SENIOR UNSECURED CONVERTIBLE NOTE

NEITHER THE ISSUANCE AND SALE OF THIS NOTE NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS. THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THIS NOTE OR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE UNDER THE SECURITIES ACT, OR (B) AN OPINION OF COUNSEL (SELECTED BY THE HOLDER AND REASONABLY ACCEPTABLE TO THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY BE OFFERED FOR SALE, SOLD, ASSIGNED OR TRANSFERRED PURSUANT TO AN EXEMPTION FROM REGISTRATION; PROVIDED THAT SUCH OPINION OF COUNSEL SHALL NOT BE REQUIRED IN CONNECTION WITH ANY SUCH SALE, ASSIGNMENT OR TRANSFER TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT IS PRIOR TO SUCH SALE, ASSIGNMENT OR TRANSFER A HOLDER OF ADDITIONAL NOTES (AS SUCH TERM IS DEFINED IN THIS NOTE) OR AN AFFILIATE OF THE HOLDER OF THIS NOTE, OR (C) IN THE CASE OF A HOLDER RESIDENT IN CANADA OR OTHERWISE SUBJECT TO THE PROVINCIAL SECURITIES LAWS OF CANADA, A PROSPECTUS QUALIFIYING THE DISTRIBUTION OF THIS NOTE OR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTES OR AN EXEMPTION THEREFROM, OR (II) THE HOLDER PROVIDES THE COMPANY WITH ASSURANCE (REASONABLY SATISFACTORY TO THE COMPANY) THAT SUCH NOTE OR THE SHARES OF COMMON STOCK ISSUABLE UPON THE CONVERSION OF THE NOTE CAN BE SOLD, ASSIGNED OR TRANSFERRED PURSUANT TO RULE 144.

ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING, WITHOUT LIMITATION, SECTIONS 3(c)(iii) AND 17(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

THIS NOTE HAS BEEN ISSUED PURSUANT TO THE NOTE EXCHANGE AGREEMENT (AS SUCH TERM IS DEFINED IN THIS NOTE), ARTICLE FOUR OF WHICH CONTEMPLATES CERTAIN RESTRICTIONS ON SALES, PURCHASES, HEDGING TRANSACTIONS, VOTING WITH RESPECT TO BOARD OF DIRECTOR NOMINEES AND CERTAIN OTHER TRANSACTIONS RELATING TO THE COMPANY’S SECURITIES. ANY ASSIGNEE OR TRANSFEREE OF THIS NOTE SHALL BE SUBJECT TO THE RESTRICTIONS SET FORTH IN ARTICLE FOUR OF THE NOTE EXCHANGE AGREEMENT.

FOR VALUE RECEIVED, PharmAthene, Inc., a Delaware corporation (the “ Company ”), hereby promises to pay to [NAME OF HOLDER] or registered assigns (“ Holder ”) the amount set out above as the Principal (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “ Principal ”) when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to accrue interest (“ Interest ”) on any outstanding Principal at the Interest Rate (as defined below), from [Month] ●, 2007 (the “ Initial Issuance Date ”) until the same becomes due and payable, whether upon the Maturity Date, acceleration, conversion, redemption or otherwise (in each case, in accordance with the terms hereof). This Senior Unsecured Convertible Note (including all Senior Unsecured Convertible Notes issued in exchange, transfer or replacement hereof, this “ Note ” and such other Senior Unsecured Convertible Notes, the “Additional Notes”) is one of an issue of Senior Unsecured Convertible Notes issued pursuant to the Note Exchange Agreement (as defined below) (collectively, the “ Notes ”). Certain capitalized terms used herein are defined in Section 27.

(1)    MATURITY . On the Maturity Date, the Holder shall surrender the Note to the Company and the Company shall pay to the Holder an amount in cash representing all outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late Charges (as defined below), if any. The “ Maturity   Date ” shall be [Month] ●, 2009 [INSERT Two year anniversary of Initial Issuance Date].

(2)    INTEREST; INTEREST RATE . Interest on this Note shall commence accruing on the Initial Issuance Date and shall be computed on the basis of a 360-day year comprised of twelve 30-day months and shall be payable entirely in cash with respect to the unpaid balance of any Principal upon the repayment thereof. Prior to the payment of Interest upon repayment, Interest on this Note shall accrue at the Interest Rate and be payable by way of inclusion of the Interest in the Conversion Amount in accordance with Section 3(b)(i). If an Event of Default occurs and such Event of Default is subsequently cured, the adjustment referred to in Section 27(xviii) shall cease to be effective as of the date of such cure; provided that the Interest as calculated at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of cure of such Event of Default. All payments of Interest on the Notes shall be made on a pro rata basis in accordance with each holder’s percentage ownership of then outstanding Notes.

(3)    CONVERSION OF NOTES . This Note shall be convertible into shares of Common Stock, on the terms and conditions set forth in this Section 3.

(a)    Conversion Right . At any time or times on or after the date first set forth above as the Issuance Date (the “ Issuance Date ”), the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock in excess of one half of one share, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all stock transfer, stamp, documentary and similar taxes (excluding any taxes on the income or gain of the Holder) that may be payable with respect to the issuance and delivery of shares of Common Stock to the Holder upon conversion of any Conversion Amount.

(b)    Conversion Rate . The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “ Conversion Rate ”).

(i)    “ Conversion Amount ” means the sum of (A) the portion of the Principal to be converted, redeemed or otherwise with respect to which this determination is being made, (B) accrued and unpaid Interest with respect to such Principal and (C) accrued and unpaid Late Charges with respect to such Principal and Interest.

(ii)    “ Conversion Price ” means, as of any Conversion Date (as defined below) or other date of determination, $10.00, subject to adjustment as provided herein (including, without limitation, adjustment pursuant to Section 6).

(c)    Mechanics of Conversion .

(i)    Optional Conversion . To convert any Conversion Amount into shares of Common Stock on any date (a “ Conversion Date ”), the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 4:00 p.m., New York Time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “ Conversion Notice ”) to the Company and (B) if required by Section 3(c)(iii), cause this Note to be delivered to the Company as soon as practicable on or following such date. On or before 4:00 p.m., New York Time, on the first (1 ^st ) Business Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Conversion Notice to the Holder (at the facsimile number provided in the Conversion Notice) and the Company’s transfer agent, if any (the “ Transfer Agent ”). On or before 4:00 p.m., New York Time, on the third (3 ^rd ) Business Day following the date of receipt of a Conversion Notice (the “ Share Delivery   Date ”), the Company shall issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled. If this Note is physically surrendered for conversion as required by Section 3(c)(iii) and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three (3) Business Days after receipt of this Note and at its own expense, issue and deliver to the holder a new Note (in accordance with Section 17(d)), representing the outstanding Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.

(ii)    Company’s Failure to Timely Convert . If, at any time, the Company shall fail to issue a certificate to the Holder upon conversion of any Conversion Amount on or prior to the date which is seven (7) Business Days after the Conversion Date (a “ Conversion Failure ”), then (A) the Company shall pay damages to the Holder for each day of such Conversion Failure in an amount equal to 1.5% of the product of (I) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and to which the Holder is entitled, and (II) the Closing Sale Price of the Common Stock on the Share Delivery Date and (B) the Holder, upon written notice to the Company, may void its Conversion Notice with respect to, and retain or have returned, as the case may be, any portion of this Note that has not been converted pursuant to such Conversion Notice; provided that the voiding of a Conversion Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to this Section 3(c)(ii) or otherwise.

(iii)    Book-Entry . Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting physical surrender and reissue of this Note. The Holder and the Company shall maintain records showing the Principal, Interest and Late Charges converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion.

(iv)    Pro Rata Conversion; Disputes . In the event that the Company receives a Conversion Notice from more than one holder of Notes for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes submitted for conversion, the Company shall convert from each holder of Notes electing to have Notes converted on such date a pro rata amount of each such holder’s portion of its Notes submitted for conversion based on the principal amount of Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all Notes submitted for conversion on such date. In the event of a dispute between the Company and any holders of Notes that are subject to any such Conversion Notice or among any holders of Notes that are subject to any such Conversion Notice as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 22.

(4)    RIGHTS UPON EVENT OF DEFAULT.

(a)    Event of Default . Each of the following events shall constitute an “ Event of Default ”:

(i)    the Company’s failure to pay to the Holder any amount of Principal when and as due under this Note (including, without limitation, the Company’s failure to pay any Redemption Price);

(ii)    the Company’s failure to pay to the Holder any amount of Interest, Late Charges or other amounts (other than the amounts specified in clause (i)) when and as due under this Note if such failure continues for a period of at least thirty (30) Business Days;

(iii)    any acceleration prior to maturity of any Indebtedness referred to in clause (a) or (b) of the definition thereof of the Company or any of its Subsidiaries which individually or in the aggregate is equal to or greater than $250,000 principal amount of Indebtedness (following the expiration of all applicable grace periods);

(iv)    the Company or any of its Material Subsidiaries, pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal, foreign or state law for the relief of debtors (collectively, “ Bankruptcy Law ”), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a “ Custodian ”), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due;

(v)    a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that is not vacated, set aside or reversed within sixty (60) days that (A) is for relief against the Company or any of its Material Subsidiaries in an involuntary case, (B) appoints a Custodian of the Company or any of its Material Subsidiaries or (C) orders the liquidation of the Company or any of its Material Subsidiaries;

(vi)    a final judgment or judgments for the payment of money aggregating in excess of $5,000,000 are rendered against the Company or any of its Subsidiaries and which judgments are not, within sixty (60) days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within sixty (60) days after the expiration of such stay; provided, however, that any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $5,000,000 amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company will receive the proceeds of such insurance or indemnity within sixty (60) days of the issuance of such judgment;

(vii)    the Company breaches any covenant or agreement or materially breaches any representation or warranty in any Transaction Document (except for Section 14(f) of the Notes and Section 5.3 of Note Exchange Agreement), and such breach continues for a period of at least thirty (30) days after written notice thereof from one or more Holders to the Company; or

(viii)    if at any time while at least thirty percent (30%) of the aggregate Principal amount of the Notes outstanding on the date hereof remain outstanding (x) the Board of Directors fails to include three (3) Directors designated pursuant to Section ● of the Company’s Certificate of Incorporation (“ Noteholder   Directors ”), provided that the Company shall have thirty (30) Business Days following the resignation, removal or death or disability of a Noteholder Director to appoint a successor Noteholder Director, unless such failure is the result of the failure by the Holders to notify the Company of the name of the replacement Noteholder Directors, in which event the thirty (30) Business Day period shall be extended until a date which is ten (10) Business Days after notice of the name and background of the replacement Noteholder Directors is given to the Company, or (y) without the consent of the persons then serving as Noteholder Directors, the Board of Directors exceeds seven (7) directors, or the Compensation Committee or Nominating Committee (or other committees serving similar functions) exceeds three (3) members, or (z) the Noteholder Directors are not afforded the right to appoint two (2) members of each of the Compensation Committee and Nominating Committee (or committees serving similar functions).

(b)    Rights Upon Event of Default . Promptly after the occurrence of an Event of Default with respect to this Note, the Company shall deliver written notice thereof (an “ Event of Default Notice ”) to the Holder. If an Event of Default with respect to the Company described in Sections 4(a)(iv), 4(a)(v) or 4(a)(viii) has occurred, all the Notes then outstanding shall automatically become immediately due and payable. If any Event of Default described in Sections 4(a)(i), 4(a)(ii), 4(a)(iii), 4(a)(vi) or 4(a)(vii) has occurred and is continuing, holders of not less than two-thirds of the aggregate Principal amount of the Notes then outstanding (the “ Required Holders ”) may at any time at its or their option, by notice or notices to the Company (an “ Event of Default Payment Notice ”), declare all the Notes then outstanding to be immediately due and payable. Upon any Notes becoming due and payable under this Section 4(b), whether automatically or by declaration, such Notes will forthwith mature and the the entire unpaid Principal, plus all accrued and unpaid Interest and Late Charges, shall become immediately due and payable (the “ Event of Default   Price ”). Payments required by this Section 4(b) shall be made in accordance with the provisions of Section 12.

(5)    RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL .

(a)    Assumption . The Company shall not enter into or be party to a Fundamental Transaction unless the Successor Entity assumes in writing all of the obligations of the Company under this Note and the other Transaction Documents in accordance with the provisions of this Section 5(a) pursuant to written agreements on or prior to such Fundamental Transaction, including the agreement to deliver to each holder of Notes in exchange for such Notes a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including, without limitation, having a principal amount and interest rate equal to the principal amounts and the interest rates of the Notes held by such holder (the “ Successor Note ”). Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note with the same effect as if such Successor Entity had been named as the Company herein, until such time as the Successor Note is delivered. Upon consummation of a Reclassification or Fundamental Transaction as a result of which holders of Common Stock shall be entitled to receive stock, securities, cash, assets or any other property with respect to or in exchange for such Common Stock, the Company or Successor Entity, as the case may be, shall deliver to the Holder confirmation that there shall be issued upon conversion or redemption of this Note at any time after the consummation of such Reclassification or Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other property) issuable upon the conversion or redemption of the Notes prior to such Reclassification or Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of such Reclassification or Fundamental Transaction had this Note been converted immediately prior to such Reclassification or Fundamental Transaction, as adjusted in accordance with the provisions of this Note. The provisions of this Section shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion or redemption of this Note.

(b)    Redemption upon Change of Control . No sooner than fifteen (15) days nor later than ten (10) days prior to the consummation of a Change of Control (but not prior to the public announcement of such Change of Control), the Company shall deliver written notice thereof to the Holder (a “ Change of Control   Notice ”). If at any time during the period (the “ Change of Control Measuring Period ”) beginning after the Holder’s receipt of a Change of Control Notice and ending on the date of the consummation of such Change of Control (or, in the event a Change of Control Notice is not delivered at least ten (10) days prior to a Change of Control, at any time on or after the date which is ten (10) days prior to a Change of Control and ending ten (10) days after the consummation of such Change of Control), the Holder may require the Company to redeem all (but not less than all) of this Note (“ Optional Change of Control Redemption ”) by delivering written notice thereof (“ Optional Change of Control Redemption Notice ”) to the Company, provided , however , the Company shall not be required to redeem any amount pursuant to such notice unless Holders of not less than two-thirds of the aggregate Principal amount of the Notes then outstanding submit Optional Change of Control Redemption Notices. An Optional Change of Control Redemption required by this Section 5 shall be made in accordance with the provisions of Section 12. If this Note is subject to redemption pursuant to this Section 5 it shall be redeemed by the Company at a price equal to the Conversion Amount (“ the Change of Control Redemption Price ”).   Notwithstanding anything to the contrary in this Section 5, until the Change of Control Redemption Price (together with any interest thereon) is paid in full, the Conversion Amount submitted for redemption under this Section 5(b) (together with any interest thereon) may be converted, in whole or in part, by the Holder into shares of Common Stock pursuant to Section 3.

(c)    Redemption of Illiquid Consideration After Conversion . Following the Company’s entry into a definitive agreement relating to a Fundamental Transaction, the Company will notify each Holder not later than the 10 ^th day following the effective date of such Fundamental Transaction of the determination by the Company’s board of directors, made in good faith, of the fair market value of the Illiquid Consideration at the time of such Fundamental Transaction, and each Holder shall have the right, exercisable for thirty (30) days following the delivery of such notice, to require the Company to redeem all or any part of the Illiquid Consideration received upon conversion of its Notes for cash in the amount of such fair market value; provided that such notice shall specify in reasonable detail the basis for such determination. In the event that the Holder disagrees with such determination of fair market value, the Holder may require that such fair market value be determined in accordance with the provisions of Section 22.

(6)    RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS .

(a)    Purchase Rights . If the Company at any time, or from time to time, grants, issues or sells any (i) Options, (ii) Convertible Securities or (iii) rights to purchase stock, warrants, securities or other property, pro rata to all record holders of any class of Common Stock (the “ Purchase Rights ”), then the person who is the Holder as of the Stock Record Date (as defined below) will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or restrictions on the convertibility of this Note) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (the “ Stock Record Date ”).

(b)    Other Corporate Events . In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Reclassification or Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “ Corporate Event ”), the Company shall make appropriate provision to ensure that the Holder will thereafter have the right to receive upon a conversion of this Note, (i) in the event that the Common Stock remains outstanding after any such Corporate Event, in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Note) or (ii) in the event that the Common Stock is no longer outstanding after any such Corporate Event, in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Note). The provisions of this Section shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or redemption of this Note. Notwithstanding this Section (6)(b), in no event shall the Company be obligated to distribute any Purchase Rights pursuant to this Section (6)(b) if and to the extent that it has distributed such Purchase Rights to the Holder pursuant to Section (6)(a).

(7)    RIGHTS UPON ISSUANCE OF OTHER SECURITIES .

(a)    Record Date . If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

(b)    Adjustment of Conversion Price upon Subdivision or Combination of Common Stock; Stock Dividends . If, on or after the Merger Agreement Date, the Company at any time, or from time to time, subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time on or after the Merger Agreement Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment under this Section 7(b) shall become effective at the close of business on the date the subdivision or combination becomes effective or, in the case of a stock dividend or distribution, the date of such event.

(c)    (i) Adjustment of Conversion Price upon Cash Dividends and Distributions . If the Company at any time, or from time to time, pays a dividend or makes a distribution in cash to the record holders of any class of Common Stock, then immediately after the close of business on the day that the Common Stock trades ex-distribution, the Conversion Price then in effect shall be reduced to an amount equal to the product of (i) the Conversion Price in effect immediately prior to such dividend or distribution and (ii) the quotient determined by dividing (A) the Closing Sale Price of the Common Stock on the day that the Common Stock trades ex-distribution by (B) the sum of (1) the Closing Sale Price of the Common Stock on the day that the Common Stock trades ex-distribution plus (2) the amount per share of such dividend or distribution. The Company shall not be required to give effect to any adjustment in the Conversion Price pursuant to this Section 7(c) unless and until the net effect of one or more adjustments (each of which shall be carried forward until counted toward an adjustment), determined in accordance with this Section 7(c), shall have resulted in a change of the Conversion Price by at least 1%, and when the cumulative net effect of more than one adjustment so determined shall be to change the Conversion Price by at least 1%, such change in the Conversion Price shall thereon be given effect.

(ii)   Adjustment of Conversion Price upon Distributions of Capital Stock, Indebtedness or Other Non-Cash Assets . If the Company at any time, or from time to time, distributes 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 Section 7(b)) to the record holders of any class of Common Stock, then the Conversion Price then in effect shall be reduced to an amount equal to the product of (A) the Conversion Price then in effect and (B) a fraction of which the numerator shall be the Closing Sale Price share of the Common Stock on the record date fixed for determination of stockholders entitled to receive such distribution less the fair market value on such record date (as determined by the Board of Directors) of the portion of the capital stock, evidences of indebtedness or other non-cash assets so distributed 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 Closing Sale Price per share of the Common Stock on such record date. Notwithstanding the foregoing, if the securities distributed by the Company to the record holders of any class of Common Stock consist of capital stock of, or similar equity interests in, a Subsidiary or other business unit, the Conversion Price shall be decreased so that the same shall be equal to the rate determined by multiplying the Conversion Price in effect on the record date with respect to such distribution by a fraction the numerator of which shall be the average Closing Sale Price of one share of Common Stock over the Spinoff Valuation Period and of which the denominator shall be the sum of (x) the average Closing Sale Price of one share of Common Stock over the ten consecutive Trading Day period (the “ Spinoff Valuation Period ”) commencing on and including the fifth Trading Day after the date on which “ex-dividend trading” commences on the Common Stock on the Eligible Market or such other national or regional exchange or market on which the Common Stock is then listed or quoted and (y) the average Closing Sale Price over the Spinoff Valuation Period of the portion of the securities so distributed applicable to one share of Common Stock, such adjustment to become effective immediately prior to the opening of business on the fifteenth Trading Day after the date on which “ex-dividend trading” commences.

(d)    Other Events; Other Dividends and Distributions . If any event occurs of the type contemplated by the provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s board of directors shall make in good faith an adjustment in the Conversion Price so as to protect the rights of the Holder under this Note; provided that no such adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 7.

(e)    Notice of Adjustment . Whenever the Conversion Price is adjusted pursuant to this Section 7, the Company shall promptly mail notice of such adjustment to each Holder, which notice shall set forth the Conversion Price after adjustment, the date on which such adjustment became effective and a brief statement of the facts resulting in such adjustment.

(8)    COMPANY’S RIGHT OF REDEMPTION .

(a)    Call Redemption . At any time from and after the first anniversary of the Initial Issuance Date (the “ Call Redemption Eligibility Date ”), the Company shall have the right to redeem, from time to time, all or any portion of the Conversion Amount then remaining under this Note, as designated in the Call Redemption Notice, as of the Call Redemption Date (a “ Call Redemption ”). The portion of this Note subject to redemption pursuant to this Section 8(a) shall be redeemed by the Company at a price equal to the Conversion Amount being redeemed (the “ Call   Redemption Price ”, and together with the Change of Control Redemption Price and Significant Transaction Redemption Price, “ Redemption Prices ”) on the date specified by the Company in the Call Redemption Notice (the “ Call Redemption Date ”), which date shall not be less than thirty (30) nor more than sixty (60) days after the Call Redemption Notice Date. The Company may exercise its right to require redemption under this Section 8(a) by delivering a written notice thereof to all of the holders of Notes and the Transfer Agent (the “ Call Redemption Notice ” and the date such notice is sent is referred to as the “ Call Redemption Notice Date ”). Each such Call Redemption Notice shall be irrevocable. The Call Redemption Notice shall state the aggregate Conversion Amount of the Notes which the Company has elected to be subject to Call Redemption from all of the holders of the Notes pursuant to this Section 8(a) (and analogous provisions under the Additional Notes). All Conversion Amounts converted by the Holder after the Call Redemption Notice Date shall reduce the Conversion Amount of this Note required to be redeemed on the Call Redemption Date. Redemptions made pursuant to this Section 8(a) shall be made in accordance with Section 12.