtracting other offering expenses payable by us, were $194.0 million.

In March 2000 and February 2001, we obtained stand-by letters of credit for $2.0 million and $3.0 million, respectively, from a commercial bank as security on our obligations under two facility leases. These were increased in January 2002 to $2.5 and $3.2 million, respectively, in connection with amendments to our facility leases. In September 2001, we obtained a stand-by letter of credit for 1.0 million Canadian dollars from a commercial bank as security on our obligations under a facility lease in Canada. The stand-by letters of credit are secured by an investment account, in which we must maintain a $7.0 million balance. Additionally, in 1997 we leased $2.0 million of our laboratory and office equipment from a financing company. The lease bore interest at approximately 12.5% to 13.0%, and matured in September 2001.

Financing Uncertainties Related to Our Business Plan. We plan to continue to make significant expenditures to establish our own manufacturing facility and expand our research and development activities, including pre-clinical product development and clinical trials. We will also continue to look for new technology suppliers as potential acquisitions or alliance collaborators. Over the next nine months, we estimate that we will spend approximately $96.5 million on leasehold improvements and equipment for our new manufacturing and research and development facilities. Additionally, during the same period we expect to spend approximately $9.9 million on new computer hardware and software, including the acquisition of a new enterprise resource planning system. We also plan to spend significant amounts to develop, on a proprietary or co-developed basis, INDs for up to three product candidates annually, beginning in 2002. We believe that the annual goals of our customers and collaborators for 2002 and beyond may include up to five INDs for additional product candidates based on our XenoMouse technology. In light of initiatives we have underway to increase significantly the number of drugs we have in development, we also expect that our cash used in operating activities will be significantly greater in 2002 than in 2001.

We currently intend to use our available cash on hand to finance these projects and business developments, but we might also pursue other financing alternatives, such as a bank line of credit or a mortgage financing, that may become available to us. Whether we use cash on hand or choose to obtain financing will depend on, among other things, the future success of our business, the prevailing interest rate environment and the condition of financial markets generally.

The amounts of the expenditures that will be necessary to execute our business plan are subject to numerous uncertainties, which may adversely affect our liquidity and capital resources to a significant extent. As of March 31, 2002, four of our proprietary product candidates, ABX-CBL, ABX-IL8, ABX-EGF and ABX-MA1, were in various stages of clinical trials. Completion of clinical trials may take several years or more, but the length of time generally varies substantially according to the type,

complexity, novelty and intended use of a product candidate. We estimate that clinical trials of the type we generally conduct are typically completed over the following timelines:

Clinical Phase		Estimated Completion Period
Phase I		1 Year
Phase II		1-2 Years
Phase III		2-4 Years

However, the duration and the cost of clinical trials may vary significantly over the life of a project as a result of differences arising during the clinical trial protocol, including, among others, the following:

•: the number of patients that ultimately participate in the trial;
•: the duration of patient follow-up that seems appropriate in view of the results;
•: the number of clinical sites included in the trials; and
•: the length of time required to enroll suitable patient subjects.

We test our potential product candidates in numerous pre-clinical studies to identify disease indications for which they may be product candidates. We may conduct multiple clinical trials to cover a variety of indications for each product candidate. As we obtain results from trials, we may elect to discontinue clinical trials for certain product candidates or for one or more indications for a given product candidate in order to focus our resources on more promising product candidates or indications. For example, in January 2002 and May 2002, we announced that clinical trials of our proprietary product candidate ABX-IL8 as a treatment for rheumatoid arthritis and psoriasis, respectively, did not support further clinical studies of that product candidate.

An important element of our business strategy is to pursue the research and development of a diverse range of product candidates for a variety of disease indications. This strategy is designed to diversify the risks associated with our research and development spending. As a result, we believe our future capital requirements and our future financial success are not substantially dependent on any one product candidate. The decision to terminate or wind down our clinical programs for developing ABX-IL8 has reduced the diversity of our product portfolio. We believe that this effect is temporary, in view of the number of potential product candidates we have in preclinical development. To the extent, however, that we are unable to maintain a diverse and broad range of product candidates, our dependence on the success of one or a few product candidates would increase.

Our proprietary product candidates also have not yet achieved FDA regulatory approval, which is required before we can market them as therapeutic products. In order to proceed to subsequent clinical trial stages and to ultimately achieve regulatory approval, the FDA must conclude that our clinical data establish safety and efficacy. Historically, the results from preclinical testing and early clinical trials have often not been predictive of results obtained in later clinical trials. A number of new drugs and biologics have shown promising results in clinical trials, but subsequently failed to establish sufficient safety and efficacy data to obtain necessary regulatory approvals.

Furthermore, our business strategy includes the option of entering into collaborative arrangements with third parties to complete the development and commercialization of our products. In the event that third parties take over the clinical trial process for one of our product candidates, the estimated completion date would largely be under the control of that third party rather than us. We cannot forecast with any degree of certainty which proprietary products or indications, if any, will be subject to future collaborative arrangements, in whole or in part, and how such arrangements would affect our capital requirements.

As a result of the uncertainties discussed above, among others, the duration and completion costs of our research and development projects are difficult to estimate and are subject to considerable variation. Our inability to complete our research and development projects in a timely manner or our failure to enter into collaborative agreements, when appropriate, could significantly increase our capital requirements and could adversely impact our liquidity. These uncertainties could force us to seek additional, external sources of financing from time to time in order to continue with our business strategy. Our inability to raise additional capital, or to do so on terms reasonably acceptable to us, would jeopardize the future success of our business.

We also may be required to make further substantial expenditures if unforeseen difficulties arise in other parts of our business. In particular, our future liquidity and capital requirements also will depend on many factors other than our research and development activities, including:

•: the retention of existing and establishment of further licensing and other agreements, if any;
•: the cost of establishing our manufacturing capabilities;
•: the cost of conducting commercialization activities and arrangements;
•: the time and expense involved in seeking regulatory approvals;
•: competing technological and market developments;
•: the time and expense of filing and prosecuting patent applications and enforcing patent claims;
•: our investment in, or acquisition of, other companies;
•: the amount of product in-licensing in which we engage; and
•: other factors not within our control.

We believe that our current cash balances, cash equivalents, marketable securities, and the cash generated from our licensing and contractual agreements will be sufficient to meet our operating and capital requirements for at least one year. However, because of the uncertainties in our business discussed above, among others, we cannot assure you that this will be the case. In addition, we may choose to, or prevailing business conditions may require us to, obtain additional financing from time to time. We may choose to raise additional funds through public or private financing, licensing and contractual agreements or other arrangements. We cannot be sure that any additional funding, if needed, will be available on terms favorable to us or at all. Furthermore, any additional equity or equity-related financing may be dilutive to our stockholders, and debt financing, if available, may subject us to restrictive covenants. We may also choose to obtain funding through licensing and other contractual agreements. Such agreements may require us to relinquish our rights to certain of our technologies, products or marketing territories. Our failure to raise capital when needed would harm our business, financial condition and results of operations.

History of Net Losses. We have incurred net losses in each of the last six years of operation, including net losses of $7.1 million in 1996, $35.9 million in 1997, $16.8 million in 1998, $20.5 million in 1999, $8.8 million in 2000, $60.9 million in 2001 and $56.5 million in the three months ended March 31, 2002. As of March 31, 2002, our accumulated deficit was $215.9 million. Our losses to date have resulted principally from:

•: research and development costs relating to the development of our XenoMouse and XenoMax technologies and antibody therapeutic product candidates;
•: costs associated with certain agreements with Japan Tobacco, Inc. and certain 1997 settlement and cross-licensing agreements with GenPharm International, Inc.;

•: in-process research and development costs and amortization of intangible assets associated with our acquisitions of Hesed Biomed, Abgenix Biopharma, IntraImmune and Japan Tobacco's interest in Xenotech;
•: general and administrative costs relating to our operations; and
•: an impairment charge related to our strategic investments in CuraGen and ImmunoGen.

We expect to incur additional losses for the foreseeable future as a result of increases in our research and development costs, including costs associated with conducting pre-clinical development and clinical trials, charges related to purchases of technology or other assets, and costs associated with establishing our manufacturing facilities. We intend to invest significantly in our products prior to entering into licensing agreements. This may increase our need for capital and will result in losses for at least several years. We expect that the amount of operating losses will fluctuate significantly from quarter to quarter as a result of increases or decreases in our research and development efforts, the execution or termination of licensing and contractual agreements, and the initiation, and success or failure, of clinical trials.

Net Operating Loss Carryforwards. As of December 31, 2001, we had federal net operating loss carryforwards of approximately $189.0 million. Our net operating loss carryforwards exclude losses incurred prior to our formation in July 1996. Further, we have capitalized the amounts associated with the 1997 settlement and cross-license that have been expensed for financial statement accounting purposes and we are amortizing those amounts over a period of approximately 15 years for tax purposes. The net operating loss and credit carryforwards will expire in the years 2006 through 2021, if not utilized. Utilization of the net operating losses and credits may be subject to a substantial annual limitation due to the "change in ownership" provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

Critical Accounting Policies

The financial results that we report are impacted by the application of a several accounting policies that require us to make subjective and complex judgments. We are required to estimate the effect of matters that are inherently uncertain. Changes in our estimates or judgments could materially impact our results of operations, financial condition and cash flows in future years. We believe our most critical accounting policies include revenue recognition, accounting for our marketable equity securities, and the capitalization of clinical trial supplies. Our accounting practices are discussed in more detail in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Note 1 of "Notes to Consolidated Financial Statements" in our Annual Report on Form 10-K for the year ended December 31, 2001. The discussion below is an update to our disclosure in our Annual Report on Form 10-K relating to our method of accounting for our marketable securities.

Accounting for Marketable Securities.

We are exposed to equity price risk on our strategic investments in CuraGen and ImmunoGen. As of March 31, 2002, we have a new cost basis of $36.6 million in CuraGen common stock, which reflects the public trading price on that date of $16.06. We also have a new cost basis of $8.7 million of ImmunoGen common stock, which reflects the public trading price on that date of $11.07. We typically do not attempt to reduce or eliminate our market exposure on these types of investments. Under SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," the CuraGen and ImmunoGen investments are designated as available-for-sale and are reported at fair value on our balance sheet. Unrealized holding gains and losses for available-for-sale securities generally are excluded from earnings and reported as a component of stockholders' equity. However, if a decline in the fair value of available-for-sale securities is judged to be other than temporary, the cost basis of the

security is written down to fair value as a new cost basis and the amount of the write-down is included in earnings as an impairment charge. Under our accounting policy, marketable equity securities are presumed to be impaired if their fair value is less than their cost basis for more than six months, absent compelling evidence to the contrary. At March 31, 2002, our investments in CuraGen and ImmunoGen common stock had traded below their original cost basis for more than six months. Accordingly, we recorded an impairment charge of $34.7 million in our results of operations, and the new cost basis of each of these investments now reflects the public trading prices on March 31, 2002. The amount of the charge was based on the difference between the market price of the securities, as of March 31, 2002, and our original cost basis. We purchased $15 million of CuraGen common stock in December 1999 at price of $17.90 per share and $50 million of CuraGen common stock in November 2000 at a price of $34.69 per share. We purchased $15 million of ImmunoGen common stock in September 2000 at a price of $19.00 per share. The public trading prices of the shares of both companies have fluctuated significantly since we purchased them and could continue to do so. As of May 8, 2002, the public trading price for the common stock of Curagen and ImmunoGen was $8.771 and $7.99, respectively. If the public trading prices of these shares continue to trade below their new cost basis in future periods, we may incur additional impairment charges relating to these investments.

Contractual Obligations and Commercial Commitments

As of March 31, 2002, there were no material changes in our contractual obligations or commercial commitments from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2001. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" in our Annual Report on Form 10-K for the year ended December 31, 2001.

Additional Factors That Might Affect Future Results

Risks Related to our Finances

We are an early stage company without commercial therapeutic products, and we cannot assure you that we will develop sufficient revenues in the future to sustain our business.

You must evaluate us in light of the uncertainties and complexities present in an early stage biopharmaceutical company. Our product candidates are in early stages of development. We will require significant additional investment in research and development, preclinical testing and clinical trials, and regulatory and sales and marketing activities to commercialize current and future product candidates. Our product candidates, if successfully developed, may not generate sufficient or sustainable revenues to enable us to be profitable.

We have a history of losses and we expect to continue to incur losses for the foreseeable future.

We have incurred net losses in each of the last six years of operation, including net losses of $7.1 million in 1996, $35.9 million in 1997, $16.8 million in 1998, $20.5 million in 1999, $8.8 million in 2000, $60.9 million in 2001 and $56.5 million in the three months ended March 31, 2002. As of March 31, 2002, our accumulated deficit was $215.9 million. Our losses to date have resulted principally from:

•: research and development costs relating to the development of our XenoMouse® technology and antibody product candidates;
•: costs associated with certain agreements with Japan Tobacco and certain 1997 settlement and cross-licensing agreements with GenPharm;

•: in-process research and development costs and amortization of intangible assets associated with our acquisitions of Abgenix Biopharma Inc. (formerly known as ImmGenics Pharmaceuticals, Inc.), IntraImmune Therapies, Inc. and Xenotech;
•: general and administrative costs relating to our operations; and
•: an impairment charge related to our strategic investments in the common stock of CuraGen and ImmunoGen.

We expect to incur additional losses for the foreseeable future as a result of increases in our research and development costs, including costs associated with conducting preclinical development and clinical trials, and charges related to purchases of technology or other assets. We intend to invest significantly in our products prior to entering into licensing agreements. This will increase our need for capital and will result in losses for at least the next several years. We expect that the amount of operating losses will fluctuate significantly from quarter to quarter as a result of increases or decreases in our research and development efforts, the execution or termination of licensing and contractual agreements, and the initiation, success or failure of clinical trials.

We are currently unprofitable and may never be profitable, and our future revenues could fluctuate significantly.

Prior to June 1996, Cell Genesys owned our business and operated it as a separate business unit. Since that time, we have funded our research and development activities primarily from private placements and public offerings of our securities and from revenues generated by our licensing and contractual agreements.

We expect that substantially all of our revenues for the foreseeable future will result from payments under licensing and other contractual arrangements and from interest income. To date, payments under licensing and other agreements have been in the form of option fees, reimbursement for research and development expenses, license fees and milestone payments. Payments under our existing and any future customer agreements will be subject to significant fluctuation in both timing and amount. Our revenues may not be indicative of our future performance or of our ability to continue to achieve such milestones. Our revenues and results of operations for any period may also not be comparable to the revenues or results of operations for any other period. We may not be able to:

•: enter into further licensing and other agreements;
•: successfully complete pre-clinical development or clinical trials;
•: obtain required regulatory approvals;
•: successfully develop, manufacture and market product candidates; or
•: generate additional revenues or profitability.

Our failure to achieve any of the above goals would materially harm our business, financial condition and results of operations.

We may require additional financing, and an inability to raise the necessary capital or to do so on acceptable terms would threaten the continued success of our business.

We will continue to expend substantial resources for the expansion of research and development, including costs associated with conducting pre-clinical development and clinical trials. In the three months ended March 31, 2002, we spent $29.0 million on research and development. In the years ended December 31, 2001, 2000 and 1999, we spent $96.2 million, $50.1 million and $21.1 million, respectively, on research and development. Regulatory and business factors will require us to expend substantial funds in the course of completing required additional development, pre-clinical testing and clinical trials of, and regulatory approvals for, product candidates. The amounts of the expenditures

that will be necessary to execute our business plan are subject to numerous uncertainties, which may adversely affect our liquidity and capital resources. Our future liquidity and capital requirements will depend on many factors, including:

•: the scope and results of pre-clinical development and clinical trials;
•: the retention of existing and establishment of further licensing and other agreements, if any;
•: continued scientific progress in our research and development programs;
•: the size and complexity of these programs;
•: the cost of establishing manufacturing capabilities and conducting commercialization activities and arrangements;
•: the time and expense involved in seeking regulatory approvals;
•: competing technological and market developments;
•: the time and expense of filing and prosecuting patent applications and enforcing patent claims;
•: our investment in, or acquisition of, other companies;
•: the amount of product in-licensing in which we engage; and
•: other factors not within our control.

We believe that our current cash balances, cash equivalents, marketable securities, and the cash generated from our licensing and contractual agreements will be sufficient to meet our operating and capital requirements for at least one year. However, because of the uncertainties in our business, including the uncertainties listed above, we cannot assure you that this will be the case. In addition, we may choose to obtain additional financing from time to time. We may choose to raise additional funds through public or private financing, licensing and contractual agreements or other arrangements. We cannot be sure that any additional funding, if needed, will be available on terms favorable to us or at all. Furthermore, any additional equity or equity-related financing may be dilutive to our stockholders, and debt financing, if available, may subject us to restrictive covenants. We may also choose to obtain funding through licensing and other contractual agreements. Such agreements may require us to relinquish our rights to certain of our technologies, products or marketing territories. Our failure to raise capital when needed would harm our business, financial condition and results of operations.

Our strategic investments in two companies expose us to equity price risk and our investments in those companies could be deemed to be further impaired in the future, which could affect our results of operations.

We are exposed to equity price risk on our strategic investments in CuraGen and ImmunoGen and we may elect to make additional similar investments in the future. As of March 31, 2002, we have a new cost basis of $36.6 million in CuraGen common stock which reflects the public trading price on that date of $16.06. We also have a new cost basis of $8.7 million of ImmunoGen common stock which reflects the public trading price on that date of $11.07. We typically do not attempt to reduce or eliminate our market exposure on these types of investments. Under SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," the CuraGen and ImmunoGen investments are designated as available-for-sale and are reported at fair value on our balance sheet. Unrealized holding gains and losses for available-for-sale securities generally are excluded from earnings and reported as a component of stockholders' equity. However, if a decline in the fair value of available-for-sale securities is judged to be other than temporary, the cost basis of the security is written down to fair value as a new cost basis and the amount of the write-down is included in earnings as an impairment charge. Under our accounting policy, marketable equity securities are presumed to be impaired if their fair value is less than their cost basis for more than six months, absent compelling evidence to the contrary. At March 31, 2002, our investments in CuraGen and ImmunoGen common stock had traded below

their original cost basis for more than six months. Accordingly, we recorded an impairment charge of $34.7 million in our results of operations, and the new cost basis of these investments now reflects the public trading prices on March 31, 2002. The amount of the charge was based on the difference between the market price of the securities, as of March 31, 2002, and our original cost basis. We purchased $15 million of CuraGen common stock in December 1999 at price of $17.90 per share and $50 million of CuraGen common stock in November 2000 at a price of $34.69 per share. We purchased $15 million of ImmunoGen common stock in September 2000 at a price of $19.00 per share. The public trading prices of the shares of both companies have fluctuated significantly since we purchased them and could continue to do so. As of May 8, 2002, the public trading price for the common stock of Curagen and ImmunoGen was $8.771 and $7.99, respectively. If the public trading prices of these shares continue to trade below their new cost basis in future periods, we may incur additional impairment charges relating to these investments.

Risks Related to the Development and Commercialization of our Products

Our XenoMouse and XenoMax technologies may not produce safe, efficacious or commercially viable products, which will be critical to our ability to generate revenues from our products.

Our XenoMouse and XenoMax technologies are new approaches to developing antibodies as products for the treatment of diseases and medical disorders. We have not commercialized any antibody therapeutic products based on our technologies. Moreover, we are not aware of any commercialized, fully human antibody therapeutic products that have been generated from any technologies similar to ours. Our antibody therapeutic product candidates are still at an early stage of development. We have initiated clinical trials with respect to three proprietary fully human antibody therapeutic product candidates, and our collaborators have initiated clinical trials with respect to two other fully human antibody therapeutic product candidates generated by XenoMouse technology. We cannot be certain that either XenoMouse technology or XenoMax technology will generate antibodies against every antigen to which they are exposed in an efficient and timely manner, if at all. Furthermore, XenoMouse technology and XenoMax technology may not result in any meaningful benefits to our current or potential customers or in product candidates that are safe and efficacious for patients. Our failure to generate antibody therapeutic product candidates that lead to the successful commercialization of products would materially harm our business, financial condition and results of operations.

If we do not successfully develop our products, or if they do not achieve commercial success, our business will be materially harmed.

Our development of current and future product candidates, either alone or in conjunction with collaborators, is subject to the risks of failure inherent in the development of new pharmaceutical products and products based on new technologies. These risks include:

•: delays in product development, clinical testing or manufacturing;
•: unplanned expenditures in product development, clinical testing or manufacturing;
•: failure in clinical trials or failure to receive regulatory approvals;
•: emergence of superior or equivalent product development technologies or products;
•: inability to manufacture on our own, or through others, product candidates on a commercial scale;
•: inability to market products due to third-party proprietary rights;
•: election by our customers not to pursue product development;
•: failure by our customers to develop products successfully; and

•: failure to achieve market acceptance.

Because of these risks, our research and development efforts and those of our customers and collaborators may not result in any commercially viable products. Our failure to successfully complete a significant portion of these development efforts, to obtain required regulatory approvals or to achieve commercial success with any approved products would materially harm our business, financial condition and results of operations.

In addition, our recent decision to terminate or wind down our clinical programs for developing ABX-IL8 has reduced the diversity of our product portfolio. We hope to be able to make up for this loss of diversity through the number of potential new product candidates we have in preclinical development. However, to the extent that we are unable to maintain a broad and diverse range of product candidates, our success would depend more heavily on one or a few product candidates.

Before we commercialize and sell any of our product candidates, we must conduct clinical trials, which are expensive and have uncertain outcomes.

Conducting clinical trials is a lengthy, time-consuming and expensive process. Before obtaining regulatory approvals for the commercial sale of any products, we must demonstrate through pre-clinical testing and clinical trials that our product candidates are safe and effective for use in humans. We have incurred and will continue to incur substantial expense for, and we have devoted and expect to continue to devote a significant amount of time to, pre-clinical testing and clinical trials.

Historically, the results from pre-clinical testing and early clinical trials have often not been predictive of results obtained in later clinical trials. A number of new drugs and biologics have shown promising results in clinical trials, but subsequently failed to establish sufficient safety and efficacy data to obtain necessary regulatory approvals. Data obtained from pre-clinical and clinical activities are susceptible to varying interpretations, which may delay, limit or prevent regulatory approval. In addition, we may encounter regulatory delays or rejections as a result of many factors, including changes in regulatory policy during the period of product development.

As of March 31, 2002, four of our proprietary product candidates, ABX-CBL, ABX-IL8, ABX-EGF and ABX-MA1, were in clinical trials. Patient follow-up for these clinical trials has been limited because these trials have been ongoing for a relatively short period of time. To date, data obtained from these clinical trials have been insufficient to demonstrate safety and efficacy under applicable Food and Drug Administration, or FDA, guidelines. As a result, these data will not support an application for regulatory approval without further clinical trials. Clinical trials that we conduct or that third parties conduct on our behalf may not demonstrate sufficient safety and efficacy to obtain the requisite regulatory approvals for any of our product candidates. We expect to commence new clinical trials from time to time in the course of our business as our product development work continues. However, regulatory authorities may not permit us to undertake any additional clinical trials for our product candidates.

In addition, we have ongoing research projects that may lead to product candidates, but we have not submitted INDs nor begun clinical trials for these projects. Our preclinical or clinical development efforts may not be successfully completed, we may not file further INDs and clinical trials may not commence as planned.

Completion of clinical trials may take several years or more. The length of time generally varies substantially according to the type, complexity, novelty and intended use of the product candidate.

However, we estimate that clinical trials of the type we generally conduct are completed over the following timelines:

Clinical Phase		Estimated Completion Period
Phase I		1 Year
Phase II		1-2 Years
Phase III		2-4 Years

Many factors may delay our commencement and rate of completion of clinical trials, including:

•: the number of patients that ultimately participate in the trial;
•: the duration of patient follow-up that seems appropriate in view of the results;
•: the number of clinical sites included in the trials; and
•: the length of time required to enroll suitable patient subjects.

We have limited experience in conducting and managing clinical trials. We rely on third parties, including our customers, to assist us in managing and monitoring clinical trials. Our reliance on these third parties may result in delays in completing, or in failure to complete, these trials if the third parties fail to perform under our agreements with them.

Our product candidates may fail to demonstrate safety or efficacy in clinical trials. For example, in January 2002 and May 2002, respectively, we announced that clinical trials of our proprietary product candidate ABX-IL8 as treatment for rheumatoid arthritis and psoriasis did not support further clinical studies of that product candidate. This and other potential failures may delay development of other product candidates and hinder our ability to conduct related preclinical testing and clinical trials. As a result of these failures, we may also be unable to obtain additional financing. Any delays in, or termination of, our clinical trials could materially harm our business, financial condition and results of operations.

We currently rely on a sole source third-party manufacturer, and we may have difficulty conducting clinical trials of our product candidates if the manufacturer does not perform in accordance with our expectations.

To date we have relied on a single contract manufacturer, Lonza Biologics, to produce ABX-CBL, ABX-IL8 and ABX-EGF under good manufacturing practice regulations, for use in our clinical trials. We may also rely on other contract manufacturers from time to time to produce our product candidates for use in our clinical trials. For example, Fred Hutchinson Cancer Research Center produces ABX-MA1 for use in our clinical trials. While our Fremont manufacturing facility is expected to be operational by year-end 2002, thus creating additional capacity, which we will control, we cannot assure you that this facility will open when expected. Even when our new facility in Fremont opens, we expect to continue to rely on Lonza for at least the next five year for a portion of our manufacturing capacity. In November 2000, we entered into a manufacturing supply agreement with Lonza, under which Lonza will make available exclusively to us, for a period of five years, a cell culture production suite, with associated purification capacity, within Lonza's facility. The agreement includes an option to extend the initial five-year term. The dedicated cell culture production suite is operational and became available to us in the third quarter of 2001. Although we have gained access through this agreement to production capacity and scheduling flexibility similar to owning the production capability, Lonza retains responsibility for, and control over, staffing and operating the facility. In July 2001, we entered into an agreement giving us the right to enter into exclusive negotiations with Lonza for an additional manufacturing supply agreement under which Lonza will make available to us, for a period of up to five years, extendable for an additional two-year period, approximately one quarter of the annual capacity of a cell culture production suite for large-scale manufacturing of products that is under construction and we currently anticipate that construction of the facility will be completed in the fourth

quarter of 2004. The exclusive negotiation period has been extended and will expire no earlier than June 30, 2002. We cannot assure you that we will actually reach agreement with Lonza for this additional capacity. Even if we do reach agreement with Lonza, we cannot assure you that the facility will be completed by the end of 2004 or at all.

Lonza has a limited number of facilities in which it can produce our product candidates and has limited experience in manufacturing them in quantities sufficient for conducting clinical trials or for commercialization. We currently rely on Lonza to produce our product candidates under good manufacturing practice regulations, which meet acceptable standards for our clinical trials.

Third-party manufacturers may encounter difficulties in scaling up production, including problems involving production yields, quality control and assurance, shortage of qualified personnel, compliance with FDA and other applicable regulations, production costs, and development of advanced manufacturing techniques and process controls. Our third-party manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required by us to successfully produce and market our product candidates. The failure of our third-party manufacturers to deliver the required quantities of our product candidates for clinical use on a timely basis and at commercially reasonable prices, and our failure to find replacement manufacturers or develop our own manufacturing capabilities, would materially harm our business, financial condition and results of operations.

Our own ability to manufacture is uncertain, which may make it more difficult for us to develop and sell our products.

We are building our own manufacturing facility for the manufacture of products for clinical trials and to support the potential early commercial launch of a limited number of product candidates, in each case, in compliance with FDA and European good manufacturing practices. In May 2000, we signed a long-term lease for a building to contain this manufacturing facility. Construction has started and we expect this facility to be operational by year-end 2002. The costs of the facility, including design fees, permits, validation, leasehold improvements and equipment, will approximate $140 million. Construction of this facility may take longer than expected, and the planned and actual construction costs of building and qualifying the facility for regulatory compliance may be higher than expected. In addition, if the commercial launch of one or more of our product candidates proves successful, we will likely need to use one or more third-party facilities to produce these products in sufficient quantities. The process of manufacturing antibody therapeutic products is complex. We have no experience in the clinical or commercial scale manufacturing of our existing product candidates, or any other antibody therapeutic products. Also, we will need to manufacture such antibody therapeutic products in a facility and by a process that comply with FDA, European and other regulations. It may take a substantial period of time to begin producing antibodies in compliance with such regulations. Our manufacturing operations will be subject to ongoing, periodic unannounced inspection by the FDA and state agencies to ensure compliance with good manufacturing practices. Our inability to establish and maintain a manufacturing facility within our planned time and cost parameters could materially harm the development and sales of our products and our financial performance.

We also may encounter problems with the following:

•: production yields;
•: quality control and assurance;
•: shortages of qualified personnel;
•: on-going compliance with FDA regulations;
•: production costs; and
•: development of advanced manufacturing techniques and process controls.

We continually evaluate our options for commercial production of our antibody therapeutic products, which include use of third-party manufacturers, establishing our own commercial scale manufacturing facility or entering into a manufacturing joint venture relationship with a third party. We are aware of only a limited number of companies on a worldwide basis who operate manufacturing facilities in which our product candidates can be manufactured under good manufacturing practice regulations, a requirement for all pharmaceutical products. It would take a substantial period of time for a contract manufacturing facility that has not been producing antibodies to begin producing antibodies under good manufacturing practice regulations. We may not be able to contract with any of these companies on acceptable terms, if at all.

In addition, the FDA and other regulatory authorities will require us to register any manufacturing facilities in which our antibody therapeutic products are manufactured. The FDA and other regulatory authorities will then subject the facilities to inspections confirming compliance with FDA good manufacturing practice or other regulations. Our failure or the failure of our third-party manufacturers to maintain regulatory compliance would materially harm our business, financial condition and results of operations.

The successful growth of our business depends to a large extent on our ability to find third-party collaborators to develop and commercialize many of our product candidates.

Our strategy for the development and commercialization of antibody therapeutic products depends, in large part, upon the formation of collaboration agreements with third parties. Potential third parties include pharmaceutical and biotechnology companies, technology companies, academic institutions and other entities. We must enter into these agreements to successfully develop and commercialize product candidates. These agreements are necessary in order for us to:

•: access proprietary antigens for which we can generate fully human antibody products;
•: fund our research and development activities;
•: fund pre-clinical development, clinical trials and manufacturing;
•: seek and obtain regulatory approvals; and
•: successfully commercialize existing and future product candidates.

Our ability to continue our current collaborations and to enter into additional third party collaborations is dependent in large part on our ability to successfully demonstrate that our XenoMouse technology is an attractive method of developing fully human antibody therapeutic products. We have generated only a limited number of fully human antibody therapeutic product candidates pursuant to our collaboration agreements and only five fully human antibody therapeutic product candidates generated with XenoMouse technology have entered clinical testing. These product candidates may not result in commercially successful products. Current or future collaboration agreements may not be successful. Our failure to maintain our existing collaboration agreements or to enter into additional agreements could materially harm our business, financial condition and results of operations.

Our dependence on licensing and other agreements with third parties subjects us to a number of risks. These agreements may not be on terms that prove favorable to us, and we typically afford our collaborators significant discretion in electing whether to pursue any of the planned activities. Licensing and other contractual agreements may require us to relinquish our rights to certain of our technologies, products or marketing territories. We cannot control the amount or timing of resources our collaborators may devote to the product candidates, and collaborators may not perform their obligations as expected. Additionally, business combinations or significant changes in a collaborator's business strategy may adversely affect a collaborator's willingness or ability to complete its obligations under the arrangement. Even if we fulfill our obligations under an agreement, typically our

collaborators can terminate the agreement at any time following proper written notice. The termination or breach of agreements by our collaborators, or the failure of our collaborators to complete their obligations in a timely manner, could materially harm our business, financial condition and results of operations. If we are not able to establish further collaboration agreements or any or all of our existing agreements are terminated, we may be required to seek new collaborators or to undertake product development and commercialization at our own expense. Such an undertaking may:

•: limit the number of product candidates that we will be able to develop and commercialize;
•: reduce the likelihood of successful product introduction;
•: significantly increase our capital requirements; and
•: place additional strain on our management's time.

Existing or future collaborators may pursue alternative technologies, including those of our competitors. In addition, in recent months, some of our collaborators have undergone business combinations or are in the process of doing so. These types of transactions could have the effect of making a collaboration with us less attractive to them for a number of reasons. For example, if an existing collaborator purchases a company that is one of our competitors, that company could be less willing to continue its collaboration with us. In addition, a company that has a strategy of purchasing companies with attractive technologies might have less incentive to enter into a collaboration agreement with us. Moreover, disputes may arise with respect to the ownership of rights to any technology or products developed with any current or future collaborator. Lengthy negotiations with potential new collaborators or disagreements between us and our collaborators may lead to delays or termination in the research, development or commercialization of product candidates or result in time-consuming and expensive litigation or arbitration. The decision by our collaborators to pursue alternative technologies or the failure of our collaborators to develop or commercialize successfully any product candidate to which they have obtained rights from us could materially harm our business, financial condition and results of operations.

We are subject to extensive government regulation, which will require us to spend significant amounts of money, and we may not be able to obtain regulatory approvals, which are required for us to conduct clinical testing and commercialize our products.

Our product candidates under development are subject to extensive and rigorous domestic government regulation. The FDA regulates, among other things, the development, testing, manufacture, safety, efficacy, record-keeping, labeling, storage, approval, advertising, promotion, sale and distribution of biopharmaceutical products. If we market our products abroad, they will also be subject to extensive regulation by foreign governments. Neither the FDA nor any other regulatory agency has approved any of our product candidates for sale in the United States or any foreign market. The regulatory review and approval process, which includes preclinical studies and clinical trials of each product candidate, is lengthy, expensive and uncertain. Securing FDA approval requires the submission of extensive preclinical and clinical data and supporting information to the FDA for each indication to establish the product candidate's safety and efficacy. The approval process takes many years, requires the expenditure of substantial resources, involves post-marketing surveillance, and may involve ongoing requirements for post-marketing studies. Regulatory requirements are subject to frequent change. Delays in obtaining regulatory approvals may:

•: adversely affect the successful commercialization of any drugs that we or our customers develop;
•: impose costly procedures on us or our customers;
•: diminish any competitive advantages that we or our customers may attain; and
•: adversely affect our receipt of revenues or royalties.

Certain material changes to an approved product such as manufacturing changes or additional labeling claims are subject to further FDA review and approval. The FDA may withdraw any required approvals, after we obtain them. We may not maintain compliance with other regulatory requirements. Further, if we fail to comply with applicable FDA and other regulatory requirements at any stage during the regulatory process, we or our third-party manufacturers may be subject to sanctions, including:

•: delays;
•: warning letters;
•: fines;
•: product recalls or seizures;
•: injunctions;
•: refusal of the FDA to review pending market approval applications or supplements to approval applications;
•: total or partial suspension of production;
•: civil penalties;
•: withdrawals of previously approved marketing applications; and
•: criminal prosecutions.

In many instances we expect to rely on our customers and co-developers to file INDs and generally direct the regulatory approval process for products derived from our technologies. These customers and co-developers may not be able to conduct clinical testing or obtain necessary approvals from the FDA or other regulatory authorities for any product candidates. If they fail to obtain required governmental approvals, we will experience delays in or be precluded from marketing or realizing the commercial benefits from the marketing of products derived from our technologies. In addition, our failure to obtain the required approvals would preclude the commercial use of our products. Any such delays and limitations may materially harm our business, financial condition and results of operations.

We and our third-party manufacturers also are required to comply with the applicable FDA current good manufacturing practice regulations. Good manufacturing practice regulations include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation. Manufacturing facilities are subject to inspection by the FDA and the FDA must approve these facilities before we can use them in commercial manufacturing of our products. We or our third-party manufacturers may not be able to comply with the applicable good manufacturing practice requirements and other FDA regulatory requirements. The failure of us or our third-party manufacturers to comply with these requirements would materially harm our business, financial condition and results of operations.

If our products do not gain market acceptance among the medical community, our revenues would greatly decline.

Our product candidates may not gain market acceptance among physicians, patients, third-party payors and the medical community. We may not achieve market acceptance even if clinical trials demonstrate safety and efficacy, and the necessary regulatory and reimbursement approvals are obtained. The degree of market acceptance of any product candidates that we develop will depend on a number of factors, including:

•: establishment and demonstration of clinical efficacy and safety;

•: cost-effectiveness of our product candidates;
•: their potential advantage over alternative treatment methods;
•: reimbursement policies of government and third-party payors; and
•: marketing and distribution support for our product candidates, including the efforts of our collaborators where they have marketing and distribution responsibilities.

Physicians will not recommend therapies using our products until such time as clinical data or other factors demonstrate the safety and efficacy of such procedures as compared to conventional drug and other treatments. Even if we establish the clinical safety and efficacy of therapies using our antibody product candidates, physicians may elect not to recommend the therapies for any number of other reasons, including whether the mode of administration of our antibody products is effective for certain indications. Antibody products, including our product candidates as they would be used for certain disease indications, are typically administered by infusion or injection, which requires substantial cost and inconvenience to patients. Our product candidates, if successfully developed, will compete with a number of drugs and therapies manufactured and marketed by major pharmaceutical and other biotechnology companies. Our products may also compete with new products currently under development by others. Physicians, patients, third-party payors and the medical community may not accept and utilize any product candidates that we or our customers develop. The failure of our products to achieve significant market acceptance would materially harm our business, financial condition and results of operations.

We do not have marketing and sales experience, which may require us to rely on others to market and sell our products and may make it more challenging for us to commercialize our product candidates.

Although we have been marketing our XenoMouse technology to potential customers and collaborators for several years, we do not have marketing, sales or distribution experience or capability with respect to our therapeutic product candidates. We intend to enter into arrangements with third parties to market and sell most of our therapeutic product candidates when we commercialize them, which may be as early as 2004. We may not be able to enter into these marketing and sales arrangements with others on acceptable terms, if at all. To the extent that we enter into marketing and sales arrangements with other companies, our revenues, if any, will depend on the efforts of others. These efforts may not be successful. If we are unable to enter into third-party arrangements, then we will need to develop a marketing and sales force, which may need to be substantial in size, in order to achieve commercial success for any product candidate approved by the FDA. We may not successfully develop marketing and sales capabilities or have sufficient resources to do so. If we do develop such capabilities, we will compete with other companies that have experienced and well-funded marketing and sales operations. Our failure to enter into successful marketing arrangements with third parties and our inability to conduct such activities ourselves would materially harm our business, financial condition and results of operations.

Risks Related to Our Intellectual Property

Our ability to protect our intellectual property rights will be critically important to the success of our business, and we may not be able to protect these rights in the United States or abroad.

Our success depends in part on our ability to:

•: obtain patents;
•: protect trade secrets;
•: operate without infringing the proprietary rights of others; and

•: prevent others from infringing our proprietary rights.

We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary rights are covered by valid and enforceable patents or are effectively maintained as trade secrets. We attempt to protect our proprietary position by filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business. However, the patent position of biopharmaceutical companies involves complex legal and factual questions, and, therefore, we cannot predict with certainty whether our patents will be enforced. In addition, third parties may challenge, invalidate or circumvent any of our patents, once they are issued. Thus, any patents that we own or license from third parties may not provide any protection against competitors. Our pending patent applications, those we may file in the future, or those we may license from third parties, may not result in patents being issued. Also, patent rights may not provide us with adequate proprietary protection or competitive advantages against competitors with similar technologies. The laws of certain foreign countries do not protect our intellectual property rights to the same extent as do the laws of the United States.

In addition to patents, we rely on trade secrets and proprietary know-how. We seek protection, in part, through confidentiality and proprietary information agreements. These agreements may not provide meaningful protection or adequate remedies for our technology in the event of unauthorized use or disclosure of confidential and proprietary information, and, in addition, the parties may breach such agreements. Also, our trade secrets may otherwise become known to, or be independently developed by, our competitors. Furthermore, others may independently develop similar technologies or duplicate any technology that we have developed.

We may face challenges from third parties regarding the validity of our patents and proprietary rights, or from third parties asserting that we are infringing on their patents or proprietary rights, which could result in litigation that would be costly to defend and could deprive us of valuable rights.

Parties have conducted research for many years in the antibody and transgenic animal fields. The term "transgenic", when applied to an animal, such as a mouse, refers to an animal that passes heritable traits from human genes that have been incorporated. This research has resulted in a substantial number of issued patents and an even larger number of pending patent applications. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made. Our commercial success depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties. Our technologies may unintentionally infringe the patents or violate other proprietary rights of third parties. Such infringement or violation may prevent us and our customers from pursuing product development or commercialization. Such a result could materially harm our business, financial condition and results of operations.

In March 1997, we entered into a cross-license and settlement agreement with GenPharm International, Inc. to avoid protracted litigation. Under the cross-license, we licensed on a non-exclusive basis certain patents, patent applications, third-party licenses and inventions pertaining to the development and use of certain transgenic rodents, including mice, that produce fully human antibodies that are integral to our products and business. Our business, financial condition and results of operations could be materially harmed if any of the parties breaches the cross-license agreement.

GlaxoSmithKline, plc, or Glaxo has a family of patents relating to certain methods for generating monoclonal antibodies that Glaxo is asserting against Genentech, Inc. in litigation that was commenced in 1999. On May 4, 2001, Genentech announced that a jury had determined that Genentech had not infringed Glaxo's patents and that all of the patent claims asserted against Genentech are invalid. We understand that Glaxo has filed a notice of appeal with the Court of Appeals for the Federal Circuit. If any of the claims of these patents are finally determined in the litigation to be valid, and if we were to

use manufacturing processes covered by the patents to make our products, we may then need to obtain a license should one be available. Should a license be denied or unavailable on commercially reasonable terms, we may have difficulties commercializing one or more of our products in any territories in which these claims were in force.

Genentech owns a U.S. patent that relates to methods of generating recombinant cell lines for the production of antibodies. If we were to use a production system covered by the patents, we may then need to obtain a license should one be available. Our failure to obtain a license at all or on commercially reasonable terms could impede commercialization of one or more of our products in any territories in which these claims were in force.

Johnson & Johnson controls a U.S. patent that relates to methods of generating recombinant cell lines for the production of antibodies. If we were to use a production system covered by the patents, we may then need to obtain a license should one be available. Our failure to obtain a license at all or on commercially reasonable terms could impede commercialization of one or more of our products in any territories in which these claims were in force.

Genentech owns a U.S. patent that issued in June 1998 relating to inhibiting the growth of tumor cells that involves an antibody that binds to an epidermal growth factor receptor, or an anti-EGF receptor antibody, in combination with a cytotoxic factor, which is a substance having a toxic effect on cells. ImClone Systems, Inc. owns or is licensed under a U.S. patent that issued in April 2001, relating to inhibiting the growth of tumor cells that involves an anti-EGF receptor antibody in combination with an anti-neoplastic, or anti-tumor, agent. However, we do not believe based on our review that either the Genentech or ImClone patent would be successfully asserted against any planned commercial sales of ABX-EGF. We believe that currently all of our activities relating to anti-EGF receptor monoclonal antibodies are within the exemption provided by the U.S. patent laws for uses reasonably related to obtaining FDA approval of a drug. We do not expect the scope of our product development plans to change in the future prior to filing an application for a biologic license with the FDA. If a court determines that the claims of either the Genentech patent or the ImClone patent cover our activities with ABX-EGF and are valid, such a decision may require us to obtain a license to Genentech's or ImClone's patent, as the case may be, to label and sell ABX-EGF for certain combination therapies. Our failure to obtain a license, or to obtain a license on commercially reasonable terms, could impede our commercialization of ABX-EGF in the United States.

In 2000, the Japanese Patent Office granted a patent to Kirin Beer Kabushiki Kaisha, one of our competitors, relating to non-human transgenic mammals. Kirin has filed corresponding patent applications in Europe and Australia. Kirin may also have filed a corresponding patent application in the United States. Our licensee, Japan Tobacco, has filed opposition proceedings against the Kirin patent. We cannot predict the outcome of those opposition proceedings, which may take years to be resolved.

Extensive litigation regarding patents and other intellectual property rights has been common in the biotechnology and pharmaceutical industries. The defense and prosecution of intellectual property suits, United States Patent and Trademark Office interference proceedings, and related legal and administrative proceedings in the United States and internationally involve complex legal and factual questions. As a result, such proceedings are costly and time-consuming to pursue and their outcome is uncertain. Litigation may be necessary to:

•: enforce patents that we own or license;
•: protect trade secrets or know-how that we own or license; or
•: determine the enforceability, scope and validity of the proprietary rights of others.

Our involvement in any litigation, interference or other administrative proceedings could cause us to incur substantial expense and could significantly divert the efforts of our technical and management personnel. An adverse determination may subject us to loss of our proprietary position or to significant liabilities, or require us to seek licenses that may not be available from third parties. An adverse determination in a judicial or administrative proceeding, or a failure to obtain necessary licenses, may restrict or prevent us from manufacturing and selling our products, if any. Costs associated with these arrangements may be substantial and may include ongoing royalties. Furthermore, we may not be able to obtain the necessary licenses on satisfactory terms, if at all. These outcomes could materially harm our business, financial condition and results of operations.

Risks Related to Our Industry

We face intense competition and rapid technological change, and if we fail to develop products that keep pace with new technologies and that gain market acceptance, our product candidates or technologies could become obsolete.

The biotechnology and pharmaceutical industries are highly competitive and subject to significant and rapid technological change. We are aware of several pharmaceutical and biotechnology companies that are actively engaged in research and development in areas related to antibody therapy. These companies have commenced clinical trials of antibody therapeutic product candidates or have successfully commercialized antibody therapeutic products. Many of these companies are addressing the same diseases and disease indications as we or our customers are. Also, we compete with companies that offer antibody generation services to companies that have antigens. These competitors have specific expertise or technology related to antibody development and introduce new or modified technologies from time to time. These companies include GenPharm, Kirin; Genmab A/S; Cambridge Antibody Technology Group plc; Protein Design Labs, Inc.; MorphoSys AG; Xenerex Biosciences, Inc., a subsidiary of Avanir Pharmaceuticals; and XTL Biopharmaceuticals Ltd.

Some of our competitors have received regulatory approval of or are developing or testing product candidates that may compete directly with our product candidates. For example, SangStat, Novartis, Pharmacia and Roche market organ transplant rejection products that may compete with ABX-CBL, which is in clinical trials. In addition, MedImmune, Inc. has a potential antibody product candidate in clinical trials for graft versus host disease that may compete with ABX-CBL. Furthermore, we are aware that ImClone, AstraZeneca, plc, Glaxo and a collaboration of OSI Pharmaceuticals, Inc. Genentech and Roche have potential antibody and small molecule product candidates in clinical development that may compete with ABX-EGF, which is also in clinical trials.

Many of these companies and institutions, either alone or together with their customers, have substantially greater financial resources and larger research and development staffs than we do. In addition, many of these competitors, either alone or together with their customers, have significantly greater experience than we do in:

•: developing products;
•: undertaking pre-clinical testing and human clinical trials;
•: obtaining FDA and other regulatory approvals of products; and
•: manufacturing and marketing products.

Accordingly, our competitors may succeed in obtaining patent protection, receiving FDA approval or commercializing products before we do. If we commence commercial product sales, we will be competing against companies with greater marketing and manufacturing capabilities, areas in which we have limited or no experience.

We also face, and will continue to face, competition from academic institutions, government agencies and research institutions. There are numerous competitors working on products to treat each of the diseases for which we are seeking to develop therapeutic products. In addition, any product candidate that we successfully develop may compete with existing therapies that have long histories of safe and effective use. Competition may also arise from:

•: other drug development technologies and methods of preventing or reducing the incidence of disease;
•: new small molecules; or
•: other classes of therapeutic agents.

Developments by competitors may render our product candidates or technologies obsolete or non-competitive. We face and will continue to face intense competition from other companies for agreements with pharmaceutical and biotechnology companies, for establishing relationships with academic and research institutions, and for licenses to proprietary technology. These competitors, either alone or with their customers, may succeed in developing technologies or products that are more effective than ours.

We face uncertainty over reimbursement and healthcare reform, which, if determined adversely to us, could seriously hinder the market acceptance of our products.

In both domestic and foreign markets, sales of our product candidates will depend in part upon the availability of reimbursement from third-party payors, such as government health administration authorities, managed care providers and private health insurers. Third-party payors are increasingly challenging the price and examining the cost effectiveness of medical products and services. In addition, significant uncertainty exists as to the reimbursement status of newly approved healthcare products. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. In addition, domestic and foreign governments continue to propose and pass legislation designed to reduce the cost of healthcare, which could further limit reimbursement for pharmaceuticals. The failure of the government and third-party payors to provide adequate coverage and reimbursement rates for our product candidates could adversely affect the market acceptance of our products. The failure of our products to receive market acceptance would materially harm our business, financial condition and results of operations.

Other Risks Related to Our Company

We may experience difficulty in the integration of any future acquisition with the operations of our business.

We may from time to time seek to expand our business through corporate acquisitions. Our acquisition of companies and businesses and expansion of operations, involve risks such as the following:

•: the potential inability to identify target companies best suited to our business plan;
•: the potential inability to successfully integrate acquired operations and businesses and to realize anticipated synergies, economies of scale or other expected value;
•: incurrence of expenses attendant to transactions that may or may not be consummated; and
•: difficulties in managing and coordinating operations at multiple venues, which, among other things, could divert our management's attention from other important business matters.

In addition, our acquisition of companies and businesses and expansion of operations may result in dilutive issuances of equity securities, the incurrence of additional debt, large one-time write-offs and the creation of goodwill or other intangible assets that could result in amortization expense or other charges to expense.

The future growth and success of our business will depend on our ability to continue to attract and retain our employees and consultants.

For us to pursue product development, marketing and commercialization plans, we will need to hire additional qualified scientific personnel to perform research and development. We will also need to hire personnel with expertise in clinical testing, government regulation, manufacturing, marketing and finance. Attracting and retaining qualified personnel will be critical to our success. We may not be able to attract and retain personnel on acceptable terms given the competition for such personnel among biotechnology, pharmaceutical and healthcare companies, universities and non-profit research institutions. Our inability to attract and retain qualified personnel might materially harm our business, financial condition and results of operations.

We have implemented a stockholder rights plan and are subject to other anti-takeover provisions, which could deter a party from effecting a takeover of us at a premium to our then-current stock price.

In June 1999, our board of directors adopted a stockholder rights plan, which we amended and restated in November 1999 and May 2002. The stockholder rights plan and certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of us. This could limit the price that certain investors might be willing to pay in the future for our common stock. Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws allow us to:

•: issue preferred stock without any vote or further action by the stockholders;
•: eliminate the right of stockholders to act by written consent without a meeting;
•: specify procedures for director nominations by stockholders and submission of other proposals for consideration at stockholder meetings; and
•: eliminate cumulative voting in the election of directors.

We are subject to certain provisions of Delaware law which could also delay or make more difficult a merger, tender offer or proxy contest involving us. In particular, Section 203 of the Delaware General Corporation Law prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years unless the transaction meets certain conditions. The stockholder rights plan, the possible issuance of preferred stock, the procedures required for director nominations and stockholder proposals and Delaware law could have the effect of delaying, deferring or preventing a change in control of us, including, without limitation, discouraging a proxy contest or making more difficult the acquisition of a substantial block of our common stock. The provisions also could limit the price that investors might be willing to pay in the future for shares of our common stock.

We face product liability risks and may not be able to obtain adequate insurance, and if we are held liable for an uninsured claim or a claim in excess of our insurance limits, our business, financial condition and results of operations may be harmed.

The use of any of our product candidates in clinical trials, and the sale of any approved products, may expose us to liability claims resulting from such use or sale of our products. Consumers, healthcare providers, pharmaceutical companies or others selling such products might make claims of this kind.

We may experience financial losses in the future due to product liability claims. We have obtained limited product liability insurance coverage for our clinical trials, under which the coverage limits are $5.0 million per occurrence and $5.0 million in the aggregate. We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for product candidates in development. We may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses. If third parties bring a successful product liability claim or series of claims against us for uninsured liabilities or in excess of insured liabilities, our business, financial condition and results of operations may be materially harmed.

Our operations involve hazardous materials, and we could be held responsible for any damages caused by such materials.

Our research and manufacturing activities involve the controlled use of hazardous materials. In addition, although we maintain insurance for harm to employees and to our facilities caused by hazardous materials, we do not insure against any other harm (including harm to the environment) caused by the use of hazardous materials on our premises. We cannot eliminate the risk of accidental contamination or injury from these materials. In the event of an accident or environmental discharge, we may be held liable for any resulting damages, which may exceed our financial resources and may materially harm our business, financial condition and results of operations.

We do not intend to pay cash dividends on our common stock.

We intend to retain any future earnings to finance the growth and development of our business and we do not plan to pay cash dividends on our common stock in the foreseeable future.

If we were deemed to be an investment company, we would become subject to provisions of the Investment Company Act that likely would have a material adverse impact on our business.

A major portion of our assets has been, and after this offering will continue to be, invested in investment grade interest-bearing securities. Such investments could in some circumstances require us to register as an investment company under the Investment Company Act of 1940, as amended, or 1940 Act. Registration under the 1940 Act, or a determination that we failed to register when required to do so, could have a material adverse impact on us. We believe that we are and will remain exempt from the registration requirements, but absent interpretation by the courts or the SEC of the relevant exemption as applied to companies engaged in research and development, this result cannot be assured. In addition, a change in our allocation of assets on account of 1940 Act concerns could reduce the rate of return on our liquid assets.

Our stock price is highly volatile, and you may not be able to sell your shares of our common stock at a price greater than or equal to the price you paid for them.

The market price and trading volume of our common stock are volatile, and we expect such volatility to continue for the foreseeable future. For example, during the period between March 31, 2001 and March 31, 2002, our common stock closed as high as $46.15 per share and as low as $18.05 per share. This may impact your decision to buy or sell our common stock. Factors affecting our stock price include:

•: our financial results;
•: fluctuations in our operating results;
•: announcements of technological innovations or new commercial therapeutic products by us or our competitors;
•: published reports by securities analysts;

•: progress with and results from clinical trials;
•: government regulation;
•: changes in reimbursement policies;
•: developments in patent or other proprietary rights;
•: developments in our relationship with customers;
•: public concern as to the safety and efficacy of our products; and
•: general market conditions.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Interest Rate Risk. The objective of our investment activities is to preserve principal, while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we invest in highly liquid, investment grade and government debt securities. Our investments in debt securities are subject to interest rate risk. To minimize the exposure due to an adverse shift in interest rates, we invest in short-term securities and our goal is to maintain an average maturity of approximately one year. A hypothetical 1.0% per annum increase in interest rates would result in a decrease in the fair market value of our debt securities of approximately $7.6 million at March 31, 2002, and approximately $5.6 million at December 31, 2001.

Equity Price Risk. We are exposed to equity price risk on strategic investments, such as those we have made in CuraGen and ImmunoGen. We typically do not attempt to reduce or eliminate our market exposure on these securities. With respect to CuraGen and ImmunoGen, each of whose common stock is publicly traded, if the market price of these securities decreased by 50%, the total fair value of our equity investments would decrease in value by approximately $22.7 million from the fair value of those investments as of March 31, 2002, and by approximately $32.0 million from the fair value of those investments as of December 31, 2001. These estimates are not necessarily indicative of future performance and actual results may differ materially.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

Not applicable.

ITEM 2. Changes in Securities and Use of Proceeds

Changes in Securities

On June 2, 1999, our Board of Directors declared a dividend of one right, or Right, to purchase one one-thousandth share of our Series A Participating Preferred Stock, or Series A Preferred, for each of our outstanding shares of common stock, the Common Shares. On June 14, 1999, we entered into a Preferred Shares Rights Agreement, or Rights Agreement, with ChaseMellon Shareholder Services, L.L.C., the predecessor to Mellon Investor Services LLC, as Rights Agent, which was amended and restated on November 19, 1999 and on May 9, 2002. The dividend was payable to stockholders of record as of the close of business on the record date, June 14, 1999. As amended, each Right entitles the registered holder to purchase from us one one-thousandth of a share of Series A Preferred at an exercise price of $175.00, which is referred to as the Purchase Price, subject to automatic adjustments upon certain events, including stock splits.

The following summary of the principal terms of the Rights Agreement is a general description only and is subject to the detailed terms and conditions of that agreement, a copy of which is attached as an exhibit to Amendment No. 2 to our Registration Statement on Form 8-A filed with the Securities and Exchange Commission on May 14, 2002.

Rights Evidenced by Common Share Certificates

The Rights will not be exercisable until the Distribution Date, which is defined below. Certificates for the Rights, or Rights Certificates, will not be sent to stockholders and the Rights will attach to and trade only together with the Common Shares. Accordingly, Common Share certificates outstanding on the record date will evidence the Rights related thereto, and Common Share certificates issued after the record date will contain a notation incorporating the Rights Agreement by reference. Until the Distribution Date, or earlier redemption or expiration of the Rights, the surrender or transfer of any certificates for Common Shares, outstanding as of the record date, even without notation or a copy of the Summary of Rights being attached thereto, also will constitute the transfer of the Rights associated with the Common Shares represented by such certificate.

Distribution Date

The Rights will separate from the Common Shares, Rights Certificates will be issued and the Rights will become exercisable upon the earlier of: (i) 10 days following a public announcement that a person or group of affiliated or associated persons, referred to as an Acquiring Person, has acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding Common Shares, or (ii) 10 business days (or such later date as may be determined by our Board of Directors) following the commencement or announcement of a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 15% or more of the outstanding Common Shares. The earlier of these dates is referred to as the Distribution Date.

Issuance of Rights Certificates; Expiration of Rights

As soon as practicable following the Distribution Date, separate Rights Certificates will be mailed to holders of record of the Common Shares as of the close of business on the Distribution Date and the separate Rights Certificates alone will evidence the Rights from and after the Distribution Date. All Common Shares issued, after the Distribution Date will be issued with Rights. The Rights will

expire on the earliest of (i) the final expiration date, June 2, 2009, or (ii) redemption or exchange of the Rights as described below.

Initial Exercise of the Rights

Following the Distribution Date, and until one of the further events described below, holders of the Rights will be entitled to receive, upon exercise and the payment of the Purchase Price, one one-thousandth share of the Series A Preferred.

Right to Buy Common Shares

Unless the Rights are earlier redeemed, in the event that an Acquiring Person becomes the beneficial owner of 15% or more of our Common Shares then outstanding, each holder of a Right which has not theretofore been exercised (other than Rights beneficially owned by the Acquiring Person, which will thereafter be void) will thereafter have the right to receive, upon exercise, Common Shares having a value equal to two times the Purchase Price. Our Board of Directors at its option may substitute for a Common Share issuable upon the exercise of Rights under this provision such number of fractions of shares of Series A Preferred that have a Current Per Share Market Price, as defined in the Rights Agreement, equal to the Current Per Share Market Price of one Common Share. In addition, in the event that we do not have sufficient Common Shares available for all Rights to be exercised, or our Board of Directors decides that such action is necessary and not contrary to the interests of Rights holders, we may instead substitute cash, assets or other securities for the Common Shares for which the Rights would have been exercisable under this provision.

Right to Buy Acquiring Company Stock

Similarly, unless the Rights are earlier redeemed, in the event that, after an Acquiring Person becomes the beneficial owner of 15% or more of our then outstanding Common Shares, (i) we are acquired in a merger or other business combination transaction, or (ii) 50% or more of our consolidated assets or earning power are sold (other than in transactions in the ordinary course of business), proper provision must be made so that each holder of a Right which has not theretofore been exercised (other than Rights beneficially owned by the Acquiring Person, which will thereafter be void) will thereafter have the right to receive, upon exercise, shares of common stock of the acquiring company having a value equal to two times the Purchase Price.

Exchange Provision

At any time after the acquisition by an Acquiring Person of 15% or more of our outstanding Common Shares and prior to the acquisition by such Acquiring Person of 50% or more of our outstanding Common Shares, the Board of Directors may exchange the Rights (other than Rights owned by the Acquiring Person), in whole or in part, at an exchange ratio of one Common Share per Right.

Redemption

At any time on or prior to the close of business on the earlier of (i) such time as any party becomes an Acquiring Person, or (ii) the final expiration date, we may redeem the Rights in whole, but not in part, at a price of $0.01 per Right.

Adjustments to Prevent Dilution

The Purchase Price payable, the number of Rights, and the number of Series A Preferred or Common Shares or other securities or property issuable upon exercise of the Rights are subject to adjustment from time to time in connection with the dilutive issuances set forth in the Rights

Agreement. With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price.

Cash Paid Instead of Issuing Fractional Shares

No fractional portion less than integral multiples of one Common Share will be issued upon exercise of a Right and, in lieu thereof, an adjustment in cash will be made based on the market price of the Common Shares on the last trading date prior to the date of exercise.

No Stockholders' Rights Prior to Exercise

Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder (other than any rights resulting from such holder's ownership of Common Shares), including, without limitation, the right to vote or to receive dividends.

Amendment of Rights Agreement

The terms of the Rights and the Rights Agreement may be amended in any respect without the consent of the Rights holders for so long as the Rights are redeemable; thereafter, the terms of the Rights and the Rights Agreement may be amended without the consent of the Rights holders in order to cure any ambiguities or to make changes which do not adversely affect the interests of Rights holders (other than the Acquiring Person).

Rights and Preferences of the Series A Preferred

Each one one-thousandth of a share of Series A Preferred has rights and preferences substantially equivalent to those of one Common Share.

Recent Sales of Unregistered Securities

During the first quarter ended March 31, 2002, we issued the following unregistered securities:

•: On March 4, 2002, we issued $200.0 million principal amount of convertible subordinated notes in a private placement to Credit Suisse First Boston, Banc of America Securities LLC and Robertson Stephens, Inc, the initial purchasers of the offering. The initial purchasers resold the notes to certain qualified institutional buyers and to certain non-U.S. persons pursuant to Rule 144A and Regulation S, both promulgated under the Securities Act, respectively. We received proceeds of approximately $193.6 million from the sale of the notes, net of the initial purchasers' discount of $6.0 million and estimated offering expenses. The notes are convertible into shares of our common stock at a conversion price of $27.58 per share subject to certain adjustments. The notes will mature on March 15, 2007, and are redeemable at our option on or after March 20, 2005, or earlier if the price of our common stock exceeds specified levels. In addition, the holders of the notes may require us to repurchase the notes if we undergo a change in control.

The offer and sale of securities in the transaction described above was deemed to be exempt from registration under the Securities Act in reliance upon Section 4(2) of the Securities Act and Regulation D promulgated thereunder, as a transaction by an issuer not involving any public offering. The securities were resold by the initial purchasers upon reliance on Rule 144A and Regulation S. Each initial purchaser made representations that it was an "accredited investor," as defined in Rule 501 promulgated under the Securities Act, and as to its compliance with Rule 144A and Regulation S. In addition, appropriate legends were affixed to the securities issued in the transaction described above.

ITEM 3. Defaults upon Senior Securities

Not applicable.

ITEM 4. Submission of Matters to Vote of Security Holders

Not applicable.

ITEM 5. Other Information

Chief Executive Officer Succession

On May 1, 2002, Raymond M. Withy, Ph.D., succeeded R. Scott Greer as chief executive officer of the Company pursuant to the succession plan we announced in November 2001. Mr. Greer remains chairman of the board of directors. Dr. Withy, formerly our president and chief operating officer, is also a member of the board.

ITEM 6. Exhibits and Reports on Form 8-K

(a): Exhibits

Number		Description
3.1(1)		Amended and Restated Certificate of Incorporation of Abgenix, as currently in effect.
3.2(2)		Amended and Restated Bylaws of Abgenix, as currently in effect.
4.1(1)		Specimen Common Stock Certificate.
4.2		Indenture dated March 4, 2002 between State Street Bank and Trust Company of California, N.A. and Abgenix, Inc.
4.3		Registration Rights Agreement dated March 4, 2002 between Credit Suisse First Boston Corporation, Banc of America Securities LLC and Robertson Stephens, Inc. and Abgenix, Inc.
4.4(3)		Amended and Restated Preferred Shares Rights Agreement, between Abgenix, Inc. and Mellon Investor Services LLC, as Rights Agent, dated May 9, 2002.
4.5(4)		Amended and Restated Abgenix, Inc. 1999 Nonstatutory Stock Option Plan, effective as of January 14, 2002.
4.6(4)		Abgenix, Inc. Canadian Employee Stock Purchase Plan.
10.70		First Amendment, dated August 31, 2001, to the Lease Agreement, dated February 24, 2000, between Ardenwood Corporate Park Associates, a California Limited Partnership, and Abgenix, Inc.
10.71		First Amendment, dated August 31, 2001, to the Lease Agreement, dated May 19, 2000, between Ardenwood Corporate Park Associates, a California Limited Partnership, and Abgenix, Inc.
10.72		Second Amendment, dated November 7, 2001, to the Lease Agreement, dated May 19, 2000, between Ardenwood Corporate Park Associates, a California Limited Partnership, and Abgenix, Inc.
10.73		Amendment No. 1, dated January 22, 2002, to the Lease Agreement, dated July 31, 1996, between John Arrillaga, Trustee, or his Successor Trustee UTA dated 7/20/77 (John Arrillaga Survivors Trust) as amended, and Richard T. Peery, Trustee, or his Successor Trustee UTA dated 7/20/77 (Richard T. Peery Separate Property Trust) as amended, and Abgenix, Inc.

10.74

Lease Agreement dated January 22, 2002 between John Arrillaga, Trustee, or his Successor Trustee UTA dated 7/20/77 (John Arrillaga Survivors Trust) as amended, and Richard T. Peery, Trustee, or his Successor Trustee UTA dated 7/20/77 (Richard T. Peery Separate Property Trust) as amended, and Abgenix, Inc.

(1): Incorporated by reference to the same exhibit filed with Abgenix's Registration Statement on Form S-1 (File No. 333-49415).
(2): Incorporated by reference to the same exhibit filed with Abgenix's Annual Report on Form 10-K for the year ended December 31, 2001.
(3): Incorporated by reference to the same exhibit filed with Abgenix's Amendment No. 2 to its Registration Statement on Form 8-A (File No. 000-24207).
(4): Incorporated by reference to the same exhibit filed with Abgenix's Registration Statement on Form S-8 (File No. 333-88232).
(b): Reports on Form 8-K

We filed a Form 8-K on February 27, 2002 reporting under Item 5—Other Events, the Company's offering and pricing of its convertible subordinated notes due 2007, and under Item 9—Regulation FD Disclosure, certain risk factors contained in the Company's confidential offering memorandum related to the offering of convertible subordinated notes.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: May 15, 2002

		ABGENIX, INC. (Registrant)
		/s/ RAYMOND M. WITHY Raymond M. Withy, Ph.D. Chief Executive Officer (Principal Executive Officer)
		/s/ KURT W. LEUTZINGER Kurt W. Leutzinger Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

ABGENIX, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data)
ABGENIX, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)
ABGENIX, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
ABGENIX, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2002

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosure About Market Risk

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

ITEM 2. Changes in Securities and Use of Proceeds

ITEM 3. Defaults upon Senior Securities

ITEM 4. Submission of Matters to Vote of Security Holders

ITEM 5. Other Information

ITEM 6. Exhibits and Reports on Form 8-K

SIGNATURES
EX-4.2 3 a2078956zex-4_2.htm EXHIBIT 4.2
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Exhibit 4.2

ABGENIX, INC.

3¹/2% CONVERTIBLE SUBORDINATED NOTES DUE 2007

INDENTURE
DATED AS OF MARCH 4, 2002

STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.,
AS TRUSTEE

TABLE OF CONTENTS

			Page
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE			1
	SECTION 1.1.	DEFINITIONS	1
	SECTION 1.2.	OTHER DEFINITIONS	5
	SECTION 1.3.	TRUST INDENTURE ACT PROVISIONS	6
	SECTION 1.4.	RULES OF CONSTRUCTION	7
ARTICLE 2 THE SECURITIES			8
	SECTION 2.1.	FORM AND DATING	8
	SECTION 2.2.	EXECUTION AND AUTHENTICATION	9
	SECTION 2.3.	REGISTRAR, PAYING AGENT AND CONVERSION AGENT	10
	SECTION 2.4.	PAYING AGENT TO HOLD MONEY IN TRUST	10
	SECTION 2.5.	SECURITYHOLDER LISTS	10
	SECTION 2.6.	TRANSFER AND EXCHANGE	11
	SECTION 2.7.	REPLACEMENT SECURITIES	11
	SECTION 2.8.	OUTSTANDING SECURITIES	12
	SECTION 2.9.	TREASURY SECURITIES	12
	SECTION 2.10.	TEMPORARY SECURITIES	13
	SECTION 2.11.	CANCELLATION	13
	SECTION 2.12.	LEGEND; ADDITIONAL TRANSFER AND EXCHANGE REQUIREMENTS	13
	SECTION 2.13.	CUSIP NUMBERS	15
ARTICLE 3 REDEMPTION AND PURCHASES			15
	SECTION 3.1.	PROVISIONAL AND OPTIONAL REDEMPTION	15
	SECTION 3.2.	RIGHT TO REDEEM; NOTICE TO TRUSTEE	16
	SECTION 3.3.	SELECTION OF SECURITIES TO BE REDEEMED	16

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	SECTION 3.4.	NOTICE OF REDEMPTION	17
	SECTION 3.5.	EFFECT OF NOTICE OF REDEMPTION	17
	SECTION 3.6.	DEPOSIT OF REDEMPTION PRICE	18
	SECTION 3.7.	SECURITIES REDEEMED IN PART	18
	SECTION 3.8.	CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION	18
	SECTION 3.9.	PURCHASE OF SECURITIES AT OPTION OF THE HOLDER UPON CHANGE IN CONTROL	19
	SECTION 3.10.	EFFECT OF CHANGE IN CONTROL PURCHASE NOTICE	21
	SECTION 3.11.	DEPOSIT OF CHANGE IN CONTROL PURCHASE PRICE	21
	SECTION 3.12.	SECURITIES PURCHASED IN PART	22
	SECTION 3.13.	COMPLIANCE WITH SECURITIES LAWS UPON PURCHASE OF SECURITIES	22
	SECTION 3.14.	REPAYMENT TO THE COMPANY	22
ARTICLE 4 CONVERSION			22
	SECTION 4.1.	CONVERSION PRIVILEGE	22
	SECTION 4.2.	CONVERSION PROCEDURE	23
	SECTION 4.3.	FRACTIONAL SHARES	24
	SECTION 4.4.	TAXES ON CONVERSION	24
	SECTION 4.5.	COMPANY TO PROVIDE STOCK	24
	SECTION 4.6.	ADJUSTMENT OF CONVERSION PRICE	25
	SECTION 4.7.	NO ADJUSTMENT	29
	SECTION 4.8.	ADJUSTMENT FOR TAX PURPOSES	30
	SECTION 4.9.	NOTICE OF ADJUSTMENT	31
	SECTION 4.10.	NOTICE OF CERTAIN TRANSACTIONS	31
	SECTION 4.11.	EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE ON CONVERSION PRIVILEGE	31
	SECTION 4.12.	TRUSTEE'S DISCLAIMER	32

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	SECTION 4.13.	VOLUNTARY REDUCTION	32
ARTICLE 5 SUBORDINATION			32
	SECTION 5.1.	AGREEMENT OF SUBORDINATION	32
	SECTION 5.2.	PAYMENTS TO HOLDERS	33
	SECTION 5.3.	SUBROGATION OF SECURITIES	35
	SECTION 5.4.	AUTHORIZATION TO EFFECT SUBORDINATION	36
	SECTION 5.5.	NOTICE TO TRUSTEE	36
	SECTION 5.6.	TRUSTEE'S RELATION TO SENIOR INDEBTEDNESS	37
	SECTION 5.7.	NO IMPAIRMENT OF SUBORDINATION	37
	SECTION 5.8.	CERTAIN CONVERSIONS DEEMED PAYMENT	37
	SECTION 5.9.	ARTICLE APPLICABLE TO PAYING AGENTS	37
	SECTION 5.10.	SENIOR INDEBTEDNESS ENTITLED TO RELY	38
ARTICLE 6 COVENANTS			38
	SECTION 6.1.	PAYMENT OF SECURITIES	38
	SECTION 6.2.	SEC REPORTS	38
	SECTION 6.3.	COMPLIANCE CERTIFICATES	38
	SECTION 6.4.	FURTHER INSTRUMENTS AND ACTS	39
	SECTION 6.5.	MAINTENANCE OF CORPORATE EXISTENCE	39
	SECTION 6.6.	RULE 144A INFORMATION REQUIREMENT	39
	SECTION 6.7.	STAY, EXTENSION AND USURY LAWS	39
	SECTION 6.8.	PAYMENT OF ADDITIONAL INTEREST	39
ARTICLE 7 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE			40
	SECTION 7.1.	COMPANY MAY CONSOLIDATE, ETC, ONLY ON CERTAIN TERMS	40
	SECTION 7.2.	SUCCESSOR SUBSTITUTED	40

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ARTICLE 8 DEFAULT AND REMEDIES			41
	SECTION 8.1.	EVENTS OF DEFAULT	41
	SECTION 8.2.	ACCELERATION	42
	SECTION 8.3.	OTHER REMEDIES	42
	SECTION 8.4.	WAIVER OF DEFAULTS AND EVENTS OF DEFAULT	43
	SECTION 8.5.	CONTROL BY MAJORITY	43
	SECTION 8.6.	LIMITATIONS ON SUITS	43
	SECTION 8.7.	RIGHTS OF HOLDERS TO RECEIVE PAYMENT AND TO CONVERT	43
	SECTION 8.8.	COLLECTION SUIT BY TRUSTEE	44
	SECTION 8.9.	TRUSTEE MAY FILE PROOFS OF CLAIM	44
	SECTION 8.10.	PRIORITIES	44
	SECTION 8.11.	UNDERTAKING FOR COSTS	45
ARTICLE 9 TRUSTEE			45
	SECTION 9.1.	DUTIES OF TRUSTEE	45
	SECTION 9.2.	RIGHTS OF TRUSTEE	46
	SECTION 9.3.	INDIVIDUAL RIGHTS OF TRUSTEE	46
	SECTION 9.4.	TRUSTEE'S DISCLAIMER	47
	SECTION 9.5.	NOTICE OF DEFAULT OR EVENTS OF DEFAULT	47
	SECTION 9.6.	REPORTS BY TRUSTEE TO HOLDERS	47
	SECTION 9.7.	COMPENSATION AND INDEMNITY	47
	SECTION 9.8.	REPLACEMENT OF TRUSTEE	48
	SECTION 9.9.	SUCCESSOR TRUSTEE BY MERGER, ETC	48
	SECTION 9.10.	ELIGIBILITY; DISQUALIFICATION	49
	SECTION 9.11.	PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY	49

-iv-

ARTICLE 10 SATISFACTION AND DISCHARGE OF INDENTURE			49
	SECTION 10.1.	SATISFACTION AND DISCHARGE OF INDENTURE	49
	SECTION 10.2.	APPLICATION OF TRUST MONEY	50
	SECTION 10.3.	REPAYMENT TO COMPANY	50
	SECTION 10.4.	REINSTATEMENT	50
ARTICLE 11 AMENDMENTS, SUPPLEMENTS AND WAIVERS			50
	SECTION 11.1.	WITHOUT CONSENT OF HOLDERS	50
	SECTION 11.2.	WITH CONSENT OF HOLDERS	51
	SECTION 11.3.	COMPLIANCE WITH TRUST INDENTURE ACT	52
	SECTION 11.4.	REVOCATION AND EFFECT OF CONSENTS	52
	SECTION 11.5.	NOTATION ON OR EXCHANGE OF SECURITIES	52
	SECTION 11.6.	TRUSTEE TO SIGN AMENDMENTS, ETC	52
	SECTION 11.7.	EFFECT OF SUPPLEMENTAL INDENTURES	52
ARTICLE 12 MISCELLANEOUS			53
	SECTION 12.1.	TRUST INDENTURE ACT CONTROLS	53
	SECTION 12.2.	NOTICES	53
	SECTION 12.3.	COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS	54
	SECTION 12.4.	CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT	54
	SECTION 12.5.	RECORD DATE FOR VOTE OR CONSENT OF SECURITYHOLDERS	54
	SECTION 12.6.	RULES BY TRUSTEE, PAYING AGENT, REGISTRAR AND CONVERSION AGENT	54
	SECTION 12.7.	LEGAL HOLIDAYS	55
	SECTION 12.8.	GOVERNING LAW	55
	SECTION 12.9.	NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS	55
	SECTION 12.10.	NO RECOURSE AGAINST OTHERS	55

-v-

SECTION 12.11.	SUCCESSORS	55
SECTION 12.12.	MULTIPLE COUNTERPARTS	55
SECTION 12.13.	SEPARABILITY	55
SECTION 12.14.	TABLE OF CONTENTS, HEADINGS, ETC	55

-vi-

CROSS-REFERENCE TABLE*

TIA SECTION		INDENTURE SECTION
Section	310(a)(1)	9.10
	(a)(2)	9.10
	(a)(3)	N.A.**
	(a)(4)	N.A.
	(a)(5)	9.10
	(b)	9.8; 9.10
	(c)	N.A.
Section	311(a)	9.11
	(b)	9.11
	(c)	N.A.
Section	312(a)	2.5
	(b)	12.3
	(c)	12.3
Section	313(a)	9.6
	(b)(1)	N.A.
	(b)(2)	9.6
	(c)	9.6; 12.2
	(d)	9.6
Section	314(a)	6.2; 6.4; 12.2
	(b)	N.A.
	(c)(1)	12.4(a)
	(c)(2)	12.4(a)
	(c)(3)	N.A.
	(d)	N.A.
	(e)	12.4(b)
	(f)	N.A.
Section	315(a)	9.1(b)
	(b)	9.5; 12.2
	(c)	9.1(a)
	(d)	9.1(c)
	(e)	8.11
Section	316(a)(last sentence)	2.9
	(a)(1)(A)	8.5
	(a)(1)(B)	8.4
	(a)(2)	N.A.
	(b)	8.7
	(c)	12.5
Section	317(a)(1)	8.8
	(a)(2)	8.9
	(b)	2.4

*: This Cross-Reference Table shall not, for any purpose, be deemed a part of this Indenture.
**: N.A. means Not Applicable.

-vii-

THIS INDENTURE dated as of March 4, 2002 is between Abgenix, Inc., a corporation duly organized under the laws of the State of Delaware (the "Company"), and State Street Bank and Trust Company of California, N.A., a national banking association organized and existing under the laws of the United States, as Trustee (the "Trustee").

In consideration of the premises and the purchase of the Securities by the Holders thereof, both parties agree as follows for the benefit of the other and for the equal and ratable benefit of the registered Holders of the Company's 3¹/2% Convertible Subordinated Notes due 2007.

ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.1. DEFINITIONS.

"Additional Interest" has the meaning specified in paragraph 2 of the Security.

"Affiliate" means, with respect to any specified person, 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 "controlling" and "controlled" have meanings correlative to the foregoing.

"Agent" means any Registrar, Paying Agent or Conversion Agent.

"Applicable Procedures" means, with respect to any transfer or exchange of beneficial ownership interests in a Global Security, the rules and procedures of the Depositary, in each case to the extent applicable to such transfer or exchange.

"Board of Directors" means either the board of directors of the Company or any committee of the Board of Directors authorized to act for it with respect to this Indenture.

"Business Day" means each day that is not a Legal Holiday.

"Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, but excluding any debt securities convertible into such equity.

"Cash" or "cash" means such coin or currency of the United States as at any time of payment is legal tender for the payment of public and private debts.

"Certificated Security" means a Security that is in substantially the form attached hereto as Exhibit A and that does not include the information or the schedule called for by footnotes 1, 3 and 4 thereof.

"Common Stock" means the common stock of the Company, $0.0001 par value, as it exists on the date of this Indenture and any shares of any class or classes of capital stock of the Company 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, however, that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable on conversion of Securities 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" means the party named as such in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Company.

"Corporate Trust Office" means the office of the Trustee at which at any particular time the trust created by this Indenture shall be administered which office at the date of the execution of this Indenture is located at 633 West Fifth Street, 12^th Floor, Los Angeles, California 90071, Attention: Corporate Trust Administration (Abgenix, Inc.—3¹/2% Convertible Subordinated Notes Due 2007) or at any other time at such other address as the Trustee may designate from time to time by notice to the Company.

"Default" or "default" means, when used with respect to the Securities, any event which is or, after notice or passage of time or both, would be an Event of Default.

"Designated Senior Indebtedness" means any particular Senior Indebtedness of the Company in which the instrument creating or evidencing the same or the assumption or guarantee thereof (or any 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 creating or evidencing the indebtedness may place limitations and conditions on the right of such Senior Indebtedness to exercise the rights of Designated Senior Indebtedness). If any payment made to any holder of any Designated Senior Indebtedness or its Representative with respect to such Designated Senior Indebtedness is rescinded or must otherwise be returned by such holder or Representative upon the insolvency, bankruptcy or reorganization of the Company or otherwise, the reinstated Indebtedness of the Company arising as a result of such rescission or return shall constitute Designated Senior Indebtedness effective as of the date of such rescission or return.

"Exchange Act" means the Securities and Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as in effect from time to time.

"Final Maturity Date" means March 15, 2007.

"GAAP" means generally accepted accounting principles in the United States of America as in effect as of the date of this Indenture, including those set forth in (1) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (2) the statements and pronouncements of the Financial Accounting Standards Board, (3) such other statements by such other entity as approved by a significant segment of the accounting profession and (4) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in registration statements filed under the Securities Act and periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC.

"Global Security" means a permanent Global Security that is in substantially the form attached hereto as Exhibit A and that includes the information and schedule called for by footnotes 1, 3 and 4 thereof and which is deposited with the Depositary or its custodian and registered in the name of the Depositary or its nominee.

"Holder" or "Securityholder" means the person in whose name a Security is registered on the Primary Registrar's books.

"Indebtedness" means, with respect to any Person, without duplication, (a) all indebtedness, obligations and other liabilities (contingent or otherwise) of such Person (i) for borrowed money (including obligations of such Person in respect of overdrafts, foreign exchange contracts, currency exchange agreements, interest rate protection agreements, and any loans or advances from banks,

whether or not evidenced by notes or similar instruments) or (ii) evidenced by credit or loan agreements, bonds, debentures, notes or similar instruments (whether or not the recourse of the lender is to the whole of the assets of such Person or to only a portion thereof) (other than any accounts payable or other accrued current liability or obligation incurred in the ordinary course of business in connection with the obtaining of materials or services), (b) all reimbursement obligations and other liabilities (contingent or otherwise) of such Person with respect to letters of credit, bank guarantees or bankers' acceptances, (c) all obligations and liabilities (contingent or otherwise) of such Person (i) in respect of (A) leases of such Person required, in conformity with GAAP, to be accounted for as capitalized lease obligations on the balance sheet of such Person (as determined by the Company), and (B) ground leases the Company may enter into the future with respect to the Company's facilities in Fremont, California, or (ii) under any lease or related document (including a purchase agreement, conditional sale or other title retention agreement) in connection with the lease of real property or improvement thereon (or any personal property included as part of any such lease) which provides that such Person is contractually obligated to purchase or cause a third party to purchase the leased property or pay an agreed upon residual value of the leased property to the lessor (whether or not such lease transaction is characterized as an operating lease or a capitalized lease in accordance with GAAP), (d) all obligations (contingent or otherwise) of such Person with respect to any interest rate or other swap, cap, floor or collar agreement, hedge agreement, forward contract, or other similar instrument or agreement or foreign currency hedge, exchange, purchase or similar instrument or agreement; (e) all direct or indirect guaranties, agreements to be jointly liable or similar agreements by such Person in respect of, and obligations or liabilities of such Person to purchase or otherwise acquire or otherwise assure a creditor against loss in respect of, indebtedness, obligations or liabilities of another Person of the kind described in clauses (a) through (d), and (f) any and all deferrals, renewals, extensions, refinancings and refundings of, or amendments, modifications or supplements to, any indebtedness, obligation or liability of the kind described in clauses (a) through (e).

"Indenture" means this Indenture as amended or supplemented from time to time pursuant to the terms of this Indenture.

"Initial Purchasers" means Credit Suisse First Boston Corporation, Banc of America Securities LLC and Robertson Stephens, Inc.

"Issuance Date" means the date on which the Securities are first authenticated and issued.

"Officer" means the Chairman or any Co-Chairman of the Board, any Vice Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Controller, the Secretary or any Assistant Controller or Assistant Secretary of the Company.

"Officers' Certificate" means a certificate signed by two Officers; provided, however, that for purposes of Sections 4.11 and 6.3, "Officers' Certificate" means a certificate signed by the principal executive officer, principal financial officer or principal accounting officer of the Company and by one other Officer.

"Opinion of Counsel" means a written opinion from legal counsel. The counsel may be an employee of or counsel to the Company or the Trustee.

"Person" or "person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

"Principal" or "principal" of a debt security, including the Securities, means the principal of the security plus, when appropriate, the premium, if any, on the security.

"Redemption Date" when used with respect to any Security to be redeemed, means the date fixed for such redemption pursuant to this Indenture.

"Redemption Price" when used with respect to any Security to be redeemed, means the price fixed for such redemption pursuant to this Indenture, as set forth in the form of Security annexed as Exhibit A hereto.

"Registration Rights Agreement" means the Registration Rights Agreement dated, as of March 4, 2002, between the Company and the Initial Purchasers.

"Representative" means the (a) indenture trustee or other trustee, agent or representative for any Senior Indebtedness or (b) with respect to any Senior Indebtedness that does not have any such trustee, agent or other representative, (i) in the case of such Senior Indebtedness issued pursuant to an agreement providing for voting arrangements as among the holders or owners of such Senior Indebtedness, any holder or owner of such Senior Indebtedness acting with the consent of the required persons necessary to bind such holders or owners of such Senior Indebtedness and (ii) in the case of all other such Senior Indebtedness, the holder or owner of such Senior Indebtedness.

"Rule 144" means Rule 144 under the Securities Act or any successor to such Rule.

"Rule 144A" means Rule 144A under the Securities Act or any successor to such Rule.

"SEC" means the Securities and Exchange Commission.

"Securities" means the 3¹/2% Convertible Subordinated Notes due 2007 or any of them (each, a "Security"), as amended or supplemented from time to time, that are issued under this Indenture.

"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, as in effect from time to time.

"Securities Custodian" means the Trustee, as custodian with respect to the Securities in global form, or any successor thereto.

"Senior Indebtedness" means the principal of, premium, if any, interest (including all interest accruing subsequent to the commencement of any bankruptcy or similar proceeding, whether or not a claim for post-petition interest is allowed as a claim in any such proceeding) and rent payable on or in connection with, and all fees, costs, expenses and other amounts accrued or due on or in connection with, Indebtedness of the Company, whether outstanding on the date of this Indenture or thereafter created, incurred, assumed, guaranteed or in effect guaranteed by the Company (including all deferrals, renewals, extensions or refundings of, or amendments, modifications or supplements to, the foregoing), unless in the case of any particular Indebtedness the instrument creating or evidencing the same or the assumption or guarantee thereof expressly provides that such Indebtedness shall not be senior in right of payment to the Securities or expressly provides that such Indebtedness is "pari passu" or "junior" to the Securities. Notwithstanding the foregoing, the term Senior Indebtedness shall not include (i) any Indebtedness of the Company to any Subsidiary of the Company (other than Indebtedness of the Company to such Subsidiary arising by reason of guarantees by the Company of Indebtedness of such Subsidiary to a Person that is not a Subsidiary of the Company); (ii) the Securities; or (iii) Indebtedness of or amounts owed by the Company for compensation to employees, or for goods or materials purchased in the ordinary course of business, or for services. If any payment made to any holder of any Senior Indebtedness or its Representative with respect to such Senior Indebtedness is rescinded or must otherwise be returned by such holder or Representative upon the insolvency, bankruptcy or reorganization of the Company or otherwise, the reinstated Indebtedness of the Company arising as a result of such rescission or return shall constitute Senior Indebtedness effective as of the date of such rescission or return.

"Significant Subsidiary" means, in respect of 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 under the Securities Act and the Exchange Act.

"Subsidiary" means, in respect of any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, general partners or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person; (ii) such Person and one or more Subsidiaries of such Person; or (iii) one or more Subsidiaries of such Person.

"TIA" means the Trust Indenture Act of 1939, as amended, and the rules and regulations thereunder as in effect on the date of this Indenture, except as provided in Section 11.3, and except to the extent any amendment to the Trust Indenture Act expressly provides for application of the Trust Indenture Act as in effect on another date.

"Trading Day" means, with respect to any security, each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on which securities are not generally traded on the principal exchange or market in which such security is traded.

"Transfer Restricted Global Security" means a Global Security that is a Transfer Restricted Security.

"Transfer Restricted Security" means a Security required to bear the restricted legend set forth in the form of Security set forth in Exhibit A of this Indenture.

"Trustee" means the party named as such in the first paragraph of this Indenture until a successor replaces it in accordance with the provisions of this Indenture, and thereafter means the successor.

"Trust Officer" means, with respect to the Trustee, any officer assigned to the Corporate Trust Office, and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject.

"Unrestricted Certificated Security" means a Certificated Security that is not a Transfer Restricted Security.

"Unrestricted Global Security" means a Global Security that is not a Transfer Restricted Security.

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

"Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof.

SECTION 1.2. OTHER DEFINITIONS.

Term	Defined in Section
"Agent Members"	2.1	(b)
"Bankruptcy Law"	8.1
"Change in Control"	3.9	(a)
"Change in Control Purchase Date"	3.9	(c)
"Change in Control Purchase Notice"	3.9	(f)
"Change in Control Purchase Price"	3.9	(a)
"Closing Price"	4.6	(d)
"Company Order"	2.2
"Conversion Agent"	2.3
"Conversion Date"	4.2

"Conversion Price"	4.6
"Current Market Price"	4.6	(d)
"Custodian"	8.1
"DTC"	2.1
"Depositary"	2.1
"Determination Date"	4.6	(c)
"Event of Default"	8.1
"Expiration Date"	4.6	(c)
"Expiration Time"	4.6	(c)
"Legal Holiday"	12.7
"Legend"	2.12
"Make-Whole Payment"	3.1	(a)
"NNM"	4.6	(d)
"Paying Agent"	2.3
"Payment Blockage Notice"	5.2
"Primary Registrar"	2.3
"Provisional Redemption	3.1	(a)
"Provisional Redemption Date	3.1	(a)
"Provisional Redemption Notice Date	3.1	(a)
"Provisional Redemption Price	3.1	(a)
"Purchase Agreement"	2.1
"Purchase Offer"	3.9	(a)
"Purchased Shares"	4.6	(c)
"QIB"	2.1
"Registrar"	2.3
"Rights Plan"	4.6	(c)
"Triggering Distribution"	4.6	(c)
"Trigger Event"	4.6	(c)
"Unissued Shares"	3.9	(a)

SECTION 1.3. TRUST INDENTURE ACT PROVISIONS.

Whenever this Indenture refers to a provision of the TIA, that provision is incorporated by reference in and made a part of this Indenture. The Indenture shall also include those provisions of the TIA required to be included herein by the provisions of the Trust Indenture Reform Act of 1990. The following TIA terms used in this Indenture have the following meanings:

"indenture securities" means the Securities;

"indenture security holder" means a Securityholder;

"indenture to be qualified" means this Indenture;

"indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the indenture securities means the Company or any other obligor on the Securities.

All other terms used in this Indenture that are defined in the TIA, defined by TIA reference to another statute or defined by any SEC rule and not otherwise defined herein have the meanings assigned to them therein.

SECTION 1.4. RULES OF CONSTRUCTION.

Unless the context otherwise requires:

(A) a term has the meaning assigned to it;

(B) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(D) provisions apply to successive events and transactions;

(E) the term "merger" includes a statutory share exchange and the term "merged" has a correlative meaning;

(F) the masculine gender includes the feminine and the neuter;

(G) references to agreements and other instruments include subsequent amendments thereto; and

(H) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.

ARTICLE 2
THE SECURITIES

SECTION 2.1. FORM AND DATING.

The Securities and the Trustee's certificate of authentication shall be substantially in the respective forms set forth in Exhibit A, which Exhibit is incorporated in and made part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage. The Company shall provide any such notations, legends or endorsements to the Trustee in writing. Each Security shall be dated the date of its authentication. The Securities are being offered and sold by the Company pursuant to a Purchase Agreement, dated February 27, 2002 (the "Purchase Agreement"), between the Company and the Initial Purchasers, in transactions exempt from, or not subject to, the registration requirements of the Securities Act.

(a) Restricted Global Securities. All of the Securities are initially being offered and sold to qualified institutional buyers as defined in Rule 144A (collectively, "QIBs" or individually, each a "QIB") in reliance on Rule 144A under the Securities Act and to certain non-U.S. persons under Regulation S under the Securities Act, shall be issued initially in the form of one or more Restricted Global Securities, which shall be deposited on behalf of the purchasers of the Securities represented thereby with the Trustee, at its Corporate Trust Office, as custodian for the depositary, The Depository Trust Company ("DTC") (such depositary, or any successor thereto, being hereinafter referred to as the "Depositary"), and registered in the name of its nominee, Cede & Co., duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Restricted Global Securities may from time to time be increased or decreased by adjustments made on the records of the Securities Custodian as hereinafter provided, subject in each case to compliance with the Applicable Procedures.

(b) Global Securities In General. Each Global Security shall represent such of the outstanding Securities as shall be specified therein and each shall provide that it shall represent the aggregate amount of outstanding Securities from time to time endorsed thereon and that the aggregate amount of outstanding Securities represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges, redemptions, purchases or conversions of such Securities. Any adjustment of the aggregate principal amount of a Global Security to reflect the amount of any increase or decrease in the amount of outstanding Securities represented thereby shall be made by the Trustee in accordance with instructions given by the Holder thereof as required by Section 2.12 hereof and shall be made on the records of the Trustee and the Depositary.

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

(c) Book Entry Provisions. The Company shall execute and the Trustee shall, in accordance with this Section 2.1(c), authenticate and deliver initially one or more Global Securities that (i) shall be registered in the name of the Depositary, (ii) shall be delivered by the Trustee to the Depositary or

pursuant to the Depositary's instructions and (iii) shall bear legends substantially to the following effect:

"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY 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 THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND, UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE 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."

SECTION 2.2. EXECUTION AND AUTHENTICATION.

An Officer shall sign the Securities for the Company by manual or facsimile signature attested by the manual or facsimile signature of the Secretary or an Assistant Secretary of the Company. Typographic and other minor errors or defects in any such facsimile signature shall not affect the validity or enforceability of any Security which has been authenticated and delivered by the Trustee.

If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless.

A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture.

The Trustee shall authenticate and make available for delivery Securities for original issue in the aggregate principal amount of up to $250,000,000 upon receipt of a written order or orders of the Company signed by two Officers of the Company (a "Company Order"). The Company Order shall specify the amount of Securities to be authenticated, shall provide that all such Securities will be represented by a Restricted Global Security and the date on which each original issue of Securities is to be authenticated. The aggregate principal amount of Securities outstanding at any time may not exceed $250,000,000 except as provided in Section 2.7.

The Trustee shall act as the initial authenticating agent. Thereafter, the Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. An authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent shall have the same rights as an Agent to deal with the Company or an Affiliate of the Company.

The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 principal amount and any integral multiple thereof.

SECTION 2.3. REGISTRAR, PAYING AGENT AND CONVERSION AGENT.

The Company shall maintain one or more offices or agencies where Securities may be presented for registration of transfer or for exchange (each, a "Registrar"), one or more offices or agencies where Securities may be presented for payment (each, a "Paying Agent"), one or more offices or agencies where Securities may be presented for conversion (each, a "Conversion Agent") and one or more offices or agencies where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will at all times maintain a Paying Agent, Conversion Agent, Registrar and an office or agency where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served in the Borough of Manhattan, The City of New York. One of the Registrars (the "Primary Registrar") shall keep a register of the Securities and of their transfer and exchange.

The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any Agent not a party to this Indenture. If the Company fails to maintain a Registrar, Paying Agent, Conversion Agent or agent for service of notices and demands in any place required by this Indenture, or fails to give the foregoing notice, the Trustee shall act as such. The Company or any Affiliate of the Company may act as Paying Agent (except for the purposes of Section 6.1 and Article 10).

The Company hereby initially designates the Trustee as Paying Agent, Registrar, Custodian and Conversion Agent, and each of the Corporate Trust Office of the Trustee and the office or agency of the Trustee in the Borough of Manhattan, The City of New York (which shall initially be State Street Bank and Trust Company, N.A., an Affiliate of the Trustee, as agent of the Trustee located at 61 Broadway, New York, New York 10006, Attention: Corporate Trust Administration (Abgenix, Inc.—3¹/2% Convertible Subordinated Notes due 2007)), one such office or agency of the Company for each of the aforesaid purposes.

SECTION 2.4. PAYING AGENT TO HOLD MONEY IN TRUST.

Prior to 11:00 a.m., New York City time, on each due date of the principal of or interest, if any, on any Securities, the Company shall deposit with a Paying Agent a sum sufficient to pay such principal or interest, if any, so becoming due. Subject to Section 5.2, a Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest, if any, on the Securities, and shall notify the Trustee of any default by the Company (or any other obligor on the Securities) in making any such payment. If the Company or an Affiliate of the Company acts as Paying Agent, it shall, before 11:00 a.m., New York City time, on each due date of the principal of or interest on any Securities, segregate the money and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee, and the Trustee may at any time during the continuance of any default, upon written request to a Paying Agent, require such Paying Agent to pay forthwith to the Trustee all sums so held in trust by such Paying Agent. Upon doing so, the Paying Agent (other than the Company) shall have no further liability for the money.

SECTION 2.5. SECURITYHOLDER LISTS.

The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Primary Registrar, the Company shall furnish to the Trustee on or before each semiannual interest payment

date, and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders.

SECTION 2.6. TRANSFER AND EXCHANGE.

(a) Subject to compliance with any applicable additional requirements contained in Section 2.12, when a Security is presented to a Registrar with a request to register a transfer thereof or to exchange such Security for an equal principal amount of Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested; provided, however, that every Security presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by an assignment form and, if applicable, a transfer certificate each in the form included in Exhibit A, and in form satisfactory to the Registrar duly executed by the Holder thereof or its attorney duly authorized in writing. To permit registration of transfers and exchanges, upon surrender of any Security for registration of transfer or exchange at an office or agency maintained pursuant to Section 2.3, the Company shall execute and the Trustee shall authenticate Securities of a like aggregate principal amount at the Registrar's request. Any exchange or transfer shall be without charge, except that the Company or the Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto, and provided, that this sentence shall not apply to any exchange pursuant to Section 2.10, 2.12(a), 3.6, 3.11, 4.2 (last paragraph) or 11.5.

Neither the Company, any Registrar nor the Trustee shall be required to exchange or register a transfer of (i) any Securities for a period of 15 days next preceding any mailing of a notice of Securities to be redeemed, (ii) any Securities or portions thereof selected or called for redemption (except, in the case of redemption of a Security in part, the portion thereof not to be redeemed) or (iii) any Securities or portions thereof in respect of which a Change in Control Purchase Notice has been delivered and not withdrawn by the Holder thereof (except, in the case of the purchase of a Security in part, the portion thereof not to be purchased).

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

(b) Any Registrar appointed pursuant to Section 2.3 hereof shall provide to the Trustee such information as the Trustee may reasonably require in connection with the delivery by such Registrar of Securities upon transfer or exchange of Securities.

(c) Each Holder of a Security agrees to indemnify the Company and the Trustee against any liability that may result from the transfer, exchange or assignment of such Holder's Security in violation of any provision of this Indenture and/or applicable United States federal or state securities law.

The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Agent Members or other beneficial owners of interests in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

SECTION 2.7. REPLACEMENT SECURITIES.

If any mutilated Security is surrendered to the Company, a Registrar or the Trustee, or the Company, a Registrar and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company, the applicable Registrar and the Trustee such security or indemnity as will be required by them to save each of them harmless, then, in the

absence of notice to the Company, such Registrar or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute, and upon its written request the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount, bearing a number not contemporaneously outstanding.

In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, or is about to be redeemed or purchased by the Company pursuant to Article 3, the Company in its discretion may, instead of issuing a new Security, pay, redeem or purchase such Security, as the case may be.

Upon the issuance of any new Securities under this Section 2.7, 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 reasonable expenses (including the reasonable fees and expenses of the Trustee or the Registrar) in connection therewith.

Every new Security issued pursuant to this Section 2.7 in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder.

The provisions of this Section 2.7 are (to the extent lawful) exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

SECTION 2.8. OUTSTANDING SECURITIES.

Securities outstanding at any time are all Securities authenticated by the Trustee, except for those canceled by it, those converted pursuant to Article IV, those delivered to it for cancellation or surrendered for transfer or exchange and those described in this Section 2.8 as not outstanding.

If a Security is replaced pursuant to Section 2.7, it ceases to be outstanding unless the Company receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser.

If a Paying Agent (other than the Company or an Affiliate of the Company) holds on a Redemption Date, a Change in Control Purchase Date or the Final Maturity Date money sufficient to pay the principal of (including premium, if any) and accrued interest on Securities (or portions thereof) payable on that date, then on and after such Redemption Date, Change in Control Purchase Date or the final Maturity Date, as the case may be, such Securities (or portions thereof, as the case may be) shall cease to be outstanding and interest on them shall cease to accrue; provided, that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefore satisfactory to the Trustee has been made.

Subject to the restrictions contained in Section 2.9, a Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security.

SECTION 2.9. TREASURY SECURITIES.

In determining whether the Holders of the required principal amount of Securities have concurred in any notice, direction, waiver or consent, Securities owned by the Company or any other obligor on the Securities or by any Affiliate of the Company or of such other obligor shall be disregarded, except that, for purposes of determining whether the Trustee shall be protected in relying on any such notice, direction, waiver or consent, only Securities which a Trust Officer of the Trustee actually knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith shall not be

disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to the Securities and that the pledgee is not the Company or any other obligor on the Securities or any Affiliate of the Company or of such other obligor.

SECTION 2.10. TEMPORARY SECURITIES.

Until definitive Securities are ready for delivery, the Company may prepare and execute, and, upon receipt of a Company Order, the Trustee shall authenticate and deliver, temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company with the consent of the Trustee considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate and deliver definitive Securities in exchange for temporary Securities.

SECTION 2.11. CANCELLATION.

The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar, the Paying Agent and the Conversion Agent shall forward to the Trustee or its agent any Securities surrendered to them for transfer, exchange, redemption, payment or conversion. The Trustee and no one else shall cancel, in accordance with its standard procedures, all Securities surrendered for transfer, exchange, redemption, payment, conversion or cancellation and shall deliver the canceled Securities to the Company. All Securities which are redeemed, purchased or otherwise acquired by the Company or any of its Subsidiaries prior to the Final Maturity Date shall be delivered to the Trustee for cancellation, and the Company may not hold or resell such Securities or issue any new Securities to replace any such Securities or any Securities that any Holder has converted pursuant to Article 4. Without limitation to the foregoing, any Securities acquired by any investment bankers or other purchasers pursuant to Section 3.7 shall be surrendered for conversion and thereafter cancelled, and may not be reoffered, sold or otherwise transferred.

SECTION 2.12. LEGEND; ADDITIONAL TRANSFER AND EXCHANGE REQUIREMENTS.

(a) If Securities are issued upon the transfer, exchange or replacement of Securities subject to restrictions on transfer and bearing the legends set forth on the forms of Securities attached hereto as Exhibit A (collectively, the "Legend"), or if a request is made to remove the Legend on a Security, the Securities so issued shall bear the Legend, or the Legend shall not be removed, as the case may be, unless there is delivered to the Company and the Registrar such satisfactory evidence, which shall include an opinion of counsel if requested by the Company or such Registrar, as may be reasonably required by the Company and the Registrar, that neither the Legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A or Rule 144 under the Securities Act or that such Securities are not "restricted" within the meaning of Rule 144 under the Securities Act; provided that no such evidence need be supplied in connection with the sale of such Security pursuant to a registration statement that is effective at the time of such sale. Upon (i) provision of such satisfactory evidence if requested, or (ii) notification by the Company to the Trustee and Registrar of the sale of such Security pursuant to a registration statement that is effective at the time of such sale, the Trustee, at the written direction of the Company, shall authenticate and deliver a Security that does not bear the Legend. If the Legend is removed from the face of a Security and the Security is subsequently held by an Affiliate of the Company, the Legend shall be reinstated.

(b) A Global Security may not be transferred, in whole or in part, to any Person other than the Depositary or a nominee or any successor thereof, and no such transfer to any such other Person may be registered; provided that the foregoing shall not prohibit any transfer of a Security that is issued in exchange for a Global Security but is not itself a Global Security. No transfer of a Security to any Person shall be effective under this Indenture or the Securities unless and until such Security has been registered in the name of such Person. Notwithstanding any other provisions of this Indenture or the

Securities, transfers of a Global Security, in whole or in part, shall be made only in accordance with this Section 2.12.

(c) Subject to the succeeding paragraph, every Security shall be subject to the restrictions on transfer provided in the Legend other than a Restricted Global Security. Whenever any Transfer Restricted Security other than a Restricted Global Security is presented or surrendered for registration of transfer or for exchange for a Security registered in a name other than that of the Holder, such Security must be accompanied by a certificate in substantially the form set forth in Exhibit B, dated the date of such surrender and signed by the Holder of such Security, as to compliance with such restrictions on transfer. The Registrar shall not be required to accept for such registration of transfer or exchange any Security not so accompanied by a properly completed certificate.

(d) The restrictions imposed by the Legend upon the transferability of any Security shall cease and terminate when such Security has been sold pursuant to an effective registration statement under the Securities Act or transferred in compliance with Rule 144 under the Securities Act (or any successor provision thereto) or, if earlier, upon the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision). Any Security as to which such restrictions on transfer shall have expired in accordance with their terms or shall have terminated may, upon a surrender of such Security for exchange to the Registrar in accordance with the provisions of this Section 2.12 (accompanied, in the event that such restrictions on transfer have terminated by reason of a transfer in compliance with Rule 144 or any successor provision, by, if requested, an opinion of counsel reasonably acceptable to the Company, addressed to the Company and in form acceptable to the Company, to the effect that the transfer of such Security has been made in compliance with Rule 144 or such successor provision), be exchanged for a new Security, of like tenor and aggregate principal amount, which shall not bear the restrictive Legend. The Company shall inform the Trustee of the effective date of any registration statement registering the Securities under the Securities Act. The Trustee shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the aforementioned opinion of counsel or registration statement.

(e) As used in the preceding two paragraphs of this Section 2.12, the term "transfer" encompasses any sale, pledge, transfer, hypothecation or other disposition of any Security.

(f) The provisions of clauses (i), (ii), (iii) and (iv) below shall apply only to Global Securities:

(i) Notwithstanding any other provisions of this Indenture or the Securities, a Global Security shall not be exchanged in whole or in part for a Security registered in the name of any Person other than the Depositary or one or more nominees thereof, provided that a Global Security may be exchanged for Securities registered in the names of any person designated by the Depositary in the event that (A) the Depositary has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security or such Depositary has ceased to be a "clearing agency" registered under the Exchange Act, and a successor Depositary is not appointed by the Company within 90 days, (B) the Company has provided the Depositary with written notice that it has decided to discontinue use of the system of book-entry transfer through the Depositary or any successor Depositary or (C) an Event of Default has occurred and is continuing with respect to the Securities. Any Global Security exchanged pursuant to clauses (A) or (B) above shall be so exchanged in whole and not in part, and any Global Security exchanged pursuant to clause (C) above may be exchanged in whole or from time to time in part as directed by the Depositary. Any Security issued in exchange for a Global Security or any portion thereof shall be a Global Security; provided that any such Security so issued that is registered in the name of a Person other than the Depositary or a nominee thereof shall not be a Global Security.

(ii) Securities issued in exchange for a Global Security or any portion thereof shall be issued in definitive, fully-registered book entry form, without interest coupons, shall have an aggregate principal amount equal to that of such Global Security or portion thereof to be so exchanged, shall

be registered in such names and be in such authorized denominations as the Depositary shall designate and shall bear the applicable legends provided for herein. Any Global Security to be exchanged in whole shall be surrendered by the Depositary to the Trustee, as Registrar. With regard to any Global Security to be exchanged in part, either such Global Security shall be so surrendered for exchange or, if the Trustee is acting as custodian for the Depositary or its nominee with respect to such Global Security, the principal amount thereof shall be reduced, by an amount equal to the portion thereof to be so exchanged, by means of an appropriate adjustment made on the records of the Trustee. Upon any such surrender or adjustment, the Trustee shall authenticate and deliver the Security issuable on such exchange to or upon the order of the Depositary or an authorized representative thereof.

(iii) Subject to the provisions of clause (v) below, the registered Holder may grant proxies and otherwise authorize any Person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities.

(iv) In the event of the occurrence of any of the events specified in clause (i) above, the Company will promptly make available to the Trustee a reasonable supply of Certificated Securities in definitive, fully registered form, without interest coupons.

(v) Neither Agent Members nor any other Persons on whose behalf Agent Members may act shall have any rights under this Indenture with respect to any Global Security registered in the name of the Depositary or any nominee thereof, or under any such Global Security, and the Depositary or such nominee, as the case may be, may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner and holder of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or such nominee, as the case may be, or impair, as between the Depositary, its Agent Members and any other person on whose behalf an Agent Member may act, the operation of customary practices of such Persons governing the exercise of the rights of a holder of any Security.

SECTION 2.13. CUSIP NUMBERS.

The Company in issuing the Securities may use one or more "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption or purchase as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption or purchase and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption or purchase 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 3
REDEMPTION AND PURCHASES

SECTION 3.1. PROVISIONAL AND OPTIONAL REDEMPTION

(a) The Securities may be redeemed at the election of the Company, as a whole or in part from time to time, at any time prior to March 20, 2005 (a "Provisional Redemption"), upon at least 20 and not more than 60 days' notice by mail to the Holders of the Securities at a redemption price equal to $1,000 per $1,000 principal amount of the Securities redeemed plus accrued and unpaid interest, if any (such amount, together with the Make-Whole Payment described below, the "Provisional Redemption Price"), to but excluding the date of redemption (the "Provisional Redemption Date") if (1) the

Closing Price of the Common Stock has exceeded 150% of the then applicable Conversion Price for at least 20 Trading Days within a period of any 30 consecutive Trading Days ending on the Trading Day prior to the date of mailing of the notice of Provisional Redemption (the "Provisional Redemption Notice Date"), and (2) a shelf registration statement covering resales of the Securities and the Common Stock issuable upon conversion thereof is effective and available for use in accordance with the Registration Rights Agreement and is expected to remain effective and available for use for the 30 days following the Provisional Redemption Date unless registration is no longer required.

Upon any such Provisional Redemption, the Company, shall make an additional payment, which at its option shall be made either in cash or Common Stock or a combination of cash and Common Stock (the "Make-Whole Payment") with respect to the Securities called for redemption to holders on the Provisional Redemption Notice Date in an amount equal to $105.00 per $1,000 principal amount of the Securities, less the amount of any interest actually paid (including, if the Provisional Redemption Date occurs after a record date but before an interest payment date, any interest paid or to be paid in connection with such interest payment date) on such Securities prior to the Provisional Redemption Date. Payments made in Common Stock will be valued at 97% of the average Closing Price of Common Stock for the five Trading Days ending on the day prior to the Redemption Date. The Company shall make the Make-Whole Payment on all Securities called for Provisional Redemption, including those Securities converted into Common Stock between the Provisional Redemption Notice Date and the Provisional Redemption Date.

(b) Except as set forth in clause (a) of this Section 3.1, the Company shall not have the option to redeem the Notes pursuant to this Section 3.1 prior to March 20, 2005. Thereafter, the Company shall have the option to redeem the Securities, in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Additional Interest thereon, if any, to the applicable Redemption Date, if redeemed during the periods set forth below:

Period		Percentage
Beginning March 20, 2005 through March 14, 2006		100.875%
Beginning March 15, 2006 and thereafter		100.000%

(c) Any redemption pursuant to this Section 3.1 shall be made pursuant to the provisions of Section 3.2 through 3.14 hereof.

SECTION 3.2. RIGHT TO REDEEM; NOTICE TO TRUSTEE.

If the Company elects to redeem Securities pursuant to Section 3.1 and paragraph 6 of the Securities, it shall notify the Trustee at least 45 days prior to the Redemption Date as fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee) of the Redemption Date and the principal amount of Securities to be redeemed. If fewer than all of the Securities are to be redeemed, the record date relating to such redemption shall be selected by the Company and given to the Trustee, which record date shall not be less than ten days after the date of notice to the Trustee.

SECTION 3.3. SELECTION OF SECURITIES TO BE REDEEMED.

If less than all of the Securities are to be redeemed, unless the procedures of the Depositary provide otherwise, the Trustee shall, at least 20 days but not more than 60 days prior to the Redemption Date, select the Securities to be redeemed. The Trustee shall make the selection from the Securities outstanding and not previously called for redemption, by lot, or in its discretion, on a pro rata basis. Securities in denominations of $1,000 may only be redeemed in whole. The Trustee may select for redemption portions (equal to $1,000 or any integral multiple thereof) of the principal of

Securities that have denominations larger than $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption.

If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed to be the portion selected for redemption. Securities which have been converted during a selection of Securities to be redeemed shall be treated by the Trustee as outstanding for the purpose of such selection.

SECTION 3.4. NOTICE OF REDEMPTION.

At least 20 days but not more than 60 days before a Redemption Date, the Company shall mail or cause to be mailed a notice of redemption to each Holder of Securities to be redeemed at such Holder's address as it appears on the Primary Registrar's books.

The notice shall identify the Securities (including CUSIP numbers) to be redeemed and shall state:

(1) the Redemption Date;

(2) the Redemption Price;

(3) the then current Conversion Price;

(4) the name and address of each Paying Agent and Conversion Agent;

(5) that Securities called for redemption must be presented and surrendered to a Paying Agent to collect the Redemption Price;

(6) that Holders who wish to convert Securities must surrender such Securities for conversion no later than the close of business on the Business Day immediately preceding the Redemption Date and must satisfy the other requirements set forth in paragraph 9 of the Securities;

(7) that, unless the Company defaults in making the payment of the Redemption Price, interest on Securities called for redemption shall cease accruing on and after the Redemption Date and the only remaining right of the Holder shall be to receive payment of the Redemption Price plus accrued interest, if any, to the Redemption Date, upon presentation and surrender to a Paying Agent of the Securities; and

(8) if any Security is being redeemed in part, the portion of the principal amount of such Security to be redeemed and that, after the Redemption Date, upon presentation and surrender of such Security, a new Security or Securities in aggregate principal amount equal to the unredeemed portion thereof will be issued.

If any of the Securities to be redeemed is in the form of a Global Security, then the Company shall modify such notice to the extent necessary to accord with the procedures of the Depositary applicable to redemptions. At the Company's written request to the Trustee at least 25 days prior to the Redemption Date, which request shall (i) be irrevocable once given and (ii) set forth all relevant information required by clauses (1) through (8) of the preceding paragraph, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense.

SECTION 3.5. EFFECT OF NOTICE OF REDEMPTION.

Once notice of redemption is mailed, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price stated in the notice, together with accrued interest, if any, except for Securities that are converted in accordance with the provisions of Article 4. Upon presentation and surrender to a Paying Agent, Securities called for redemption shall be paid at the Redemption Price, plus accrued interest up to but not including the Redemption Date; provided that if

the Redemption Date falls after an interest payment record date and on or before an interest payment date, then the interest will be payable to the Holders in whose name the Securities are registered at the close of business on the interest payment record date.

SECTION 3.6. DEPOSIT OF REDEMPTION PRICE.

Prior to 11:00 a.m. New York City time, on the Redemption Date, the Company shall deposit with a Paying Agent (or, if the Company acts as Paying Agent, shall segregate and hold in trust) an amount of money (in immediately available funds if deposited on such Redemption Date) sufficient to pay the Redemption Price of and accrued interest on all Securities to be redeemed on that date, other than Securities or portions thereof called for redemption on that date which have been delivered by the Company to the Trustee for cancellation or have been converted. The Paying Agent shall as promptly as practicable return to the Company any money not required for that purpose because of the conversion of Securities pursuant to Article 4 or, if such money is then held by the Company in trust and is not required for such purpose, it shall be discharged from the trust.

SECTION 3.7. SECURITIES REDEEMED IN PART.

Upon presentation and surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder a new Security equal in principal amount to the unredeemed portion of the Security surrendered.

SECTION 3.8. CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION.

In connection with any redemption of Securities, the Company may arrange for the purchase and conversion of any Securities called for redemption by an agreement with one or more investment bankers or other purchasers to purchase such Securities by paying to a Paying Agent (other than the Company or any of its Affiliates) in trust for the Holders, on or before 11:00 a.m. New York City time on the Redemption Date, an amount that, together with any amounts deposited with such Paying Agent by the Company for the redemption of such Securities, is not less than the Redemption Price, together with interest accrued to, but not including, the Redemption Date, of such Securities. Notwithstanding anything to the contrary contained in this Article 3, the obligation of the Company to pay the Redemption Price of such Securities, including all accrued interest, shall be deemed to be satisfied and discharged to the extent such amount is so paid by such purchasers; provided, however, that nothing in this Section 3.7 shall relieve the Company of its obligation to pay the Redemption Price, plus accrued interest to but excluding the relevant Redemption Date, on Securities called for redemption. If such an agreement with one or more investment banks or other purchasers is entered into, any Securities called for redemption and not surrendered for conversion by the Holders thereof prior to the relevant Redemption Date may, at the option of the Company upon written notice to the Trustee, 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 4) surrendered by such purchasers for conversion, all as of 11:00 a.m. New York City time on the Redemption Date, subject to payment of the above amount as aforesaid. The Paying Agent shall hold and pay to the Holders whose Securities are selected for redemption any such amount paid to it for purchase in the same manner as it would money deposited with it by the Company for the redemption of Securities. Without the Paying Agent's prior written consent, no arrangement between the Company and such purchasers for the purchase and conversion of any Securities shall increase or otherwise affect any of the powers, duties, responsibilities or obligations of the Paying Agent as set forth in this Indenture, and the Company agrees to indemnify the Paying Agent 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 Securities between the Company and such purchasers, including the costs and expenses incurred by the Paying Agent 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.

SECTION 3.9. PURCHASE OF SECURITIES AT OPTION OF THE HOLDER UPON CHANGE IN CONTROL

(a) If at any time that Securities remain outstanding there shall occur a Change in Control, Securities shall be purchased by the Company at the option of the Holders, as of the date that is 30 Business Days after the occurrence of the Change in Control (the "Change in Control Purchase Date") at a purchase price equal to 100% of the principal amount of the Securities, together with accrued and unpaid interest to, but excluding, the Change in Control Purchase Date (the "Change in Control Purchase Price"), subject to satisfaction by or on behalf of any Holder of the requirements set forth in subsection (c) of this Section 3.9.

A "Change in Control" shall be deemed to have occurred if any of the following occurs after the date hereof:

(1) any "person" or "group" (as such terms are defined below) is or becomes the "beneficial owner" (as defined below), directly or indirectly, of shares of Voting Stock of the Company representing 50% or more of the total voting power of all outstanding classes of Voting Stock of the Company or has the power, directly or indirectly, to elect a majority of the members of the Board of Directors of the Company; or

(2) the Company consolidates with, or merges with or into, another Person or the Company sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of the assets of the Company, or any Person consolidates with, or merges with or into, the Company, in any such event other than pursuant to a transaction in which the Persons that "beneficially owned" (as defined below), directly or indirectly, the shares of Voting Stock of the Company immediately prior to such transaction "beneficially own" (as defined below), directly or indirectly, shares of Voting Stock of the Company representing at least a majority of the total voting power of all outstanding classes of Voting Stock of the surviving or transferee Person; or

(3) the holders of capital stock of the Company approve any plan or proposal for the liquidation or dissolution of the Company (whether or not otherwise in compliance with the terms hereof).

For the purpose of the definition of "Change in Control", (i) "person" and "group" have the meanings given such terms under Section 13(d) and 14(d) of the Exchange Act or any successor provision to either of the foregoing, and the term "group" includes any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act (or any successor provision thereto), (ii) a "beneficial owner" shall be determined in accordance with Rule 13d-3 under the Exchange Act, as in effect on the date of this Indenture, except that the number of shares of Voting Stock of the Company shall be deemed to include, in addition to all outstanding shares of Voting Stock of the Company and Unissued Shares deemed to be held by the "person" or "group" (as such terms are defined above) or other Person with respect to which the Change in Control determination is being made, all Unissued Shares deemed to be held by all other Persons, and (iii) the terms "beneficially owned" and "beneficially own" shall have meanings correlative to that of "beneficial owner". The term "Unissued Shares" means shares of Voting Stock not outstanding that are subject to options, warrants, rights to purchase or conversion privileges exercisable within 60 days of the date of determination of a Change in Control.

Notwithstanding anything to the contrary set forth in this Section 3.9, a Change in Control will not be deemed to have occurred if either:

(1) the Closing Price (determined in accordance with Section 4.6(d) of this Indenture) of the Common Stock for any five Trading Days during the ten Trading Days immediately preceding the Change in Control is at least equal to 105% of the Conversion Price in effect on such Trading Day; or

(2) in the case of a merger or consolidation, all of the consideration (excluding cash payments for fractional shares and cash payments pursuant to dissenters' appraisal rights) in the 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 the Securities become convertible solely into such common stock.

(b) Within 10 Business Days after the occurrence of a Change in Control, the Company shall mail a written notice of the Change in Control to the Trustee and to each Holder (and to beneficial owners as required by applicable law). The notice shall include the form of a Change in Control Purchase Notice to be completed by the Holder and shall state:

(1) the date of such Change in Control and, briefly, the events causing such Change in Control;

(2) the date by which the Change in Control Purchase Notice pursuant to this Section 3.9 must be given;

(3) the Change in Control Purchase Date;

(4) the Change in Control Purchase Price;

(5) the Holder's right to require the Company to purchase the Securities;

(6) briefly, the conversion rights of the Securities;

(7) the name and address of each Paying Agent and Conversion Agent;

(8) the Conversion Price and any adjustments thereto;

(9) that Securities as to which a Change in Control Purchase Notice has been given may be converted into Common Stock pursuant to Article 4 of this Indenture only to the extent that the Change in Control Purchase Notice has been withdrawn in accordance with the terms of this Indenture;

(10) the procedures that the Holder must follow to exercise rights under this Section 3.9;

(11) the procedures for withdrawing a Change in Control Purchase Notice, including a form of notice of withdrawal; and

(12) that the Holder must satisfy the requirements set forth in the Securities in order to convert the Securities.

If any of the Securities is in the form of a Global Security, then the Company shall modify such notice to the extent necessary to accord with the procedures of the Depositary applicable to the repurchase of Global Securities.

(c) A Holder may exercise its rights specified in subsection (a) of this Section 3.9 upon delivery of a written notice (which shall be in substantially the form included in Exhibit A hereto and which may be delivered by letter, overnight courier, hand delivery, facsimile transmission or in any other written

form and, in the case of Global Securities, may be delivered electronically or by other means in accordance with the Depositary's customary procedures) of the exercise of such rights (a "Change in Control Purchase Notice") to any Paying Agent at any time prior to the close of business on the Business Day next preceding the Change in Control Purchase Date.

The delivery of such Security to any Paying Agent (together with all necessary endorsements) at the office of such Paying Agent shall be a condition to the receipt by the Holder of the Change in Control Purchase Price therefor.

The Company shall purchase from the Holder thereof, pursuant to this Section 3.9, a portion of a Security if the principal amount of such portion is $1,000 or an integral multiple of $1,000. Provisions of the Indenture that apply to the purchase of all of a Security pursuant to Sections 3.9 through 3.14 also apply to the purchase of such portion of such Security.

Notwithstanding anything herein to the contrary, any Holder delivering to a Paying Agent the Change in Control Purchase Notice contemplated by this subsection (c) shall have the right to withdraw such Change in Control Purchase Notice in whole or in a portion thereof that is a principal amount of $1,000 or in an integral multiple thereof at any time prior to the close of business on the Business Day next preceding the Change in Control Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.10.

A Paying Agent shall promptly notify the Company of the receipt by it of any Change in Control Purchase Notice or written withdrawal thereof.

Anything herein to the contrary notwithstanding, in the case of Global Securities, any Change in Control Purchase Notice may be delivered or withdrawn and such Securities may be surrendered or delivered for purchase in accordance with the Applicable Procedures as in effect from time to time.

SECTION 3.10. EFFECT OF CHANGE IN CONTROL PURCHASE NOTICE.

Upon receipt by any Paying Agent of the Change in Control Purchase Notice specified in Section 3.9(c), the Holder of the Security in respect of which such Change in Control Purchase Notice was given shall (unless such Change in Control Purchase Notice is withdrawn as specified below) thereafter be entitled to receive the Change in Control Purchase Price with respect to such Security. Such Change in Control Purchase Price shall be paid to such Holder promptly following the later of (a) the Change in Control Purchase Date with respect to such Security (provided the conditions in Section 3.9(c) have been satisfied) and (b) the time of delivery of such Security to a Paying Agent by the Holder thereof in the manner required by Section 3.9(c). Securities in respect of which a Change in Control Purchase Notice has been given by the Holder thereof may not be converted into shares of Common Stock pursuant to Article 4 on or after the date of the delivery of such Change in Control Purchase Notice unless such Change in Control Purchase Notice has first been validly withdrawn.

A Change in Control Purchase Notice may be withdrawn by means of a written notice (which may be delivered by mail, overnight courier, hand delivery, facsimile transmission or in any other written form and, in the case of Global Securities, may be delivered electronically or by other means in accordance with the Depositary's customary procedures) of withdrawal delivered by the Holder to a Paying Agent at any time prior to the close of business on the Business Day immediately preceding the Change in Control Purchase Date, specifying the principal amount of the Security or portion thereof (which must be a principal amount of $1,000 or an integral multiple of $1,000 in excess thereof) with respect to which such notice of withdrawal is being submitted.

SECTION 3.11. DEPOSIT OF CHANGE IN CONTROL PURCHASE PRICE.

On or before 11:00 a.m. New York City time on the Change in Control Purchase Date, the Company shall deposit with the Trustee or with a Paying Agent (other than the Company or an

Affiliate of the Company) an amount of money (in immediately available funds if deposited on such Change in Control Purchase Date) sufficient to pay the aggregate Change in Control Purchase Price of all the Securities or portions thereof that are to be purchased as of such Change in Control Purchase Date. The manner in which the deposit required by this Section 3.11 is made by the Company shall be at the option of the Company, provided that such deposit shall be made in a manner such that the Trustee or a Paying Agent shall have immediately available funds on the Change in Control Purchase Date.

If a Paying Agent holds, in accordance with the terms hereof, money sufficient to pay the Change in Control Purchase Price of any Security for which a Change in Control Purchase Notice has been tendered and not withdrawn in accordance with this Indenture then, on the Change in Control Purchase Date, such Security will cease to be outstanding and the rights of the Holder in respect thereof shall terminate (other than the right to receive the Change in Control Purchase Price as aforesaid). The Company shall publicly announce the principal amount of Securities purchased as a result of such Change in Control on or as soon as practicable after the Change in Control Purchase Date.

SECTION 3.12. SECURITIES PURCHASED IN PART.

Any Security that is to be purchased only in part shall be surrendered at the office of a Paying Agent, and promptly after the Change in Control Purchase Date the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, a new Security or Securities, of such authorized denomination or denominations as may be requested by such Holder, in aggregate principal amount equal to, and in exchange for, the portion of the principal amount of the Security so surrendered that is not purchased.

SECTION 3.13. COMPLIANCE WITH SECURITIES LAWS UPON PURCHASE OF SECURITIES.

In connection with any offer to purchase or purchase of Securities under Section 3.9, the Company shall (a) comply with Rule 13e-4 and Rule 14e-1 (or any successor to either such Rule), if applicable, under the Exchange Act, (b) file the related Schedule TO (or any successor or similar schedule, form or report) if required under the Exchange Act, and (c) otherwise comply with all federal and state securities laws in connection with such offer to purchase or purchase of Securities, all so as to permit the rights of the Holders and obligations of the Company under Sections 3.9 through 3.12 to be exercised in the time and in the manner specified therein.

SECTION 3.14. REPAYMENT TO THE COMPANY.

To the extent that the aggregate amount of cash deposited by the Company pursuant to Section 3.11 exceeds the aggregate Change in Control Purchase Price together with interest, if any, thereon of the Securities or portions thereof that the Company is obligated to purchase, then promptly after the Change in Control Purchase Date the Trustee or a Paying Agent, as the case may be, shall return any such excess cash to the Company.

ARTICLE 4
CONVERSION

SECTION 4.1. CONVERSION PRIVILEGE.

Subject to the further provisions of this Article 4 and paragraph 9 of the Securities, a Holder of a Security may convert the principal amount of such Security (or any portion thereof equal to $1,000 or any integral multiple of $1,000 in excess thereof) into Common Stock at any time prior to the close of business on the last Business Date prior to the Final Maturity Date, at the Conversion Price then in

effect; provided, however, that, if such Security is called for redemption or submitted or presented for purchase pursuant to Article 3, such conversion right shall terminate at the close of business on the Business Day immediately preceding the Redemption Date or Change in Control Purchase Date, as the case may be, for such Security or such earlier date as the Holder presents such Security for redemption or for purchase (unless the Company shall default in making the redemption payment or Change in Control Purchase Price payment when due, in which case the conversion right shall terminate at the close of business on the date such default is cured and such Security is redeemed or purchased, as the case may be). The number of shares of Common Stock issuable upon conversion of a Security shall be determined by dividing the principal amount of the Security or portion thereof surrendered for conversion by the Conversion Price in effect on the Conversion Date. The initial Conversion Price is set forth in paragraph 9 of the Securities and is subject to adjustment as provided in this Article 4.

Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion of a portion of a Security.

A Security in respect of which a Holder has delivered a Change in Control Purchase Notice pursuant to Section 3.9 exercising the option of such Holder to require the Company to purchase such Security may be converted only if such Change in Control Purchase Notice is withdrawn by a written notice of withdrawal delivered to a Paying Agent prior to the close of business on the Business Day immediately preceding the Change in Control Purchase Date in accordance with Section 3.9.

A Holder of Securities is not entitled to any rights of a holder of Common Stock until such Holder has converted its Securities to Common Stock, and only to the extent such Securities are deemed to have been converted into Common Stock pursuant to this Article 4.

SECTION 4.2. CONVERSION PROCEDURE.

To convert a Security, a Holder must (a) complete and manually sign the conversion notice on the back of the Security and deliver such notice to a Conversion Agent, (b) surrender the Security to a Conversion Agent, (c) furnish appropriate endorsements and transfer documents if required by a Registrar or a Conversion Agent, and (d) pay any transfer or similar tax, if required. The date on which the Holder satisfies all of those requirements is the "Conversion Date." As soon as practicable after the Conversion Date, the Company shall deliver to the Holder through a Conversion Agent a certificate for the number of whole shares of Common Stock issuable upon the conversion and cash in lieu of any fractional shares pursuant to Section 4.3. Anything herein to the contrary notwithstanding, in the case of Global Securities, conversion notices may be delivered and such Securities may be surrendered for conversion in accordance with the Applicable Procedures as in effect from time to time.

The person in whose name the Common Stock certificate is registered shall be deemed to be a stockholder of record on the Conversion Date; provided, however, that no surrender of a Security on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the person or persons entitled to receive the shares of Common Stock upon such conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the person or persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open; provided, further, that such conversion shall be at the Conversion Price in effect on the Conversion Date as if the stock transfer books of the Company had not been closed. Upon conversion of a Security, such person shall no longer be a Holder of such Security. No payment or adjustment will be made for dividends or distributions on shares of Common Stock issued upon conversion of a Security.

Securities so surrendered for conversion (in whole or in part) during the period from the close of business on any regular record date to the opening of business on the next succeeding interest payment

date (excluding Securities or portions thereof called for redemption or presented for purchase upon a Change in Control on a Redemption Date or Change in Control Purchase Date, as the case may be, during the period beginning at the close of business on a regular record date and ending at the opening of business on the first Business Day after the next succeeding interest payment date, or if such interest payment date is not a Business Day, the second such Business Day) shall also be accompanied by payment in funds acceptable to the Company of an amount equal to the interest payable on such interest payment date on the principal amount of such Security then being converted, and such interest shall be payable to such registered Holder notwithstanding the conversion of such Security, subject to the provisions of this Indenture relating to the payment of defaulted interest by the Company. Except as otherwise provided in this Section 4.2, no payment or adjustment will be made for accrued interest on a converted Security. If the Company defaults in the payment of interest payable on such interest payment date, the Company shall promptly repay such funds to such Holder.

Nothing in this Section shall affect the right of a Holder in whose name any Security is registered at the close of business on a record date to receive the interest payable on such Security on the related interest payment date in accordance with the terms of this Indenture and the Securities. If a Holder converts more than one Security at the same time, the number of shares of Common Stock issuable upon the conversion shall be based on the aggregate principal amount of Securities converted.

Upon surrender of a Security that is converted in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Security equal in principal amount to the unconverted portion of the Security surrendered.

SECTION 4.3. FRACTIONAL SHARES.

The Company will not issue fractional shares of Common Stock upon conversion of Securities. In lieu thereof, the Company will pay an amount in cash for the current market value of the fractional shares. The current market value of a fractional share shall be determined, (calculated to the nearest 1/1000^th of a share) by multiplying the Closing Price (determined as set forth in Section 4.6(d)) of the Common Stock on the Trading Day immediately prior to the Conversion Date by such fractional share and rounding the product to the nearest whole cent.

SECTION 4.4. TAXES ON CONVERSION.

If a Holder converts a Security, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon such conversion. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder's name. The Conversion Agent may refuse to deliver the certificate representing the Common Stock being issued in a name other than the Holder's name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder's name. Nothing herein shall preclude any tax withholding required by law or regulation.

SECTION 4.5. COMPANY TO PROVIDE STOCK.

The Company shall, prior to issuance of any Securities hereunder, and from time to time as may be necessary, reserve, out of its authorized but unissued Common Stock, a sufficient number of shares of Common Stock to permit the conversion of all outstanding Securities into shares of Common Stock.

All shares of Common Stock delivered upon conversion of the Securities shall be newly issued shares, shall be duly authorized, validly issued, fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim.

The Company will endeavor promptly to comply with all federal and state securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Securities, if any, and will list or cause to have quoted such shares of Common Stock on each national securities exchange or on the Nasdaq National Market or other over-the-counter market or such other market on which the Common Stock is then listed or quoted; provided, however, that if rules of such automated quotation system or exchange permit the Company to defer the listing of such Common Stock until the first conversion of the Notes into Common Stock in accordance with the provisions of this Indenture, the Company covenants to list such Common Stock issuable upon conversion of the Notes in accordance with the requirements of such automated quotation system or exchange at such time. Any Common Stock issued upon conversion of a Security hereunder which at the time of conversion was a Transfer Restricted Security will also be a Transfer Restricted Security.

SECTION 4.6. ADJUSTMENT OF CONVERSION PRICE.

The conversion price as stated in paragraph 9 of the Securities (the "Conversion Price") shall be adjusted from time to time by the Company as follows:

(a) In case the Company shall (i) pay a dividend on its Common Stock in shares of Common Stock, (ii) make a distribution on its Common Stock in shares of Common Stock, (iii) subdivide its outstanding Common Stock into a greater number of shares, or (iv) combine its outstanding Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior thereto shall be adjusted so that the Holder of any Security thereafter surrendered for conversion shall be entitled to receive that number of shares of Common Stock which it would have owned had such Security been converted immediately prior to the happening of such event. An adjustment made pursuant to this subsection (a) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of subdivision or combination.

(b) In case the Company shall issue rights or warrants to all or substantially all holders of its Common Stock entitling them (for a period commencing no earlier than the record date described below and expiring not more than 60 days after such record date) to subscribe for or purchase shares of Common Stock (or securities convertible into Common Stock) at a price per share (or having a conversion price per share) less than the Current Market Price per share of Common Stock (as determined in accordance with subsection (d) of this Section 4.6) on the record date for the determination of stockholders entitled to receive such rights or warrants, the Conversion Price in effect immediately prior thereto shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to such record date by a fraction of which the numerator shall be the number of shares of Common Stock outstanding on such record date plus the number of shares which the aggregate offering price of the total number of shares of Common Stock so offered (or the aggregate conversion price of the convertible securities so offered, which shall be determined by multiplying the number of shares of Common Stock issuable upon conversion of such convertible securities by the conversion price per share of Common Stock pursuant to the terms of such convertible securities) would purchase at the Current Market Price per share (as defined in subsection (d) of this Section 4.6) of Common Stock on such record date, and of which the denominator shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock offered (or into which the convertible securities so offered are convertible). Such adjustment shall be made successively whenever any such rights or warrants are issued, and shall become effective immediately after such record date. If at the end of the period during which such rights or warrants are exercisable not all rights or warrants shall have been exercised, the adjusted Conversion Price shall be immediately readjusted to what it would have been based upon the number of additional shares of Common Stock actually issued (or the number of shares of Common Stock issuable upon conversion of convertible securities actually issued).

(c) In case the Company shall distribute to all or substantially all holders of its Common Stock any shares of capital stock of the Company (other than Common Stock), evidences of indebtedness or other non-cash assets (including securities of any person other than the Company but excluding (1) dividends or distributions paid exclusively in cash or (2) dividends or distributions referred to in subsection (a) of this Section 4.6), or shall distribute to all or substantially all holders of its Common Stock rights or warrants to subscribe for or purchase any of its securities (excluding those rights and warrants referred to in subsection (b) of this Section 4.6 and also excluding the distribution of rights to all holders of Common Stock pursuant to the adoption of a stockholders rights plan or the detachment of such rights under the terms of such stockholder rights plan), then in each such case the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the current Conversion Price by a fraction of which the numerator shall be the Current Market Price per share (as defined in subsection (d) of this Section 4.6) of the Common Stock on the record date mentioned below less the fair market value on such record date (as determined by the Board of Directors, whose determination shall be conclusive evidence of such fair market value and which shall be evidenced by an Officers' Certificate delivered to the Trustee) of the portion of the capital stock, evidences of indebtedness or other non-cash assets so distributed or of such rights or warrants applicable to one share of Common Stock (determined on the basis of the number of shares of Common Stock outstanding on the record date), and of which the denominator shall be the Current Market Price per share (as defined in subsection (d) of this Section 4.6) of the Common Stock on such record date. Such adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of shareholders entitled to receive such distribution.

In the event the then fair market value (as so determined) of the portion of the capital stock, evidences of indebtedness or other non-cash assets so distributed or of such rights or warrants applicable to one share of Common Stock is equal to or greater than the Current Market Price per share of the Common Stock on such record date, in lieu of the foregoing adjustment, adequate provision shall be made so that each holder of a Security shall have the right to receive upon conversion the amount of capital stock, evidences of indebtedness or other non-cash assets so distributed or of such rights or warrants such holder would have received had such holder converted each Security on such record date. In the event that such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not been declared. If the Board of Directors determines the fair market value of any distribution for purposes of this Section 4.6(c) by reference to the actual or when issued trading market for any securities, it must in doing so consider the prices in such market over the same period used in computing the Current Market Price of the Common Stock.

In the event that the Company implements a preferred shares rights plan ("Rights Plan"), upon conversion of the Securities into Common Stock, to the extent that the Rights Plan has been implemented and is still in effect upon such conversion, the holders of Securities will receive, in addition to the Common Stock, the rights described therein (whether or not the rights have separated from the Common Stock at the time of conversion), subject to the limitations set forth in the Rights Plan. Any distribution of rights or warrants pursuant to a 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 pursuant to this Section 4.6(c).

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 4.6 (and no adjustment to the

Conversion Price under this Section 4.6 will be required) until the occurrence of the earliest Trigger Event, whereupon such rights and warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the Conversion Price shall be made under this Section 4.6(c). If any such right or warrant, including any such existing rights or warrants distributed prior to the date of this Indenture, are subject to events, upon the occurrence of which such rights or warrants become exercisable to purchase different securities, evidences of indebtedness or other assets, then the date of the occurrence of any and each such event shall be deemed to be the date of distribution and record date with respect to new rights or warrants with such rights (and a termination or expiration of the existing rights or warrants without exercise by any of the holders 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 was counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Price under this Section 4.6 was made, (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 or holders of Common Stock with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Common Stock as of the date of such redemption or repurchase, and (2) in the case of such rights or warrants which shall have expired or been terminated without exercise by any holders thereof, the Conversion Price shall be readjusted as if such rights and warrants had not been issued.

(1) In case the Company shall, by dividend or otherwise, at any time distribute (a "Triggering Distribution") to all or substantially all holders of its Common Stock cash in an aggregate amount that, together with the aggregate amount of (A) any cash and the fair market value (as determined by the Board of Directors, whose determination shall be conclusive evidence thereof and which shall be evidenced by an Officers' Certificate delivered to the Trustee) of any other consideration payable in respect of any tender offer by the Company or a Subsidiary of the Company for Common Stock consummated within the 12 months preceding the date of payment of the Triggering Distribution and in respect of which no Conversion Price adjustment pursuant to this Section 4.6 has been made and (B) all other cash distributions to all or substantially all holders of its Common Stock made within the 12 months preceding the date of payment of the Triggering Distribution and in respect of which no Conversion Price adjustment pursuant to this Section 4.6 has been made, exceeds an amount equal to 10.0% of the product of the Current Market Price per share of Common Stock (as determined in accordance with subsection (d) of this Section 4.6) on the Business Day (the "Determination Date") immediately preceding the day on which such Triggering Distribution is declared by the Company multiplied by the number of shares of Common Stock outstanding on the Determination Date (excluding shares held in the treasury of the Company), the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying such Conversion Price in effect immediately prior to the Determination Date by a fraction of which the numerator shall be the Current Market Price per share of the Common Stock (as determined in accordance with subsection (d) of this Section 4.6) on the Determination Date less the sum of the aggregate amount of cash and the aggregate fair market value (determined as aforesaid in this Section 4.6(c)(1)) of any such other consideration so distributed, paid or payable within such 12 months (including, without limitation, the Triggering Distribution) applicable to one share of Common Stock (determined on the basis of the number of shares of Common Stock outstanding on the Determination Date) and the denominator shall be such Current Market Price per share of the Common Stock (as determined in accordance with subsection (d) of this Section 4.6) on the Determination Date, such reduction to become effective immediately prior to the opening of business on the day following the date on which the Triggering Distribution is paid.

(2) In case any tender offer made by the Company or any of its Subsidiaries for Common Stock shall expire and such tender offer (as amended upon the expiration thereof) shall involve the payment of aggregate consideration in an amount (determined as the sum of the aggregate amount of cash consideration and the aggregate fair market value (as determined by the Board of Directors, whose determination shall be conclusive evidence thereof and which shall be evidenced by an Officers' Certificate delivered to the Trustee thereof) of any other consideration) that, together with the aggregate amount of (A) any cash and the fair market value (as determined by the Board of Directors, whose determination shall be conclusive evidence thereof and which shall be evidenced by an Officers' Certificate delivered to the Trustee) of any other consideration payable in respect of any other tender offers by the Company or any Subsidiary of the Company for Common Stock consummated within the 12 months preceding the date of the Expiration Date (as defined below) and in respect of which no Conversion Price adjustment pursuant to this Section 4.6 has been made and (B) all cash distributions to all or substantially all holders of its Common Stock made within the 12 months preceding the Expiration Date and in respect of which no Conversion Price adjustment pursuant to this Section 4.6 has been made, exceeds an amount equal to 10.0% of the product of the Current Market Price per share of Common Stock (as determined in accordance with subsection (d) of this Section 4.6) as of the last date (the "Expiration Date") tenders could have been made pursuant to such tender offer (as it may be amended) (the last time at which such tenders could have been made on the Expiration Date is hereinafter sometimes called the "Expiration Time") multiplied by the number of shares of Common Stock outstanding (including tendered shares but excluding any shares held in the treasury of the Company) at the Expiration Time, then, immediately prior to the opening of business on the day after the Expiration 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 the Expiration Date by a fraction of which the numerator shall be the product of the number of shares of Common Stock outstanding (including tendered shares but excluding any shares held in the treasury of the Company) at the Expiration Time multiplied by the Current Market Price per share of the Common Stock (as determined in accordance with subsection (d) of this Section 4.6) on the Trading Day next succeeding the Expiration Date and the denominator shall be the sum of (x) the aggregate consideration (determined as aforesaid) payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender offer) of all shares validly tendered and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Shares") and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares and excluding any shares held in the treasury of the Company) at the Expiration Time and the Current Market Price per share of Common Stock (as determined in accordance with subsection (d) of this Section 4.6) on the Trading Day next succeeding the Expiration Date, such reduction to become effective immediately prior to the opening of business on the day following the Expiration Date. 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 or all such purchases or any or all such purchases are rescinded, the Conversion Price shall again be adjusted to be the Conversion Price which would have been in effect based upon the number of shares actually purchased. If the application of this Section 4.6(c)(2) 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 4.6(c)(2).

(3) For purposes of this Section 4.6(c), the term "tender offer" shall mean and include both tender offers and exchange offers, all references to "purchases" of shares in tender offers (and all similar references) shall mean and include both the purchase of shares in tender offers and the acquisition of shares pursuant to exchange offers, and all references to "tendered shares" (and all

similar references) shall mean and include shares tendered in both tender offers and exchange offers.

(d) For the purpose of any computation under subsections (b) and (c) of this Section 4.6, the current market price (the "Current Market Price") per share of Common Stock on any date shall be deemed to be the average of the daily closing prices for the 30 consecutive Trading Days commencing 45 Trading Days before (i) the Determination Date or the Expiration Date, as the case may be, with respect to distributions or tender offers under subsection (c) of this Section 4.6 or (ii) the record date with respect to distributions, issuances or other events requiring such computation under subsection (b) or (c) of this Section 4.6. The closing price (the "Closing Price") for each day shall be the last reported sales price or, in case no such reported sale takes place on such date, the average of the reported closing bid and asked prices in either case on the Nasdaq National Market (the "NNM") or, if the Common Stock is not listed or admitted to trading on the NNM, on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if not listed or admitted to trading on the NNM or any national securities exchange, the last reported sales price of the Common Stock as quoted on NASDAQ or, in case no reported sales takes place, the average of the closing bid and asked prices as quoted on NASDAQ or any comparable system or, if the Common Stock is not quoted on NASDAQ or any comparable system, the closing sales price or, in case no reported sale takes place, the average of the closing bid and asked prices, as furnished by any two members of the National Association of Securities Dealers, Inc. selected from time to time by the Company for that purpose. If no such prices are available, the Current Market Price per share shall be the fair value of a share of Common Stock as determined by the Board of Directors (which shall be evidenced by an Officers' Certificate delivered to the Trustee).

(e) In any case in which this Section 4.6 shall require that an adjustment be made following a record date or a Determination Date or Expiration Date, as the case may be, established for purposes of this Section 4.6, the Company may elect to defer (but only until five Business Days following the filing by the Company with the Trustee of the certificate described in Section 4.9) issuing to the Holder of any Security converted after such record date or Determination Date or Expiration Date the shares of Common Stock and other capital stock of the Company issuable upon such conversion over and above the shares of Common Stock and other capital stock of the Company issuable upon such conversion only on the basis of the Conversion Price prior to adjustment; and, in lieu of the shares the issuance of which is so deferred, the Company shall issue or cause its transfer agents to issue due bills or other appropriate evidence prepared by the Company of the right to receive such shares. If any distribution in respect of which an adjustment to the Conversion Price is required to be made as of the record date or Determination Date or Expiration Date therefor is not thereafter made or paid by the Company for any reason, the Conversion Price shall be readjusted to the Conversion Price which would then be in effect if such record date had not been fixed or such effective date or Determination Date or Expiration Date had not occurred.

SECTION 4.7. NO ADJUSTMENT.

No adjustment in the Conversion Price shall be required unless the adjustment would require an increase or decrease of at least 1% in the Conversion Price as last adjusted; provided, however, that any adjustments which by reason of this Section 4.7 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article 4 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 issuances of Common Stock pursuant to a Company plan for reinvestment of dividends or interest or for a change in the par value or a change to no par value of the Common Stock.

To the extent that the Securities become convertible into the right to receive cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash.

SECTION 4.8. ADJUSTMENT FOR TAX PURPOSES.

The Company shall be entitled to make such reductions in the Conversion Price, in addition to those required by Section 4.6, as it in its discretion shall determine to be advisable in order that any stock dividends, subdivisions of shares, distributions of rights to purchase stock or securities or distributions of securities convertible into or exchangeable for stock hereafter made by the Company to its stockholders shall not be taxable.

SECTION 4.9. NOTICE OF ADJUSTMENT.

Whenever the Conversion Price or conversion privilege is adjusted, the Company shall promptly mail to Securityholders a notice of the adjustment and file with the Trustee an Officers' Certificate briefly stating the facts requiring the adjustment and the manner of computing it. Unless and until the Trustee shall receive an Officers' Certificate setting forth an adjustment of the Conversion Price, the Trustee may assume without inquiry that the Conversion Price has not been adjusted and that the last Conversion Price of which it has knowledge remains in effect.

SECTION 4.10. NOTICE OF CERTAIN TRANSACTIONS.

In the event that:

(1) the Company takes any action which would require an adjustment in the Conversion Price;

(2) the Company consolidates or merges with, or transfers all or substantially all of its property and assets to, another corporation and shareholders of the Company must approve the transaction; or

(3) there is a dissolution or liquidation of the Company,

the Company shall mail to Holders and file with the Trustee a notice stating the proposed record or effective date, as the case may be. The Company shall mail the notice at least ten days before such date. Failure to mail such notice or any defect therein shall not affect the validity of any transaction referred to in clause (1), (2) or (3) of this Section 4.10.

SECTION 4.11. EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE ON CONVERSION PRIVILEGE.

If any of the following shall occur, namely: (a) any reclassification or change of shares of Common Stock issuable upon conversion of the Securities (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, or any other change for which an adjustment is provided in Section 4.6); (b) any consolidation or merger or combination to which the Company is a party other than a merger in which the Company is the continuing corporation and which does not result in any reclassification of, or change (other than 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) in, outstanding shares of Common Stock; or (c) any sale or conveyance as an entirety or substantially as an entirety of the property and assets of the Company, directly or indirectly, to any person, then the Company, or such successor, purchasing or transferee corporation, as the case may be, shall, as a condition precedent to such reclassification, change, combination, consolidation, merger, sale or conveyance, execute and deliver to the Trustee a supplemental indenture providing that the Holder of each Security then outstanding shall have the right to convert such Security into the kind and amount of shares of stock and other securities and property (including cash) receivable upon such reclassification, change, combination, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock deliverable upon conversion of such Security immediately prior to such reclassification, change, combination, consolidation, merger, sale or conveyance. Such supplemental indenture shall provide for adjustments of the Conversion Price which shall be as nearly equivalent as may be practicable to the adjustments of the Conversion Price provided for in this Article 4. If, in the case of any such consolidation, merger, combination, sale or conveyance, the stock or other securities and property (including cash) receivable thereupon by a holder of Common Stock include shares of stock or other securities and property of a person other than the successor, purchasing or transferee corporation, as the case may be, in such consolidation, merger, combination, sale or conveyance, then such supplemental indenture shall also be executed by such

other person and shall contain such additional provisions to protect the interests of the Holders of the Securities as the Board of Directors shall reasonably consider necessary by reason of the foregoing. The provisions of this Section 4.11 shall similarly apply to successive reclassifications, changes, combinations, consolidations, mergers, sales or conveyances.

In the event the Company shall execute a supplemental indenture pursuant to this Section 4.11, the Company shall promptly file with the Trustee (x) an Officers' Certificate briefly stating the reasons therefor, the kind or amount of shares of stock or other securities or property (including cash) receivable by Holders of the Securities upon the conversion of their Securities after any such reclassification, change, combination, consolidation, merger, sale or conveyance, any adjustment to be made with respect thereto and that all conditions precedent have been complied with and (y) an Opinion of Counsel that all conditions precedent have been complied with, and shall promptly mail notice thereof to all Holders.

SECTION 4.12. TRUSTEE'S DISCLAIMER.

The Trustee shall have no duty to determine when an adjustment under this Article 4 should be made, how it should be made or what such adjustment should be, but may accept as conclusive evidence of that fact or the correctness of any such adjustment, and shall be protected in relying upon, an Officers' Certificate including the Officers' Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 4.9. The Trustee makes no representation as to the validity or value of any securities or assets issued upon conversion of Securities, and the Trustee shall not be responsible for the Company's failure to comply with any provisions of this Article 4.

The Trustee shall not be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture executed pursuant to Section 4.11, but may accept as conclusive evidence of the correctness thereof, and shall be fully protected in relying upon, the Officers' Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 4.11.

SECTION 4.13. VOLUNTARY REDUCTION.

The Company from time to time may reduce the Conversion Price by any amount for any period of time if the period is at least 20 days and if the reduction is irrevocable during the period if our Board of Directors determines that such reduction would be in the best interest of the Company or to avoid or diminish income tax to holders of shares of our Common Stock in connection with a dividend or distribution of stock or similar event, and the Company provides 15 days prior notice of any reduction in the Conversion Price; provided, however, that in no event may the Company reduce the Conversion Price to be less than the par value of a share of Common Stock.

ARTICLE 5
SUBORDINATION

SECTION 5.1. AGREEMENT OF SUBORDINATION.

The Company covenants and agrees, and each Holder of Securities issued hereunder by its acceptance thereof likewise covenants and agrees, that all Securities shall be issued subject to the provisions of this Article 5; and each Person holding any Security, 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 (including Additional Interest, if any) on all Securities (including, but not limited to, the Redemption Price with respect to the Securities called for redemption or the Change in Control Purchase Price with respect to the Securities subject to purchase in accordance with Article 3 as provided in this Indenture) issued hereunder shall, to the

extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to the prior payment in full in cash or payment satisfactory to the holders of Senior Indebtedness of all Senior Indebtedness, whether outstanding at the date of this Indenture or thereafter incurred.

No provision of this Article 5 shall prevent the occurrence of any default or Event of Default hereunder.

SECTION 5.2. PAYMENTS TO HOLDERS.

No payment shall be made with respect to the principal of, or premium, if any, or interest (including Additional Interest, if any) on the Securities (including, but not limited to, the Redemption Price with respect to the Securities to be called for redemption or the Change in Control Purchase Price with respect to the Securities subject to purchase in accordance with Article 3 as provided in this Indenture), except payments and distributions made by the Trustee as permitted by the first or second paragraph of Section 5.5, if:

(i) a default in the payment of principal, premium, interest, rent or other obligations due on any Designated Senior Indebtedness occurs and is continuing (or, in the case of Designated Senior Indebtedness for which there is a period of grace, in the event of such a default that continues beyond the period of grace, if any, specified in the instrument or lease evidencing such Designated Senior Indebtedness), unless and until such default shall have been cured or waived or shall have ceased to exist; or

(ii) a default, other than a payment default, on a Designated Senior Indebtedness occurs and is continuing that then permits holders of such Designated Senior Indebtedness to accelerate its maturity and the Trustee receives a notice of the default (a "Payment Blockage Notice") from a Representative or holder of Designated Senior Indebtedness or the Company.

Subject to the provisions of Section 5.5, if the Trustee receives any Payment Blockage Notice pursuant to clause (ii) above, no subsequent Payment Blockage Notice shall be effective for purposes of this Section unless and until (a) at least 365 days shall have elapsed since the initial effectiveness of the immediately prior Payment Blockage Notice; and (b) all scheduled payments on the Securities that have come due have been paid in full in cash. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee (unless such default was waived, cured or otherwise ceased to exist and thereafter subsequently reoccurred) shall be, or be made, the basis for a subsequent Payment Blockage Notice.

The Company may and shall resume payments on and distributions in respect of the Securities upon the earlier of:

(a) in the case of a default referred to in clause (i) above, the date upon which the default is cured or waived or ceases to exist, or

(b) in the case of a default referred to in clause (ii) above, the earlier of the date on which such 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, if the maturity of such Designated Senior Indebtedness has not been accelerated, unless this Article 5 otherwise prohibits the payment or distribution at the time of such payment or distribution.

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 or winding-up or liquidation or reorganization of the Company (whether voluntary or involuntary) or in bankruptcy, insolvency, receivership or similar proceedings, all amounts due or to become due upon all Senior Indebtedness shall first be paid in full in cash, or other payments satisfactory to the holders of Senior Indebtedness before any payment is made on account of the principal of, premium, if any, or interest

(including Additional Interest, if any) on the Securities (except payments made pursuant to Article 10 from monies deposited with the Trustee pursuant thereto prior to commencement of proceedings for such dissolution, winding-up, liquidation or reorganization); and upon any such dissolution or winding-up or liquidation or reorganization of the Company or bankruptcy, insolvency, receivership or other proceeding, 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 Securities or the Trustee would be entitled, except for the provision of this Article 5, 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 Securities 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 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 other payment satisfactory 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 Securities or to the Trustee.

For purposes of this Article 5, 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 5 with respect to the Securities 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 any reorganization or readjustment, and (ii) the rights of the holders of Senior Indebtedness (other than leases which are not assumed by the Company or 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, transfer or lease of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article 7 shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 5.2 if such other corporation shall, as a part of such consolidation, merger, conveyance, transfer or lease, comply with the conditions stated in Article 7.

In the event of the acceleration of the Securities because of an Event of Default, no payment or distribution shall be made to the Trustee or any Holder of Securities in respect of the principal of, premium, if any, or interest (including Additional Interest, if any) on the Securities by the Company (including, but not limited to, the Redemption Price with respect to the Securities called for redemption or the Change in Control Purchase Price with respect to the Securities subject to purchase in accordance with Article 3 as provided in this Indenture), except payments and distributions made by the Trustee as permitted by Section 5.5, 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 Securities is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Indebtedness of such acceleration.

In the event that, notwithstanding the foregoing provisions, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (including, without limitation, by way of setoff or otherwise), prohibited by the foregoing, shall be received by the Trustee or the Holders of the Securities before all Senior Indebtedness is paid in full, in cash or other payment satisfactory to the holders of Senior Indebtedness, or provision is made for such payment thereof in accordance with its terms in cash or other payment satisfactory to the holders of Senior Indebtedness,

such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of Senior Indebtedness or their 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 pay all Senior Indebtedness in full, in cash or other payment satisfactory to the holders of Senior Indebtedness, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness.

Nothing in this Section 5.2 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 9.7. This Section 5.2 shall be subject to the further provisions of Section 5.5.

SECTION 5.3. SUBROGATION OF SECURITIES.

Subject to the payment in full, in cash or other payment satisfactory to the holders of Senior Indebtedness, of all Senior Indebtedness, the rights of the Holders of the Securities 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 5 (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 Securities 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, premium, if any, and interest (including Additional Interest, if any) on the Securities shall be paid in full in cash or other payment satisfactory to the holders of Senior Indebtedness; 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 Securities or the Trustee would be entitled except for the provisions of this Article 5, and no payment over pursuant to the provisions of this Article 5, to or for the benefit of the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Securities, 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 Securities pursuant to the subrogation provisions of this Article 5, 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 Securities. It is understood that the provisions of this Article 5 are and are intended solely for the purposes of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of the Senior Indebtedness, on the other hand.

Nothing contained in this Article 5 or elsewhere in this Indenture or in the Securities is intended to or shall impair, as among the Company, its creditors other than the holders of Senior Indebtedness, and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest on the Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Securities and creditors of the Company other than the holders of the Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article 5 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 5, the Trustee, subject to the provisions of Section 9.1, and the Holders of the Securities shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings are pending, or a 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 Securities, 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 and all other facts pertinent thereto or to this Article 5.

SECTION 5.4. AUTHORIZATION TO EFFECT SUBORDINATION.

Each Holder of a Security by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 5 and appoints the Trustee to act as the Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 5.3 hereof at least 30 days before the expiration of the time to file such claim, the holders of any Senior Indebtedness or their representatives are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Securities.

SECTION 5.5. NOTICE TO TRUSTEE.

The Company shall give prompt written notice in the form of an Officers' Certificate to a Trust 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 Securities pursuant to the provisions of this Article 5. Notwithstanding the provisions of this Article 5 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment of monies to or by the Trustee in respect of the Securities pursuant to the provisions of this Article 5, unless and until a Trust 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 Representative or a Holder or Holders of Senior Indebtedness or from any trustee thereof; and before the receipt of any such written notice, the Trustee, subject to the provisions of Section 9.1, shall be entitled in all respects to assume that no such facts exist; provided that if on a date not less than one Business Day 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 Security) the Trustee shall not have received, with respect to such monies, the notice provided for in this Section 5.5, 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 in this Article 5 to the contrary, nothing shall prevent any payment by the Trustee to the Holders of monies deposited with it pursuant to Article 10, and any such payment shall not be subject to the provisions of Article 5.

The Trustee, subject to the provisions of Section 9.1, shall be entitled to rely on the delivery to it of a written notice by a Representative or 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 Representative or 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 5, 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 5, 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 5.6. TRUSTEE'S RELATION TO SENIOR INDEBTEDNESS.

The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article 5 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 9.11 or elsewhere in this Indenture shall deprive the Trustee of any of its rights as such holder.

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 5, 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 9.1, the Trustee shall not be liable to any holder of Senior Indebtedness if it shall pay over or deliver to Holders of Securities, the Company or any other person money or assets to which any holder of Senior Indebtedness shall be entitled by virtue of this Article 5 or otherwise.

SECTION 5.7. 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 5.8. CERTAIN CONVERSIONS DEEMED PAYMENT.

For the purposes of this Article 5 only, (1) the issuance and delivery of junior securities upon conversion of Securities in accordance with Article 4 shall not be deemed to constitute a payment or distribution on account of the principal of (or premium, if any) or interest on Securities or on account of the purchase or other acquisition of Securities, and (2) the payment, issuance or delivery of cash (except in satisfaction of fractional shares pursuant to Section 4.3), property or securities (other than junior securities) upon conversion of a Security shall be deemed to constitute payment on account of the principal of such Security. For the purposes of this Section 5.8, the term "junior securities" means (a) shares of any stock of any class of the Company, or (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 Securities are so subordinated as provided in this Article. Nothing contained in this Article 5 or elsewhere in this Indenture or in the Securities is intended to or shall impair, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders, the right, which is absolute and unconditional, of the Holder of any Security to convert such Security in accordance with Article 4.

SECTION 5.9. 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 shall (unless the context otherwise requires) 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 paragraph of Section 5.5 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent.

SECTION 5.10. 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 5, 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 6
COVENANTS

SECTION 6.1. PAYMENT OF SECURITIES.

The Company shall promptly make all payments in respect of the Securities on the dates and in the manner provided in the Securities and this Indenture. An installment of principal or interest or Additional Interest, if any, shall be considered paid on the date it is due if the Paying Agent (other than the Company) holds by 11:00 a.m., New York City time, on that date money, deposited by the Company or an Affiliate thereof, sufficient to pay the installment. The Company shall, (in immediately available funds) to the fullest extent permitted by law, pay interest on overdue principal (including premium, if any) and overdue installments of interest at the rate borne by the Securities per annum.

Payment of the principal of (and premium, if any) and any interest on the Securities 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 State Street Bank and Trust Company, N.A., an Affiliate of the Trustee, as agent of the Trustee) or at the Corporate Trust Office of the Trustee in such coin or currency of the United States of America as at the time of payment is legal tender for 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 address of the Person entitled thereto as such address appears in the Register; provided further that a Holder with an aggregate principal amount in excess of $2,000,000 will be paid by wire transfer in immediately available funds at the election of such Holder if such Holder has provided wire transfer instructions to the Company at least 10 Business Days prior to the payment date.

SECTION 6.2. SEC REPORTS.

The Company shall file all reports and other information and documents which it is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, and within 15 days after it files them with the SEC, the Company shall file copies of all such reports, information and other documents with the Trustee. It is agreed that delivery of said reports to the Trustee by electronic means shall constitute "filing" of such reports with the Trustee for purposes of this Section 6.2.

Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates).

SECTION 6.3. COMPLIANCE CERTIFICATES.

The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year of the Company (beginning with the fiscal year ending December 31, 2002), an Officers' Certificate as to the signer's knowledge of the Company's compliance with all conditions and covenants on its part contained in this Indenture and stating whether or not the signer knows of any default or Event of Default. If such signer knows of such a default or Event of Default, the Officers' Certificate shall describe the default or Event of Default and the efforts to remedy the same. For the purposes of this

Section 6.3, compliance shall be determined without regard to any grace period or requirement of notice provided pursuant to the terms of this Indenture.

SECTION 6.4. 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.

SECTION 6.5. MAINTENANCE OF CORPORATE EXISTENCE.

Subject to Article 7, 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 6.6. 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, upon the request of any Holder or beneficial holder of the Securities make available to such Holder or beneficial holder of Securities or any Common Stock issued upon conversion thereof which continue to be Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of Securities or such Common Stock designated by such Holder or beneficial holder, the information required pursuant to Rule 144A(d)(4) under the Securities Act or such Common Stock and it will take such further action as any Holder or beneficial holder of such Securities or such Common Stock may reasonably request, all to the extent required from time to time to enable such Holder or beneficial holder to sell its Securities 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 Securities or such Common Stock, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements.

SECTION 6.7. 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, premium, if any, or interest (including Additional Interest, if any) on the Securities 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 had been enacted.

SECTION 6.8. PAYMENT OF ADDITIONAL INTEREST.

If Additional Interest is 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 Additional Interest that is payable and (ii) the date on which such Additional Interest is payable. Unless and until a Trust Officer of the Trustee receives such a certificate, the Trustee may assume without inquiry that no such Additional Interest is payable. If the Company has paid Additional

Interest directly to the Persons entitled to it, the Company shall deliver to the Trustee a certificate setting forth the particulars of such payment.

ARTICLE 7
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

SECTION 7.1. COMPANY MAY CONSOLIDATE, ETC, ONLY ON CERTAIN TERMS.

The Company shall not consolidate with or merge into any other Person (in a transaction in which the Company is not the surviving corporation) or convey, transfer or lease its properties and assets substantially as an entirety to any Person, unless:

(1) in case the Company shall consolidate with or merge into another Person (in a transaction in which the Company is not the surviving corporation) or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a corporation 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 and any premium and interest on all the Securities and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed and the conversion rights shall be provided for in accordance with Article 4, by supplemental indenture satisfactory in form to the Trustee, executed and delivered to the Trustee, by the Person (if other than the Company) formed by such consolidation or into which the Company shall have been merged or by the Person which shall have acquired the Company's assets;

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

(3) 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.

SECTION 7.2. SUCCESSOR SUBSTITUTED.

Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 7.1, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities.

ARTICLE 8
DEFAULT AND REMEDIES

SECTION 8.1. EVENTS OF DEFAULT.

An "Event of Default" shall occur if:

(1) the Company defaults in the payment of any interest or Additional Interest, if any, on any Security when the same becomes due and payable and the default continues for a period of 30 days, whether or not such payment shall be prohibited by the provisions of Article 5 hereof;

(2) the Company defaults in the payment of any principal of (including, without limitation, any premium, if any, on) any Security when the same becomes due and payable (whether at maturity, upon redemption, on a Change of Control Purchase Date or otherwise), whether or not such payment shall be prohibited by the provisions of Article 5 hereof;

(3) the Company fails to comply with any of its other agreements contained in the Securities or this Indenture and the default continues for the period and after the notice specified below;

(4) the Company defaults in the payment of the purchase price of any Security when the same becomes due and payable, whether or not such payment shall be prohibited by the provisions of Article 5 hereof;

(5) the Company fails to provide notice of a Change in Control to the Trustee and to each Holder when required by Section 3.9 for a period of 30 days after notice of failure to do so; or

(6) any indebtedness under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company or any Significant Subsidiary (all or substantially all of the outstanding voting securities of which are owned, directly or indirectly, by the Company) or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company or any Significant Subsidiary (all or substantially all of the outstanding voting securities of which are owned, directly or indirectly, by the Company) (an "Instrument") with an aggregate outstanding principal amount then outstanding in excess of U.S. $25,000,000, whether such indebtedness now exists or shall hereafter be created, is not paid at final maturity of the Instrument (either at its stated maturity or upon acceleration thereof), and such indebtedness is not discharged, or such acceleration is not rescinded or annulled, within a period of 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 at least 25% in aggregate principal amount of the Outstanding Securities 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

(7) the Company or any Significant Subsidiary, pursuant to or within the meaning of any Bankruptcy Law:

(A): commences a voluntary case or proceeding;
(B): consents to the entry of an order for relief against it in an involuntary case or proceeding;
(C): consents to the appointment of a Custodian of it or for all or substantially all of its property; or
(D): makes a general assignment for the benefit of its creditors; or

(8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(A): is for relief against the Company or any Significant Subsidiary in an involuntary case or proceeding;
(B): appoints a Custodian of the Company or any Significant Subsidiary or for all or substantially all of the property of the Company or any Significant Subsidiary; or
(C): orders the liquidation of the Company or any Significant Subsidiary;

and in each case the order or decree remains unstayed and in effect for 60 consecutive days.

The term "Bankruptcy Law" means Title 11 of the United States Code (or any successor thereto) or any similar federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law.

A default under clause (3) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding notify the Company and the Trustee, in writing of the default, and the Company does not cure the default within 60 days after receipt of such notice. The notice given pursuant to this Section 8.1 must specify the default, demand that it be remedied and state that the notice is a "Notice of Default." When any default under this Section 8.1 is cured, it ceases.

The Trustee shall not be charged with knowledge of any Event of Default unless written notice thereof shall have been given to a Trust Officer at the Corporate Trust Office of the Trustee by the Company, a Paying Agent, any Holder or any agent of any Holder.

SECTION 8.2. ACCELERATION.

If an Event of Default (other than an Event of Default specified in clause (7) or (8) of Section 8.1) occurs and is continuing, the Trustee may, by notice to the Company, or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding may, by notice to the Company and the Trustee, declare all unpaid principal to the date of acceleration on the Securities then outstanding (if not then due and payable) to be due and payable upon any such declaration, and the same shall become and be immediately due and payable. If an Event of Default specified in clause (7) or (8) of Section 8.1 occurs, all unpaid principal of the Securities then outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of a majority in aggregate principal amount of the Securities then outstanding by notice to the Trustee may rescind an acceleration and its consequences if (a) all existing Events of Default, other than the nonpayment of the principal of the Securities which has become due solely by such declaration of acceleration, have been cured or waived; (b) to the extent the payment of such interest is lawful, interest (calculated at the rate per annum borne by the Securities) on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid; (c) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction; and (d) all payments due to the Trustee and any predecessor Trustee under Section 9.7 have been made. No such rescission shall affect any subsequent default or impair any right consequent thereto.

SECTION 8.3. OTHER REMEDIES.

If an Event of Default occurs and is continuing, the Trustee may, but shall not be obligated to, pursue any available remedy by proceeding at law or in equity to collect the payment of the principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law.

SECTION 8.4. WAIVER OF DEFAULTS AND EVENTS OF DEFAULT.

Subject to Sections 8.7 and 11.2, the Holders of a majority in aggregate principal amount of the Securities then outstanding by notice to the Trustee may waive an existing default or Event of Default and its consequence, except a default or Event of Default in the payment of the principal of, premium, if any, or interest on any Security, a failure by the Company to convert any Securities into Common Stock in accordance with the provisions of the Note and this Indenture or any default or Event of Default in respect of any provision of this Indenture or the Securities which, under Section 11.2, cannot be modified or amended without the consent of the Holder of each Security affected. When a default or Event of Default is waived, it is cured and ceases.

SECTION 8.5. CONTROL BY MAJORITY.

The Holders of a majority in aggregate principal amount of the Securities then outstanding may 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 it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of another Holder or the Trustee, or that may involve the Trustee in personal liability unless the Trustee is offered indemnity satisfactory to it; provided, however, that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction.

SECTION 8.6. LIMITATIONS ON SUITS.

A Holder may not pursue any remedy with respect to this Indenture or the Securities (except actions for payment of overdue principal or interest or for the conversion of the Securities pursuant to Article 4) unless:

(1) the Holder gives to the Trustee written notice of a continuing Event of Default;

(2) the Holders of at least 25% in aggregate principal amount of the then outstanding Securities make a written request to the Trustee to pursue the remedy;

(3) such Holder or Holders offer to the Trustee reasonable indemnity to the Trustee against any loss, liability or expense;

(4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and

(5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in aggregate principal amount of the Securities then outstanding.

A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over such other Securityholder.

SECTION 8.7. RIGHTS OF HOLDERS TO RECEIVE PAYMENT AND TO CONVERT.

Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of the principal of and interest on the Security, on or after the respective due dates expressed in the Security and this Indenture, to convert such Security in accordance with Article 4 and

to bring suit for the enforcement of any such payment on or after such respective dates or the right to convert, is absolute and unconditional and shall not be impaired or affected without the consent of the Holder.

SECTION 8.8. COLLECTION SUIT BY TRUSTEE.

If an Event of Default in the payment of principal or interest specified in clause (1) or (2) of Section 8.1 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or another obligor on the Securities for the whole amount of principal and accrued interest remaining unpaid, together with, to the extent that payment of such interest is lawful, interest on overdue principal and on overdue installments of interest, in each case at the rate per annum borne by the Securities and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

SECTION 8.9. TRUSTEE MAY FILE PROOFS OF CLAIM.

The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor on the Securities), its creditors or its property and shall be entitled and empowered to collect and receive any money or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 9.7, and to the extent that such payment of the reasonable compensation, expenses, disbursements and advances 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, money, securities and other property which the Holders 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, on behalf of any Holder, to authorize, accept or adopt any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

SECTION 8.10. PRIORITIES.

If the Trustee collects any money pursuant to this Article 8, it shall pay out the money in the following order:

First, to the Trustee for amounts due under Section 9.7;

Second, to the holders of Senior Indebtedness to the extent required by Article 5;

Third, to Holders for amounts due and unpaid on the Securities for principal and interest (including Additional Interest, if any), ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest (including Additional Interest, if any), respectively; and

Fourth, the balance, if any, to the Company.

The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 8.10.

SECTION 8.11. UNDERTAKING FOR COSTS.

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, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 8.11 does not apply to a suit made by the Trustee, a suit by a Holder pursuant to Section 8.7, or a suit by Holders of more than 10% in aggregate principal amount of the Securities then outstanding.

ARTICLE 9
TRUSTEE

SECTION 9.1. DUTIES OF TRUSTEE.

(a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

(b) Except during the continuance of an Event of Default:

(1) the Trustee need perform only those duties as are specifically set forth in this Indenture and no others; and

(2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. The Trustee, however, shall examine any certificates and opinions which by any provision hereof are specifically required to be delivered to the Trustee to determine whether or not they conform to the requirements of this Indenture.

(c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(1) this paragraph does not limit the effect of subsection (b) of this Section 9.1;

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

(3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 8.5.

(d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers unless the Trustee shall have received adequate indemnity in its opinion against potential costs and liabilities incurred by it relating thereto.

(e) Every provision of this Indenture that in any way relates to the Trustee is subject to subsections (a), (b), (c) and (d) of this Section 9.1.

(f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

SECTION 9.2. RIGHTS OF TRUSTEE.

Subject to Section 9.1:

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

(b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Section 12.4(b). The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion.

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

(d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers.

(e) The Trustee may consult with counsel of its selection, and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection in respect of any such action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.

(f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction.

(g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.

(h) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Trust Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office, and such notice references the Securities and this Indenture.

(i) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder.

SECTION 9.3. INDIVIDUAL RIGHTS OF TRUSTEE.

The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or an Affiliate of the Company with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 9.10 and 9.11.

SECTION 9.4. TRUSTEE'S DISCLAIMER.

The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement in the Securities other than its certificate of authentication.

SECTION 9.5. NOTICE OF DEFAULT OR EVENTS OF DEFAULT.

If a default or an Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the default or Event of Default within 90 days after it occurs. However, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interests of Securityholders, except in the case of a default or an Event of Default in payment of the principal of or interest on any Security.

SECTION 9.6. REPORTS BY TRUSTEE TO HOLDERS.

If such report is required by TIA Section 313, within 60 days after each May 15, beginning with the May 15 following the date of this Indenture, the Trustee shall mail to each Securityholder a brief report dated as of such May 15 that complies with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b)(2) and (c).

A copy of each report at the time of its mailing to Securityholders shall be mailed to the Company and filed with the SEC and each stock exchange, if any, on which the Securities are listed. The Company shall notify the Trustee whenever the Securities become listed on any stock exchange or listed or admitted to trading on any quotation system and any changes in the stock exchanges or quotation systems on which the Securities are listed or admitted to trading and of any delisting thereof.

SECTION 9.7. COMPENSATION AND INDEMNITY.

The Company shall pay to the Trustee from time to time such compensation (as agreed to from time to time by the Company and the Trustee in writing) for its services (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust). The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it. Such expenses may include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel.

The Company shall indemnify the Trustee or any predecessor Trustee (which for purposes of this Section 9.7 shall include its officers, directors, employees and agents) for, and hold it harmless against, any and all loss, liability or expense including taxes (other than taxes based upon, measured by or determined by the income of the Trustee), (including reasonable legal fees and expenses) incurred by it in connection with the acceptance or administration of its duties under this Indenture or any action or failure to act as authorized or within the discretion or rights or powers conferred upon the Trustee hereunder including the reasonable costs and expenses of the Trustee and its counsel in defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. The Company need not pay for any settlement without its written consent, which shall not be unreasonably withheld.

The Company need not reimburse the Trustee for any expense or indemnify it against any loss or liability incurred by it resulting from its gross negligence or bad faith.

To secure the Company's payment obligations in this Section 9.7, the Trustee shall have a senior claim to which the Securities are hereby made subordinate on all money or property held or collected by the Trustee, except such money or property held in trust to pay the principal of and interest on the

Securities. The obligations of the Company under this Section 9.7 shall survive the satisfaction and discharge of this Indenture or the resignation or removal of the Trustee.

When the Trustee incurs expenses or renders services after an Event of Default specified in clause (7) or (8) of Section 8.1 occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. The provisions of this Section shall survive the termination of this Indenture.

SECTION 9.8. REPLACEMENT OF TRUSTEE.

The Trustee may resign by so notifying the Company. The Holders of a majority in aggregate principal amount of the Securities then outstanding may remove the Trustee by so notifying the Trustee and may, with the Company's written consent, appoint a successor Trustee. The Company may remove the Trustee if:

(1) the Trustee fails to comply with Section 9.10;

(2) the Trustee is adjudged a bankrupt or an insolvent;

(3) a receiver or other public officer takes charge of the Trustee or its property; or

(4) the Trustee becomes incapable of acting.

If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. The resignation or removal of a Trustee shall not be effective until a successor Trustee shall have delivered the written acceptance of its appointment as described below.

If a successor Trustee does not take office within 45 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of 10% in principal amount of the Securities then outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee at the expense of the Company.

If the Trustee fails to comply with Section 9.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee and be released from its obligations (exclusive of any liabilities that the retiring Trustee may have incurred while acting as Trustee) hereunder, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Holder.

A retiring Trustee shall not be liable for the acts or omissions of any successor Trustee after its succession.

Notwithstanding replacement of the Trustee pursuant to this Section 9.8, the Company's obligations under Section 9.7 shall continue for the benefit of the retiring Trustee.

SECTION 9.9. SUCCESSOR TRUSTEE BY MERGER, ETC.

If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust assets (including the administration of this Indenture) to, another corporation, the resulting, surviving or transferee corporation, without any further act, shall be the successor Trustee, provided such transferee corporation shall qualify and be eligible under Section 9.10. Such successor Trustee shall promptly mail notice of its succession to the Company and each Holder.

SECTION 9.10. ELIGIBILITY; DISQUALIFICATION.

The Trustee shall always satisfy the requirements of paragraphs (1), (2) and (5) of TIA Section 310(a). The Trustee (or its parent holding company) shall have a combined capital and surplus of at least $50,000,000. If at any time the Trustee shall cease to satisfy any such requirements, it shall resign immediately in the manner and with the effect specified in this Article 9. The Trustee shall be subject to the provisions of TIA Section 310(b). Nothing herein shall prevent the Trustee from filing with the SEC the application referred to in the penultimate paragraph of TIA Section 310(b).

SECTION 9.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.

The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein.

ARTICLE 10
SATISFACTION AND DISCHARGE OF INDENTURE

SECTION 10.1. SATISFACTION AND DISCHARGE OF INDENTURE.

This Indenture shall cease to be of further effect (except as to any surviving rights of conversion, registration of transfer or exchange of Securities herein expressly provided for and except as further provided below), and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when

(1) either

(A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.7 and (ii) Securities for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company as provided in Section 10.3) have been delivered to the Trustee for cancellation; or

(B) all such Securities not theretofore delivered to the Trustee for cancellation

(i) have become due and payable, or

(ii) will become due and payable at the Final Maturity Date within one year, or

(iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company,

and the Company, in the case of clause (i), (ii) or (iii) above, has irrevocably deposited or caused to be irrevocably deposited with the Trustee or a Paying Agent (other than the Company or any of its Affiliates) as trust funds in trust for the purpose cash in an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and interest (including Additional Interest, if any) to the date of such deposit (in the case of Securities which have become due and payable) or to the Final Maturity Date or Redemption Date, as the case may be;

(2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and

(3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 9.7 shall survive and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the provisions of Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.12, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14 and 12.5, Article 4, the last paragraph of Section 6.2 and this Article 10, shall survive until the Securities have been paid in full.

SECTION 10.2. APPLICATION OF TRUST MONEY.

Subject to the provisions of Section 10.3, the Trustee or a Paying Agent shall hold in trust, for the benefit of the Holders, all money deposited with it pursuant to Section 10.1 and shall apply the deposited money in accordance with this Indenture and the Securities to the payment of the principal of and interest on the Securities. Money so held in trust shall not be subject to the subordination provisions of Article 5.

SECTION 10.3. REPAYMENT TO COMPANY.

The Trustee and each Paying Agent shall promptly pay to the Company upon request any excess money (i) deposited with them pursuant to Section 10.1 and (ii) held by them at any time.

The Trustee and each Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years after a right to such money has matured; provided, however, that the Trustee or such Paying Agent, before being required to make any such payment, may at the expense of the Company cause to be mailed to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein, which shall be at least 30 days from the date of such mailing, any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Holders entitled to money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person.

SECTION 10.4. REINSTATEMENT.

If the Trustee or any Paying Agent is unable to apply any money in accordance with Section 10.2 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 10.1 until such time as the Trustee or such Paying Agent is permitted to apply all such money in accordance with Section 10.2; provided, however, that if the Company has made any payment of the principal of or interest on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive any such payment from the money held by the Trustee or such Paying Agent.

ARTICLE 11
AMENDMENTS, SUPPLEMENTS AND WAIVERS

SECTION 11.1. WITHOUT CONSENT OF HOLDERS.

The Company and the Trustee may amend or supplement this Indenture or the Securities without notice to or consent of any Securityholder:

(a) to comply with Sections 4.11 and 7.1;

(b) to cure any ambiguity, defect or inconsistency;

(d) to comply with the provisions of the TIA;

(e) to add to the covenants of the Company for the equal and ratable benefit of the Securityholders or to surrender any right, power or option conferred upon the Company; or

(f) to appoint a successor Trustee.

SECTION 11.2. WITH CONSENT OF HOLDERS.

The Company and the Trustee may amend or supplement this Indenture or the Securities with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding. The Holders of at least a majority in aggregate principal amount of the Securities then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture or the Securities without notice to any Securityholder. However, notwithstanding the foregoing but subject to Section 11.4, without the written consent of each Securityholder affected, an amendment, supplement or waiver, including a waiver pursuant to Section 8.4, may not:

(a) change the stated maturity of the principal of, or interest on, any Security;

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

(d) change the place or currency of payment of principal of, or any premium or interest on, any Security;

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

(f) modify the provisions with respect to the purchase right of Holders pursuant to Article 3 upon a Change in Control in a manner adverse to Holders;

(g) modify the subordination provisions of Article 5 in a manner materially adverse to the Holders of Securities;

(h) adversely affect the right of Holders to convert Securities other than as provided in or under Article 4 of this Indenture;

(i) reduce the percentage of the aggregate principal amount of the outstanding Securities whose Holders must consent to a modification or amendment;

(j) reduce the percentage of the aggregate principal amount of the outstanding Securities necessary for the waiver of compliance with certain provisions of this Indenture or the waiver of certain defaults under this Indenture; and

(k) modify any of the provisions of this Section or Section 8.4, except to increase any such percentage or to provide that certain provisions of this Indenture cannot be modified or waived without the consent of the Holder of each outstanding Security affected thereby.

It shall not be necessary for the consent of the Holders under this Section 11.2 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof.

After an amendment, supplement or waiver under this Section 11.2 becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver. An amendment or supplement under this Section 11.2 or under Section 11.1 may not make any change that adversely affects the rights under Article 5 of any holder of an issue of Senior Indebtedness unless the holders of that issue, pursuant to its terms, consent to the change.

To the extent that the Company or any of the Subsidiaries hold any Securities, such Securities shall be disregarded for purposes of voting in connection with any notice, waiver, consent or direction requiring the vote or concurrence of Securityholders.

SECTION 11.3. COMPLIANCE WITH TRUST INDENTURE ACT.

Every amendment to or supplement of this Indenture or the Securities shall comply with the TIA as in effect at the date of such amendment or supplement.

SECTION 11.4. REVOCATION AND EFFECT OF CONSENTS.

Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to its Security or portion of a Security if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective.

After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder, unless it makes a change described in any of clauses (a) through (k) of Section 11.2. In that case the amendment, supplement or waiver shall bind each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security.

SECTION 11.5. NOTATION ON OR EXCHANGE OF SECURITIES.

If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms.

SECTION 11.6. TRUSTEE TO SIGN AMENDMENTS, ETC.

The Trustee shall sign any amendment or supplemental indenture authorized pursuant to this Article 11 if the amendment or supplemental indenture does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, in its sole discretion, but need not sign it. In signing or refusing to sign such amendment or supplemental indenture, the Trustee shall be entitled to receive and, subject to Section 9.1, shall be fully protected in relying upon, an Opinion of Counsel stating that such amendment or supplemental indenture is authorized or permitted by this Indenture. The Company may not sign an amendment or supplement indenture until the Board of Directors approves it.

SECTION 11.7. EFFECT OF SUPPLEMENTAL INDENTURES.

Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

ARTICLE 12
MISCELLANEOUS

SECTION 12.1. TRUST INDENTURE ACT CONTROLS.

If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by any of Sections 310 to 317, inclusive, of the TIA through operation of Section 318(c) thereof, such imposed duties shall control.

SECTION 12.2. NOTICES.

Any demand, authorization notice, request, consent or communication shall be given in writing and delivered in person or mailed by first-class mail, postage prepaid, addressed as follows or transmitted by facsimile transmission (confirmed by delivery in person or mail by first-class mail, postage prepaid, or by guaranteed overnight courier) to the following facsimile numbers:

If to the Company, to:
Abgenix, Inc. 6701 Kaiser Drive
Fremont, California 94555
Attention: Chief Financial Officer
Facsimile No.: (510) 608-6547
Phone No. [510] 608-6547

with a copy to:
Abgenix, Inc.
6701 Kaiser Drive
Fremont, California 94555
Attention: General Counsel
Facsimile No.: (510) 790-5102
Phone No. [510] 790-5129

if to the Trustee, to:
State Street Bank and Trust Company of California, N.A.
633 West 5^th Street, 12th Floor
Los Angeles, California 90071
Attn: Corporate Trust Department (Abgenix, Inc.—3¹/2% Convertible Subordinated Notes due 2007)
Facsimile No.: (213) 362-7357
Phone No.: 213-362-7369

Such notices or communications shall be effective when received.

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

Any notice or communication mailed to a Securityholder shall be mailed by first-class mail or delivered by an overnight delivery service to it at its address shown on the register kept by the Primary Registrar.

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

SECTION 12.3. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.

Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and any other person shall have the protection of TIA Section 312(c).

SECTION 12.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.

(a) Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee at the request of the Trustee:

(1) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent (including any covenants, compliance with which constitutes a condition precedent), if any, provided for in this Indenture relating to the proposed action have been complied with; and

(2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent (including any covenants, compliance with which constitutes a condition precedent) have been complied with.

(b) Each Officers' Certificate and Opinion of Counsel 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 statements or opinions contained in such certificate or opinion are based;

(3) a statement that, in the opinion of such person, he or she has made such examination or investigation as is necessary to enable him or her 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;

provided however, that with respect to matters of fact an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials.

SECTION 12.5. RECORD DATE FOR VOTE OR CONSENT OF SECURITYHOLDERS.

The Company (or, in the event deposits have been made pursuant to Section 10.1, the Trustee) may set a record date for purposes of determining the identity of Holders entitled to vote or consent to any action by vote or consent authorized or permitted under this Indenture, which record date shall not be more than thirty (30) days prior to the date of the commencement of solicitation of such action. Notwithstanding the provisions of Section 11.4, if a record date is fixed, those persons who were Holders of Securities at the close of business on such record date (or their duly designated proxies), and only those persons, shall be entitled to take such action by vote or consent or to revoke any vote or consent previously given, whether or not such persons continue to be Holders after such record date.

SECTION 12.6. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR AND CONVERSION AGENT.

The Trustee may make reasonable rules (not inconsistent with the terms of this Indenture) for action by or at a meeting of Holders. Any Registrar, Paying Agent or Conversion Agent may make reasonable rules for its functions.

SECTION 12.7. LEGAL HOLIDAYS.

A "Legal Holiday" is a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York and the state in which the Corporate Trust Office is located are not required to be open. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected.

SECTION 12.8. GOVERNING LAW.

This Indenture and the Securities shall be governed by, and construed in accordance with, the laws of the State of New York.

SECTION 12.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.

This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or a Subsidiary of the Company. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

SECTION 12.10. NO RECOURSE AGAINST OTHERS.

All liability described in paragraph 19 of the Securities of any director, officer, employee or shareholder, as such, of the Company is waived and released.

SECTION 12.11. SUCCESSORS.

All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor.

SECTION 12.12. MULTIPLE COUNTERPARTS.

The parties may sign multiple counterparts of this Indenture. Each signed counterpart shall be deemed an original, but all of them together represent the same agreement.

SECTION 12.13. SEPARABILITY.

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

SECTION 12.14. TABLE OF CONTENTS, HEADINGS, ETC.

The table of contents, cross-reference sheet 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.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the date and year first above written.

	Abgenix, Inc.
	By:		/s/ KURT W. LEUTZINGER
	Name:		Kurt W. Leutzinger
	Title:		Chief Financial Officer
	State Street Bank and Trust Company of California, N.A., as Trustee
	By:		/s/ SCOTT C. EMMONS
	Name:		Scott C. Emmons
	Title:		Vice President

EXHIBIT A
[FORM OF FACE OF SECURITY]

[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY 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 THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND, UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE 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.]¹

1: These paragraphs should be included only if the Security is a Global Security.

[THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.]²

2: These paragraphs to be included only if the Security is a Transfer Restricted Security.

THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. IN ANY CASE,

A-1

THE HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTIONS WITH REGARD TO THE SECURITIES EXCEPT AS PERMITTED UNDER THE SECURITIES ACT.]²

2: These paragraphs to be included only if the Security is a Transfer Restricted Security.

[THE HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A REGISTRATION RIGHTS AGREEMENT (AS SUCH TERM IS DEFINED IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF) AND, BY ITS ACCEPTANCE HEREOF, AGREES TO BE BOUND BY AND TO COMPLY WITH THE PROVISIONS OF SUCH REGISTRATION RIGHTS AGREEMENT.]²

2: These paragraphs to be included only if the Security is a Transfer Restricted Security.

A-2

ABGENIX, INC.

CUSIP No.: 00339B AA 5

3¹/2% CONVERTIBLE SUBORDINATED NOTES DUE 2007

Abgenix, Inc., a Delaware corporation (the "Company", which term shall include any successor corporation under the Indenture referred to on the reverse hereof), promises to pay to Cede & Co., or registered assigns, the principal sum of Two Hundred Million Dollars ($200,000,000.00) on March, 15, 2007, or such greater or lesser amount as is indicated on the Schedule of Exchanges of Notes on the other side of this Note.

Interest Payment Dates:		March 15 and September 15, commencing September 15, 2002
Record Dates:		March 1 and September 1

This Note is convertible as specified on the other side of this Note. Additional provisions of this Note are set forth on the other side of this Note.

SIGNATURE PAGE FOLLOWS

A-3

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

	ABGENIX, INC.
	By:
	Name:
	Title:
Attest:
Name: Title:
Dated:

TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to
in the within-mentioned Indenture.

State Street Bank And Trust Company of California, N.A., as Trustee
Authorized Signatory

A-4

EXHIBIT B

CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION
OF TRANSFER OF TRANSFER RESTRICTED SECURITIES⁴

⁴: This certificate should only be included if this Security is a Transfer Restricted Security.

Re:		3¹/2% Convertible Subordinated Notes due 2007 (the "Notes") of Abgenix, Inc.
		This certificate relates to $ principal amount of Notes owned in (check applicable box)
		o book-entry or o definitive form by (the "Transferor").

The Transferor has requested a Registrar or the Trustee to exchange or register the transfer of such Notes.

In connection with such request and in respect of each such Note, the Transferor does hereby certify that the Transferor is familiar with transfer restrictions relating to the Notes as provided in Section 2.12 of the Indenture dated as of March 4, 2002 between Abgenix, Inc. and State Street Bank and Trust Company of California, N.A., as trustee (the "Indenture"), and the transfer of such Note is being made pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act") (check applicable box) or the transfer or exchange, as the case may be, of such Note does not require registration under the Securities Act because (check applicable box):

		o		Such Note is being transferred pursuant to an effective registration statement under the Securities Act.
		o		Such Note is being transferred outside the United States in an offshore transaction in accordance with Rule 904 under the Securities Act.
		o		Such Note is being acquired for the Transferor's own account, without transfer.
		o		Such Note is being transferred to the Company or a Subsidiary (as defined in the Indenture) of the Company.
		o		Such Note is being transferred to a person the Transferor reasonably believes is a "qualified institutional buyer" (as defined in Rule 144A or any successor provision thereto ("Rule 144A") under the Securities Act) that is purchasing for its own account or for the account of a "qualified institutional buyer", in each case to whom notice has been given that the transfer is being made in reliance on such Rule 144A, and in each case in reliance on Rule 144A.
		o		Such Note is being transferred pursuant to and in compliance with an exemption from the registration requirements under the Securities Act in accordance with Rule 144 (or any successor thereto) ("Rule 144") under the Securities Act.

Such Note is being transferred pursuant to and in compliance with an exemption from the registration requirements of the Securities Act (other than an exemption referred to above) and as a result of which such Note will, upon such transfer, cease to be a "restricted security" within the meaning of Rule 144 under the Securities Act.

The Transferor acknowledges and agrees that, if the transferee will hold any such Notes in the form of beneficial interests in a global Note which is a "restricted security" within the meaning of Rule 144 under the Securities Act, then such transfer can only be made pursuant to Rule 144A under the Securities Act and such transferee must be a "qualified institutional buyer" (as defined in Rule 144A).

Date:
				(Insert Name of Transferor)

B-1

[FORM OF REVERSE SIDE OF SECURITY]

ABGENIX, INC.
3¹/2% CONVERTIBLE SUBORDINATED NOTES DUE 2007

1. INTEREST

Abgenix, Inc., a Delaware corporation (the "Company", which term shall include any successor corporation under the Indenture hereinafter referred to), promises to pay interest on the principal amount of this Note at the rate of 3¹/2% per annum. The Company shall pay interest semiannually on March 15 and September 15 of each year, commencing on September 15, 2002. Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from March 4, 2002; provided, however, that if there is not an existing default in the payment of interest and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding interest payment date, interest shall accrue from such interest payment date. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

2. REGISTRATION RIGHTS AGREEMENT

The holder of this Note is entitled to the benefits of a Registration Rights Agreement, dated as of March 4, 2002, among the Company and the Initial Purchasers (the "Registration Rights Agreement"). Pursuant to the Registration Rights Agreement the Company has agreed for the benefit of the Holders of the Notes, that (i) it will, at its cost, within 90 days after the closing of the sale of the Notes (the "Closing"), file a shelf registration statement (the "Shelf Registration Statement") with the Securities and Exchange Commission (the "Commission") with respect to resales of the Notes and the Common Stock issuable upon conversion thereof, (ii) it will use commercially reasonable efforts to cause such Shelf Registration Statement to be declared effective within 180 days after the Closing, and (iii) it will use commercially reasonable efforts to keep such Shelf Registration Statement continuously effective under the Securities Act, subject to certain exceptions specified in the Registration Rights Agreement, until the second anniversary of the date of the Closing. If (a) the Company fails to file the Shelf Registration Statement required by the Registration Rights Agreement on or before the date specified above for such filing, (b) such Shelf Registration Statement is not declared effective by the Commission on or prior to the date specified above for such effectiveness, or (c) the Shelf Registration Statement is declared effective but thereafter ceases to be effective or useable in connection with resales of Transfer Restricted Securities (as defined in the Registration Rights Agreement), other than for a permitted suspension as described in this Section 2, during the periods specified in the Registration Rights Agreement (each such event referred to in clauses (a) through (c) above a "Registration Default"), then the Company will pay Additional Interest to each Holder of Transfer Restricted Securities, in an amount equal to an increase in the annual interest rate on the Notes of 0.50% ("Additional Interest") until all Registration Defaults have been cured. All accrued Additional Interest shall be paid by the Company on each Interest Payment Date for which Additional Interest is owed to the holders of Global Notes by wire transfer of immediately available funds or by federal funds check and to holders of certificated Notes registered as such as of the preceding Record Date by mailing checks to their registered addresses. The Company will be permitted to suspend the effectiveness of the Shelf Registration Statement for up to 45 consecutive days in any 90-day period, and for up to a total of 90 days in any 365-day period, without being required to pay Additional Interest. Following the cure of all Registration Defaults, the application of Additional Interest will cease.

3. METHOD OF PAYMENT

The Company shall pay interest on this Note (except defaulted interest) to the person who is the Holder of this Note at the close of business on March 1 or September 1, as the case may be, next

B-2

preceding the related interest payment date. The Holder must surrender this Note to a Paying Agent to collect payment of principal. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company may, however, pay principal and interest in respect of any Certificated Security by check or wire payable in such money; provided, however, that a Holder with an aggregate principal amount in excess of $2,000,000 will be paid by wire transfer in immediately available funds at the election of such Holder if such Holder has provided wire transfer instructions to the Company at least 10 Business Days prior to the payment date.

4. PAYING AGENT, REGISTRAR AND CONVERSION AGENT

Initially, State Street Bank and Trust Company of California, N.A. (the "Trustee", which term shall include any successor trustee under the Indenture hereinafter referred to) will act as Paying Agent, Registrar and Conversion Agent. The Company may change any Paying Agent, Registrar or Conversion Agent without notice to the Holder. The Company or any of its Subsidiaries may, subject to certain limitations set forth in the Indenture, act as Paying Agent or Registrar.

5. INDENTURE, LIMITATIONS

This Note is one of a duly authorized issue of Securities of the Company designated as its 3¹/2% Convertible Subordinated Notes due 2007 (the "Notes"), issued under an Indenture dated as of March 4, 2002 (together with any supplemental indentures thereto, the "Indenture"), between the Company and the Trustee. The terms of this Note include those stated in the Indenture and those required by or made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended, as in effect on the date of the Indenture. This Note is subject to all such terms, and the Holder of this Note is referred to the Indenture and said Act for a statement of them. The Notes are subordinated unsecured obligations of the Company limited to $250,000,000 aggregate principal amount. The Indenture does not limit other debt of the Company, secured or unsecured, including Senior Indebtedness.

6. PROVISIONAL AND OPTIONAL REDEMPTION

This Note may be redeemed at the election of the Company, as a whole or in part from time to time, at any time prior to March 20, 2005 (a "Provisional Redemption"), upon at least 20 and not more than 60 days' notice by mail to the Holders of the Notes at a redemption price equal to $1,000 per $1,000 principal amount of the Notes redeemed plus accrued and unpaid interest, if any (such amount, together with the Make-Whole Payment described below, the "Provisional Redemption Price"), to but excluding the date of redemption (the "Provisional Redemption Date") if (1) the Closing Price of the Common Stock has exceeded 150% of the then applicable Conversion Price for at least 20 Trading Days within a period of any 30 consecutive Trading Days ending on the Trading Day prior to the date of mailing of the notice of Provisional Redemption (the "Provisional Redemption Notice Date"), and (2) a shelf registration statement covering resales of the Notes and the Common Stock issuable upon conversion thereof is effective and available for use in accordance with the Registration Rights Agreement and is expected to remain effective and available for use for the 30 days following the Provisional Redemption Date unless registration is no longer required.

Upon any such Provisional Redemption, the Company, shall make an additional payment, at its option, in cash or Common Stock or a combination of cash and Common Stock (the "Make Whole Payment") with respect to the Notes called for redemption to holders on the Provisional Redemption Notice Date in an amount equal to $ 105.00 per $1,000 principal amount of the Notes, less the amount of any interest actually paid (including, if the Provisional Redemption Date occurs after a record date but before an interest payment date, any interest paid or payable in connection with such interest payment date) on such Notes prior to the Provisional Redemption Date. Payments made in

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Common Stock will be valued at 97% of the average Closing Price of Common Stock for the five Trading Days ending on the day prior to the Redemption 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 Redemption Notice Date and the Provisional Redemption Date.

Except as set forth above, the Notes are subject to redemption, at any time on or after March 20, 2005, on at least 20 days and no more than 60 days notice, in whole or in part, at the election of the Company. The Redemption Prices (expressed as percentages of the principal amount) are as follows for Notes redeemed during the periods set forth below:

Period		Redemption Price
March 20, 2005 through March 14, 2006		100.875%
March 15, 2006 and thereafter		100.000%

in each case together with accrued interest up to but not including the Redemption Date; provided that if the redemption date is an interest payment date, interest will be payable to the Holders in whose names the Notes are registered at the close of business on the relevant record dates.

No sinking fund is provided for the Notes.

7. NOTICE OF REDEMPTION

Notice of redemption will be mailed by first-class mail at least 20 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part, but only in whole multiples of $1,000. On and after the Redemption Date, subject to the deposit with the Paying Agent of funds sufficient to pay the Redemption Price plus accrued interest, if any, accrued to, but excluding, the Redemption Date, interest shall cease to accrue on Notes or portions of them called for redemption.

8. PURCHASE OF NOTES AT OPTION OF HOLDER UPON A CHANGE IN CONTROL

At the option of the Holder and subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase all or any part specified by the Holder (so long as the principal amount of such part is $1,000 or an integral multiple of $1,000 in excess thereof) of the Notes held by such Holder on the date that is 30 Business Days after the occurrence of a Change in Control, at a purchase price equal to 100% of the principal amount thereof together with accrued interest up to, but excluding, the Change in Control Purchase Date. The Holder shall have the right to withdraw any Change in Control Purchase Notice (in whole or in a portion thereof that is $1,000 or an integral multiple of $1,000 in excess thereof) at any time prior to the close of business on the second Business Day next preceding the Change in Control Purchase Date by delivering a written notice of withdrawal to the Paying Agent in accordance with the terms of the Indenture.

9. CONVERSION

A Holder of a Note may convert the principal amount of such Note (or any portion thereof equal to $1,000 or any integral multiple of $1,000 in excess thereof) into Common Stock at any time prior to the close of business on the Final Maturity Date, at the Conversion Price then in effect; provided, however, that, if such Note is called for redemption or submitted or presented for purchase pursuant to Article 3 of the Indenture, such conversion right shall terminate at the close of business on the Business Day immediately preceding the Redemption Date or Change in Control Purchase Date, as the case may be, for such Note or such earlier date as the Holder presents such Security for redemption or for purchase (unless the Company shall default in making the redemption payment or Change in

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Control Purchase Price payment when due, in which case the conversion right shall terminate at the close of business on the date such default is cured and such Note is redeemed or purchased, as the case may be).

The initial Conversion Price is $27.58 per share, subject to adjustment under certain circumstances as provided in the Indenture. The number of shares of Common Stock issuable upon conversion of a Note is determined by dividing the principal amount of the Note or portion thereof converted by the Conversion Price in effect on the Conversion Date. No fractional shares will be issued upon conversion; in lieu thereof, an amount will be paid in cash based upon the Closing Price (as defined in the Indenture) of the Common Stock on the Trading Day immediately prior to the Conversion Date.

To convert a Note, a Holder must (a) complete and manually sign the conversion notice set forth below and deliver such notice to a Conversion Agent, (b) surrender the Note to a Conversion Agent, (c) furnish appropriate endorsements and transfer documents if required by a Registrar or a Conversion Agent, and (d) pay any transfer or similar tax, if required. Notes so surrendered for conversion (in whole or in part) during the period from the close of business on any regular record date to the opening of business on the next succeeding interest payment date (excluding Notes or portions thereof called for redemption or subject to purchase upon a Change in Control on a Redemption Date or Change in Control Purchase Date, as the case may be, during the period beginning at the close of business on a regular record date and ending at the opening of business on the first Business Day after the next succeeding interest payment date, or if such interest payment date is not a Business Day, the second such Business Day) shall also be accompanied by payment in funds acceptable to the Company of an amount equal to the interest payable on such interest payment date on the principal amount of such Note then being converted, and such interest shall be payable to such registered Holder notwithstanding the conversion of such Note, subject to the provisions of this Indenture relating to the payment of defaulted interest by the Company. If the Company defaults in the payment of interest payable on such interest payment date, the Company shall promptly repay such funds to such Holder. A Holder may convert a portion of a Note equal to $1,000 or any integral multiple thereof.

A Note in respect of which a Holder had delivered a Change in Control Purchase Notice exercising the option of such Holder to require the Company to purchase such Note may be converted only if the Change in Control Purchase Notice is withdrawn in accordance with the terms of the Indenture.

10. CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION

Any Notes called for redemption, unless surrendered for conversion before the close of business on the Business Day immediately preceding the Redemption Date, may be deemed to be purchased from the Holders of such Notes at an amount not less than the Redemption Price, together with accrued interest, if any, to, but not including, the Redemption Date, by one or more investment bankers or other purchasers who may agree with the Company to purchase such Notes from the Holders, to convert them into Common Stock of the Company and to make payment for such Notes to the Paying Agent in trust for such Holders.

11. SUBORDINATION

The indebtedness evidenced by the Notes is, to the extent and in the manner provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company. Any Holder by accepting this Note agrees to and shall be bound by such subordination provisions and authorizes the Trustee to give them effect. In addition to all other rights of Senior Indebtedness described in the Indenture, the Senior Indebtedness shall continue to be Senior Indebtedness and entitled to the benefits of the subordination provisions irrespective of any

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amendment, modification or waiver of any terms of any instrument relating to the Senior Indebtedness or any extension or renewal of the Senior Indebtedness.

12. DENOMINATIONS, TRANSFER, EXCHANGE

The Notes are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. A Holder may register the transfer of or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes or other governmental charges that may be imposed in relation thereto by law or permitted by the Indenture.

13. PERSONS DEEMED OWNERS

The Holder of a Note may be treated as the owner of it for all purposes.

14. UNCLAIMED MONEY

If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent will pay the money back to the Company at its written request, subject to applicable unclaimed property law. After that, Holders entitled to money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person.

15. AMENDMENT, SUPPLEMENT AND WAIVER

Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding, and an existing default or Event of Default and its consequence or compliance with any provision of the Indenture or the Notes may be waived in a particular instance with the consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding. Without the consent of or notice to any Holder, the Company and the Trustee may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency or make any other change that does not adversely affect the rights of any Holder.

16. SUCCESSOR ENTITY

When a successor corporation assumes all the obligations of its predecessor under the Notes and the Indenture in accordance with the terms and conditions of the Indenture, the predecessor corporation (except in certain circumstances specified in the Indenture) shall be released from those obligations.

17. DEFAULTS AND REMEDIES

Under the Indenture, an Event of Default includes: (i) default for 30 days in payment of any interest or Additional Interest on any Notes; (ii) default in payment of any principal (including, without limitation, any premium, if any) on the Notes when due; (iii) failure by the Company for 60 days after notice to it to comply with any of its other agreements contained in the Indenture or the Notes; (iv) default in the payment of certain indebtedness of the Company or a Significant Subsidiary; (v) the Company fails to provide a Purchase Offer within 30 days after notice of failure to timely deliver the same; and (vi) certain events of bankruptcy, insolvency or reorganization of the Company or any Significant Subsidiary. If an Event of Default (other than as a result of certain events of bankruptcy, insolvency or reorganization of the Company) occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding may declare all unpaid principal to the date of acceleration on the Notes then outstanding to be due and payable immediately, all as and to the extent provided in the Indenture. If an Event of Default occurs as a result of certain

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events of bankruptcy, insolvency or reorganization of the Company, unpaid principal of the Notes then outstanding shall become due and payable immediately without any declaration or other act on the part of the Trustee or any Holder, all as and to the extent provided in the Indenture. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Notes then outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in their interests. The Company is required to file periodic reports with the Trustee as to the absence of default.

18. TRUSTEE DEALINGS WITH THE COMPANY

State Street Bank and Trust Company of California, N.A., the Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from and perform services for the Company or an Affiliate of the Company, and may otherwise deal with the Company or an Affiliate of the Company, as if it were not the Trustee.

19. NO RECOURSE AGAINST OTHERS

A director, officer, employee or shareholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture nor for any claim based on, in respect of or by reason of such obligations or their creation. The Holder of this Note by accepting this Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Note.

20. AUTHENTICATION

This Note shall not be valid until the Trustee or an authenticating agent manually signs the certificate of authentication on the other side of this Note.

21. ABBREVIATIONS AND DEFINITIONS

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

All terms defined in the Indenture and used in this Note but not specifically defined herein are defined in the Indenture and are used herein as so defined.

22. INDENTURE TO CONTROL; GOVERNING LAW

In the case of any conflict between the provisions of this Note and the Indenture, the provisions of the Indenture shall control. This Note shall be governed by, and construed in accordance with, the laws of the State of New York.

The Company will furnish to any Holder, upon written request and without charge, a copy of the Indenture. Requests may be made to: Abgenix, Inc., 6701 Kaiser Drive Fremont, California 94555, Attention: Investor Relations.

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ASSIGNMENT FORM

To assign this Note, fill in the form below:

I or we assign and transfer this Note to

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

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

and irrevocably appoint

agent to transfer this Note on the books of the Company. The agent may substitute another to act for him or her.

				Your Signature:
Date:
				(Sign exactly as your name appears on the other side of this Note)
*Signature guaranteed by:
By:

*: The signature must be guaranteed by an institution which is a member of one of the following recognized signature guaranty programs: (i) the Securities Transfer Agent Medallion Program (STAMP); (ii) the New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or (iv) such other guaranty program acceptable to the Trustee.

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CONVERSION NOTICE

To convert this Note into Common Stock of the Company, check the box:

To convert only part of this Note, state the principal amount to be converted (must be $1,000 or a integral multiple of $1,000): $ .

If you want the stock certificate made out in another person's name, fill in the form below:

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

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

				Your Signature:
Date:
				(Sign exactly as your name appears on the other side of this Note)
*Signature guaranteed by:
By:

*: The signature must be guaranteed by an institution which is a member of one of the following recognized signature guaranty programs: (i) the Securities Transfer Agent Medallion Program (STAMP); (ii) the New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or (iv) such other guaranty program acceptable to the Trustee.

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OPTION TO ELECT REPURCHASE
UPON A CHANGE OF CONTROL

To: Abgenix, Inc.

The undersigned registered owner of this Security hereby irrevocably acknowledges receipt of a notice from Abgenix, Inc. (the "Company") as to the occurrence of a Change in Control with respect to the Company and requests and instructs the Company to redeem the entire principal amount of this Security, or the portion thereof (which is $1,000 or an integral multiple thereof) below designated, in accordance with the terms of the Indenture referred to in this Security at the Change in Control Purchase Price, together with accrued interest to, but excluding, such date, to the registered Holder hereof.

Dated:
				Signature(s)
				Signature(s) must be guaranteed by a qualified guarantor institution with membership in an approved signature guarantee program pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934.
				Signature Guaranty
Principal amount to be redeemed (in an integral multiple of $1,000, if less than all):

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

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SCHEDULE OF EXCHANGES OF NOTES³

³: This schedule should be included only if the Security is a Global Security.

The following exchanges, redemptions, repurchases or conversions of a part of this global Note have been made:

Principal Amount of this Global Note Following Such Decrease Date of Exchange (or Increase)		Authorized Signatory of Securities Custodian		Amount of Decrease in Principal Amount of this Global Note		Amount of Increase in Principal Amount of this Global Note

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QuickLinks

Exhibit 4.2

TABLE OF CONTENTS
CROSS-REFERENCE TABLE
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE
ARTICLE 2 THE SECURITIES
ARTICLE 3 REDEMPTION AND PURCHASES
ARTICLE 4 CONVERSION
ARTICLE 5 SUBORDINATION
ARTICLE 6 COVENANTS
ARTICLE 7 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
ARTICLE 8 DEFAULT AND REMEDIES
ARTICLE 9 TRUSTEE
ARTICLE 10 SATISFACTION AND DISCHARGE OF INDENTURE
ARTICLE 11 AMENDMENTS, SUPPLEMENTS AND WAIVERS
ARTICLE 12 MISCELLANEOUS
EXHIBIT A [FORM OF FACE OF SECURITY]
EXHIBIT B
ASSIGNMENT FORM
CONVERSION NOTICE
OPTION TO ELECT REPURCHASE UPON A CHANGE OF CONTROL
SCHEDULE OF EXCHANGES OF NOTES³
EX-4.3 4 a2078956zex-4_3.htm EXHIBIT 4.3
QuickLinks -- Click here to rapidly navigate through this document

Exhibit 4.3

$200,000,000

ABGENIX, INC.

3¹/2% Convertible Subordinated Notes Due 2007

REGISTRATION RIGHTS AGREEMENT

March 4, 2002

CREDIT SUISSE FIRST BOSTON CORPORATION
BANC OF AMERICA SECURITIES LLC
ROBERTSON STEPHENS, INC.,
    C/O CREDIT SUISSE FIRST BOSTON CORPORATION,
        ELEVEN MADISON AVENUE,
        NEW YORK, N.Y. 10010-3629

Dear Sirs:

Abgenix, Inc., a Delaware corporation (the "Company") proposes to issue and sell to Credit Suisse First Boston Corporation, Banc of America Securities LLC and Robertson Stephens, Inc. (collectively, the "Initial Purchasers"), upon the terms set forth in a purchase agreement dated as of February 27, 2002 (the "Purchase Agreement"), $200,000,000 aggregate principal amount (plus up to an additional $50,000,000 principal amount) of its 3¹/2% Convertible Subordinated Notes due 2007 (the "Initial Securities"). The Initial Securities will be convertible into shares of common stock, par value $0.0001 per share, of the Company (the "Common Stock") at the conversion price set forth in the Offering Circular dated February 27, 2002 (the "Offering Circular"). The Initial Securities will be issued pursuant to an Indenture, dated as of the date hereof (the "Indenture"), between the Company and State Street Bank and Trust Company of California, N.A., as trustee (the "Trustee"). As an inducement to the Initial Purchasers to enter into the Purchase Agreement, the Company agrees with the Initial Purchasers, for the benefit of (i) the Initial Purchasers and (ii) the holders of the Initial Securities and the Common Stock issuable upon conversion of the Initial Securities (collectively, the "Securities") from time to time until such time as such Securities have been sold pursuant to a Shelf Registration Statement (as defined below) (each of the forgoing a "Holder" and collectively the "Holders"), as follows:

1. Shelf Registration. (a) The Company shall, at its cost, prepare and, as promptly as practicable (but in no event more than 90 days after the date of this Agreement) file with the Securities and Exchange Commission (the "Commission") and thereafter use its commercially reasonable efforts to cause to be declared effective as soon as practicable after it has filed a registration statement on Form S-3 or, if Form S-3 is not available, on an appropriate form under the Securities Act (the "Shelf Registration Statement") relating to the offer and sale of the Transfer Restricted Securities (as defined in Section 5 hereof) by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act of 1933, as amended (the "Securities Act") (hereinafter, the "Shelf Registration"); provided, however, that no Holder (other than an Initial Purchaser) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder.

(b) The Company shall use its commercially reasonable efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus included therein (the "Prospectus") to be lawfully delivered by the Holders of the relevant Securities, for a period of two years (or for such longer period if extended pursuant to Section 2(h) below) from the date of this Agreement or such shorter period that will terminate when all the Securities covered by the Shelf Registration Statement (i) have been sold pursuant thereto or (ii) are no longer restricted securities (as defined in Rule 144(k)

under the Securities Act, or any successor rule thereof), assuming for this purpose that the Holders thereof are not affiliates of the Company (in any such case, such period being called the "Shelf Registration Period"). The Company shall be deemed not to have used its commercially reasonable efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless such action is (i) required by applicable law or (ii) taken by the Company in good faith and contemplated by Section 2(b)(v) below, and the Company thereafter complies with the requirements of Section 2(h).

(c) Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause the Shelf Registration Statement and the Prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

(d) Each Holder of Transfer Restricted Securities agrees, by its acquisition of Transfer Restricted Securities, that if such Holder wishes to sell Transfer Restricted Securities pursuant to a Shelf Registration Statement and related Prospectus, it will do so only in accordance with this Section 1(d) and Section 2(h). Each Holder of Transfer Restricted Securities wishing to sell Transfer Restricted Securities pursuant to a Shelf Registration Statement and related Prospectus agrees to deliver a written notice, substantially in the form of Annex A to the Offering Circular (a "Notice and Questionnaire") to the Company at least five (5) Business Days prior to any intended distribution of Transfer Restricted Securities under the Shelf Registration Statement. Any Holder who does not complete and deliver a Notice and Questionnaire to the Company will not be permitted to sell Transfer Restricted Securities pursuant to the Shelf Registration Statement.

2. Registration Procedures. In connection with the Shelf Registration contemplated by Section 1 hereof, the following provisions shall apply:

(a) The Company shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Shelf Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that an Initial Purchaser (with respect to any portion of an unsold allotment from the original offering) is participating in the Shelf Registration Statement, shall use its commercially reasonable efforts to reflect in each such document, when so filed with the Commission, such comments as such Initial Purchaser reasonably may propose; (ii) include in the Shelf Registration Statement at the time it is first declared effective, the name of each Holder that provided a written notice to the Company on or prior to the date five (5) Business Days prior to such time of effectiveness containing substantially the information called for by the Notice and Questionnaire; and (iii) from and after the date the Shelf Registration Statement is initially declared effective, use its commercially reasonable efforts, as promptly as practicable after the date a Notice and Questionnaire is delivered, if required by applicable law, to file with the Commission 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 document required under the Securities Act so that the Holder delivering such Notice and Questionnaire is named as a selling security holder 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 reasonable efforts to cause such post-effective amendment to be declared effective under the Securities Act as promptly as is practicable.

(b) The Company shall give written notice to the Initial Purchasers and the Holders of the Securities (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the Prospectus pursuant to the terms of Section 2(b)(v) and is referred to herein as a "Deferral Notice"):

(i) when the Shelf Registration Statement or any amendment thereto has been filed with the Commission and when the Shelf Registration Statement or any post-effective amendment thereto has become effective;

(ii) of any request by the Commission for amendments or supplements to the Shelf Registration Statement or the prospectus included therein or for additional information;

(iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of any proceedings for that purpose;

(iv) of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

(v) of (A) the happening of any event that requires the Company to make changes in the Shelf Registration Statement or the Prospectus in order that the Shelf Registration Statement or the Prospectus does not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading, or (B) the occurrence or existence of any pending corporate development, public filing with the Commission or other similar event with respect to the Company that, in the reasonable discretion of the Company, makes it appropriate to suspend the availability of a Shelf Registration Statement and the related Prospectus. The Company shall be entitled to exercise its right to deliver a Deferral Notice under this Section 2(b) to suspend the availability of the Shelf Registration Statement or any prospectus, without incurring or accruing any obligation to pay Additional Interest pursuant to Section 5, for one or more periods not to exceed 45 consecutive days in any 90-day period, and not to exceed, in the aggregate, 90 days in any 365-day period (such period during which the availability of the Registration Statement and any prospectus is suspended being a "Deferral Period").

(c) The Company shall make every reasonable effort to obtain the withdrawal at the earliest possible time, of any order suspending the effectiveness of the Shelf Registration Statement.

(d) The Company shall furnish to each Holder of Securities included within the coverage of the Shelf Registration, without charge, at least one copy of the Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, if any, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference).

(e) The Company shall, during the Shelf Registration Period, deliver to each Holder of Securities included within the coverage of the Shelf Registration, without charge, as many copies of the Prospectus (including each preliminary prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of the Securities in connection with the offering and sale of the Securities covered by the Prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement.

(f) Prior to any public offering of the Securities pursuant to the Shelf Registration Statement, the Company shall register or qualify or cooperate with the Holders of the Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer

and sale under the securities or "blue sky" laws of such states of the United States as any Holder of the Securities reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by such Registration Statement; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject.

(g) The Company shall cooperate with the Holders of the Securities to facilitate the timely preparation and delivery of certificates, if any, representing the Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders may reasonably request a reasonable period of time prior to sales of the Securities pursuant to the Shelf Registration Statement.

(h) Upon the occurrence of any event contemplated by paragraphs (ii) through (v) of Section 2(b) above during the period for which the Company is required to maintain an effective Shelf Registration Statement, the Company shall promptly prepare and file a post-effective amendment to the Shelf Registration Statement or an amendment or supplement to the Prospectus and any other required document so that, as thereafter delivered to Holders or purchasers of the Securities, the Prospectus will not contain an 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; provided, that if the Company has delivered a Deferral Notice, then the Company shall have no obligation to file any such amendment, supplement or other document until the 45^th or 90^th day, as the case may be, after the delivery of the Deferral Notice. If the Company notifies the Initial Purchasers and the Holders in accordance with paragraphs (ii) through (v) of Section 2(b) above to suspend the use of the Prospectus until the end of the Deferral Period, then the Initial Purchasers and the Holders shall suspend use of such prospectus, and the period of effectiveness of the Shelf Registration Statement provided for in Section 1(b) above shall be extended by the number of days from and including the date of the giving of such notice to and including the date when the Initial Purchasers and the Holders shall have received such amended or supplemented prospectus pursuant to this Section 2(h), unless the Securities covered by the Shelf Registration Statement are no longer restricted securities as defined in Rule 144(k) of the Securities Act.

(i) Not later than the effective date of the Shelf Registration Statement, the Company will provide CUSIP numbers for the Initial Securities and the Common Stock registered under the Shelf Registration Statement, and provide the Trustee with printed certificates for the Initial Securities, in a form eligible for deposit with The Depository Trust Company.

(j) The Company will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Shelf Registration Statement, which statement shall cover such 12-month period; provided, that if the Company files the reports required by this Section 3(j) with the SEC and such reports are publicly available, it shall be deemed to have satisfied its obligation to furnish reports to its security holders pursuant to this Section 3(j).

(k) The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, (the "Trust Indenture Act") in a timely manner and containing such changes, if any, as shall be necessary for such qualification. In the event that such qualification would require the

appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture.

(l) The Company may require each Holder of Securities to be sold pursuant to the Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of the Securities as the Company may from time to time reasonably require for inclusion in the Shelf Registration Statement, and the Company may exclude from such registration the Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request.

(m) The Company shall enter into such customary agreements and take all such other actions, if any, as any Holder shall reasonably request in order to facilitate the disposition of the Securities pursuant to the Shelf Registration.

(n) The Company shall (i) make reasonably available for inspection by the Holders and any attorney, accountant or other agent retained by the Holders, all relevant financial and other records, pertinent corporate documents and properties of the Company and (ii) cause the Company's officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders or any such attorney, accountant or agent in connection with the Shelf Registration Statement, in each case, as shall be reasonably necessary to enable such persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Initial Purchasers by you and on behalf of the other parties, by one counsel designated by and on behalf of such other parties as described in Section 3 hereof; provided, further, that no person shall be granted the rights set forth in (i) and (ii) above unless and until such person shall have executed and delivered a confidentiality agreement in favor of the Company with respect to any information received pursuant to the exercise of such rights in a customary form reasonably acceptable to the Company prior to the receipt of any such information.

(o) The Company will use its commercially reasonable efforts to cause the Securities covered by a Registration Statement to be rated with the appropriate rating agencies, if so requested by holders of a majority in aggregate principal amount of Securities covered by the Shelf Registration Statement.

(p) The Company shall use its commercially reasonable efforts, subject to the terms and conditions of this Agreement, to take all other steps necessary to effect the registration of the Securities covered by a Registration Statement contemplated hereby.

3. Registration Expenses. (a) All expenses incident to the Company's performance of and compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement is ever filed or becomes effective, including without limitation;

(i) all registration and filing fees and expenses;

(ii) all fees and expenses of compliance with federal securities and state "blue sky" or securities laws;

(iii) all expenses of printing (including printing certificates for the Securities to be issued and printing of Prospectuses), messenger and delivery services and telephone;

(iv) all fees and disbursements of counsel for the Company;

(v) all application and filing fees in connection with listing the Securities on a national securities exchange or automated quotation system pursuant to the requirements hereof; and

(vi) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance).

The Company will bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any person, including special experts, retained by the Company.

(b) In connection with the Shelf Registration Statement required by this Agreement, the Company will reimburse the Initial Purchasers and the Holders of Securities covered by the Shelf Registration Statement, for the reasonable fees and disbursements of not more than one counsel, designated by the Holders of a majority in principal amount of the Securities covered by the Shelf Registration Statement (provided that Holders of Common Stock issued upon the conversion of the Initial Securities shall be deemed to be Holders of the aggregate principal amount of Initial Securities from which such Common Stock was converted) to act as counsel for the Holders in connection therewith.

4. Indemnification. (a) The Company agrees to indemnify and hold harmless each Holder and each person, if any, who controls such Holder within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act") (each Holder, and such controlling persons are referred to collectively as the "Indemnified Parties") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement or prospectus including any document incorporated by reference therein, or in any amendment or supplement thereto or in any preliminary prospectus relating to the Shelf Registration, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in the Shelf Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to the Shelf Registration in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to the Shelf Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Holder from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned, to the extent that a prospectus relating to such Securities was required to be delivered by such Holder under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Securities to such person, a copy of the final prospectus if the Company had previously furnished copies thereof to such Holder; provided further, however, that this indemnity agreement will be in addition to any liability which the Company may otherwise have to such Indemnified Party.

(b) Each Holder, severally and not jointly, will indemnify and hold harmless the Company, its officers and directors and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement or prospectus including any document

incorporated by reference therein, or in any amendment or supplement thereto or in any preliminary prospectus relating to the Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by the Company or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company or any of its officers, directors or controlling persons.

(c) Promptly after receipt by an indemnified party under this Section 4 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 4, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 4 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action, and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

(d) If the indemnification provided for in this Section 4 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the sale of the Securities, pursuant to the Shelf Registration, or (ii) if the allocation provided by the foregoing clause (i) 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 in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Holder or such other indemnified party, as the case may be, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence

of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 4(d), the Holders shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to the Shelf Registration Statement exceeds the amount of damages which such Holders have 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. For purposes of this paragraph (d), each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company.

(e) The agreements contained in this Section 4 shall survive the sale of the Securities pursuant to the Shelf Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party.

5. Additional Interest Under Certain Circumstances. (a) Additional interest (the "Additional Interest") with respect to the Transfer Restricted Securities shall be assessed as follows if any of the following events occur (each such event in clauses (i) through (iii) below being herein called a "Registration Default"):

(i) the Shelf Registration Statement has not been filed with the Commission by the 90^th day after the first date of original issuance of the Initial Securities;

(ii) the Shelf Registration Statement has not been declared effective by the Commission by the 180^th day after the first date of original issuance of the Initial Securities; or

(iii) the Shelf Registration Statement is declared effective by the Commission but (A) the Shelf Registration Statement thereafter ceases to be effective or (B) the Shelf Registration Statement or the Prospectus ceases to be usable in connection with resales of Transfer Restricted Securities (as defined below) during the Shelf Registration Period.

Each of the foregoing will constitute a Registration Default whatever the reason for any such event and whether it is voluntary or involuntary or is beyond the control of the Company or pursuant to operation of law or as a result of any action or inaction by the Commission.

Additional Interest shall accrue on the Transfer Restricted Securities (in addition to the interest set forth in the title of the Initial Securities) from and including the date on which any such Registration Default shall occur to but excluding the date on which all such Registration Defaults have been cured, at (x) in respect of any Initial Securities, a rate of 0.50% per annum of the principal amount thereof to the Damages Payment Date (as defined below), and (y) in respect of any shares of Common Stock issued upon conversion of each $1,000 principal amount of Initial Securities, a rate of 0.50% per annum of the principal amount of such Initial Securities so converted, to the Damages Payment Date, divided by the Conversion Price (as defined in the Indenture), in each case determined as of the Business Day immediately preceding the next Damages Payment Date; provided, that any Additional Interest accrued with respect to any Initial Security or portion thereof called for redemption on a redemption 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 Security or portion thereof for redemption or conversion on the applicable redemption date or conversion date, as the case may be, on such date (or promptly following the conversion date in the case of conversion). The rate of accrual of the Additional Interest with respect to any period shall not

exceed 0.50% per annum notwithstanding the occurrence of multiple concurrent Registration Defaults until all Registration Defaults have been cured.

(b) Notwithstanding Section 5(a)(iii), a Registration Default referred to in Section 5(a)(iii) hereof shall be deemed not to have occurred and be continuing in relation to the Shelf Registration Statement or the related Prospectus if the Company has delivered a Deferral Notice pursuant to Section 2(b) of this Agreement and the Deferral Period shall not have extended past the periods permitted by Section 2(b)(v).

(c) Any amounts of Additional Interest due pursuant to Section 5(a) will be payable in cash on the regular interest payment dates with respect to the Initial Securities (each a "Damages Payment Date"), except in the case of an Initial Security or portion thereof called for redemption on a redemption date or converted into shares of Common Stock on a conversion date prior to a Damages Payment Date. The amount of Additional Interest will be determined on the basis of a 360-day year comprised of twelve 30-day months and the actual number of days on which Additional Interest accrued during such period.

(d) "Transfer Restricted Securities" means each Security until the earliest of (i) the date on which such Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement, or (ii) the date on which such Security is distributed to the public pursuant to Rule 144 under the Securities Act or (iii) the date on which such Security would be saleable pursuant to Rule 144(k) under the Securities Act were it not held by an affiliate of the Company.

6. Rules 144 and 144A. The Company shall use its best efforts to 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 the Company is not required to file such reports, it will, upon the request of any Holder, make publicly available other information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A. The Company covenants that it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell Transfer Restricted Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). The Company will provide a copy of this Agreement to prospective purchasers of Securities identified to the Company by the Initial Purchasers upon request. Upon the request of any Holder, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 6 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act.

7. Miscellaneous.

(a) Remedies. The Company acknowledges and agrees that any failure by the Company to comply with its obligations under Section 1 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Sections 1 hereof. The Company further agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. Notwithstanding the forgoing, in the event of a Registration Default as described in Section 5(a)(ii), Holders agree to waive the remedy of specific performance with respect to such Registration Default only if it would be commercially unreasonable for the Company to have the Shelf Registration Statement declared effective by the Commission. In the case of an action for specific performance pursuant to the preceding sentence of this paragraph, the Company's waiver of the defense that an adequate remedy at law would be adequate shall not apply, notwithstanding anything to the contrary in this Agreement.

(b) No Inconsistent Agreements. The Company will not on or after the date of this Agreement 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 rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof.

(c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Company and the written consent of the holders of a majority in principal amount of the Securities affected by such amendment, modification, supplement, waiver or consent (provided that holders of Common Stock issued upon conversion of Initial Securities shall not be deemed holders of Common Stock, but shall be deemed to be holders of the aggregate principal amount of Initial Securities from which such Common Stock was converted). Without the consent of the Holder of each Initial Security, however, no modification may change the provisions relating to the payment of Additional Interest.

(d) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery:

(1) if to a Holder of the Securities, at the most current address given by such Holder to the Company.

(2) if to the Initial Purchasers;

Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group

with a copy to:

Latham & Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Fax No.: (619) 696-7419
Attention: David A. Hahn, Esq.

(3) if to the Company, at its address as follows:

Abgenix, Inc.
6701 Kaiser Drive
Fremont, CA 94555
Fax No.: (510) 608-6511
Attention: General Counsel

with a copy to:

Simpson Thacher & Bartlett
3330 Hillview Avenue
Palo Alto, CA 94304
Fax No.: (650) 251-5002
Attention: William H. Hinman, Esq.

All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage

prepaid, if mailed; when receipt is acknowledged by recipient's facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery.

(e) Third Party Beneficiaries. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder.

(f) Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns.

(g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, 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 agreement.

(h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

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

By the execution and delivery of this Agreement, the Company submits to the nonexclusive jurisdiction of any federal or state court in the State of New York.

(j) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

(k) Securities Held by the Company. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities is required hereunder, Securities held by the Company or its affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.

[Signature Page Follows]

If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the several Initial Purchasers and the Company in accordance with its terms.

	Very truly yours,
	ABGENIX, INC.
	by		/s/ KURT W. LEUTZINGER Name: Kurt W. Leutzinger Title: Chief Financial Officer

The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.

CREDIT SUISSE FIRST BOSTON CORPORATION
BANC OF AMERICA SECURITIES LLC
ROBERTSON STEPHENS, INC.

BY: CREDIT SUISSE FIRST BOSTON CORPORATION

/s/ RENEE COMPTON RYAN

Name: Renee Compton Ryan Title: Director

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Exhibit 4.3

REGISTRATION RIGHTS AGREEMENT
EX-10.70 5 a2078956zex-10_70.htm EXHIBIT 10.70
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Exhibit 10.70

FIRST AMENDMENT TO LEASE
(6701 Kaiser Drive)

This First Amendment to Lease ("First Amendment") is made as of the 31st day of August, 2001 by and between Ardenwood Corporate Park Associates, a California Limited Partnership, having an address at 10600 N. De Anza Blvd., Suite 200, Cupertino, California 95014 ("Landlord") and Abgenix, Inc., a Delaware corporation, whose address 7601 Dumbarton Circle, Fremont California, 94555 ("Tenant").

WITNESSETH

WHEREAS, Landlord and Tenant entered into a lease dated February 24, 2000 ("Lease") for a building of approximately 100,103 rentable square feet ("Building") located at 6701 Kaiser Drive in Fremont, California ("Premises"), adjacent to a building at 6755 Kaiser Drive ("6755 Premises") currently leased by Tenant from Landlord pursuant to a lease between the parties dated May 19, 2000 as amended by First Amendment to Lease dated as of August 31, 2001 ("6755 Premises Lease");

WHEREAS, pursuant to the 6755 Premises Lease, Tenant granted to Landlord real estate financing for the construction and permanent financing of the 6755 Premises in the amount of $16,750,000.00 ("Loan") evidenced by a promissory note, deed of trust, assignment of leases, assignment of contracts, loan agreement and other loan documents (collectively "Loan Documents") between the parties;

WHEREAS, Landlord and CPTFNC Funding, LLC (the "First Lender") and Tenant have agreed to enter into an Intercreditor Agreement dated as of the date hereof (the "Intercreditor Agreement") and Landlord, Tenant and First Lender have agreed to enter into a subordination, nondisturbance and attornment agreement dated as of August 31, 2001 (the "SNDA") with respect to the 6755 Premises Lease;

WHEREAS, simultaneously herewith, the parties have agreed to enter into a Standstill Agreement with respect to the Lease and the Loan Documents (the "Standstill Agreement").

NOW, THEREFORE, in order to effect the intent of the parties as set forth above and for good and valuable consideration exchanged between the parties, the Lease is amended as follows:

1.: [MISSING TEXT]

Premises Lease shall apply to Tenant's exercise of its Option(s) to extend the Term of the 6755 Premises Lease.)

5.: Tenant's breach of its obligations under Section 6.2 of the Standstill Agreement shall constitute a default under the Lease. Accordingly, the following clause (viii) is added to the end of the first paragraph of Section 13 of the Lease:

or (viii) Tenant's breach of its obligations under Section 6.2 of that certain Standstill Agreement executed by Landlord as Borrower and Tenant as Lender dated as of August 31, 2001.

6.: All defined terms shall have the same meanings as in the Lease, except as otherwise stated in this First Amendment.
7.: Except as hereby amended, the Lease and all of the terms, covenants and conditions thereof shall remain unmodified and in full force and effect. In the event of conflict or inconsistency between the terms and provisions of this First Amendment and the terms and provisions of the Lease, the terms and provisions of this First Amendment shall prevail to the Initial Disbursement of the Loan.

2.: Concurrently with the execution of this First Amendment, the parties have executed Loan Documents in connection with the Loan. The effectiveness of this First Amendment is subject to and conditioned upon (a) Landlord and Tenant executing the Loan Documents and the Standstill Agreement; (b) Landlord, Tenant and First Lender executing the Intercreditor Agreement and the SNDA; (c) First Lender consenting in writing to this First Amendment; (d) Landlord and Tenant executing a First Amendment to the 6755 Premises Lease in form acceptable to Landlord and Tenant (the "6755 Lease Amendment"); and (e) First Lender consenting in writing to the 6755 Lease Amendment.
3.: The following sentence shall be added to the end of Section 15B of the Lease.

Notwithstanding the foregoing, in the event that damage or destruction occurs in the last eighteen (18) months of the Lease Term but prior to the date which is twelve (12) months prior to the expiration of the Lease Term and in the event Landlord elects to terminate this Lease pursuant to clause (iv) above, Tenant may void Landlord's termination notice by exercising in writing any next immediately succeeding Option to extend the Term of the Lease and the Term of the 6755 Premises Lease pursuant to Section 18 of this Lease, provided Tenant notifies Landlord of its exercise of said Option(s) within ten (10) days following receipt of Landlord's termination notice. In the event Tenant timely exercises its next succeeding Option to extend the Term of this Lease and the Term of the 6755 Premises Lease, then Landlord's termination notice shall be void and Landlord shall complete the repair or restoration of the Premises in accordance with the terms of this Lease.

4.

A new Section 18E shall be added to the Lease as follows:

E.: Exercise of Option to Extend Tenant's Lease for 6755 Kaiser Drive, Fremont

Tenant leases from Landlord the building adjacent to the Premises, which building is located at 6755 Kaiser Drive (the "6755 Premises") pursuant to a lease between Landlord and Tenant dated February 24, 2000 ("6755 Premises Leases"). The 6755 Premises are connected to the Premises by the portion of the Premises referred to as the Link Structure. Accordingly, it shall be a further condition to Tenant's exercise of its Option(s) to extend the Term of this Lease pursuant to this Section 18, that Tenant simultaneously exercise its Option(s) to extend the Term of the 6755 Premises Lease in accordance with the provisions of Section 18 of the 6755 Premises Lease. (All terms and conditions of Section 18 of the 6755

IN WITNESS WHEREOF, the parties hereto have set their hands to this First Amendment as of the day and date first above written.

Landlord Ardenwood Corporate Park Associates, a California Limited Partnership				Tenant Abgenix, Inc., a Delaware Corporation
By:		/s/ JOHN MICHAEL SOBRATO Its: General Partner		By:		/s/ KURT LEUTZINGER Its: CFO

Exhibit A
PROFORMA

SCHEDULE C
LEGAL DESCRIPTION

All that certain real property situate in the City of Fremont, County of Alameda, State of California, described as follows:

PARCEL ONE:

All that portion of land designated and delineated as "Merged Lot A" in the Declaration of Merger filed for record in the office of the Recorder of the County of Alameda on under Recorder's Series No. Official Records and being more particularly described as follows;

Being all of Lot 9 and Lot 10– Lot Line Adjustment 2000-10, as said lots are described in the Grant Deed recorded January 25, 2001, as instrument number 01-027935, Alameda County Records, more particularly described as follows:

Beginning at the easterly corner of said Lot 10, said corner being a point in the northwesterly right of way line of Kaiser Drive, 100 feet in width, as said drive is shown on Parcel Map 4118, filed March 30, 1984 in Book 143 of Maps, at pages 44 and 48, Alameda County Records,

Thence along the southeasterly lien of said Lot 10, and along the southwesterly line of said Lot 9, said lines being also the northwesterly right of way lien of Kaiser Drive, the following three courses:

1.: South 60°00'00" West, 120.97 feet;
2.: Southwesterly along the arc of a 946.00 foot radius, tangent curve to the right, through a central angle of 4°00'00", an arc distance of 66.04 feet; and
3.: South 68°00'00" West, 547.23 feet to the southerly corner of said Lot 9;

Thence along the southwesterly line of said Lot 9, North 21°53'25" West, 600.09 feet to the westerly corner of said Lot 9;

Thence along the northwesterly line of said Lot 9 and along the northwesterly line of said Lot 10, North 65°05'35" East, 689.97 feet to the northerly corner of said Lot 10;

Thence along the northeasterly line of said Lot 10, South 26°00'00" East, 625.86 feet to the point of beginning.

PARCEL TWO:

A non-exclusive easement for Ingress and Egress over the following described property:

Being a portion of Lot 11, as said Lot is shown upon that certain Parcel map 4118, filed in Book 143 of Maps at pages 44-48, inclusive, Alameda County Records;

Being a strip of land 22.50 feet in width, the westerly line of said strip described as follows:

Beginning at the southwest corner of said Lot 11, said point also being on the northerly right of way line of Kaiser Drive, (108 feet wide), as shown upon said map; thence departing said right of way line, and along the westerly line of said Lot 11, North 26°02'11" West, 72.00 feet to the terminus of said westerly line being described.

ARB No: -0-
APN No: 543-0439-047-01; 543-0439-048-02

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Exhibit 10.70

EX-10.71 6 a2078956zex-10_71.htm EXHIBIT 10.71
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Exhibit 10.71

FIRST AMENDMENT TO LEASE
(6755 Kaiser Drive)

WITNESSETH

WHEREAS, Landlord and Tenant entered into a lease dated May 19, 2000 ("Lease") for a building of approximately 100,000 rentable square feet ("Building") to be constructed at 6755 Kaiser Drive in Fremont, California ("Premises"), adjacent to a building at 6701 Kaiser Drive ("6701 Premises") currently leased by Tenant from Landlord pursuant to a lease between the parties dated February 24, 2000 ("6701 Premises Lease");

WHEREAS, effective the date of this First Amendment, Landlord and Tenant wish to modify the Lease to: (i) provide for construction of a 2-story building link totaling 15,522 rentable square feet ("Link Structure") to connect the 6701 Premises and the Premises; (ii) specify the terms and conditions under which Tenant shall lease the Link Structure; and (iii) provide for Tenant's granting to Landlord of real estate financing for the Premises and Link Structure in the amount of $16,750,000.00 ("Loan") evidenced by a promissory note, deed of trust, assignment of leases, assignment of contracts, loan agreement and other loan documents (collectively "Loan Documents") between the parties;

WHEREAS, simultaneously herewith, the parties have agreed to enter into a Standstill Agreement with respect to the Lease and the Loan Documents (the "Standstill Agreement").

NOW, THEREFORE, in order to effect the intent of the parties as set forth above and for good and valuable consideration exchanged between the parties, the Lease is amended as follows:

1.: The definition of the Premises as set forth in Lease paragraph 2 is amended to include the Link Structure.
2.: Concurrently with execution of this First Amendment, the parties have executed the Loan Documents which provides for Tenant's commitment to fund the Loan to Landlord for the purposes of financing the Premises and the Link Structure. The effectiveness of this First Amendment is subject to and conditioned upon (a) Landlord and Tenant executing the Loan Documents and the Standstill Agreement; (b) Landlord, Tenant and First Lender executing the Intercreditor Agreement and the SNDA; (c) First Lender consenting in writing to this First Amendment; (d) Landlord and Tenant executing a First Amendment to the 6701 Premises Lease in form acceptable to Landlord and Tenant (the "6701 Lease Amendment"); and (e) First Lender consenting in writing to the 6701 Lease Amendment.
3.: The shell of the Link Structure ("Link Shell") shall be Landlord's responsibility and shall be constructed by independent contractors employed by and under the supervision of General Contractor in accordance with plans and specifications prepared by Arc-Tec Associates dated March 7, 2001 ("Link Shell Plans and Specifications"), attached by reference as Exhibit "A". Subject to Force Majeure events, Landlord shall complete construction of the Link Shell by March 31, 2002. The cost of construction of the Link Shell pursuant to the Link Shell Plans and Specifications are itemized on the budget attached hereto as Schedule 1 and are referred to herein as the "Link Shell Hard Costs." Tenant's obligation for payment of the Link Shell Hard Costs shall

not exceed the "Maximum Link Shell Hard Costs" set forth on Schedule 1. In addition to Landlord's obligation to pay to Tenant the Link Structure Allowance (as defined in paragraph 5 below), Landlord shall be responsible for any Link Shell Hard Costs in excess of the Maximum Link Shell Hard Costs ("Landlord Excess Hard Costs"). Notwithstanding anything in the Lease to the contrary, the parties agree that to the extent reasonably possible, the same contractors with which General Contractor has already committed to construct the Building and Premises shall also be hired to construct the Link Shell. The parties acknowledge that Tenant may elect to have construction of the Link Tenant Improvements (as defined in Section 4 below) completed at a later date than the Link Shell. The parties acknowledge that Tenant has requested and Landlord has agreed to defer Landlord's completion of slurry, striping and signage in associated parking lot areas and landscape pertaining to the Building and the Link Shell ("Deferred Landlord's Work"). Landlord agrees to complete the Deferred Landlord's Work by December 1, 2002 or such later date as Tenant may direct in writing.

4.: Tenant, at Tenant's sole cost and expense, has retained Dowler Gruman Architects which has prepared the plans and outline specifications attached as Exhibit B ("Link Tenant Improvement Plans and Specifications") with respect to Tenant's construction of improvements to the Link Structure ("Link Tenant Improvements") necessary for Tenant's use and occupancy. Landlord has reviewed and approved the Link Tenant Improvement Plans and Specifications. The Link Tenant Improvement Plans and Specifications provide for a minimum build-out in all areas of the Link Structure consisting of: (i) fire sprinklers, (ii) floor coverings, (iii) t-bar suspended ceiling (iv) distribution of the HVAC system, (v) adequate lighting, and (vi) any other work necessary to obtain an unconditional certificate of occupancy from the city of Fremont. Tenant's Contractor shall use union labor. Tenant shall contract directly with and shall cause Tenant's Contractor to construct the Link Tenant Improvements substantially in accordance with all Link Tenant Improvement Plans and Specifications. Landlord agrees to permit Tenant's Contractor access to the Link Structure as soon as reasonably practicable in order to commence construction of the Link Tenant Improvements provided such access does not unreasonably interfere with General Contractor's construction of the Link Shell. Tenant shall use commercially reasonable efforts to obtain a building permit from the City of Fremont as soon as reasonably practicable and thereafter diligently supervise the construction of Link Tenant Improvements until they are substantially complete as hereinafter defined. The Link Tenant Improvements shall be deemed substantially complete ("Substantially Complete" or "Substantial Completion") when the Link Tenant Improvements have been substantially completed other than for minor punchlist items in accordance with the Link Tenant Improvement Plans and Specifications, as evidenced by the completion of a final inspection or the issuance of a certificate of occupancy or its equivalent by the appropriate governmental authority, whichever is applicable. Installation of Tenant's data and phone cabling or furniture shall not be required in order to deem the Link Tenant Improvements Substantially Complete. Once complete, the Link Tenant Improvements shall be considered Tenant Improvements and subject to all applicable provisions in the Lease regarding Tenant Improvements.
5.: All design and architectural costs, permit fees, and other costs imposed by governmental authorities related to the Link Shell ("Link Shell Soft Costs") shall be paid by Landlord. In addition, Landlord shall also pay to Tenant $776,000.00 ("Link Structure Allowance") towards the Link Shell Hard Costs payable by Tenant. Upon Landlord's completion of the Link Shell (other than the Deferred Landlord's Work), Landlord shall deliver to Tenant an invoice ("Invoice") for the amount of the actual Link Shell Hard Costs including the General Contractor's Fee defined in paragraph 6 hereof (not to exceed the Maximum Link Shell Hard Costs) ("Invoiced Amount"). Within ten (10) days following receipt of the Invoice, Tenant shall pay to Landlord the Invoiced Amount. Concurrently therewith, Landlord shall pay the Link Structure Allowance to Tenant or,

alternatively, if Landlord and Tenant mutually agree, Tenant may offset the amount of the Link Structure Allowance from the Invoiced Amount paid by Tenant to Landlord.

6.: Other than the Link Shell Soft Costs and Link Structure Allowance paid by Landlord pursuant to paragraph 5 above, and any Landlord Excess Hard Costs for which Landlord is responsible pursuant to paragraph 3 above, Tenant shall pay all costs associated with construction of the Link Structure including, but not limited to the following: (i) Link Shell Hard Costs up to the Maximum Link Shell Hard Costs; (ii) construction costs of the Link Tenant Improvements, (iii) all permit fees, construction taxes or other costs imposed by governmental authorities related to the Link Tenant Improvements, and (iv) a fee equal to 5.5% of the Link Shell Hard Costs (up to the Maximum Link Shell Hard Costs) to be paid to General Contractor to cover all of the following: construction supervision and administration, temporary on-site facilities, home office administration, supervision, and coordination and construction profit ("General Contractor's Fee").
7.: In order to facilitate construction and financing of the Premises, Tenant consents to the merging of the two parcels on which the Premises and the 6701 Premises are situated (APN 543-439-048-01 and 543-439-047-02 respectively) into one parcel totaling 10.082 acres, as shown on the attached Exhibit "C". Landlord, at its sole cost and expense, shall cause the merger of the two parcels to occur prior to the Initial Disbursement of the Loan.
8.: Base Monthly Rent for the Link Structure shall at all times be at the same rate as the Building as set forth in Section 4.A. of the Lease; provided, however, that Base Monthly Rent for the Link Structure portion of the Premises shall not commence until Landlord's Substantial Completion of the Link Structure. With respect to the rent commencement date for the Building, the parties acknowledge that construction of the Link Structure will delay Landlord's completion of the Building and Premises. Such delay does not affect the Lease and the parties acknowledge that the Lease has commenced and that the rent commencement date was April 1, 2001.
9.: The following sentence shall be added to the end of Section 14B of the Lease.

Notwithstanding the foregoing, in the event that damage or destruction occurs in the last eighteen (18) months of the Lease Term but prior to the date which is twelve (12) months prior to the expiration of the Lease Term and in the event Landlord elects to terminate this Lease pursuant to clause (iv) above, Tenant may void Landlord's termination notice by exercising in writing any next immediately succeeding Option to extend the Term of the Lease and the Term of the 6701 Premises Lease pursuant to Section 18 of this Lease, provided Tenant notifies Landlord of its exercise of said Option(s) within ten (10) days following receipt of Landlord's termination notice. In the event Tenant timely exercises its next succeeding Option to extend the Term of this Lease and the Term of the 6701 Premises Lease, then Landlord's termination notice shall be void and Landlord shall complete the repair or restoration of the Premises in accordance with the terms of this Lease.

10.

A new Section 18 E shall be added to the Lease as follows:

E.: Exercise of Option to Extend Tenant's Lease for 6701 Kaiser Drive, Fremont

Tenant leases from Landlord the building adjacent to the Premises, which building is located at 6701 Kaiser Drive (the "6701 Premises") pursuant to a lease between Landlord and Tenant dated February 24, 2000 ("6701 Premises Leases"). The 6701 Premises are connected to the Premises by the portion of the Premises referred to as the Link Structure. Accordingly, it shall be a further condition to Tenant's exercise of its Option(s) to extend the Term of this Lease pursuant to this Section 18, that Tenant simultaneously exercise its Option(s) to extend the Term of the 6701 Premises Lease in accordance with the provisions of Section 18 of the 6701 Premises Lease. (All terms and conditions of Section 18 of the 6701 Premises Lease shall apply to Tenant's exercise of its Option(s) to extend the Term of the 6701 Premises Lease.)

11.: Tenant's breach of its obligations under Section 6.2 of the Standstill Agreement shall constitute a default under the Lease. Accordingly, the following clause (viii) is added to the end of the first paragraph of Section 13 of the Lease:

or (viii) Tenant's breach of its obligations under Section 6.2 of that certain Standstill Agreement executed by Landlord as Borrower and Tenant as Lender dated as of August 31, 2001.

12.: All defined terms shall have the same meanings as in the Lease, except as otherwise stated in this First Amendment.
13.: Except as hereby amended, the Lease and all of the terms, covenants and conditions thereof shall remain unmodified and in full force and effect. In the event of conflict or inconsistency between the terms and provisions of this First Amendment and the terms and provisions of the Lease, the terms and provisions of this First Amendment shall prevail.

IN WITNESS WHEREOF, the parties hereto have set their hands to this First Amendment as of the day and date first above written.

Landlord Ardenwood Corporate Park Associates, a California Limited Partnership			Tenant Abgenix, Inc., a Delaware Corporation
By:	/s/ JOHN MICHAEL SOBRATO		By:	/s/ KURT LEUTZINGER
	Its:	General Partner		Its:	CFO

Exhibit A
Link Shell Plans and Specifications

Ardenwood Phase III Link
6753 Kaiser Drive.
Fremont, California

*Drawing List:*
*Architectural:*
Cover Sheet		Delta 3—5/1/01
A0.1	Project Information and Drawing Index	Delta 3—5/1/01
A1.0	Site Plan	Delta 3—5/1/01
A2.0	First Level Plan	Delta 3—5/1/01
A2.1	Second Level Plan	Delta 3—5/1/01
A2.2	Roof Plan	Delta 1—3/14/01
A2.3	Entry Plans and Elevations	Delta 2—4/6/01
A3.0	Exterior Elevations	Delta 2—4/6/01
A4.0	Building Sections	Delta 2—4/6/01
A4.1	Building Wall Sections	Delta 3—5/1/01
A7.0	Door Schedule	Delta 2—4/6/01
A8.0	Details	Delta 3—5/1/01
A8.1	Details	Delta 2—4/6/01
A8.2	Details	Delta 3—5/1/01
A8.3	Details	Delta 1—3/14/01
A10.0	Specifications	3/7/01
A10.1	Title 24, Non Residential Accessibility Requirements	3/7/01
A10.2	Title 24, Energy Compliance Requirements	3/7/01
A10.3	Title 24, Energy Compliance Requirements	3/7/01
*Civil*
C-1	Topographic	Delta 3—5/1/01
C-2	Demolition Plan	Delta 3—5/1/01
C-3	Grading and Drainage Plan	Delta 3—5/1/01
C-4	Utility Plan	Delta 3—5/1/01
C-5	Erosion Control Plan	Delta 3—5/1/01
C-6	Horizontal Control Plan	Delta 3—5/1/01
C-7	Details	Delta 3—5/1/01
ENV-1	Building Envelope Compliance	10/2/01
*Landscape*
L-1.0	Notes and Legends	Delta 3—5/1/01
L-2.1	Layout and Grading Plan	Delta 3—5/1/01
L-2.2	Planting Plan	Delta 3—5/1/01
L-3.0	Irrigation Notes & Details	Delta 3—5/1/01
L-3.1	Irrigation Plan	Delta 3—5/1/01
L-4.1	Construction Details	Delta 3—5/1/01
L-4.2	Construction Details	Delta 3—5/1/01

*Structural Continued*
S-0.1	General Notes	Delta 3—5/1/01
S-1.0	Foundation Plan	Delta 3—5/1/01
S-2.0	Second Floor Framing Plan	Delta 3—5/1/01
S-3.0	Roof Framing Plan	Delta 3—5/1/01
S-4.0	Moment Frame Elevations & Schedules	Delta 3—5/1/01
S-5.0	Floor Framing Details	Delta 3—5/1/01
S-5.1	Floor Framing Details	Delta 3—5/1/01
S-6.0	Framing Details	Delta 3—5/1/01
S-6.1	Framing Details	Delta 3—5/1/01
S-6.2	Framing Details	Delta 3—5/1/01
S-6.3	Framing Details	Delta 3—5/1/01

Exhibit B
Link Tenant Improvement Plans and Specifications

*DRAWING INDEX*
*ARCHITECTURAL*
A0		DRAWING INDEX, PROJECT DATA, ABBREVIATIONS
A0.1		OVERALL CODE COMPLIANCE PLANS—LEVEL 1
A0.2		OVERALL CODE COMPLIANCE PLANS—LEVEL 2
A1.0		OVERALL SITE PLAN; PARKING CALCULATION AND NOTES
A2.0D		DEMOLITION FLOOR AND CEILING PLANS—LEVELS 1 & 2
A2.1		FLOOR PLAN—LEVEL 1
A2.1F		FINISH PLAN—LEVEL 1
A2.1Q		EQUIPMENT PLAN—LEVEL 1
A2.1R		REFLECTED CEILING PLAN—LEVEL 1
A2.2		FLOOR PLAN—LEVEL 2
A2.2F		FINISH PLAN—LEVEL 2
A2.2R		REFLECTED CEILING PLAN—LEVEL 2
A2.3		HORIZONTAL EXIT FLOOR PLANS, SECTION AND DETAILS
A3.1		DOOR, FRAME AND WINDOW SCHEDULES; WALL TYPES
A3.2		ENLARGED PLANS & ELEVATIONS; TOILET ROOMS & SHOWERS; MOUNTING HGHT. SCHEDULE
A3.3		ENLARGED PLANS, DETAILS & SECTION: STAIRS & WH/CHRLIFT
A4.1		BUILDING SECTIONS
A5.1		EXTERIOR ELEVATIONS
A6.1		ROOF PLAN AND TYPICAL EXTERIOR & PENETRATION DETAILS
A7.1		INTERIOR ELEVATIONS
A8.1		INTERIOR DETAILS
A8.2		INTERIOR DETAILS
A8.3		INTERIOR DETAILS
A8.4		INTERIOR DETAILS
A8.5		INTERIOR DETAILS

Exhibit C
PROFORMA

SCHEDULE C
LEGAL DESCRIPTION

All that certain real property situate in the City of Fremont, County of Alameda, State of California, described as follows:

PARCEL ONE:

All that portion of land designated and delineated as "Merged Lot A" in the Declaration of Merger filed for record in the office of the Recorder of the County of Alameda on under Recorder's Serials No. Official Records and being more particularly described as follows;

Being all of Lot 9 and Lot 10-Lot Line Adjustment 2000-10, as said lots are described in the Grant Deed recorded January 25, 2001, as instrument number 01-027935, Alameda County Records, more particularly described as follows:

1.: South 64°00'00" West, 120.97 feet;
2.: Southwesterly along the arc of a 946.00 foot radius, tangent curve to the right, through a central angle of 4°00'00", an arc distance of 66.04 feet; and
3.: South 68°00'00" West, 547.23 feet to the southerly corner of said Lot 9;

Thence along the southwesterly line of said Lot 9, North 21°53'25" West, 600.09 feet to the westerly corner of said Lot 9;

Thence along the northwesterly line of said Lot 9 and along the northwesterly line of said Lot 10, North 65°05'35" East, 689.97 feet to the northerly corner of said Lot 10;

Thence along the northeasterly line of said Lot 10, South 26°00'00" East, 625.86 feet to the point of beginning.

PARCEL TWO:

A non-exclusive easement for Ingress and Egress over the following described property;

Being a portion of Lot 11, as said Lot is shown upon that certain Parcel map 4118, filed in Book 143 of Maps at pages 44-48, inclusive, Alameda County Records;

Being a strip of land 22.50 feet in width, the westerly line of said strip described as follows:

ARB No: -0-
APN No: 543-0439-047-01; 543-0439-048-02

Schedule 1

Project	Ardenwood Link Building	Date: August 28, 2001
Location:	6753 Kaiser Drive, Fremont, CA
Size:	15522 square feet
Job #30L

BUDGET—LINK SHELL HARD COSTS

	DESCRIPTION	SOBRATO		Comments
1	Surveying and Staking		10,000	Allowance
2	Grading and Paving		54,153	Includes costs for Lime Treatment and for Courtyard grading
3	Striping		800
4	Site Utilities Asphalt Patching Allowance to use 2nd Bidder		100,320 10,000 10,000	Allowance Allowance
5	Fountain Mechanical		54,985	Bid - value engineer will design/build sub for possible savings
6	Site Concrete		83,800	Obtain additional bid
7	Building Concrete		141,953
8	GFRC		40,950
9	Steel/Misc. Metals		546,495	Cost includes $88,000 for Courtyard Metal and 320,000 for 83 mods
10	Metal Deck		36,374
11	Expansion Joint		48,659	Obtain additional bid
12	Insulation		5,500	Allowance
13	Built-up Roof and Waterproofing		31,135
14	Arch, Sheet Metal		8,344	Obtain additional bid
15	Sealants and Caulking		2,500	Allowance
16	Glass, Glazing, Aluminum Rod		328,852	Review $50,392 alternate to modify 82 window system at 2nd floor
17	Studs and Some Framing/Rough Carp.		45,860
18	Painting (Exterior) Paint Touch-up		6,875 1,000	Allowance
19	Fire Sprinklers		20,440
20	Plumbing		29,484	Abgenix and Dome to consider installation of sewer gut line under T
21	Site Lighting and Electrical		1,020
	SUBTOTAL	$	1,628,717
	CONTINGENCY (5%)	$	81,336
	Subtotal	$	1,708,053
	FEE AND GC: (5.5%)	$	83,843
	PROJECT TOTAL COST		1,801,996
Project Summary—Guaranteed Maximum Price (GMP)
	Sobrato pays last	$	776,000	(Link Structure Allowance)
	Abgenix pays next	$	1,025,996
	Sobrato pays anything over the GMP of	$	1,801,898
	In addition, beyond the first $778K, Sobrato pays for all Link Shelf Soft Costs

*: Maximum Link Shell Hard Costs

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Exhibit 10.71

EX-10.72 7 a2078956zex-10_72.htm EXHIBIT 10.72
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Exhibit 10.72

SECOND AMENDMENT TO LEASE

THIS SECOND AMENDMENT TO LEASE (this "Amendment") dated as of November 7, 2001, is entered into by and between ABGENIX, INC., a Delaware corporation ("Tenant"), and ARDENWOOD CORPORATE PARK ASSOCIATES, a California limited partnership ("Landlord").

RECITALS

A. Landlord and Tenant have entered into that certain Lease Between Abgenix, Inc. and Ardenwood Corporate Park Associates (Kaiser Drive Build-to-Suit) dated as of May 19, 2000, as amended by the First Amendment to Lease dated as of August 31, 2001 (as so amended, the "Lease"), pursuant to which Tenant leases from Landlord certain premises located at 6755 Kaiser Drive, Fremont, California and commonly known as "Building 3" (as more particularly described in the Lease, the "Premises"). Initially capitalized terms not otherwise defined herein shall have the meanings given to such terms in the Lease.

B. Tenant has elected to exercise its right to order the Building Shell Modifications described in Section 5(A) of the Lease.

C. Pursuant to Section 4(C) of the Lease, Tenant has heretofore deposited with Landlord a letter of credit (the "Letter of Credit") in the amount of $2,000,000. In consideration of certain modifications requested by Tenant with respect to the Building Shell, Tenant has agreed to increase the amount of the Letter of Credit by $500,000 upon the terms and conditions set forth below.

NOW THEREFORE, in consideration of the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

1. Building Shell Modifications. Landlord and Tenant hereby agree that Landlord shall perform the Building Shell Modifications described in Section 5(A) of the Lease, subject to Tenant's approval of the plans and specifications with respect thereto in accordance with the Lease.

2. Letter of Credit. As of the date of this Amendment, the amount of the Letter of Credit pursuant to Section 4(C) of the Lease shall be amended to be $2,500,000. On or before December 2, 2001, Tenant shall deliver to Landlord an amendment to the Letter of Credit increasing the amount of the Letter of Credit to $2,500,000 (the "LC Amendment"). From and after the date hereof, all references in the Lease to the Letter of Credit shall mean and refer to the Letter of Credit as amended by the LC Amendment.

3. Shell Modification Payment. Landlord hereby acknowledges that on or prior to the date hereof, Tenant has paid to Landlord, pursuant to Section 5(A) of the Lease, the entire cost of the Building Shell Modifications in the amount of $290,770 (the "Payment Amount"). Landlord agrees that the Payment Amount represents payment in full by Tenant for the Building Shell Modifications and that Tenant shall not be responsible for any costs or expenses incurred by Landlord with respect to the Building Shell Modifications in excess of the Payment Amount.

4. No Other Changes. Except as modified by this Amendment, all of the terms and provisions of the Lease shall remain in full force and effect and unmodified with respect to the Premises.

5. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written.

		TENANT:
		ABGENIX, INC., a Delaware corporation
		By:		/s/ KURT LEUTZINGER
		Its:		Chief Financial Officer

		LANDLORD:
		ARDENWOOD CORPORATE PARK ASSOCIATES, a California limited partnership
		By:		/s/ JOHN MICHAEL SOBRATO
		Its:		General Partner

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Exhibit 10.72

RECITALS
EX-10.73 8 a2078956zex-10_73.htm EXHIBIT 10.73
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Exhibit 10.73

AMENDMENT NO. 1
TO LEASE

THIS AMENDMENT NO. 1 is made and entered into this 22nd day of January, 2002, by and between JOHN ARRILLAGA, Trustee, or his Successor Trustee UTA dated 7/20/77 (JOHN ARRILLAGA SURVIVOR'S TRUST) (previously known as the "John Arrillaga Family Trust") as amended, and RICHARD T. PEERY, Trustee, or his Successor Trustee UTA dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended, collectively as LANDLORD, and ABGENIX, INC., a Delaware corporation, as TENANT.

RECITALS

A. WHEREAS, by Lease Agreement dated July 31, 1996 Landlord leased to Tenant all of that certain 52,416+/- square foot building located at 7601 Dumbarton Circle, Fremont, California, the details of which are more particularly set forth in said July 31, 1996 Lease Agreement, and,

B. WHEREAS, said Lease was amended by the Commencement Letter dated January 31, 1997 which confirmed the February 1, 1997 Lease Commencement Date and the January 31, 2007 Lease Termination Date, and,

C. WHEREAS, it is now the desire of the parties hereto to amend the Lease by (i) extending the Term for three (3) year, changing the Termination Date from January 31, 2007 to January 31, 2010, (ii) amending the Basic Rent schedule and Aggregate Basic Rent accordingly, (iii) increasing the Security Deposit required under the Lease, (iv) amending Lease Paragraphs 9 ("Taxes") and 43 ("Hazardous Materials"), and (v) adding a "Cross Default" paragraph to said Lease Agreement as hereinafter set forth.

AGREEMENT

NOW THEREFORE, for valuable consideration, receipt of which is hereby acknowledged, and in consideration of the hereinafter mutual promises, the parties hereto do agree as follows:

1. TERM OF LEASE: Pursuant to Lease Paragraph 44 ("Three (3) three (3) Year Options to Extend"), Tenant has exercised its First Three (3) Year Option to Extend. Therefore it is agreed between the parties that the Term of said Lease Agreement shall be extended for an additional three (3) year period, and the Lease Termination Date shall be changed from January 31, 2007 to January 31, 2010.

2. BASIC RENT FOR EXTENDED TERM OF LEASE: The monthly Basic Rent for the Extended Term of Lease shall be as follows:

On February 1, 2007, the sum of NINETY-FOUR THOUSAND THREE HUNDRED FORTY-EIGHT AND 80/100 DOLLARS ($94,348.80) shall be due, and a like sum due on the first day of each month thereafter through and including January 1, 2008.

On February 1, 2008, the sum of NINETY-SIX THOUSAND NINE HUNDRED SIXTY-NINE AND 60/100 DOLLARS ($96,969.60) shall be due, and a like sum on the first day of each month thereafter through and including January 1, 2009.

On February 1, 2009, the sum of NINETY-NINE THOUSAND FIVE HUNDRED NINETY AND 40/100 DOLLARS ($99,590.40) shall be due, and a like sum due on the first day of each month thereafter through and including January 1, 2010.

The Aggregate Basic Rent for the Lease shall be increased by $3,490,905.60 or from $9,623,577.60 to $13,114,483.20.

3. SECURITY DEPOSIT: Tenant's Security Deposit shall be increased by $15,724.80, or from $183,456.00 to $199,180.80. Said increased Security Deposit shall be paid by Tenant to Landlord concurrently with the delivery of this executed Amendment No. 1.

4. CROSS DEFAULT: It is understood that, concurrently with the execution of this Amendment No. 1, Landlord and Tenant are entering into another lease agreement dated January 22, 2002 for premises located at 34700 Campus Drive, Fremont, California (the "New Lease"). As a material part of the consideration for the execution of said New Lease by Landlord, it is agreed between Landlord and Tenant that a default under this Lease, or a default under said New Lease may, at the option of Landlord, be considered a default under both leases, in which event Landlord shall be entitled (but in no event required) to apply all rights and remedies of Landlord under the terms of one lease to both leases including, but not limited to, the right to terminate one or both of said leases by reason of default under said New Lease or hereunder. Notwithstanding anything to the contrary herein, in the event the New Lease does not commence for any reason whatsoever, this Paragraph 4 shall be null and void, and this Amendment No. 1 shall be effective absent this Paragraph 4.

5. TAXES: Lease Paragraph 9 ("Taxes") shall be amended to include the following language:

"The term "Real Estate Taxes" shall also include supplemental taxes related to the period of Tenant's Lease Term whenever levied, including any such taxes that may be levied after the Lease Term has expired".

6. HAZARDOUS MATERIALS: Lease Paragraph 43 ("Hazardous Materials") shall be amended to include the following:

As evidenced by their initials set forth immediately below, Tenant acknowledges that Landlord has provided Tenant with copies of the environmental reports listed on Exhibit A ("Reports"), and Tenant acknowledges that Tenant and Tenant's experts (if any) have had ample opportunity to review such reports and that Tenant has satisfied itself as to the environmental conditions of the Property and the suitability of such conditions for Tenant's intended use of the Property. To the best of Landlord's knowledge as of the date of this Lease, except as noted in said Reports, no additional on site Hazardous Materials contamination exist on the Property; however, Landlord shall have no obligation to further investigate.

Initial:				Initial:
		Tenant				Landlord

7. EXAMINATION OF AMENDMENT: This Amendment No. 1 shall not be effective until its execution by both Landlord and Tenant.

EXCEPT AS MODIFIED HEREIN, all other terms, covenants, and conditions of said July 31, 1996 Lease Agreements shall remain in full force and effect.

(This Space Left Blank Intentionally)

IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment No. 1 to Lease as of the day and year last written below.

LANDLORD:		TENANT:
JOHN ARRILLAGA SURVIVOR'S TRUST		ARGENIX, INC. a Delaware corporation
By	John Arrillaga, Trustee	By
Date:		Print or Type Name

RICHARD T. PEERY SEPARATE PROPERTY TRUST		Title:
By	Richard T. Peery, Trustee	Date:
Date:

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Exhibit 10.73

EX-10.74 9 a2078956zex-10_74.htm EXHIBIT 10.74
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Exhibit 10.74

		BUILDING: Ardenwood I-4
		PROPERTY: 01-0514
		UNIT: 1
		LEASE ID: 0514 ABGE01-01

LEASE AGREEMENT

THIS LEASE, made this 22nd day of January, 2002 between JOHN ARRILLAGA, Trustee, or his Successor Trustee, UTA dated 7/20/77 (JOHN ARRILLAGA SURVIVOR'S TRUST) as amended, and RICHARD T. PEERY, Trustee, or his Successor Trustee, UTA dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended, hereinafter called Landlord, and ABGENIX, INC., a Delaware corporation, hereinafter called Tenant.

WITNESSETH:

Landlord hereby leases to Tenant and Tenant hereby hires and takes from Landlord those certain premises (the "Premises") outlined in red on Exhibit "A", attached hereto and incorporated herein by this reference thereto more particularly described as follows:

All of that certain 50,688+ square foot, one-story building located at 34700 Campus Drive, Fremont, California 94555. Said Premises is more particularly shown within the area outlined in Red on Exhibit A attached hereto. The Premises shall include the entire parcel, of which the Building is a part, including exclusive parking appurtenant thereto, as shown within the area outlined in Green on Exhibit A attached. The Premises is leased on an "as is" basis, in its present condition, and in the configuration as shown in Red on Exhibit B to be attached hereto.

The word "Premises" as used throughout this lease is hereby defined to include the nonexclusive use of landscaped areas, sidewalks and driveways in front of or adjacent to the Premises, and the nonexclusive use of the area directly underneath or over such sidewalks and driveways. The gross leasable area of the building shall be measured from outside of exterior walls to outside of exterior walls, and shall include any atriums, covered entrances or egresses and covered building loading areas.

Said letting and hiring is upon and subject to the terms, covenants and conditions hereinafter set forth and Tenant covenants as a material part of the consideration for the Lease to perform and observe each and all of said terms, covenants and conditions. This Lease is made upon the conditions of such performance and observance.

1. USE Tenant shall use the Premises only in conformance with applicable governmental laws, regulations, rules and ordinances for the purpose of general office, light manufacturing, research and development (including biotechnological research and associated animal research) and storage and other uses as may be necessary or appropriate for Tenant to conduct Tenant's business, provided that such uses shall be in accordance with all applicable governmental laws and ordinances, and for no other purpose without Landlord's prior written consent. Tenant shall not do or permit to be done in or about the Premises nor bring or keep or permit to be brought or kept in or about the Premises anything which is prohibited by or will in any way increase the existing rate of (or otherwise affect) fire or any insurance covering the Premises or any part thereof, or any of its contents, or will cause a cancellation of any insurance covering the Premises or any part thereof, or any of its contents. Tenant shall not do or permit to be done anything in, on or about the Premises which will in any way obstruct or interfere with the rights of other tenants or occupants of the Premises or neighboring premises or injure or annoy them, or use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises. No sale by auction shall be permitted on the Premises. Tenant shall not place any loads upon

the floors, walls or ceiling which endanger the structure, or place any harmful fluids or other materials in the drainage system of the building, or overload existing electrical or other mechanical systems. No waste materials or refuse shall be dumped upon or permitted to remain upon any part of the Premises or outside of the building in which the Premises are a part, except in trash containers placed inside exterior enclosures designated by Landlord for that purpose or inside of the building proper where designated by Landlord. No materials, supplies, equipment, finished products or semi-finished products, raw materials or articles of any nature shall be stored upon or permitted to remain outside the Premises. Tenant shall not place anything or allow anything to be placed near the glass of any window, door partition or wall which may appear unsightly from outside the Premises. No loudspeaker or other device, system or apparatus which can be heard outside the Premises shall be used in or at the Premises without the prior written consent of Landlord. Tenant shall not commit or suffer to be committed any waste in or upon the Premises. Tenant shall indemnify, defend and hold Landlord harmless against any loss, expense, damage, reasonable attorneys' fees, or liability arising out of failure of Tenant to comply with any applicable law relating to Tenant's use of the Premises or for which Tenant is otherwise obligated to comply under the terms of this Lease. Tenant shall comply with any covenant, condition, or restriction ("CC&R's") affecting the Premises. The provisions of this paragraph are for the benefit of Landlord only and shall not be construed to be for the benefit of any tenant or occupant of the Premises.

2. TERM*

A. The term of this Lease shall be for a period of TWELVE (12) years TWO (2) months (unless sooner terminated as hereinafter provided) and, subject to Paragraphs 2B and 3, shall commence on the 1st day of May, 2002 and end on the 30th day of June, 2014.

B. Possession of the Premises shall be deemed tendered and the term of the Lease shall commence on May 1, 2002, or

(d): As otherwise agreed in writing.

3. POSSESSION If Landlord, for any reason whatsoever, cannot deliver possession of said premises to Tenant at the commencement of the said term, as hereinbefore specified, this Lease shall not be void or voidable; no obligation of Tenant shall be affected thereby; nor shall Landlord or Landlord's agents be liable to Tenant for any loss or damage resulting therefrom; but in that event the commencement and termination dates of the Lease, and all other dates affected thereby shall be revised to conform to the date of Landlord's delivery of possession, as specified in Paragraph 2B, above. The above is, however, subject to the provision that the period of delay of delivery of the Premises shall not exceed 60 days from the commencement date hereof (except those delays caused by Acts of God, strikes, war, utilities, governmental bodies, weather, unavailable materials, and delays beyond Landlord's control shall be excluded in calculating such period) in which instance Tenant, at its option, may, by written notice to Landlord, terminate this Lease.

4. RENT

A. Basic Rent. Tenant agrees to pay to Landlord at such place as Landlord may designate without deduction, offset, prior notice, or demand, and Landlord agrees to accept as Basic Rent for the leased Premises the total sum of FOURTEEN MILLION FOUR HUNDRED THOUSAND FOUR HUNDRED SIXTY AND 80/100 Dollars ($14,400,460.80) in lawful money of the United States of America, payable as follows:

See Paragraph 39 for Basic Rent Schedule

*: It is agreed in the event said Lease commences on a date other than the first day of the month the term of the Lease will be extended to account for the number of days in the partial month. The Basic Rent during the resulting partial month will be pro-rated (for the number of days in the partial month) at the Basic Rent rate scheduled for the projected commencement date as shown in Paragraph 39.

B. Time for Payment. Full monthly rent is due in advance on the first day of each calendar month. In the event that the term of this Lease commences on a date other than the first day of a calendar month, on the date of commencement of the term hereof Tenant shall pay to Landlord as rent for the period from such date of commencement to the first day of the next succeeding calendar month that proportion of the monthly rent hereunder which the number of days between such date of commencement and the first day of the next succeeding calendar month bears to thirty (30). In the event that the term of this Lease for any reason ends on a date other than the last day of a calendar month, on the first day of the last calendar month of the term hereof Tenant shall pay to Landlord as rent for the period from said first day of said last calendar month to and including the last day of the term hereof that proportion of the monthly rent hereunder which the number of days between said first day of said last calendar month and the last day of the term hereof bears to thirty (30).

C. Late Charge. Notwithstanding any other provision of this Lease, if Tenant is in default in the payment of rental as set forth in this Paragraph 4 when due, or any part thereof, Tenant agrees to pay Landlord, in addition to the delinquent rental due, a late charge for each rental payment in default ten (10) days. Said late charge shall equal ten percent (10%) of each rental payment so in default.

D. Additional Rent. Beginning with the commencement date of the term of this Lease, Tenant shall pay to Landlord or to Landlord's designated agent in addition to the Basic Rent and as Additional Rent the following:

(a): All Taxes relating to the Premises as set forth in Paragraph 9, and
(b): All insurance premiums and deductibles relating to the Premises, as set forth in Paragraph 12, and
(c): All charges, costs and expenses, which Tenant is required to pay hereunder, together with all interest and penalties, costs and expenses including reasonable attorneys' fees and legal expenses, that may accrue thereto in the event of Tenant's failure to pay such amounts, and all damages, reasonable costs and expenses which Landlord may incur by reason of default of Tenant or failure on Tenant's part to comply with the terms of this Lease. In the event of nonpayment by Tenant of Additional Rent, Landlord shall have all the rights and remedies with respect thereto as Landlord has for nonpayment of rent, and
(d): all prorated costs and expenses related to the Ardenwood Property Owners' Association as set forth in Paragraph 44.

The Additional Rent due hereunder shall be paid to Landlord or Landlord's agent (i) within five business days for taxes and insurance and within thirty days for all other Additional Rent items after presentation of invoice from Landlord or Landlord's agent setting forth such Additional Rent and/or (ii) at the option of Landlord, Tenant shall pay to Landlord monthly, in advance, Tenant's prorata share of an amount estimated by Landlord to be Landlord's approximate average monthly expenditure for such Additional Rent items, which estimated amount shall be reconciled within 120 days of the end of each calendar year or more frequently if Landlord elects to do so at Landlord's sole and absolute discretion as compared to Landlord's actual expenditure for said Additional Rent items, with Tenant paying to Landlord, upon demand, any amount of actual expenses expended by Landlord in excess of said estimated amount, or Landlord crediting to Tenant (providing Tenant is not in default in the performance of any of the terms, covenants and conditions of this Lease) any amount of estimated payments made by Tenant in excess of Landlord's actual expenditures for said Additional Rent items. Within thirty (30) days after receipt of Landlord's reconciliation, Tenant shall have the right, at Tenant's sole expense, to audit, at a mutually convenient time at Landlord's office, Landlord's records relating to the foregoing expenses. Such audit must be conducted by Tenant or an independent nationally recognized accounting firm that is not being compensated by Tenant or other third party on a

contingency fee basis. If such audit reveals that Landlord has overcharged Tenant, the amount overcharged shall be credited to Tenant's account within thirty (30) days after the audit is concluded.

E. Fixed Management Fee. Beginning with the Commencement Date of the Term of this Lease, Tenant shall pay to Landlord or Landlord's Assignee, in addition to the Basic Rent and Additional Rent, a fixed monthly management fee ("Management Fee") equal to one and one-half percent (1.5%) of the Basic Rent due for each month during the Lease Term.

The respective obligations of Landlord and Tenant under this paragraph shall survive the expiration or other termination of the term of this Lease, and if the term hereof shall expire or shall otherwise terminate on a day other than the last day of a calendar year, the actual Additional Rent incurred for the calendar year in which the term hereof expires or otherwise terminates shall be determined and settled on the basis of the statement of actual Additional Rent for such calendar year and shall be prorated in the proportion which the number of days in such calendar year preceding such expiration or termination bears to 365.

F. Place of Payment of Rent and Additional Rent. All Basic Rent hereunder and all payments hereunder for Additional Rent shall be paid to Landlord at the office of Landlord at PEERY/ARRILLAGA, FILE 1504, BOX 60000, SAN FRANCISCO, CA 94160 or to such other person or to such other place as Landlord may from time to time designate in writing.

G. Security Deposit. Concurrently with Tenant's execution of this Lease, Tenant shall deposit with Landlord the sum of ONE HUNDRED TWENTY-EIGHT THOUSAND SEVEN HUNDRED FIFTY-ONE AND NO/100 Dollars ($128,571.00). Said sum shall be held by Landlord as a Security Deposit for the faithful performance by Tenant of all of the terms, covenants, and conditions of this Lease to be kept and performed by Tenant during the term hereof. If Tenant defaults with respect to any provision of this Lease, including, but not limited to, the provisions relating to the payment of rent and any of the monetary sums due herewith, Landlord may (but shall not be required to) use, apply or retain all or any part of this Security Deposit for the payment of any other amount which Landlord may spend by reason of Tenant's default or to compensate Landlord for any other loss or damage which Landlord may suffer by reason of Tenant's default. If any portion of said Deposit is so used or applied, Tenant shall, within ten (10) days after written demand therefor, deposit cash with Landlord in the amount sufficient to restore the Security Deposit to its original amount. Tenant's failure to do so shall be a material breach of this Lease. Landlord shall not be required to keep this Security Deposit separate from its general funds, and Tenant shall not be entitled to interest on such Deposit. If Tenant fully and faithfully performs every provision of this Lease to be performed by it, the Security Deposit or any balance thereof shall be returned to Tenant (or at Landlord's option, to the last assignee of Tenant's interest hereunder) at the expiration of the Lease term and after Tenant has vacated the Premises. In the event of termination of Landlord's interest in this Lease, Landlord shall transfer said Deposit to Landlord's successor in interest whereupon Tenant agrees to release Landlord from liability for the return of such Deposit or the accounting therefor.

5. ACCEPTANCE AND SURRENDER OF PREMISES Be entry hereunder Tenant accepts the Premises as being in good and sanitary order, condition and repair and accepts the building and improvements included in the Premises in their present condition and without representation or warranty by Landlord as to the condition of such building or as to the use of occupancy which may be made thereof. Any exceptions to the foregoing must be by written agreement executed by Landlord and Tenant. Tenant agrees on the last day of the Lease term or on the sooner termination of this Lease. To surrender the Premises promptly and ocaceably to Landlord in good condition and repair (damage by Acts of God, fire and other causes for which Tenant does not have the obligation to repair under the other provisions of this Lease, and normal wear and tear excepted), with all interior walls painted, or cleaned so that they appear freshly painted, and repainted, and repaired or replaced, if damaged; all floors cleaned and waved; all carpets cleaned and shampooed; all broken, marred or nonconforming acoustical ceiling files replaced; all windows washed; the air conditioning and heating systems serviced

by a reputable and licensed service firm and in good operating condition and repair; the plumbing and electrical systems and lighting in good order and repair, including replacement of any burned out or ballast; the lawn and shrubs in good condition including the replacement of any dead or damaged plantings; the sidewalk, driveways and parking areas in good order, condition and repair; together with all alterations, additions, and improvements which may have been made in, to, or on the Premises (except moveable trade fixtures installed at the expense of Tenant) except that Tenant shall ascertain from Landlord within thirty (30) days before the end the term of this Lease whether Landlord desires to have the Premises or any part or parts thereof restored to their condition and configuration as when the Premises were delivered to Tenant and if Landlord shall so desire, then Tenant shall restore said Premises or such part or parts thereof before the end of this Lease at Tenant's sole cost and expense. Notwithstanding the above, Tenant shall not be required to remove such interior improvements shown on Exhibit B to this Lease. Tenant on or before the end of the term or sooner termination of this Lease, shall remove all of Tenant's personal property and trace fixtures from the Premises, and all property not so removed on or before on or before the end of the term or sooner termination of this Lease shall be deemed abandoned by Tenant and to same shall thereupon pass to Landlord without compensation to Tenant. Landlord may, upon termination of this Lease, remove all moveable furniture and equipment so abandoned by Tenant, at Tenant's sole cost, and repair any damage caused by such removal at Tenant's sole cost. If the Premises be not surrendered at the end of the term or sooner termination of this Lease. Tenant shall indemnify Landlord against loss or liability resulting from the delay by Tenant in so surrendering the Premises including, without limitation, any claims made by any successful Tenant founded on such delay. Nothing contained herein shall be construed as an extension of the term hereof or as a consent of Landlord to any holding given by Tenant. The voluntary or other surrender of this Lease or the Premises by Tenant or a mutual cancellation of this Lease shall not work as a merger and. all the option of Landlord, shall either terminate all or any existing subleases or subleases or operate as an assignment to Landlord of all or any such subleases or subtenancies.

6. ALTERATIONS AND ADDITIONS Tenant shall not make, or suffer to be made, any alteration or addition to the Premises, or any part thereof, without the written consent of Landlord first had and obtained by Tenant (such consent not to be unreasonably withheld), but at the cost of the Tenant, and any addition to or allocation of the Premises, except moveable furniture and trade fixtures, shall at once become a part of the Premises and upon Termination of this Lease belong to Landlord. Landlord reserves the right to approve all contracts and mechanics proposed by Tenant to make such alterations and additions which approval shall not be unreasonably withheld. Tenant shall retain little to all moveable furniture and trade fixtures placed in the Premises. All heating, lighting, electrical, air conditioning, floor to ceiling partitioning, drapery, carpeting, and floor installations made by Tenant, together with a property that has become an integral part of the Premises, shall not be deemed trade failure. Tenant agrees that it will not proceed to make such alteration or additions, without having obtained consent from Landlord to do so, and until five (5) days from the receipt of such consent. In order that Landlord may post appropriate notices to avoid any liability to contracts or materials suppliers for payment for Tenant's improvements. Tenant will at all times permit such notices to be posted and to remain posted until the completion of work, Tenant shall, if required by Landlord, secure at Tenant's own cost and expense, a completion and man indemnity band, satisfactory to Landlord, for such work. Tenant further covenants and agrees that any mechanic's lien filed against the Premises for work claimed to have been done for, or materials claimed to have been furnished to Tenant, will be discharged by Tenant, by band or otherwise, within ten (10) days after notice of the filing thereof, at the cost and expense of Tenant. Any excepting to the foregoing must be made in writing and executed by both Landlord and Tenant.

7. TENANT MAINTENANCE Subject to the provisions of Paragraph 21, Tenant shall, at its sole cost and expense, keep and maintain the Premises (including appurtenances) and every part thereof in a-high standard of maintenance and repair, or replacement,an in good and sanitary condition. Tenant's maintenance and repair responsibilities herein referred to include, but are not limited to, amortization,

all windows (interior and exterior), window frames, plate glass and glazing (destroyed by accident or act of third parties), truck doors, plumbing systems (such as water and drain lines, sinks, toilets, faucets, drains, showers and water fountains), electrical systems (such as panels, conduits, outlets, lighting fixtures, lamps, bulbs, tubes, and ballasts), heating and air conditioning systems (such as compressors, fans, air handlers, ducts, mixing boxes, thermostats, time clocks, boilers, heaters, supply and return grills), structural elements and exterior surfaces of the building, store fronts, roofs, downspouts, all interior improvements within the premises including but not limited to wall coverings, window coverings, carpet, floor coverings, partitioning, ceilings, doors (both interior and exterior), including closing mechanisms, latches, locks, skylights (if any), automatic fire extinguishing systems, and elevators and all other interior improvements of any nature whatsoever, and all exterior improvements including but not limited to landscaping, sidewalks, driveways, parking lots including striping and seating, sprinkler systems, lighting, ponds, fountains, waterways, and drains. Tenant agrees to provide carpet shields under all rolling chairs or to otherwise be responsible for wear and tear of the carpet caused by such rolling chairs if such wear and tear excess that caused by normal tool traffic in surrounding areas. Areas of excessive wear shall be replaced all Tenant's sole expense upon Lease termination. Tenant hereby waives all rights under, and benefits of, Subsection 1 of Section 1932 and Section 1341 and 1942 of the California Civil Code and under any similarities law, statute or ordinance now or hereafter in effect. In the event any of the above maintenance responsibilities apply to any other tenant(s) of Landlord where there is common usage with other tenant(s), such maintenance responsibilities and charges shall be allocated to the leased Premises by square footage or other equitable and determined by Landlord.

8. UTILITIES Tenant shall pay promptly, as the same become due, all charged for water, gas, electricity, telephone, telex and other electronic communication service, sewer service, waste pick-up and any other Utilities, materials or services furnished directly to or used by Tenant or about the Premises during the term of this Lease, including, without limitation, any temporary or permanent utility surcharge or other exactinos whether or not hereinafter imposed. In the event the above charges apply in any other tenant(s) of Landlord where there is common usage with other tenant(s), such charges shall be allocated to the leased Premises by square footage or other equitable basis as calculated and determined by Landlord.

Landlord shall not be liable for and Tenant shall not be entitled to any abatement or reduction of rent by reason of any interruption or failure of utility services in the Premises when such interruption or failure is caused by accident, breakage, repair, strikes, lockouts, or other labor disturbances or labor disputes of any nature, or by any other cause, similar or dissimilar, beyond the reasonable control of Landlord.

9. TAXES

A. As Additions Rent and in accordance with Paragraph 4D of this Lease, Tenant shall pay to Landlord, or if Landlord so directs, directly to the Tax Collector, all Real Property Taxes relating to the Premises accruing with respect to the Premises during the Term of this Lease. In the event the Premises leased hereunder consists of only a portion of the entire tax parcel, Tenant shall pay to Landlord as they become due Tenant's proportionate share of such real estate taxes allocated to the leased Premises by square footage or other reasonable basis as calculated and determined by Landlord, if the tax billing partains 100% to the leased Premises, and Landlord chooses to have Tenant pay said real estate taxes directly to the Tax Collector, then in such event it shall be the responsibility of Tenant to obtain the tax and assessment bills and pay, prior to delinquency, the applicable real property taxes and assessments pertaining to the leased Premises, and failure to receive a bill for taxes and/or assessments shall not provide a basis for cancellation of or nonresponsibility for payment of penalties for nonpayment or late payment by Tenant. The term "Real Property Taxes", as used herein, shall mean (i) all taxes, assessments, levies and other charges of any kind or nature whatsoever, general and special, foreseen and unforeseen (including all installations of principal and interest required to pay any general special assessments for public improvements and any increases resulting from reassessments

caused by any change in ownership of the Premises) now or hereafter imposed by any governmental or quasi-governmental authority or special district having the direct or indirect power to tax or levy assessments, which are levied or assessed against, or with respect to the value, occupancy or use of, all or any portion of the Premises (as now constructed or as may at any time hereafter be constructed, altered, or otherwise changed) or Landlord's interest therein; any improvements located within the Premises (regardless of ownership); the failures, equipment and other property of Landlord, neat or personal, that are an integral part if located in the Premises; or parking areas, public utilities, or energy within the Premises; (ii) all charges, levies or fees imposed by reason of environmental regulation or other governmental control of the Premises, excluding any taxes related to on-site Hazardous Materials contamination which Tenant did not cause or contribute to; and (iii) all costs and fees (including reasonable attorneys' fees) incurred by Landlord in reasonably contesting any Real Property Tax and in negotiating with public authorities as to any Real Property Tax, if at any time during the term of this Lease the taxation or assessment of the Premises prevailing as of the commencement date of this Lease shall be altered so that in lieu of or in addition to any Real Property Tax described above there shall be levied, assessed or imposed (whether by reason or change in the method of taxation or assessment, creation of a new tax exchange, or any other cause) an alternate or additional tax or charge (i) on the value, use or occupancy of the Premises of Landlord's interest therein or (ii) on or measured by the gross receipts, income or rentals from the Premises, on Landlord's business of leasing the Premises, or computed in any manner with respect to the Premises, then any such tax or charge, however designatee shall be included within the meaning of the term "Real Property Taxes" for purposes of this Lease, if any Real Property Tax is based upon property or rents unrelated to the Premises, then only that part of such Real Property Tax that is fairly allocable to the Premises shall be included within the meaning of the term "Real Property Taxes". Notwithstanding the foregoing, the term "Real Property Taxes" shall not include estate, inheritance, gift or franchise fares of Landlord or the federal or state net income tax imposed on Landlord's income from all sources or other personal taxes measured by the net income (as distinguished from gross income) of Landlord from the leasing of the Premises either separately or together with other property. SEE PARAGRAPH 46

B. Taxes on Tenant's Property Tenant shall be liable for and shall pay ten days before delinquency, taxes levied against any personal property or trade fixtures placed by Tenant in or about the Premises. If any such taxes on Tenant's personal property or trade fixtures are levied against Landlord or Landlord's property or if the assessed value of the Premises is increased by the inclusion therein of a value placed upon personal property or trade fixtures Tenant and if Landlord, after written notice to Tenant, pays the taxes based on such increased assessment, which Landlord shall have the right to do regardless of the validity thereof, but only under proper protest if requested by Tenant, Tenant shall within ten (10) days after demand, as the case may be, repay to Landlord the taxes so levied against Landlord, or the proportion of such taxes resulting from such increase in the assessment; provided that in any such event Tenant shall have the right. In the name of Landlord and with Landlord's full cooperation, to bring suit in any court of competent jurisdiction to recover the amount of such taxes so paid under protest, and any amount so recovered shall belong to Tenant.

10. LIABILITY INSURANCE Tenant, at Tenant's expense, agrees to keep in force during the term of this Lease's policy of commercial general liability insurance with combined single limit coverage of not less than Two Million Dollars ($2,000,000), per occurrence for bodily injury and property damage occurring in, on or about the Premises, including parking and landscaped areas. Such insurance shall be primary and noncontributary as respects any insurance carried by Landlord. The policy or policies effecting such insurance shall name Landlord as additional insureds, and shall insure any liability of Landlord, contingent or otherwise; as respects acts or omission of Tenant. Its agents, employees or invitees or otherwise by any conduct or transactions of any of said persons in or about or concerning the Premises including any failure of Tenant to observe or perform any of its obligations hereunder; shall be issued by an insurance company admitted to transact business in the State of California; and shall provide that the insurance effected thereby shall not be canceled, except upon thirty (30) days

prior written notice to Landlord. A certificate of insurance said policy shall be delivered to Landlord. If, during the term of this Lease, in the considered opinion of Landlord's Lender, Insurance advisor, or counsel, the amount of Insurance described in this Paragraph 10 is not adequate, Tenant agrees to increase said coverage to such reasonable amount as Landlord's Lender, insurance advisor, or counsel shall deem adequate.

11. TENANT'S PERSONAL PROPERTY INSURANCE AND WORKMAN'S COMPENSATION INSURANCE Tenant shall maintain a policy or policies of fire and property damage insurance in "all risk" form with a sprinkler leakage endorsement ensuring the personal property, inventory, trade fixtures, and leasehold improvements within the leased Premises for the full replacement value thereof. The proceeds from any of such policies shall be used for the repair or replacement of such items so insured.

Tenant shall also maintain a policy or policies of workman's compensation insurance and any other employee benefit insurance sufficient to comply with all laws.

12. PROPERTY INSURANCE Landlord shall purchase and keep in force, and as Additional Rent and in accordance with Paragraph 4D of this Lease. Tenant shall pay to Landlord (or Landlord's agent of so directed by Landlord) Tenant's proportional share (allocated to the leased Premises by square footage or other equitable basis as calculated and determined by Landlord) of the deductibles on insurance claims and the cost of, policy of policies of insurance covering loss or damage to the Premises (excluding routine maintenance and repairs and incidental damage or destruction caused by accidents or vandalism for which Tenant is responsible under Paragraph 7) in the amount of the full replacement value thereof, providing protection against those parts included within the classification of "all risks" insurance and flood and/or earthquake insurance. If available, plus a policy of rental income insurance in the amount of one hundred (100%) percent of twelve (12) months Basic Rent, plus sums paid as Additional Rent, if such insurance cost is increased due to Tenant's use of the Premises, Tenant agrees to pay to Landlord the full cost of such increase. Tenant shall have no interest in nor any right to the proceeds of any insurance procured by Landlord for the Premises.

Landlord and Tenant do each hereby respectively release the other, to the extent of insurance coverage of the releasing party, from any liability for less or damage caused by fire or any of the extended coverage casualties included in the releasing party's insurance policies. Irrespective of the cause of such fire or casualty; provided, however, that if the insurance policy of either releasing party prohibits such waiver, then this waiver shall not take effect until consent to such waiver is obtained. If such waiver is so prohibiting, the insured party affected shall promptly notify the other party thereof.

13. INDEMNIFICATION Landlord shall not be liable to Tenant and Tenant hereby waives all claims against Landlord for any injury to or death any person or damage to or destruction of property in or about the Premises by or from any cause whatsoever, including, without limitation, gas, fire, oil, electricity or leakage of any character from the roof, walls, basement or other portions of the Premises but excluding, however, the willful misconduct or negligence of Landlord, its agents, servants, employees, invitees, or contractors of which negligence Landlord has knowledge and reasonable time to correct. Except as to injury to persons or damage to property to the extent arising from the willful misconduct or the negligence of Landlord, its agents, servants, employees, invitees, or contractors, Tenant shall hold Landlord harmless from and defend Landlord against any and all expenses, including reasonable attorney's fees. In connection therewith, arising out of any injury to or death of any person or damage to or destruction or property occurring in, on or about the Premises, of any part thereof, from any causes whatsoever.

14. COMPLIANCE Tenant, at its sole cost and expense, shall promptly comply with all laws, statutes, ordinances and governmental rules, regulations of its agents, servants, employees, invitees, or contractors requirements now or hereafter in effect; with the requirements of any board of fire underwriters or other similar body now or hereafter constituted; and with any direction or occupancy certificate issued pursuant to law by any public officer, provided, however, that no such failure shall be

deemed a breach of the provisions. If Tenant, immediately upon notification, commences to remedy or rectify said failure. The judgement of any court of competent jurisdiction or the admission of Tenant in any action against Tenant, whether Landlord be a party thereto or not, that Tenant has violated any such law, statute, ordinance or governmental rule, regulation, requirement, direction or provision, shall be conclusive of that fact as between Landlord and Tenant. Tenant shall, at its sole cost and expense, comply with any and all requirements pertaining to said Premises, of any insurance organization or company, necessary for the maintenance of reasonable fire and public liability insurance covering requirements pertaining to said Premises.

15. LIENS Tenant shall keep the Premises free from any liens arising out of any work performed, materials furnished or obligation incurred by Tenant, in the event that Tenant shall not, within ten (10) days following notice of the imposition of such lien, cause the same to be released of record. Landlord shall have, in addition to all other remedies provided herein and by law, the right (after two days written notice), but no obligation, to cause the same to be released by such means as if shall deem proper, including payment of the claim giving rise to such lien. All sums paid by Landlord for such purpose, and all expense incurred by it in connection therewith, shall be payable to Landlord by Tenant on demand with interest at the prime rate of interest as quoted by the Bank of America.

16. ASSIGNMENT AND SUBLETTING Tenant shall assign, transfer, or hypothecate the leasehold estate under this Lease, of any interest therein, and shall not sublet the Premises,or any part thereof, or any right or privilege appurtenant thereto, or suffer any other person or entity to occupy or use the Premises, or any portion thereof, without, in increase, the prior written consent of Landlord which consent will not be unreasonably withheld. As a condition for granting this consent to any assignment, transfer, or subletting. Landlord may require that Tenant agrees to pay to Landlord, as Additional Rent, twenty-five percent (25%) of all rents or additional consideration received by Tenant from its assignees, transferees, or subleasees in excess of the Rent payable by Tenant to Landlord hereunder ("Excess Rent"); provided, however, that before sharing such Excess Rent, Tenant shall first be entitled to recover from such Excess Rent (i) the amount of any reasonable leasing commissions paid by Tenant to third parties not affiliated with Tenant and (ii) Tenant's unamortized costs, excluding costs of interest (if any), to construct interior improvements in the area being sublet for said subtenant(s). Tenant shall, by thirty (30) days written notice, advice Landlord of its intent to assign or transfer Tenant's interest in the Lease or sublet the Premises or any portion thereof for any part of the term hereof. Within thirty (30) days after receipt of said written notice, Landlord may, in its sole discretion elect to terminate this Lease as to the portion of the Premises described in Tenant's notice on the date specified in Tenant's notice by giving written notice of such election to terminate (provided Tenant intends to sublet 50% or more of the Premises) If no such notice to terminate is given to Tenant within said thirty (30) day period. Tenant may proceed to locate an acceptable sublease, assignor, or other transfer for presentment to Landlord for Landlord's approval, all in accordance with the lease, covenant and condition of this paragraph 16. If Tenant intends to sublet Premises and Landlord elects to terminate this Lease, this Lease shall be terminated on the date specified in Tenant's notice. If, however, this Lease shall terminate pursuant to the foregoing with respect to less than all the Premises, the rent as defined and reserved hereinabove shall be adjusted on a pro rata basis to the number of square feet retained by Tenant, and this Lease as so amended shall continue in full force and effect. In the event Tenant is allowed to assign, transfer or sublet the whole or any part of the Premise, with the prior written consent of Landlord, no assignee, transferee or subtenant shall assign or transfer this Lease, either in whole or in part, or sublet the whole or any part of the Premises without having obtained prior written consent of Landlord which consent shall not be unreasonably withheld. A consent of Landlord to one assignment, transfer, hypothecation, subletting, occupation or use without such consent shall be void and shall constitute a breach of this Lease by Tenant and shall, if the option of Landlord exercised by written notice to Tenant, terminate this Lease. The leasehold estate under this Lease shall not shall any interest therein, be assignable for any purpose by operation of law without the written consent of Landlord which consent shall not be unreasonably withheld. As a condition to its consent,

Landlord may require Tenant to pay all expenses in connection with the assignment, and Landlord may require Tenant's assignee or transferee (or other assignees or transferees) to assume in writing all of the obligations under this Lease and for Tenant to remain liable to Landlord under the Lease. SEE PARAGRAPH 42

17. SUBORDINATION AND MORTGAGES In the event Landlord's title or leasehold interest is now or hereafter encumbered by a deed of trust, upon the interest of Landlord in the land and buildings in which the demised Premises are located, to secure a loan from a lender thereinafter referred to as "Lender" to Landlord, Tenant shall, at the request of Landlord or Lender, execute in writing an agreement (in form reasonably acceptable to Tenant) subordinating its rights under this Lease to the lien of such deed of trust, or, if so requested, agreeing that the lien of Lender's deed of trust shall be or remain subject and subordinate to the rights of Tenant under this Lease. Notwithstanding any such subordination, Tenant's possession under this Lease shall not be disputed if Tenant is not in default and so long as Tenant shall pay all rent and observe and perform all of the provisions set forth in this Lease and any Subordination agreement shall reflect the agreement of the Lender to the same. SEE PARAGRAPH 47

18. ENTRY BY LANDLORD Landlord reserves, and shall at all reasonable times after at least 24 hours notice (except in emergencies) have, the right to enter the Premises to inspect them; to perform any services to be provided by Landlord hereunder; to make repairs or provide any services to a contiguous tenant(s); to submit the Premises to prospective purchasers, mortgagors or tenants; to post notices of nonresponsibility; and to alter, improve or repair the Premises or other parts of the building, all without abatement of rent, and may erect scaffolding and other necessary structures in or through the Premises where reasonably required by the character of the work to be performed provided, however that the business of Tenant shall be interfered with to the least extent that is reasonably practical. Any entry to the Premises by Landlord for the purposes provided for herein shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into or a detainer of the Premises or an eviction, actual or constructive, of Tenant from the premises or any portion thereof.

19. BANKRUPTCY AND DEFAULT The commencement of a bankruptcy action or liquidation action or reorganization action or insolvency action or an assignment of or by Tenant for the benefit of creditors, or any similar action undertaken by Tenant, or the insolvency of Tenant, shall, at Landlord's option, constitute a breach of this Lease by Tenant. If the trustee or receiver appointed to serve during a bankruptcy, liquidation, reorganization, insolvency or similar action elects to reject Tenant's unexpired Lease, the trustee or receiver shall notify Landlord in writing of its election within thirty (30) days after an order for relief in a liquidation action or within thirty (30) days after the commencement of any action.

Within thirty (30) days after court approval of the assumption of this Lease, the trustee or receiver shall cure (or provide adequate assurance to the reasonable satisfaction of Landlord that the trustee or receiver shall cure) any and all previous defaults under the unexpired Lease and shall compensate Landlord for all actual pecuniary loss and shall provide adequate assurance of future performance under said Lease to the reasonable satisfaction of Landlord. Adequate assurance of future performance, as used herein, includes, but shall not be limited to: (i) assurance of source and payment of rent, and other consideration due under this Lease; (ii) assurance that the assumption or assignment of this Lease will not breach substantially any provision, such as radius, location, use, or exclusivity provision, in any agreement relating to the above described Premises.

Nothing contained in this section shall affect the existing right of Landlord to refuse to accept an assignment upon commencement of or in connection with a bankruptcy, liquidation, reorganization or insolvency action or an assignment of Tenant for the benefit of creditors or other similar act. Nothing contained in this Lease shall be construed as giving or granting or creating an equity in the demised Premises to Tenant. In no event shall the leasehold estate under this Lease, or any interest therein, be assigned by voluntary or involuntary bankruptcy proceeding without the prior written consent of Landlord. In no event shall this Lease or any rights or privileges hereunder be an asset of Tenant under any bankruptcy, insolvency or reorganization proceedings.

The failure to perform or honor any covenant, condition or representation made under this Lease shall constitute a default hereunder by Tenant upon expiration of the appropriate grace period hereinafter provided. Tenant shall have a period of five (5) business days from the date of written notice from Landlord within which to cure any default in the payment of rental or adjustment thereto. Tenant shall have a period of thirty (30) days from the date of written notice from Landlord within which to cure any other default under this Lease; provided, however, that if the nature of Tenant's failure is such that more than thirty days is reasonably required to cure the same, Tenant shall not be in default so long as Tenant commences performance within such thirty day period and thereafter prosecutes the same to completion.

Upon an uncured default of this Lease by Tenant, Landlord shall have the following rights and remedies in addition to any other rights or remedies available to Landlord at law or in equity:

(a) The rights and remedies provided for by California Civil Code Section 1951.2, including but not limited to, recovery of the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of rental loss for the same period that Tenant proves could be reasonably avoided, as computed pursuant to subsection (b) of said Section 1951.2. Any proof by Tenant under subparagraphs (2) and (3) of Section 1951.2 of the California Civil Code of the amount of rental loss that could be reasonably avoided shall be made in the following manner: Landlord and Tenant shall each select a licensed real estate broker in the business of renting property of the same type and use as the Premises and in the same geographic vicinity. Such two real estate brokers shall select a third licensed real estate broker, and the three licensed real estate brokers so selected shall determine the amount of the rental loss that could be reasonably avoided from the balance of the term of this Lease after the time of award. The decision of the majority of said licensed real estate brokers shall be final and binding upon the parties hereto.

(b) The rights and remedies provided by California Civil Code Section which allows Landlord to continue the Lease in effect and to enforce all of its rights and remedies under this Lease, including the right to recover rent as it becomes due, for so long as Landlord does not terminate Tenant's right to possession; acts of maintenance or preservation, efforts to relet the Premises, or the appointment of a receiver upon Landlord's initiative to protect its interest under this Lease shall not constitute a termination of Tenant's right to possession.

(d) To the extent permitted by law the right and power, to enter the Premises and remove therefrom all persons and property, to store such property in a public warehouse or elsewhere at the cost of and for the account of Tenant, and to sell such property and apply such proceeds therefrom pursuant to applicable California law, Landlord may from time to time sublet the premises or any part thereof for such term or terms (which may extend beyond the term of this Lease) and at such rent and such other terms as Landlord in its reasonable sole discretion may deem advisable, with the right to make alterations and repairs to the Premises. Upon each subletting, (i) Tenant shall be immediately liable to pay Landlord, in addition to indebtedness other than rent due hereunder, the reasonable cost of such subletting, including, but not limited to, reasonable attorneys' fees, and any real estate commissions actually paid, and the cost of such reasonable alterations and repairs incurred by Landlord and the amount, if any, by which the rent hereunder for the period of such subletting (to the extent such period does not exceed the term hereof) exceeds the amount to be paid as rent for the Premises of such period or (ii) at the option of Landlord, rents received from such subletting shall be applied first to payment of indebtedness other than rent due hereunder from Tenant to Landlord; second, to the payment of any costs of such subletting and of such alterations and repairs; third to payment of rent due and

unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in payment of future rent as the same becomes due hereunder. If Tenant has been credited with any rent to be received by such subletting under option (i) and such rent shall not be promptly paid to Landlord by the subtenant(s), or if such rentals received from such subletting under option (ii) during any month be less than that to be paid during that month by Tenant hereunder, Tenant shall pay any such deficiency to Landlord. Such deficiency shall be calculated and paid monthly. No taking possession of the Premises by Landlord shall be construed as an election on its part to terminate this Lease unless a written notice of such intention be given to Tenant. Notwithstanding any such subletting without termination, Landlord may at any time hereafter elect to terminate this Lease for such previous breach.

(e) The right to have a receiver appointed for Tenant upon application by Landlord, to take possession of the Premises and to apply any rental collected from the premises and to exercise all other rights and remedies granted to Landlord pursuant to subparagraph d above.

20. ABANDONMENT Tenant shall not vacate or abandon the Premises at any time during the term of this Lease (except that Tenant may vacate so long as it pays Rent, provides a security service to check the Premises during normal business hours from Monday to Friday, and otherwise performs its obligations hereunder) and if Tenant shall abandon, vacate or surrender said Premises, or be dispossessed by the process of law, or otherwise, any personal property belonging to Tenant and left on the Premises shall be deemed to be abandoned, at the option of Landlord, except such property as may be mortgaged to Landlord.

21. DESTRUCTION In the event the Premises are destroyed in whole or in part from any cause, except for routine maintenance and repairs and incidental damage and destruction or caused from vandalism and accidents for which Tenant is responsible under Paragraph 7, Landlord may, at its option:

(a) Rebuild or restore the Premises to their condition prior to the damage or destruction, or

(b) Terminate this Lease, (providing that the Premises is damaged to the extent of 33¹/3% of the replacement cost. If Landlord does not give Tenant notice in writing within thirty (30) days from the destruction of the Premises of its election to either rebuild and restore them or to terminate this Lease, Landlord shall be deemed to have elected to rebuild or restore them, in which event Landlord agrees, at its expense promptly to rebuild or restore the premises to their condition prior to the damage or destruction. Tenant shall be entitled to a reduction in rent while such repair is being made in the proportion that the area of the Premises rendered untenantable by such damage bears to the total area of the Premises. If it is reasonably estimated by Landlord that the rebuilding or restoration will exceed 180 days or if Landlord does not complete the rebuilding or restoration within one hundred eighty (180) days following the date of destruction (such period of time to be extended for delays caused by the fault or neglect of Tenant or because of subsequent acts of God, acts of public agencies, labor disputes, strikes, fires, freight embargos, rainy or stormy weather, inability to obtain materials, supplies or fuels, acts of contractors or subcontractors, or delay of the contractors or subcontractors due to such causes or other contingencies beyond the control of Landlord), then Tenant shall have the right to terminate this Lease by giving fifteen (15) days prior written notice to Landlord. Notwithstanding anything herein to the contrary, Landlord's obligation to rebuild or restore shall be limited to the building and interior improvements constructed by Landlord as they existed as of the commencement date of the Lease and shall not include restoration of Tenant's trade fixtures, equipment, merchandise, or any improvements, alterations or additions made by Tenant to the Premises, which Tenant shall forthwith replace or fully repair at Tenant's sole cost and expense provided this Lease is not cancelled according to the provisions above.

Unless this Lease is terminated pursuant to the foregoing provisions, this Lease shall remain in full force and effect. Tenant hereby expressly waives the provisions of Section 1932, Subdivision 2, in Section 1933, Subdivision 4 of the California Civil Code.

In the event that the building in which the Premises are situated is damaged or destroyed to the extent of not less than 33¹/3% of the replacement cost thereof, Landlord may elect to terminate this Lease, whether the Premises be injured or not.

22. EMINENT DOMAIN If all or any part of the Premises shall be taken by any public or quasi-public authority under the power of eminent domain or conveyance in lieu thereof, this Lease shall terminate as to any portion of the Premises so taken or conveyed on the date when title vests in the condemnor, and Landlord shall be entitled to any and all payment, income, rent, award, or any interest therein whatsoever which may be paid or made in connection with such taking or conveyance, and Tenant shall have no claim against Landlord or otherwise for the value of any unexpired term of this Lease. Notwithstanding the foregoing paragraph, any compensation specifically awarded Tenant for loss of business, Tenant's personal property, moving cost or loss of goodwill, shall be and remain the property of Tenant.

If any action or proceeding is commenced for such taking of the Premises or any material part thereof, then Landlord shall have the right to terminate this Lease by giving Tenant written notice thereof within sixty (60) days of the date of receipt of said written advice, or commencement of said action or proceeding, or taking conveyance, which termination shall take place as of the first to occur of the last day of the calendar month next following the month in which such notice is given or the date on which title to the Premises shall vest in the condemnor.

In the event of such a partial taking or conveyance of the Premises, if the portion of the Premises taken or conveyed is so substantial that the Tenant can no longer reasonably conduct its business, Tenant shall have the privilege of terminating this Lease within sixty (60) days from the date of such taking or conveyance, upon written notice to Landlord of its intention to do so, and upon giving of such notice this Lease shall terminate on the last day of the calendar month next following the month in which such notice is given, upon payment by Tenant of the rent from the date of such taking or conveyance to the date of termination.

If a portion of the Premises be taken by condemnation or conveyance in lieu thereof and neither Landlord nor Tenant shall terminate this Lease as provided herein, this Lease shall continue in full force and effect as to the part of the Premises not so taken or conveyed, and the rent herein shall be apportioned as of the date of such taking or conveyance so that thereafter the rent to be paid by Tenant shall be in the ratio that the area of the portion of the Premises not so taken or conveyed bears to the total area of the Premises prior to such taking.

23. SALE OR CONVEYANCE BY LANDLORD In the event of a sale or conveyance of the Premises or any interest therein, by any owner of the reversion then constituting Landlord, the transferor shall thereby be released as to such interest transferred from any further liability upon any of the terms, covenants or conditions (express or implied) herein contained in favor of Tenant, and in such event, insofar as such transfer is concerned, Tenant agrees to look solely to the responsibility of the successor in interest of such transferor in and to the Premises and this Lease. This Lease shall not be affected by any such sale or conveyance, and Tenant agrees to attorn to the successor in interest of such transferor.

24. ATTORNMENT TO LENDER OR THIRD PARTY In the event the interest of Landlord in the land and buildings in which the leased Premises are located (whether such interest of Landlord is a fee title interest or a leasehold interest) is encumbered by deed of trust, and such interest is acquired by the lender or any third party through judicial foreclosure or by exercise of a power of sale at private trustee's foreclosure sale, Tenant hereby agrees to attorn to the purchaser at any such foreclosure sale and to recognize such purchaser as the Landlord under this Lease. In the event the lien of the deed of

trust securing the loan from a Lender to Landlord is prior and paramount to the Lease, this Lease shall nonetheless continue in full force and effect for the remainder of the unexpired term hereof, at the same rental herein reserved and upon all the other terms, conditions and covenants herein contained.

25. HOLDING OVER Any holding over by Tenant after expiration or other termination of the term of this Lease with the written consent of Landlord delivered to Tenant shall not constitute a renewal or extension of the Lease or give Tenant any rights in or to the leased Premises except as expressly provided in this Lease. Any holding over after the expiration or other termination of the term of this Lease, with the consent of Landlord, shall be construed to be a tenancy from month to month, on the same terms and conditions herein specified insofar as applicable except that the monthly Basic Rent shall be increased to an amount equal to one hundred fifty (150%) percent of the monthly Basic Rent required during the last month of the Lease term.

26. CERTIFICATE OF ESTOPPEL Tenant shall at any time upon not less than ten (10) days prior written notice from Landlord execute, acknowledge and deliver to Landlord a statement in writing (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect) and the date to which the rent and other charges are paid in advance, if any, and (ii) acknowledging that there are not, to Tenant's knowledge, any uncured defaults on the part of the Landlord hereunder, or specifying such defaults, if any are claimed. Any such statement may be conclusively relied upon by any prospective purchaser or encumbrancer of the Premises. Tenant's failure to deliver such statement within such time shall be conclusive upon Tenant that this Lease is in full force and effect without modification except as may be represented by Landlord; that there are no uncured defaults in Landlord's performance, and that not more than one month's rent has been paid in advance.

27. CONSTRUCTION CHANGES It is understood that the description of the Premises and the location of ductwork, plumbing and other facilities therein are subject to such minor changes as Landlord or Landlord's architect determines to be desirable in the course of construction of the Premises, and no such changes shall effect this Lease or entitle Tenant to any reduction of rent hereunder or result in any liability of Landlord to Tenant. Landlord does not guarantee the accuracy of any drawings supplied to Tenant and verification of the accuracy of such drawings rests with Tenant.

28. RIGHT OF LANDLORD TO PERFORM All terms, covenants and conditions of this Lease to be performed or observed by Tenant shall be performed or observed by Tenant at Tenant's sole cost and expense and without any reduction of rent. If Tenant shall fail to pay any sum of money, or other rent, required to be paid by it hereunder and such failure shall continue for five (5) days after written notice by Landlord, or shall fail to perform any other term or covenant hereunder on its part to be performed, and such failure shall continue for thirty (30) days after written notice thereof by Landlord, Landlord, without waiving or releasing Tenant from any obligation of Tenant hereunder, may, but shall not be obliged to, make any such payment or perform any such other term or covenant on Tenant's part to be performed. All sums so paid by Landlord and all necessary costs of such performance by Landlord together with interest thereon at the rate of the prime rate of interest per annum as quoted by the Bank of America from the date of such payment or performance by Landlord, shall be paid (and Tenant covenants to make such payment) to Landlord within five (5) business days after demand by Landlord, and Landlord shall have (in addition to any other right or remedy of Landlord) the same rights and remedies in the event of nonpayment by Tenant as in the case of failure by Tenant in the payment of rent hereunder.

29. ATTORNEYS' FEES

A. In the event that either Landlord or Tenant should bring suit for the possession of the Premises, for the recovery of any sum due under this Lease, or because of the breach of any provision of this Lease, or for any other relief against the other party hereunder, then all costs and expenses,

including reasonable attorneys' fees, incurred by the prevailing party therein shall be paid by the other party, which obligation on the part of the other party shall be deemed to have accrued on the date of the commencement of such action and shall be enforceable whether or not the action is prosecuted to judgment.

B. Should Landlord be named as a defendant in any suit brought against Tenant in connection with or arising out of Tenant's occupancy hereunder, Tenant shall pay to Landlord its costs and expenses incurred in such suit, including a reasonable attorney's fee.

30. WAIVER The waiver by either party of the other party's failure to perform or observe any term, covenant or condition herein contained to be performed or observed by such waiving party shall not be deemed to be a waiver of such term, covenant or condition or of any subsequent failure of the party failing to perform or observe the same or any other such term, covenant or condition therein contained, and no custom or practice which may develop between the parties hereto during the term hereof shall be deemed a waiver of, or in any way affect, the right of either party to insist upon performance and observance by the other party in strict accordance with the terms hereof.

31. NOTICES All notices, demands, requests, advices or designations which may be or are required to be given by either party to the other hereunder shall be in writing. All notices, demands, requests, advices or designations by Landlord to Tenant shall be sufficiently given, made or delivered if personally served on Tenant by United States certified or registered mail, postage prepaid, or by a reputable same day or overnight courier service, addressed to Tenant at the Premises Attn: President. All notices, demands, requests, advices or designations by Tenant to Landlord shall be sent by United States certified or registered mail, postage prepaid, addressed to Landlord at its offices at Peery/Arrillaga, 2560 Mission College Blvd., Suite 101, Santa Clara, CA 95054. Each notice, request, demand, advice or designation referred to in this paragraph shall be deemed received on the date of receipt or refusal to accept receipt of the mailing thereof in the manner herein provided, as the case may be. Either party shall have the right, upon ten (10) days written notice to the other, to change the address noted herein.

32. EXAMINATION OF LEASE Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or option for a lease, and this instrument is not effective as a lease or otherwise until its execution and delivery by both Landlord and Tenant.

33. DEFAULT BY LANDLORD Landlord shall not be in default unless Landlord fails to perform obligations required of Landlord within a reasonable time, but in no event earlier than (30) days after written notice by Tenant to Landlord and to the holder of any first mortgage or deed of trust covering the Premises whose name and address shall have heretofore been furnished to Tenant in writing, specifying wherein Landlord has failed to perform such obligations; provided, however, that if the nature of Landlord's obligations is such that more than thirty (30) days are required for performance, then Landlord shall not be in default if Landlord commences performance within such thirty (30) day period and thereafter diligently prosecutes the same to completion.

34. CORPORATE AUTHORITY If Tenant is a corporation (or a partnership), each individual executing this Lease on behalf of said corporation (or partnership) represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said corporation (or partnership) in accordance with the by-laws of said corporation (or partnership in accordance with the partnership agreement) and that this Lease is binding upon said corporation (or partnership) in accordance with its terms. If Tenant is a corporation, Tenant shall, within thirty (30) days after execution of this Lease, deliver to Landlord a certified copy of the resolution of the Board of Directors of said corporation authorizing or ratifying the execution of this Lease.

36. LIMITATION OF LIABILITY In consideration of the benefits accruing hereunder. Tenant and all successors and assigns covenant and agree that, in the event of any actual or alleged failure, breach or default hereunder by Landlord:

(a) the sole and exclusive remedy shall be against Landlord's interest in the Premises leased herein;

(b) no partner of Landlord shall be sued or named as a party in any suit or action (except as may be necessary to secure jurisdiction of the partnership);

(c) no service of process shall be made against any partner of Landlord (except as may be necessary to secure jurisdiction of the partnership);

(d) no partner of Landlord shall be required to answer or otherwise plead to any service of process;

(e) no judgment will be taken against any partner of Landlord;

(f) any judgment taken against any partner of Landlord may be vacated and set aside at any time without hearing;

(g) no writ of execution will ever be levied against the assets of any partner of Landlord;

(h) these covenants and agreements are enforceable both by Landlord and also by any partner of Landlord.

Tenant agrees that each of the foregoing covenants and agreements shall be applicable to any covenant or agreement either expressly contained in this Lease or imposed by statute or at common law.

37. SIGNS No sign, placard, picture, advertisement, name or notice shall be inscribed, displayed or printed or affixed on or to any part of the outside of the Premises or any exterior windows of the Premises without the written consent of Landlord first had and obtained and Landlord shall have the right to remove any such sign, placard, picture, advertisement, name or notice without notice to and at the expense of Tenant. If Tenant is allowed to print or affix or in any way place a sign in, on, or about the Premises, upon expiration or other sooner termination of this Lease, Tenant at Tenant's sole cost and expense shall both remove such sign and repair all damage in such a manner as to restore all aspects of the appearance of the Premises to the condition prior to the placement of said sign.

All approved signs or lettering on outside doors shall be printed, painted, affixed or inscribed at the expense of Tenant by a person approved of by Landlord.

Tenant shall not place anything or allow anything to be placed near the glass of any window, door partition or wall which may appear unsightly from outside the Premises.

38. MISCELLANEOUS AND GENERAL PROVISIONS

A. Use of Building Name. Tenant shall not, without the written consent of Landlord, use the name of the building for any purpose other than as the address of the business conducted by Tenant in the Premises.

B. Choice of Law, Severability. This Lease shall in all respects be governed by and construed in accordance with the laws of the State of California. If any provision of this Lease shall be invalid, unenforceable or ineffective for any reason whatsoever, all other provisions hereof shall be and remain in full force and effect.

C. Definition of Terms. The term "Premises" includes the space leased hereby and any improvements now or hereafter installed therein or attached thereto. The term "Landlord" or any pronoun used in place thereof includes the plural as well as the singular and the successors and assigns

of Landlord. The term "Tenant" or any pronoun used in place thereof includes the plural as well as the singular and individuals, firms, associations, partnerships and corporations, and their and each of their respective heirs, executors, administrators, successors and permitted assigns, according to the context hereof, and the provisions of this Lease shall inure to the benefit of and bind such heirs, executors, administrators, successors, and permitted assigns.

The term "person" includes the plural as well as the singular and individuals, firms, associations, partnerships and corporations. Words used in any gender include other genders. If there be more than one Tenant the obligations of Tenant hereunder are joint and several. The paragraph headings of this Lease are for convenience of reference only and shall have no effect upon the construction or interpretation of any provision hereof.

D. Time of Essence. Time is of the essence of this Lease and of each and all of its provisions.

E. Quitclaim. At the expiration or earlier termination of this Lease, Tenant shall execute, acknowledge and deliver to Landlord, within ten (10) days after written demand from Landlord to Tenant, any quitclaim deed or other document required by any reputable title company, licensed to operate in the State of California, to remove the cloud or encumbrance created by this Lease from the real property of which Tenant's Premises are a part.

F. Incorporation of Prior Agreements: Amendments. This instrument along with any exhibits and attachment hereto constitutes the entire agreement between Landlord and Tenant relative to the Premises and this agreement and the exhibits and attachments may be altered, amended or revoked only by an instrument in writing signed by both Landlord and Tenant. Landlord and Tenant agree hereby that all prior or contemporaneous oral agreements between and among themselves and their agents or representatives relative to the leasing of the Premises are merged in or revoked by this agreement.

G. Recording. Neither Landlord nor Tenant shall record this Lease or a short form memorandum hereof without the consent of the other.

H. Amendments for Financing. Tenant further agrees to execute any reasonable amendments required by a lender to enable Landlord to obtain financing, so long as Tenant's rights hereunder are not substantially affected.

I. Additional Paragraphs. Paragraphs 39 through 53 are added hereto and are included as a part of this lease.

J. Clauses, Plats and Riders. Clauses, plats and riders, if any, signed by Landlord and Tenant and endorsed on or affixed to this Lease are a part hereof.

K. Diminution of Light, Air or View. Tenant covenants and agrees that no diminution or shutting off of light, air or view by any structure which may be hereafter erected (whether or not by Landlord) shall in any way affect his Lease, entitle Tenant to any reduction of rent hereunder or result in any liability of Landlord to Tenant.

IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this Lease as of the day and year last written below.

LANDLORD:		TENANT:
JOHN ARRILLAGA SURVIVOR'S TRUST		ABGENIX, INC. a Delaware corporation

By		By

	John Arrillaga, Trustee

Date:		Title


RICHARD T. PEERY SEPARATE PROPERTY TRUST		Type or Print Name

By		Date:

	Richard T. Peery, Trustee
Date:

Paragraphs 39 through 53 to Lease Agreement Dated January 22, 2002, By and Between the John Arrillaga Survivor's Trust and the Richard T. Peery Separate Property Trust, as Landlord, and Abgenix, Inc., a Delaware corporation, as Tenant for 50,688± Square Feet of Space Located at 34700 Campus Drive, Fremont, California.

39. BASIC RENT: Subject to Paragraphs 2A, 2B and 48 below, and in accordance with Paragraph 4A herein, the total aggregate sum of FOURTEEN MILLION FOUR HUNDRED THOUSAND FOUR HUNDRED SIXTY AND 80/100 DOLLARS ($14,400,460.80), shall be payable as follows:

Upon Tenant's execution of this Lease, the sum of EIGHTY-THREE THOUSAND SIX HUNDRED THIRTY-FIVE AND 20/100 DOLLARS ($83,635.20) shall be due, representing the Basic Rent for the period of May 1, 2002 through May 31, 2002. In the event the Lease does not commence on May 1, 2002, said Basic Rent amount prepaid for the month of May 2002 shall be applied to the amount due as of the Lease Commencement Date and shall be prorated if the Lease does not commence on the first day of a given month, with any excess payment credited to the following month's Basic Rent due.

On June 1, 2002, the sum of EIGHTY-THREE THOUSAND SIX HUNDRED THIRTY-FIVE AND 20/100 DOLLARS ($83,635.20) shall be due, and a like sum due on the first day of each month thereafter, through and including December 1, 2002.

On January 1, 2003, the sum of EIGHTY-SIX THOUSAND ONE HUNDRED SIXTY-NINE AND 60/100 DOLLARS ($86,169.60) shall be due, and a like sum due on the first day of each month thereafter, through and including December 1, 2003.

On January 1, 2004, the sum of EIGHTY-EIGHT THOUSAND SEVEN HUNDRED FOUR AND NO/100 DOLLARS ($88,704.00) shall be due, and a like sum due on the first day of each month thereafter, through and including December 1, 2004.

On January 1, 2005, the sum of NINETY-ONE THOUSAND TWO HUNDRED THIRTY-EIGHT AND 40/100 DOLLARS ($91,238.40) shall be due, and a like sum due on the first day of each month thereafter, through and including December 1, 2005.

On January 1, 2006, the sum of NINETY-THREE THOUSAND SEVEN HUNDRED SEVENTY-TWO AND 80/100 DOLLARS ($93,772.80) shall be due, and a like sum due on the first day of each month thereafter, through and including December 1, 2006.

On January 1, 2007, the sum of NINETY-SIX THOUSAND THREE HUNDRED SEVEN AND 20/100 DOLLARS ($96,307.20) shall be due, and a like sum due on the first day of each month thereafter, through and including December 2007.

On January 1, 2008, the sum of NINETY-EIGHT THOUSAND EIGHT HUNDRED FORTY-ONE AND 60/100 DOLLARS ($98,841.60) shall be due, and a like sum due on the first day of each month thereafter, through and including December 1, 2008.

On January 1, 2009, the sum of ONE HUNDRED ONE THOUSAND THREE HUNDRED SEVENTY-SIX AND NO/100 DOLLARS ($101,376.00) shall be due, and a like sum due on the first day of each month thereafter, through and including December 1, 2009.

On January 1, 2010, the sum of ONE HUNDRED THREE THOUSAND NINE HUNDRED TEN AND 40/100 DOLLARS ($103,910.40) shall be due, and a like sum due on the first day of each month thereafter, through and including December 1, 2010.

On January 1, 2011, the sum of ONE HUNDRED SIX THOUSAND FOUR HUNDRED FORTY FOUR AND 80/100 DOLLARS ($106,444.80) shall be due, and a like sum due on the first day of each month thereafter, through and including December 1, 2011.

On January 1, 2012, the sum of ONE HUNDRED EIGHT THOUSAND NINE HUNDRED SEVENTY-NINE AND 20/100 DOLLARS ($108,979.20) shall be due, and a like sum due on the first day of each month thereafter, through and including December 1, 2012.

On January 1, 2013, the sum of ONE HUNDRED ELEVEN THOUSAND FIVE HUNDRED THIRTEEN AND 60/100 DOLLARS ($111,513.60) shall be due, and a like sum due on the first day of each month thereafter, through and including December 1, 2013.

On January 1, 2014, the sum of ONE HUNDRED FOURTEEN THOUSAND FORTY-EIGHT AND NO/100 DOLLARS ($114,048.00) shall be due, and a like sum due on the first day of each month thereafter, through and including June 1, 2014; or until the entire aggregate sum of FOURTEEN MILLION FOUR HUNDRED THOUSAND FOUR HUNDRED SIXTY AND 80/100 Dollars ($14,400,460.80) has been paid, subject to an adjustment as may be required by any provisions providing for abatement of Rent or adjustment of the Term of this Lease.

40. CONSENT: Whenever the consent or approval of one party to the other is required by the terms of this Lease, such consent or approval shall not be unreasonably withheld.

41. ASSESSMENT CREDITS: The demised property herein may be subject to a special assessment levied by the City of Fremont as part of an Improvement District. As a part of said special assessment proceedings (if any), additional bonds were or may be sold and assessments were or may be levied to provide for construction contingencies and reserve funds. Interest shall be earned on such funds created for contingencies and on reserve funds which will be credited for the benefit of said assessment district. To the extent surpluses are created in said district through unused contingency funds, interest earnings or reserve funds, such surpluses shall be deemed the property of Landlord. Notwithstanding that such surpluses may be credited on assessments otherwise due against the Leased Premises, Tenant shall pay to Landlord, as additional rent if, and at the time of any such credit of surpluses, an amount equal to all such surpluses so credited. For example: if (i) the property is subject to an annual assessment of $1,000.00, and (ii) a surplus of $200.00 is credited towards the current year's assessment which reduces the assessment amount shown on the property tax bill from $1,000.00 to $800.00, Tenant shall, upon receipt of notice from Landlord, pay to Landlord said $200.00 credit as Additional Rent.

42. ASSIGNMENT AND SUBLETTING (CONTINUED):

A. In addition to and notwithstanding anything to the contrary in Paragraph 16 of this Lease, Landlord hereby agrees to consent to Tenant's assigning or subletting said Lease to: (i) any parent or subsidiary corporation, affiliate, or corporation with which Tenant merges or consolidates, and provided that, with respect to any such assignment, said parent or subsidiary corporation, affiliate, or said corporation has a net worth equal to or greater than the net worth of Tenant at the time of such assignment, merger, or consolidation; or (ii) any third party or entity to whom Tenant sells all or substantially all of its assets; provided, that the net worth of the resulting or acquiring corporation has a net worth after the merger, consolidation or acquisition equal to or greater than the net worth of Tenant at the time of such merger, consolidation or acquisition. No such assignment or subletting will release the Tenant from its liability and responsibility under this Lease to the extent Tenant continues in existence following such transaction. Notwithstanding the above, Tenant shall be required to (a) give Landlord written notice prior to such assignment or subletting to any party as described in (i) and (ii) above, and (b) execute Landlord's consent document prepared by Landlord reflecting the assignment or subletting.

B. Any and all sublease agreement(s) between Tenant and any and all subtenant(s) (which agreements must be consented to by Landlord, pursuant to the requirements of this Lease) shall contain the following language:

"If Landlord and Tenant jointly and voluntarily elect, for any reason whatsoever, to terminate the Master Lease prior to the scheduled Master Lease termination date, then this Sublease (if

then still in effect) shall terminate concurrently with the termination of the Master Lease. Subtenant expressly acknowledges and agrees that (1) the voluntary termination of the Master Lease by Landlord and Tenant and the resulting termination of this Sublease shall not give Subtenant any right or power to make any legal or equitable claim against Landlord, including without limitation any claim for interference with contract or interference with prospective economic advantage, and (2) Subtenant hereby waives any and all rights it may have under law or at equity against Landlord to challenge such an early termination of the Sublease, and unconditionally releases and relieves Landlord, and its officers, directors, employees and agents, from any and all claims, demands, and/or causes of action whatsoever (collectively, "Claims"), whether such matters are known or unknown, latent or apparent, suspected or unsuspected, foreseeable or unforeseeable, which Subtenant may have arising out of or in connection with any such early termination of this Sublease. Subtenant knowingly and intentionally waives any and all protection which is or may be given by Section 1542 of the California Civil Code which provides as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with debtor.

The term of this Sublease is therefore subject to early termination. Subtenant's initials here below evidence (a) Subtenant's consideration of and agreement to this early termination provision, (b) Subtenant's acknowledgment that in determining the net benefits to be derived by Subtenant under the terms of this Sublease, Subtenant has anticipated the potential for early termination, and (c) Subtenant's agreement to the general waiver and release of Claims above.

Initials:				Initials:
		Subtenant				Tenant"

43. HAZARDOUS MATERIALS: Landlord and Tenant agree as follows with respect to the existence or use of "Hazardous Materials" (as defined herein) on, in, under or about the Premises and real property located beneath said Premises (hereinafter collectively referred to as the "Property"):

As used herein, the term "Hazardous Materials" shall mean any hazardous or toxic substance, material or waste which is or becomes subject to or regulated by any local governmental authority, the State of California, or the United States Government. The term "Hazardous Materials" includes, without limitation any material or hazardous substance which is (i) listed under Article 9 or defined as "hazardous" or "extremely hazardous" pursuant to Article 11 of Title 22 of the California Administrative Code, Division 4, Chapter 30, (ii) listed or defined as a "hazardous waste" pursuant to the Federal Resource Conservation and Recovery Act, Section 42 U.S.C. Section 6901 et. seq., (iii) listed or defined as a "hazardous substance" pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et. seq, (42 U.S.C. Section 9601), (iv) petroleum or any derivative of petroleum, or (v) asbestos.

Tenant shall have no obligation to "clean up", reimburse, release, indemnify, or defend Landlord with respect to any Hazardous Materials or wastes which Tenant (prior to and during the Term of the Lease) or other parties on the Property, as described below, (during the Term of this Lease) did not store, dispose, or transport in, use, or cause to be on the Property or which Tenant, its agents, employees, contractors, vendors, invitees, visitors or its future subtenants and/or assignees (if any) (during the Term of this Lease), did not store, dispose, or transport in, use or cause to be on the Property in violation of applicable law.

Tenant shall be 100 percent liable and responsible for: (i) any and all "investigation and cleanup" of any Hazardous Materials contamination resulting from any Hazardous Materials which Tenant, its agents, employees, contractors, vendors, invitees visitors or its future subtenants and/or assignees (if any), or other parties on the Property, does store, dispose, or transport in, use or cause to be on the

Property, and (ii) any claims, including third party claims, resulting from such Hazardous Materials contamination. Tenant shall indemnify Landlord and hold Landlord harmless from any liabilities, demands, costs, expenses and damages, including, without limitation, attorney fees incurred as a result of any claims resulting from any such Hazardous Materials contamination.

Tenant also agrees not to use or dispose of any Hazardous Materials on the Property without first obtaining Landlord's written consent; provided, however, that Landlord's consent shall not be required for normal use of customary household and office supplies, such as cleaners, lubricants, solvents, copier toner, etc. Tenant agrees to complete compliance with governmental regulations regarding the use or removal or remediation of all Hazardous Materials used, stored, disposed of, transported or caused to be on the Property as stated above, and prior to the termination of said Lease Tenant agrees to follow the proper closure procedures and will obtain a clearance from the local fire department and/or the appropriate governing agency. If Tenant uses any Hazardous Materials, Tenant also agrees to install, at Tenant's expense, such Hazardous Materials monitoring devices as Landlord deems reasonably necessary. It is agreed that the Tenant's responsibilities related to Hazardous Materials will survive the termination date of the Lease and that Landlord may obtain specific performance of Tenant's responsibilities under this Paragraph 43.

Subject to the terms and conditions of this Lease, Landlord hereby acknowledges its consent to Tenant's storage and use on the Property of those Hazardous Materials listed on Exhibit C attached hereto. At Tenant's sole cost and expense, each year upon the anniversary of the Commencement Date of the Lease Term ("Anniversary Date"), Tenant shall hire a qualified environmental consultant, acceptable to Landlord, to evaluate whether Tenant is in compliance with all applicable Governmental Regulations pertaining to Hazardous Materials. Tenant shall submit to Landlord a report from such environmental consultant which discusses the environmental consultant's findings within two (2) months of each Anniversary Date. Tenant shall promptly take all steps necessary to correct any and all problems identified by the environmental consultant and provide Landlord with documentation of all such corrections.

As evidenced by their initials set forth immediately below, Tenant acknowledges that Landlord has provided Tenant with copies of the environmental reports listed on Exhibit D ("Reports"), and Tenant acknowledges that Tenant and Tenant's experts (if any) have had ample opportunity to review such reports and that Tenant has satisfied itself as to the environmental conditions of the Property and the suitability of such conditions for Tenant's intended use of the Property. To the best of Landlord's knowledge as of the date of this Lease, except as noted in said Reports, no additional on site Hazardous Materials contamination exist on the Property; however, Landlord shall have no obligation to further investigate.

Initial:				Initial:
		Tenant				Landlord

It is agreed that the Tenant's responsibilities related to Hazardous Materials will survive the expiration or termination of this Lease and that Landlord may obtain specific performance of Tenant's responsibilities under this Paragraph 43.

44. ASSOCIATION DUES: The Premises leased hereunder is part of the Ardenwood Property Owner's Association (the "Association"), and is subject to Association Dues to fund the cost of the Association's obligations and expenses as authorized under said Agreement. As of the date of this Lease, Tenant's current prorata share of the Association Dues is currently estimated at $44.52 per month and is subject to adjustment as provided for by said Association. Said Association Dues are payable to Tenant to Landlord as Additional Rent on a monthly basis throughout the Term of this Lease. Tenant understands that it will not be a direct member of the Association.

45. AUTHORITY TO EXECUTE: The parties executing this Agreement hereby warrant and represent that they are properly authorized to execute this Agreement and bind the parties on behalf of whom they execute this agreement and to all of the terms, covenants and conditions of this Agreement as they relate to the respective parties hereto.

46. TAXES CONTINUED: Notwithstanding anything within Paragraph 9, it is agreed that if any special assessments for capital improvements are assessed, and if Landlord has the option to either pay the entire assessment in cash or go to bond, and if Landlord elects to pay the entire assessment in cash in lieu of going to bond, the entire portion of the assessment assigned to Tenant's Leased Premises will be prorated over the same period that the assessment would have been prorated had the assessment gone to bond.

47. SUBORDINATION AND MORTGAGES CONTINUED: Landlord represents to Tenant that the Premises are not presently encumbered by a deed of trust or other security device in favor of any Lender.

48. LEASE CONTINGENT UPON LANDLORD OBTAINING TERMINATION AGREEMENT WITH CURRENT TENANT: This Lease is subject to and conditional upon Landlord obtaining from Matrix Pharmaceutical, Inc. ("Matrix"), the current tenant occupying the Premises leased hereunder, a Termination Agreement related to the Premises satisfactory to Landlord on or before April 30, 2002. In the event Matrix does not fully vacate and surrender the Premises to Landlord on or before April 30, 2002, the scheduled Commencement Date herein shall automatically be amended to June 1, 2002. In the event Landlord is unable to obtain said satisfactory Termination Agreement on or before May 31, 2002, this Lease shall be automatically rescinded.

49. BROKERS. Landlord and Tenant each represent and warrant that they have not dealt with any real estate brokers, agents, or finders in connection with the original Term of this Lease, and know of no real estate broker, agent or finder who is entitled to a commission in connection with this Lease ("Lease Commission"), except Mark Pearson of Cresa Partners, which Lease Commission shall be paid one hundred percent (100%) by Matrix Pharmaceutical, Inc. The parties hereto acknowledge that Landlord will not pay a Lease Commission to Mark Pearson, Cresa Partners or any other broker related to the original Term of this Lease, or in the event this Lease is extended or the square footage leased hereunder is increased for any reason whatsoever. Landlord and Tenant each agrees to defend, protect, indemnify and hold the other party harmless from and against all claims for brokerage commissions, finder's fees, and other compensation made by any other broker, agent, or finder as consequence of Landlord's or Tenant's actions or dealings with such other broker, agent or finder.

50. CROSS DEFAULT. It is understood that Landlord and Tenant have previously entered into another lease dated July 31, 1996 for premises located at 7601 Dumbarton Circle, Fremont, California (the "Existing Lease"). As a material part of the consideration for the execution of this Lease by Landlord, it is agreed between Landlord and Tenant that a default under this Lease, or a default under said Existing Lease may, at the option of Landlord, be considered a default under both leases, in which event Landlord shall be entitled (but in no event required) to apply all rights and remedies of Landlord under the terms of one lease to both leases including, but not limited to, the right to terminate one or both of said leases by reason of a default under said Existing Lease or hereunder.

51. OPTION TO EXTEND LEASE FOR ONE (1) YEAR SEVEN (7) MONTHS: Landlord hereby grants to Tenant an Option to Extend this Lease Agreement for an additional one (1) year seven (7) month period upon the following terms and conditions;

A. Tenant shall give Landlord written notice of Tenant's exercise of this Option to Extend not later than twelve (12) months prior to the scheduled Lease Termination Date, which Termination Date is currently projected to be June 30, 2014, in which event the Lease shall be considered extended for an additional one (1) year and seven (7) months, subject to the Basic Rental set forth below and with: (i) the Rent to be determined pursuant to Paragraph B below; (ii) the terms and conditions subject to amendment by Landlord (Landlord, in its sole and absolute discretion, may, but is not required to, incorporate its current Lease provisions that are standard in Landlord's leases as of the date of Tenant's exercise of its Option to Extend); and (iii) this Paragraph 51 deleted. In the event that Tenant fails to timely exercise Tenant's Option to Extend as set forth herein in writing, Tenant shall have no

further Option to Extend this Lease, and this Lease shall continue in full force and effect for the full remaining term hereof, absent this Paragraph 51.

B. In the event Tenant timely exercises Tenant's Option to Extend as set forth herein, Landlord shall, within fifteen (15) days after receipt of Tenant's exercise of option, advise Tenant of the terms and conditions and Rent required for the Extended Term of the Lease. Tenant shall have five (5) days after receipt from the Landlord of said new terms and conditions and Rent in which to accept said new Basic Rental, terms and conditions and enter into written documentation confirming same. In the event Tenant fails to execute said written documentation confirming said new terms and conditions and Rent for the Extended Term of Lease within said five (5) day period, Tenant shall have no further Option to Extend this Lease, and this Lease shall continue in full force and effect for the full remaining term hereof absent of this Paragraph 51, with Landlord having no further responsibility or obligation to Tenant with respect to Tenant's Option to Extend.

C. The option rights of Tenant under this Paragraph 51, and the Extended Term hereunder, are granted for Tenant's personal benefit and may not be assigned or transferred by Tenant, either voluntarily or by operation of law, in any manner whatsoever (except to a parent or subsidiary corporation or successor by merger as provided for in Paragraph 42A). In the event that Landlord consents to a sublease or assignment under Paragraph 51, the option granted herein and any Extended Term hereunder shall be void and of no force and effect, whether or not Tenant shall have purported to exercise such option prior to such assignment or sublease.

D. It is agreed that if Tenant is at any time prior to exercising its Option to Extend in default of this Lease and has failed to cure the default in the time period allowed, this Paragraph 51 will be null and void and Tenant will have no further rights under this Paragraph 51. It is further agreed that if Tenant has exercised its Option to Extend and is subsequently in default and fails to cure said default in the time period allowed prior to, or at any time the lease commences on the Extended Term, Landlord may at its sole and absolute discretion, cancel Tenant's Option to Extend, and this Lease will continue in full force and effect for the full remaining term hereof, absent of this Paragraph 51.

52. EXISTING TENANT IMPROVEMENTS: It is agreed between the parties hereto that the existing tenant improvements ("Existing Tenant Improvements") as detailed on Exhibit B-1 attached hereto shall not be removed from the Premises by Landlord prior to the Lease Commencement Date or thereafter during the Lease Term and that said Existing Tenant Improvements will be available for Tenant's use during the Lease Term. Notwithstanding the above, Tenant shall be one hundred percent (100%) responsible for the maintenance, repair and replacement (if necessary) of said Existing Tenant Improvements.

53. TRADE FIXTURES: Notwithstanding anything to the contrary in Lease Paragraphs 5 ("Acceptance and Surrender of Premises") and 6 ("Alterations and Additions"), Tenant shall be entitled to remove any trade fixtures that are not attached to the Premises. Any trade fixtures that are attached to the Premises shall become the property of Landlord at the expiration of the Lease, and may not be removed by Tenant without the prior written consent of Landlord. Tenant shall be one hundred percent (100%) responsible for the maintenance, repair and replacement (if necessary) of all trade fixtures installed in the Premises.

[Floor Plan 1]

EXHIBIT A TO LEASE AGREEMENT DATED JANUARY 22, 2002 BY AND BETWEEN THE JOHN ARRILLAGA SURVIVOR'S TRUST AND THE RICHARD T. PEERY SEPARATE PROPERTY TRUST, AS LANDLORD, AND ABGENIX, INC., AS TENANT.

[Floor Plan 2]

EXHIBIT B TO LEASE AGREEMENT DATED JANUARY 22, 2002 BY AND BETWEEN THE JOHN ARRILLAGA SURVIVOR'S TRUST AND THE RICHARD T. PEERY SEPARATE PROPERTY TRUST, AS LANDLORD, AND ABGENIX, INC., AS TENANT.

EXHIBIT B-1

Existing Tenant Improvements Not to Be Removed By Landlord
Prior to Lease Commencement Date or During the Lease Term

1.: All HVAC, plumbing, electrical, and security systems currently installed (as of the Lease Commencement Date) within the Premises.
2.: Emergency Generator.
3.: All walls, doors and built-in cabinetry.
4.: All laboratory case work and fume hoods.
5.: One cold room.
6.: All installed glass wash and autoclave equipment/facilities.
7.: All installed equipment/facilities servicing the vivarium (Bally Boiler and Gage Wash equipment).
8.: All other installed utility systems and related infrastructure shall remain in place.
9.: All installed data/telephone cabling.
10.: All installed document storage vaults

Notwithstanding anything to the contrary in said Lease, Tenant shall be one hundred percent (100%) responsible for the maintenance, repair and replacement (if necessary) of said items noted above.

Exhibit C to Lease Agreement dated January 22, 2002

Abgenix Estimated Chemical Inventory for B-6

												Units (lbs, gal, cu ft)
																NFPA
Hazard Class	Common Name			Extremely Hazardous?	Pure or Mixture	Solid, Gas or Liquid	Fed Haz Cat	Days on Site	Largest Container	Max. Amount	Avg Amount					NFPA
Hazard Class	Common Name	Chemical Name	CAS #	Extremely Hazardous?	Pure or Mixture	Solid, Gas or Liquid	Fed Haz Cat	Days on Site	Largest Container	Max. Amount	Avg Amount		Container	Pressure	Temp	Health	Fire	Reactivity
TOX		10% Azide	26628-22-8	N	P	L	ACR	365	0.1	0.2	0.1	G	PB	A	A	3	1	3
FL		1-Propanol	71-23-B	N	P	L	CAF	365	1	1	1	G	GB	A	A	1	3	0
FL		2 Propanol	67-63-0	N	P	L	ACF	365	1	4	2	G	PB	A	A	2	3	0
IRR	Bleach	5% Sodium Hydrochlorite	7681-52-9	N	P	L	C	365	1	2	1	G	PB	A	A	2	0	1
COR		5% Sodium Hydroxide	1310-73-2	N	P	L	A	365	0.2	0.2	0.2	G	PB	A	A	3	0	1
COR	LancerAid	Acetic Acid	631-61-8	N	M	L	C	365	25	50	40	G	CB	A	A	t	1	0
COR		Acetic Acid	64-19-7	N	P	L	AR	365	0.2	1	0.5	G	GB	A	A	3	2	0
IRR		Acetic Acid Glacial	64-19-7	N	P	L	CA	365	0.2	0.2	0.2	G	GB	A	A	2	2	1
IRR		Acetic Acid Glacial	64-19-7	N	P	L	ACFR	365	0.3	0.3	0.3	G	GB	A	A	2	2	1
FL		Acetone	67-64-1	N	P	L	A/F	365	1	3	2	G	GB	A	A	2	3	0
FL		Acetone?	75-05-8	N	P	L	ACF	365	1	5	2.5	G	GB	A	A	3	3	0
NFG		Air Compressed	25635-88-5	N	P	G	P	365	250	5000	5000	CF	CY	G	A	0	0	0
NFG	Air	Air, Compressed	25635-88-5	N	P	G	P	365	233	466	466	cu ft	CYL	G	A	0	0	0
OHH		Aluminum Potassium Sulfate	7784-24-9	N	P	S	C	365	0.25	0.5	0.25	P	PB	A	A	1	0	0
OHH		Ammonium Bicarbonate	1066-33-7	N	P	S	C	365	0.5	1.00	0.50	P	PB	A	A	1	0	0
IRR		Ammonium Chloride	12125-02-9	N	P	S	A	365	0.1	0.1	0.1	P	PB	A	A	2	0	0
COR		Ammonium Hydroxide	1336-21-6	N	P	L	CIA	365	0.25	1	0.5	G	GB	A	A	3	1	0
OX		Ammonium Persulfate	7727-54-9	N	P	S	AR	365	0.1	0.25	0.1	P	GB	A	A	2	0	1
IRR		Ammonium Sulfate	7783-20-2	N	P	S	C	365	0.25	1	1	G	PB	A	A	2	0	0
IRR		Ammonium Chloride	12125-02-9	N	P	S	C	365	0.1	0.2	0.1	P	PB	A	A	2	0	0
MFG		Argon	7440-37-1	N	P	G	P	365	100	100	100	CF	CY	G	A	0	0	0
DHH		Aspartic Acid	617-45-8	N	P	S	C	365	0.2	0.4	0.2	P	PB	A	A	1	0	0
IRR		Butyric Acid	107-92-6	N	P	L	AF	365	0.1	0.1	0.1	G	PB	A	A	2	2	0
FS		Carbon Decolorizing	7440-44-0	N	P	S	CF	365	0.2	0.5	0.2	P	GB	A	A	3	3	0
CRY		Carbon dioxide, liquified	124-38-9	N	P	L	PA	365	40	120	120	GAL	DEW	G	L	3	0	0
TOX		Chloroform	67-66-3	N	P	L	A/C	365	0.2	0.20	0.20	G	GB	A	A	3	0	0
COR	Chronenge	Chromium Trioxide	1333-82-0	N	P	L	ACR	365	0.1	0.2	0.1	G	GB	A	A	3	0	2
IRR		Citric Acid	5949-29-1	N	P	S	C	365	0.25	1	1	P	GB	A	A	2	1	0

Exhibit C to Lease Agreement dated January 22, 2002

Abgenix Estimated Chemical Inventory for B-6

												Units (lbs, gal, cu ft)				NFPA
Hazard Class	Common Name			Extremely Hazardous?	Pure or Mixture	Solid, Gas or Liquid	Fed Haz Cat	Days on Site	Largest Container	Max. Amount	Avg Amount					NFPA
Hazard Class	Common Name	Chemical Name	CAS #	Extremely Hazardous?	Pure or Mixture	Solid, Gas or Liquid	Fed Haz Cat	Days on Site	Largest Container	Max. Amount	Avg Amount		Container	Pressure	Temp	Health	Fire	Reactivity
OHH		D(+)- Glucose	50-99-7	N	P	S	C	365	500	500	300	P	FB	A	A	0	0	0
CL	Diesel	Diesel #2	68476-34-6	N	M	L	FAC	365	400	400	400	G	AT	A	A	0	2	0
FL	Starting Fluid	Diethyl ether	60-29-7	N	M	L	ACF	365	0.5	0.5	0.5	CUFT	CN	G	A	2	4	1
OHH		Diethylenetrismin-pentacetic acid	67-43-6	N	M	S	C	365	0.1	0.1	0.1	P	GB	A	A	1	0	0
FL	Acetone	Dimethyl Ketone	67-64-1	N	P	L	FA	365	1	2	2	G	PB	A	A	1	3	0
OHH		Dimethyl Polysifoxane	9016-00-6	N	P	L	C	365	0.5	0.5	0.5	G	GB	A	A	1	1	0
OHH		Dimethyl Sulfox	67-68-5	N	P	L	CA	365	0.1	0.20	0.1	L	GB	A	A	1	1	0
OHH		Dimethyl Sulphoxide	67-68-5	N	P	L	C	365	0.1	0.1	0.1	G	GB	A	A	1	1	0
OHH		Disodium Pyrophosphate	7722-88-5	N	P	S	C	365	0.25	0.5	0.25	P	PB	A	A	1	0	0
OHH		DMSO	67-68-5	N	P	L	C	365	0.1	0.1	0.1	G	GB	A	A	1	1	0
FL	Alcohol	Ethanol	64-17-5	N	P	L	FAC	365	1	2	1	G	PB	A	A	0	3	0
FL		Ethanol 70%	64-17-5	N	P	L	ACF	365	1	6	6	G	PB	A	A	0	3	0
FL	Gills III	Ethanol, Aluminus Sulfate	64-17-5	N	M	L	FC	365	0.25	0.25	0.25	G	PB	A	A	1	3	0
FL	Eosiny Stain	Ethanol, Aluminus Sulfate	64-17-5 631-61-8	N	M	L	FC	365	0.25	0.25	0.25	G	PB	A	A	0	3	0
FL	Reagent Alcohol	Ethanol, Methanol	64-17-5 57-56-1	N	M	L	CAF	365	0.25	4	4	G	GB	A	A	0	3	0
FL	Reagent Alcohol	Ethanol, methanol, isopropanol	64-17-5	N	M	L	F	365	1	10	6	G	PB	A	A	0	3	0
FL	REAGENT ALOCHOL	ETHANOL/METHONAL	64-17-5	N	P	L	CAF	365	1	3	2	G	PB	A	A	0	3	0
OHH		Ethanolamine	2002-24-6	N	P	S	AR	365	0.25	0.25	0.25	P	PB	A	A	1	0	1
COR/FLAM		Ethanolamine	141-43-5	N	P	L	CFA	365	0.26	1	0.5	G	GB	A	A	3	2	0
OHH		Ethylene Bromine	1239-49-8	N	P	L	C	365	10	0.10	10	G	GB	A	A	1	1	0
FL		Ethyl Alcohol	64-17-5	N	P	L	ACF	365	0.25	5	2.5	G	GB	A	A	2	3	0
OHH		Ethylenediamineletracelic Acid	60-00-4	N	P	S	C	365	0.1	0.25	0.1	P	PB	A	A	1	0	0
OHH		Ferrous Sulfate	7720-78-7	N	P	S	C	365	0.1	0.25	0.1	P	PB	A	A	1	1	0
IOX		Formaldehyde	50-08-0	Y	P	L	ACF	365	0.25	0.5	0.25	G	GB	A	A	3	2	0
CL		Formatin 4%	50-00-01	N	P	L	ACF	365	0.1	0.1	0.1	G	PB	A	A	3	2	0
COR		Formic Acid	64-18-6	N	P	L	AF	365	0.2	1	0.5	G	PB	A	A	3	2	0
COR		Formic Acid 1% IPR	64-18-6	N	M	L	ACF	365	0.1	0.5	0.25	G	GB	A	A	3	2	0

Exhibit C to Lease Agreement dated January 22, 2002

Abgenix Estimated Chemical Inventory for B-6

																NFPA
Hazard Class	Common Name	Chemical Name		Extremely Hazardous?	Pure or Mixture	Solid, Gas or Liquid	Fed Haz Cat	Days on Site	Largest Container	Max. Amount	Avg Amount	Units (lbs, gal, cu ft)				NFPA
Hazard Class	Common Name	Chemical Name	CAS #	Extremely Hazardous?	Pure or Mixture	Solid, Gas or Liquid	Fed Haz Cat	Days on Site	Largest Container	Max. Amount	Avg Amount	Units (lbs, gal, cu ft)	Container	Pressure	Temp	Health	Fire	Reactivity
OHH		Glutamic Acid	56-85-0	N	P	S	C	365	0.5	0.1	0.1	P	PB	A	A	0	0	0
OHH	Glycerol	Glycerin	56-81-5	N	P	L	C	365	0.2	0.25	0.2	G	PB	A	A	1	1	0
OHH		Glycerin	56-81-5	N	P	L	C	365	0.1	0.20	0.1	G	GB	A	A	1	1	0
OHH		Glycerol	56-81-5	N	P	L	C	365	1	3	1.5	G	GB	A	A	1	1	0
OHH		Glycine	58-40-6	N	P	S	C	365	0.1	0.25	0.25	P	PB	A	A	0	1	0
RAD	Tritium	H-3		N	P	S/L	C	365	1	10	2	mCi	GB	A	A
NFG		Helium Compressed	7440-59-7	N	P	G	P	365	304	1250	1250	CF	CY	G	A	0	0	0
NFG		Helium Compressed	7440-59-7	N	P	G	C,P	365	291	291	291	CF	CYL	G	A	0	0	0
NFG		Helium, Compressed	7440-59-7	N	P	G	P	365	223	223	223	cuft	CY	G	A	0	0	0
COR		Hydrochloric Acid	7647-01-0	N	P	L	A	365	0.25	3	1.5	G	PB	A	A	3	0	0
OX		Hydrogen Peroxide	7722841	N	P	L	ACR	365	0.1	0.2	0.1	G	PB	A	A	3	0	1
OX		Hydrogen Peroxide 30%	7722-B4-1	N	P	L	AC	365	0.1	0.2	0.1	G	PB	A	A	3	0	1
OX		Hydrogen Peroxide 30%	7722-B4-1	N	P	L	A	365	0.1	0.1	0.1	G	PB	A	A	3	0	1
COR		Hydroxamine Hydrochloride	5470-11-1	N	P	L	ACR	365	0.1	0.2	0.1	P	GB	A	A	3	1	1
RAD		I-125		N	P	S/L	C	365	1	10	2	mCi	GB	A	A
FL	2-Propanol	Isopropanol	E7-63-0	N	P	L	CAF	365	1	15	5	G	GB	A	A	2	3	0
IRR		Karamycin	25369-94-0	N	P	S	C	365	0.1	0.1	0.1	P	PB	A	A	2	0	0
CL	Charcoal Starter	Kerosene	8008-20-6	N	M	L	F	365	0.1	0.2	0.1	G	PB	A	A	1	2	0
OHH		Lauryl Sulfate	151-21-3	N	P	S	C	365	0.25	0.5	0.25	P	PB	A	A	1	0	0
CRY		Liquid Nitrogen	7727-37-9	N	P	L	PA	365	40	160	120	GAL	DEW	G	L	3	0	0
CRY		Liquid Nitrogen	7727-37-9	N	P	L	PA	365	40	300	240	G	DEW	G	L	3	0	0
OHH		L-Protine	147-85-3	N	P	S	C	365	0.1	0.1	0.1	P	PB	A	A	1	0	0
FL	Reagent grade alcohol	Methanol	64-17-5	N	P	L	F	365	1	6	4	G	PB	A	A	0	3	0
FL		Methanol	67-58-1	N	P	L	A/C	365	1	8	1	G	GB	A	A	1	3	0
CL	10% buffered	methanol, formaldehyde	50-00-0	N	M	L	FAC	365	1	1	2	G	PB	A	A	2	2	0
FL	Methanol	Methyl Alcohol	67-56-1	N	P	L	FA	365	1	2	1	G	GB	A	A	1	3	0
FL	Paint	Methyl ethyl ketone	78-86-4	N	M	L	F	365	0.1	0.1	0.1	G	CN	G	A	1	3	0
TOX		Methylene Chloride	75-09-2	N	P	L	A/C	365	0.25	0.5	0.25	G	GB	A	A	3	1	0
OHH		Mineral Oil	8012-95-1	N	P	L	C	365	0.25	0.20	0.25	G	PB	A	A	0	1	0

Exhibit C to Lease Agreement dated January 22, 2002

Abgenix Estimated Chemical Inventory for B-6

																NFPA
Hazard Class	Common Name			Extremely Hazardous?	Pure or Mixture	Solid, Gas or Liquid	Fed Haz Cat	Days on Site	Largest Container	Max. Amount	Avg Amount	Units (lbs, gal, cu ft)				NFPA
Hazard Class	Common Name	Chemical Name	CAS #	Extremely Hazardous?	Pure or Mixture	Solid, Gas or Liquid	Fed Haz Cat	Days on Site	Largest Container	Max. Amount	Avg Amount	Units (lbs, gal, cu ft)	Container	Pressure	Temp	Health	Fire	Reactivity
IRR		N,N- Dimethyl Formamide	6B-12-2	N	P	S	AF	365	1	1	1	P	PB	A	A	2	2	0
CL		N,N-Dimethyl Formamide	6B-12-2	N	P	L	CAF	365	0.2	0.25	0.2	G	GB	A	A	1	2	0
OX		Nitric Acid	7697-37-2	N	P	L	ACR	365	0.1	0.1	0.1	G	GB	A	A	3	0	1
CRG		Nitrogen	7727-37-9	N	P	G	A	365	50	400	350	cuft	DEW	G	L	3	0	0
NFG		Nitrogen Compressed	7727-37-9	N	P	G	P	365	291	291	600	CF	CY	G	A	0	0	0
CRG		Nitrogen Compressed	7727-37-9	N	P	G	A	365	304	304	304	cuft	CY	G	L	3	0	0
NFG		Nitrogen Compressed	7727-37-9	N	P	G	A P	365	304	304	304	CF	CYL	G	A	0	0	0
IRR	Hapes	N-LZ Hydroxyethy Piperazine N- Ether	17365-45-9	N	P	S	C	365	0.1	0.25	0.1	P	PB	A	A	1	1	0
OXY		Oxygen 50%/CO2 50%	7782-44-7	N	M	G	PF	365	117	117	117	CF	CY	G	A	1	0	0
OXY		Oxygen 50%/Nitrogen 50%	7782-44-7	N	M	G	PF	365	250	1250	1250	CF	CY	G	A	1	0	0
RAD		P-32		N	P	S/L	C	365	1	10	2	mCi	GB	A	A
TOX		Paraformaldehyde 16%	3052S-89-4	Y	M	L	AC	365	0.05	0.1	0.1	G	GB	A	A	3	1	0
IRR		Perchloric Acid	7601-90-3	N	P	L	CA	365	0.1	0.2	0.2	G	GB	A	A	2	0	0
TOX		Phenol	108-95-2	Y	P	L	ACF	365	0.25	0.25	0.25	G	GB	A	A	4	2	0
TOX		Phenol	108-95-2	N	P	L	A	365	0.1	0.1	0.1	G	GB	A	A	4	2	0
TOX		Phenol Chloroform	67-66-3	Y	P	L	CA	365	0.1	0.1	0.1	G	GB	A	A	3	0	1
CCH		Phenylmethy Sulfuryl	329-98-6	N	P	S	A/C	365	0.25	0.25	0.25	P	GB	A	A	3	0	1
COR/TOX		Phenylmethylsulfuryl Fluoride	329-98-6	N	P	S	A	365	0.5	5.00	2.5	P	GB	A	A	3	0	1
COR		Phosphoric Acid	766-38-2	N	P	L	A	365	0.2	0.25	0.2	G	GB	A	A	3	0	0
COR		Phosphoric Acid	766-38-2	N	P	L	A	365	0.1	0.5	0.25	G	GB	A	A	3	0	0
IRR		Polyoxyethylene Sorbitan	9005-64-5	N	M	L	C	365	0.1	0.20	0.1	G	PB	A	A	1	0	0
OHH		Potassium Chloride	7447-40-7	N	P	L	C	365	0.2	0.25	0.2	G	GB	A	A	1	0	0
COR		Potassium Hydroxide	1310-58-3	N	P	L	ACR	365	0.25	0.5	0.25	G	PB	A	A	3	0	1
IRR		Pyruvic Acid	127-17-3	N	0	S	C	365	0.25	0.5	0.25	P	PB	A	A	2	1	0
FL		Rossville Alcohol 200 Proof	64-17-5	N	P	L	CAF	365	1	10	0	G	GB	A	A	1	3	0
OHH	Salt	Salt	7647-14-5	N	P	S	C	365	23	500	500	P	Bag	A	A	1	0	0
OX		Silver Nitrate	7761-88-98	N	P	L	A R	365	0.1	0.10	0.1	P	PB	A	A	4	0	0
OYR	Fixer	Silver Nitrate (0.1%)	7761-88-8	N	M	L	C	365	10	20	10	G	PB	A	A	1	0	0
OHH		Sodium Heparin	9D41-D8-1	N	P	S	A	365	0.1	0.10	0.10	P	GB	A	A	1	1	0

Exhibit C to Lease Agreement dated January 22, 2002

Abgenix Estimated Chemical Inventory for B-6

																NFPA
Hazard Class	Common Name			Extremely Hazardous?	Pure or Mixture	Solid, Gas or Liquid	Fed Haz Cat	Days on Site	Largest Container	Max. Amount	Avg Amount	Units (lbs, gal, cu ft)				NFPA
Hazard Class	Common Name	Chemical Name	CAS #	Extremely Hazardous?	Pure or Mixture	Solid, Gas or Liquid	Fed Haz Cat	Days on Site	Largest Container	Max. Amount	Avg Amount	Units (lbs, gal, cu ft)	Container	Pressure	Temp	Health	Fire	Reactivity
TOX		Sodium Azide	26528-22-0	Y	P	S	ACR	365	0.25	0.5	0.25	P	GB	A	A	3	1	3
DVR	Developer	Sodium Bissulfate (0.5%)	7601-38-1	N	M	L	C	365	10	20	10	G	PB	A	A	1	0	0
OHH		Sodium Chloride	7647-14-5	N	P	S	C	365	0.5	0.1	0.5	P	PB	A	A	1	0	0
OHH	TRYPAN BLUE SOLUTION	SODIUM CHLORIDE	75-57-1	N	M	L	C	365	0.1	0.2	0.1	G	PB	A	A	1	0	0
COR	Luminey	Sodium Chloride Sodium Phosphate	7647-14-5 7722-88-5	N	M	L	C	365	5	10	5	G	GB	A	A	1	0	0
COR		Sodium Hydroxide	1310-73-2	N	P	L	A/C	365	2.5	20	10	G	PB	A	A	3	0	1
IRR	Bleach	Sodium Hypochloride	7681-52-9	N	P	L	A	365	1	20	10	G	PR	A	A	2	0	1
IRR		Sodium Orthorariadate	13721-39-6	N	P	S	A	365	0.25	0.50	0.25	P	PB	A	A	2	0	0
OX		Sodium Perchlorate	1791-07-3	N	P	S	AR	365	0.1	0.25	0.1	P	PB	A	A	2	0	1
HTOX		Sodium Selenite	10102-18-8	Y	P	S	C/A	365	0.1	0.1	0.1	P	BOX	A	A	3	0	0
CL	WD 40	Standard Solvent	8052-41-3	N	M	L	C	365	0.5	0.5	0.5	CUFT	CA	G	A	1	2	0
COR		Sulfuric Acid	7684-93-9	Y	P	L	AR	365	0.2	0.5	0.2	G	GB	A	A	3	0	2
IRR		Tetraethylammonium Chloride Hydrate	56-34-8	N	P	S	C	365	0.25	0.5	0.25	P	GB	A	A	2	0	0
FL	Permount	Toluene, piocolyte	108-08-33	N	M	L	AF	365	0.1	0.2	0.1	G	GB	A	A	2	3	0
COR		Trichloracelic Acid	76-02-9	N	P	S	C	365	0.5	1.00	1.00	P	GB	A	A	3	0	0
FL		Tilethytamine	121-44-8	N	P	L	CAF	365	0.2	0.20	0.2	G	GB	A	A	2	3	0
FL		Tilethytamine	121-44-8	N	P	L	ACF	365	0.1	0.1	0.1	G	GB	A	A	3	3	0
COR		Telfluoroacetic Acid	76-05-1	N	P	L	A	365	0.1	0.5	0.1	G	GB	A	A	3	0	0
IRR		Tris Hyrdoxymethyl	77-86-1	N	P	S	C	365	2.2	2.2	2.2	P	PB	A	A	1	1	0
IRR		Trion-x-100	9002-98-1	N	M	L	C	365	0.25	0.50	0.25	G	GB	A	A	2	1	0
OHH		Trypan Blue Solution	72-57-1	N	P	L	A/C	365	0.2	0.1	0.1	G	PB	A	A	1	0	0
IRR		Tween	9005-64-5	N	M	L	C	365	0.2	0.20	0.1	G	GB	A	A	1	0	0
OHH		Urea	57-13-6	N	P	S	C	365	0.5	1.00	0.50	P	PB	A	A	1	0	0

EXHIBIT D TO LEASE AGREEMENT DATED JANUARY 22, 2002 BETWEEN THE
JOHN ARRILLAGA SURVIVOR'S TRUST AND THE RICHARD T. PEERY
SEPARATE PROPERTY TRUST, AS LANDLORD, AND ABGENIX, INC., AS TENANT

HAZARDOUS MATERIALS REPORTS
PROVIDED TO TENANT

1): Preliminary Environmental Assessment and Soil Testing for Ardenwood Corporate Commons: prepared for Bedford Properties on August 10, 1988 by Kaldveer Associates;
2): Preliminary Environmental Assessment and Soil Testing for Ardenwood Corporate Commons Lots 1 through 27; prepared for Bedford Properties on June 13, 1989 by Kaldveer Associates;
3): Phase I Site Assessment for Ardenwood Corporate Commons; prepared for Bedford Properties in July 1991 by Mittelhauser Corporation.

QuickLinks

Exhibit 10.74

EXHIBIT B-1 Existing Tenant Improvements Not to Be Removed By Landlord Prior to Lease Commencement Date or During the Lease Term
Exhibit C to Lease Agreement dated January 22, 2002
EXHIBIT D TO LEASE AGREEMENT DATED JANUARY 22, 2002 BETWEEN THE JOHN ARRILLAGA SURVIVOR'S TRUST AND THE RICHARD T. PEERY SEPARATE PROPERTY TRUST, AS LANDLORD, AND ABGENIX, INC., AS TENANT
HAZARDOUS MATERIALS REPORTS PROVIDED TO TENANT
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