Document:

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                                                                   EXHIBIT 10.33

                                MERGER AGREEMENT

                                      AMONG

                              A.C.F. IMPORTS, INC.
                            A.C.F. ACQUISITION, INC.
                        DOWLING'S FLEET SERVICE CO., INC.
                                       AND
                             OAKHURST COMPANY, INC.

                              DATED: JUNE 30, 2000

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                                MERGER AGREEMENT

         THIS MERGER AGREEMENT (this "Agreement") is entered into as of the 30th
day of June, 2000 by and among A.C.F. IMPORTS, INC., a New York corporation (the
"Buyer"); A.C.F. ACQUISITION, INC., a New York corporation and a wholly-owned
Subsidiary of the Buyer (the "Transitory Subsidiary"); DOWLING'S FLEET SERVICE
CO., INC., a New York corporation (the "Target"); and OAKHURST COMPANY, INC., a
Delaware corporation and parent of the Target (the "Target Stockholder"). The
Buyer, the Transitory Subsidiary, the Target and the Target Stockholder are
referred to collectively herein as the "Parties."

         This Agreement contemplates a transaction in which the Buyer will
acquire by merger all of the outstanding capital stock of the Target for cash
through a reverse subsidiary merger of the Transitory Subsidiary with and into
the Target.

         NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.

         1. DEFINITIONS.

         "Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.

         "Buyer" has the meaning set forth in the preface, above.

         "Buyer Disclosure Schedule" has the meaning set forth in Section 4.

         "Buyer Indebtedness" has the meaning set forth in the Section 2(f).

         "Cash Consideration" has the meaning set forth in Section 2(b).

         "Certificate of Merger" has the meaning set forth in Section 2(d)(i).

         "Closing" has the meaning set forth in Section 2(c).

         "Closing Date" has the meaning set forth in Section 2(c).

         "COBRA" means the requirements of Part 6 of Subtitle B of Title I of
ERISA and Code Section 4980B.

         "Code" means the Internal Revenue Code of 1986, as amended.

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         "Confidential Information" means any information concerning the
businesses and affairs of the Target and its Subsidiaries that is not already
generally available to the public.

         "Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (c) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), or (d)
Employee Welfare Benefit Plan or material fringe benefit or other retirement,
bonus, or incentive plan or program.

         "Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).

         "Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).

         "Environmental, Health, and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation, each as amended and as
now or hereafter in effect.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

         "FINOVA" means FINOVA Capital Corporation.

         "FINOVA Debt" means the debt due from the Target to FINOVA, but only
with respect to amounts borrowed by the Target in connection with the operations
of the Target, the outstanding principal balance of which was $1,470,000 as of
May 26, 2000.

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

         "Indemnified Party" has the meaning set forth in Section 8(c)(i) below.

         "Indemnifying Party" has the meaning set forth in Section 8(c)(i)
below.

         "Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications,

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registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including data and related documentation), (g) all
other proprietary rights, and (h) all copies and tangible embodiments thereof
(in whatever form or medium).

         "Knowledge" means actual knowledge after reasonable investigation.

         "Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.

         "Merger" has the meaning set forth in Section 2(a).

         "Merger Consideration" has the meaning set forth in Section 2(b).

         "Most Recent Financial Statements" has the meaning set forth in Section
3(h).

         "Most Recent Fiscal Quarter End" has the meaning set forth in Section
3(h).

         "Most Recent Fiscal Year End" has the meaning set forth in Section
3(h).

         "Oakhurst Plan" means The Oakhurst Company, Inc. Profit Sharing Plan.

         "Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.

         "Party" has the meaning set forth in the preface, above.

         "Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).

         "Pre-Closing Board" has the meaning set forth in Section 2(f).

         "Pre-Closing Period" shall mean the period beginning on the date of
this Agreement and ending on the earlier of (a) the Closing Date, (b) the day
which is one hundred twenty (120) days after the date of this Agreement, as the
same may be extended in writing by the Parties, or (c) the date this Agreement
is terminated in accordance with the provisions of Section 7(a).

         "Securities Act" means the Securities Act of 1933, as amended.

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         "Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialman's,
and similar liens; (b) liens for taxes not yet due and payable or for taxes that
the taxpayer is contesting in good faith through appropriate proceedings; (c)
purchase money liens and liens securing rental payments under capital lease
arrangements; and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.

         "Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.

         "Surviving Corporation" has the meaning set forth in Section 2(a).

         "Target" has the meaning set forth in the preface, above.

         "Target Disclosure Schedule" has the meaning set forth in Section 3.

         "Target Share" means any share of the Common Stock, $10.00 par value
per share, of the Target.

         "Target Stockholder" has the meaning set forth in the preface, above.

         "Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.

         "Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

         "Third Party Claim" has the meaning set forth in Section 8(c) below.

         "Transitory Subsidiary" has the meaning set forth in the preface,
above.

         2. BASIC TRANSACTION.

             (a) The Merger. On and subject to the terms and conditions of this
Agreement, the Transitory Subsidiary will merge with and into the Target (the
"Merger") on the Closing Date. The Target shall be the corporation surviving the
Merger (the "Surviving Corporation").

             (b) Merger Consideration. The consideration for the Merger (the
"Merger Consideration") to be paid by the Buyer shall be equal to the sum of (i)
$1.00 (the "Cash

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Consideration") and (ii) the balance, including principal and accrued interest,
of the FINOVA Debt as of the Closing Date. The Merger Consideration shall be
paid as provided in Section 2(d)(ii) and Section 2(d)(iii).

             (c) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Harter,
Secrest & Emery LLP in Buffalo, New York on such date as the parties shall agree
upon (the "Closing Date"); provided, however, that the Closing Date shall occur
no later than one hundred twenty (120) days following the date of this
Agreement.

             (d) Actions at the Closing. At the Closing (or on such other date
indicated below):

                  (i) the Target and the Transitory Subsidiary will file with
the Secretary of State of the State of New York a Certificate of Merger in the
form attached hereto as Exhibit 2(d)(i) (the "Certificate of Merger");

                  (ii) the Buyer will deliver to the Target Stockholder the Cash
Consideration;

                  (iii) on the Closing Date (or such other date as may be agreed
upon by the Buyer and FINOVA), the Buyer will pay to FINOVA an amount equal to
the outstanding balance, including principal and accrued interest, of the FINOVA
Debt;

                  (iv) the Buyer and the Transitory Subsidiary will deliver to
the Target Stockholder the various certificates, instruments, and documents
referred to in Section 6(b), below;

                  (v) the Target will deliver to the Buyer the various
certificates, instruments, and documents referred to in Section 6(a), below; and

                  (vi) the Target Stockholder will deliver at and as of the
Closing Date, to the Buyer the various certificates, instruments and documents
referred to in Section 6(a) below.

             (e) Effect of the Merger.

                  (i) General. The Merger shall become effective at the time the
Target and the Transitory Subsidiary file the Certificate of Merger with the
Secretary of State of the State of New York. The Merger shall have the effect
set forth in the Business Corporation Law of the State of New York. The
Surviving Corporation may, at any time after the Closing Date, take any action
(including executing and delivering any document) in the name and on behalf of
either the Target or the Transitory Subsidiary in order to carry out and
effectuate the transactions contemplated by this Agreement.

                  (ii) Certificate of Incorporation. The Certificate of
Incorporation of the Surviving Corporation shall be amended and restated at and
as of the Closing Date to read as did the Certificate of Incorporation of the
Transitory Subsidiary immediately prior to the Closing Date.

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                  (iii) Bylaws. The Bylaws of the Surviving Corporation shall be
amended and restated at and as of the Closing Date to read as did the Bylaws of
the Transitory Subsidiary immediately prior to the Closing Date.

                  (iv) Directors and Officers. The directors and officers of the
Transitory Subsidiary shall become the directors and officers of the Surviving
Corporation at and as of the Closing Date (retaining their respective positions
and terms of office).

                  (v) Status of Target Shares. No Target Share shall be deemed
to be outstanding or to have any rights after the Closing Date other than the
right to receive the Merger Consideration.

                  (vi) Conversion of Capital Stock of the Transitory Subsidiary.
At and as of the Closing Date, each share of common stock, no par value per
share, of the Transitory Subsidiary shall be converted into one share of Class A
Voting common stock, $10.00 par value per share, of the Surviving Corporation.

             (f) Operation of Business Prior to the Closing. The Target
Stockholder agrees to vote its shares of the Target to elect the following three
Persons to serve as directors of the Target during the Pre-Closing Period (the
"Pre-Closing Board"): Maarten D. Hemsley (or such other person as is nominated
in writing by the Target Stockholder) and John C. Romanelli and Patricia M.
Nolan (or such other two Persons as are nominated in writing by the Buyer). The
Pre-Closing Board shall be responsible for the management of the operations of
the Target during the Pre-Closing Period, subject to the terms of this
Agreement. Notwithstanding the foregoing, unless authorized by the Board of
Directors of the Target Stockholder, the Pre-Closing Board shall not authorize
or permit the Target to (i) borrower from FINOVA any amount which, when added to
the FINOVA Debt, exceeds the amounts available under the existing loan documents
relating to the FINOVA Debt, or (ii) incur any indebtedness for borrowed money
(other than for purchases of inventory in the ordinary course of business) to
any lender other than FINOVA or the Buyer. The Buyer agrees that during the
Pre-Closing Period, it shall make loans to the Target for working capital, as
needed by the Target from time to time, in an aggregate amount of up to
$500,000. In addition, the Buyer may, within its discretion from time to time,
extend credit to the Target for purchases of inventory on Buyer's customary
credit terms. The Target Stockholder hereby consents to, and agrees to vote if
necessary to approve, the following actions of the Target during the Pre-Closing
Period, as authorized from time to time by the Pre-Closing Board: (1) the
borrowing of funds for working capital from the Buyer, which borrowings shall
bear a reasonable rate of interest, be payable within sixty (60) days after
demand (provided that such demand shall not be made prior to the earlier of the
Closing or the termination of this Agreement), subject to the provisions of any
applicable promissory notes, and be secured by a security interest in all of the
Target's tangible and intangible assets (subject to the consent of FINOVA), all
of which may but need not be evidenced by a promissory note; and (2) the
purchasing of inventory on credit from the Buyer, which purchase obligations
(for purchases of inventory both prior to and subsequent to the date hereof) are
to be secured by a security interest in all of the Target's tangible and
intangible assets (subject to the consent of FINOVA) and are to be in accordance
with Buyer's customary credit terms. All indebtedness (including principal,
interest and other amounts) due to the Buyer from the Target

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pursuant to the working capital loans and inventory sales described in this
Section 2(f) shall be referred to herein as the "Buyer Indebtedness." During the
Pre-Closing Period, the Pre-Closing Board may authorize the Target to repay any
or all of the Buyer Indebtedness with available cash, to the extent permitted by
FINOVA. Any renewal fee or similar fee which becomes due to FINOVA as a result
of the obtaining FINOVA's consent to the transactions contemplated hereby shall
be paid by the Target, and the Target Stockholder shall have no obligation to
pay such fee.

         3. REPRESENTATIONS AND WARRANTIES OF THE TARGET AND TARGET STOCKHOLDER.
The Target and the Target Stockholder jointly and severally represent and
warrant to the Buyer and the Transitory Subsidiary that the statements contained
in this Section 3 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3), except (i) as set forth in the disclosure schedule
accompanying this Agreement (the "Target Disclosure Schedule"), (ii) for any
non-conformity resulting from matters authorized by the Pre-Closing Board during
the Pre-Closing Period, as provided in Section 2(f), and (iii) those
representations and warranties which address matters only as of a particular
date, which representations and warranties are true and correct as of that date.
The Target Disclosure Schedule will be arranged in paragraphs corresponding to
the lettered and numbered paragraphs contained in this Section 3.

             (a) Organization, Qualification, and Corporate Power. Each of the
Target and its Subsidiaries is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its incorporation.
Each of the Target and its Subsidiaries is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification would not
have a material adverse effect on the financial condition, business or assets of
the Target and its Subsidiaries taken as a whole or on the ability of the
Parties to consummate the transactions contemplated by this Agreement. The
jurisdiction of incorporation and each jurisdiction in which the Target and its
Subsidiaries are qualified to conduct business are set forth in Section 3(a) of
the Target Disclosure Schedule. Each of the Target and its Subsidiaries has full
corporate power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. Section 3(a) of the
Target Disclosure Schedule lists the directors and officers of the Target. The
Target has delivered to the Buyer correct and complete copies of the charter and
bylaws of the Target (as amended to date). The minute books (containing the
records of meetings of the stockholders, the board of directors, and any
committees of the board of directors), the stock certificate books, and the
stock record books of the Target are correct and complete. The Target is not in
default under or in violation of any provision of its charter or bylaws.

             (b) Capitalization. The entire authorized capital stock of the
Target consists of 2,000 Target Shares, $10 par value per share, of which one
thousand (1,000) shares are designated Class A Voting Shares and one thousand
(1,000) shares are designated Class B Non-Voting Shares. One hundred (100) Class
A Voting Target Shares are issued and outstanding and one hundred (100) Class A
Voting Target Shares are held in treasury. All of the issued and outstanding
Target Shares have been duly authorized and are validly issued, fully paid, and
non-assessable and all are held of record and beneficially owned by the Target
Stockholder, free and clear of any restrictions on transfer (other than any
restrictions under the Securities Act and state securities laws). There are no

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outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the Target to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, or similar rights with respect to the Target.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of the capital stock of the Target.

             (c) Authorization of Transaction. The Target has full power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder; provided, however, that the Target cannot consummate the Merger
unless and until it receives the Target Stockholder's approval. Subject to the
approval by the Target Stockholder's board of directors, the execution and
delivery of this Agreement by Target and the Target's consummation of the
transactions contemplated hereby have all been duly and validly authorized by
all necessary corporate action. This Agreement constitutes the valid and legally
binding obligation of the Target and the Target Stockholder, enforceable in
accordance with its terms and conditions except as enforceability may be limited
by any bankruptcy, insolvency, reorganization, moratorium and other similar laws
now or hereafter in effect relating to creditors' rights generally.

             (d) Noncontravention. To the Knowledge of the officers and
directors of the Target Stockholder and the Target, neither the execution and
the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which any of the Target and
its Subsidiaries is subject or any provision of the charter or bylaws of any of
the Target and its Subsidiaries; or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which any of the Target and its Subsidiaries is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets) other than with respect to certain
agreements evidencing the FINOVA Debt, which is to be repaid by the Buyer as a
portion of the Merger Consideration, and except where the violation, conflict,
breach, default, acceleration, termination, modification, cancellation, failure
to give notice, or Security Interest would not have a material adverse effect on
the business, assets or financial condition of either the Target or its
Subsidiaries or the ability of the Parties to consummate the transactions
contemplated by this Agreement. To the Knowledge of the officers and directors
of the Target Stockholder and the Target, and other than in connection with the
provisions of the Business Corporation Law of the State of New York and
applicable state securities laws, none of the Target and its Subsidiaries needs
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement except
where the failure to give notice, file or obtain any authorization, consent or
approval would not have a material adverse effect on the business, assets or
financial condition of either the Target or its Subsidiaries or on the ability
of the Parties to consummate the transactions contemplated by this Agreement.

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             (e) Brokers' Fees. None of the Target and its Subsidiaries or the
Target Stockholder has any Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.

             (f) Title to Assets. Except as provided in Section 3(f) of the
Target Disclosure Schedule, the Target and its Subsidiaries have good and
marketable title to, or a valid leasehold interest in, the properties and assets
used by them, located on their premises, or shown in the Most Recent Financial
Statements, or acquired after the date thereof, free and clear of all Security
Interests, except for properties and assets disposed of in the Ordinary Course
of Business since the date of the Most Recent Financial Statements and except
for security interests securing the FINOVA Debt, which is to be repaid by the
Buyer as a portion of the Merger Consideration.

             (g) Subsidiaries.

                  (i) The Target's sole Subsidiary is G&O Sales Company, a
Pennsylvania corporation, which has 250 authorized shares, $100 par value per
share, of which all 250 shares have been issued to, and are held beneficially
and of record by, the Target; all such shares have been duly authorized and are
validly issued, fully paid, and non-assessable and are free and clear of any
restrictions on transfer (other than restrictions under the Securities Act and
state securities laws), Security Interests (other than those that will be
released concurrently with the Closing), options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands.

                  (ii) The Target has delivered to the Buyer correct and
complete copies of the charter and bylaws of each Subsidiary of the Target (as
amended to date) and the names of the officers and directors of such Subsidiary.

                  (iii) There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require any of the Target
and its Subsidiaries to sell, transfer, or otherwise dispose of any capital
stock of any of its Subsidiaries or that could require any Subsidiary of the
Target to issue, sell, or otherwise cause to become outstanding any of its own
capital stock (other than this Agreement).

                  (iv) There are no voting trusts, proxies, or other agreements
or understandings with respect to the voting of any capital stock of any
Subsidiary of the Target.

                  (v) None of the Subsidiaries of the Target is in default under
or in violation of any provision of its charter or bylaws.

                  (vi) None of the Target and its Subsidiaries controls directly
or indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust, or other business association, other than
control by the Target of its Subsidiaries.

             (h) Financial Statements. Attached hereto as Exhibit 3(h) are the
following financial statements (collectively the "Financial Statements"): (i)
balance sheets and statements of income as of and for the fiscal years ended
February 28, 1998 and February 28, 1999 and for the

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fiscal year ended February 29, 2000 (the "Most Recent Fiscal Year End") for the
Target and its Subsidiaries; and (ii) interim balance sheets and statements of
income as of and for the one month period ended March 31, 2000 for the Target
and its Subsidiaries. The Financial Statements as of the Most Recent Fiscal Year
End are referred to herein as the "Most Recent Financial Statements". The
Financial Statements have been included in the consolidated financial statements
of the Target Stockholder for the same periods, which consolidated financial
statements of the Target Stockholder, with the exception of the interim
financial statements, have been audited, have been prepared, with the exception
of the interim financial statements in that no footnotes are provided, in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, and present fairly the consolidated financial condition of the
Target Stockholder, the Target and its subsidiaries. The foregoing balance
sheets exclude the FINOVA Debt, inter-company debt between the Target and the
Target Stockholder, and cash.

         (i) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End through May 26, 2000, there has not been any material
adverse change in the business, financial condition, assets, operations, results
of operations, or future prospects of any of the Target and its Subsidiaries.
Without limiting the generality of the foregoing, between the date of the Most
Recent Fiscal Year End and May 26, 2000:

                  (i) none of the Target and its Subsidiaries has sold, leased,
transferred, or assigned any of its assets, tangible or intangible, other than
for a fair consideration in the Ordinary Course of Business;

                  (ii) none of the Target and its Subsidiaries has entered into
any agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) either involving more than $10,000 or outside
the Ordinary Course of Business;

                  (iii) no party (including any of the Target and its
Subsidiaries) has accelerated, terminated, modified, or canceled any agreement,
contract, lease, or license (or series of related agreements, contracts, leases,
and licenses) involving more than $10,000, to which any of the Target and its
Subsidiaries is a party or by which any of them is bound;

                  (iv) none of the Target and its Subsidiaries has imposed any
Security Interest upon any of its assets, tangible or intangible;

                  (v) none of the Target and its Subsidiaries has made any
capital expenditure (or series of related capital expenditures) either involving
more than $10,000, or outside the Ordinary Course of Business;

                  (vi) none of the Target and its Subsidiaries has made any
capital investment in, any loan to, or any acquisition of the securities or
assets of, any other Person either involving more than $10,000, or outside the
Ordinary Course of Business;

                  (vii) none of the Target and its Subsidiaries has issued any
note, bond, or other debt security or created, incurred, assumed, or guaranteed
any indebtedness for borrowed

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money with the exception of the FINOVA Debt, which is to be repaid by the Buyer
as a portion of the Merger Consideration;

                  (viii) except as set forth in Section 3(i)(viii) of the Target
Disclosure Schedule, none of the Target and its Subsidiaries has delayed or
postponed the payment of accounts payable and other Liabilities beyond the
applicable due dates or outside the Ordinary Course of Business;

                  (ix) except as set forth in Section 3(i)(ix) of the Target
Disclosure Schedule, none of the Target and its Subsidiaries has canceled,
compromised, waived, or released any right or claim either involving more than
$10,000, or outside the Ordinary Course of Business;

                  (x) none of the Target and its Subsidiaries has granted any
license or sublicense of any rights under or with respect to any Intellectual
Property either in writing or outside the Ordinary Course of Business;

                  (xi) there has been no change made or authorized in the
charter or bylaws of any of the Target and its Subsidiaries;

                  (xii) none of the Target and its Subsidiaries has issued,
sold, or otherwise disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock (other than as provided for in
this Agreement);

                  (xiii) none of the Target and its Subsidiaries has declared,
set aside, or paid any dividend or made any distribution with respect to its
capital stock (whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;

                  (xiv) none of the Target and its Subsidiaries has experienced
any damage, destruction, or loss (whether or not covered by insurance) to its
property;

                  (xv) none of the Target and its Subsidiaries has made any loan
to, or entered into any other transaction with, any of its directors, officers,
and employees outside the Ordinary Course of Business;

                  (xvi) none of the Target and its Subsidiaries has entered into
any employment contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement;

                  (xvii) except as set forth in Section 3(i)(xvii) of the Target
Disclosure Schedule, none of the Target and its Subsidiaries has granted any
increase in the base compensation of any of its directors, officers, and
employees outside the Ordinary Course of Business;

                  (xviii) none of the Target and its Subsidiaries has adopted,
amended, modified or terminated any bonus, profit-sharing, incentive, severance,
or other plan, contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to any other
Employee Benefit Plan);

                                       11
<PAGE>   13

                  (xix) none of the Target and its Subsidiaries has made any
other change in employment terms for any of its directors, officers, and
employees outside the Ordinary Course of Business;

                  (xx) none of the Target and its Subsidiaries has made or
pledged to make any charitable or other capital contribution outside the
Ordinary Course of Business;

                  (xxi) except as set forth in Section 3(i)(viii) of the Target
Disclosure Schedule, there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary Course of
Business involving any of the Target and its Subsidiaries; and

                  (xxii) none of the Target and its Subsidiaries has committed
to do any of the foregoing.

             (j) Undisclosed Liabilities. None of the Target and its
Subsidiaries has any Liability, except for (i) Liabilities set forth in the Most
Recent Financial Statements, and (ii) Liabilities which have arisen after the
Most Recent Fiscal Year End in the Ordinary Course of Business, all of which are
reflected in the books and records of Target.

             (k) Legal Compliance. To the Knowledge of the officers and
directors of the Target Stockholder and the Target, each of the Target and its
Subsidiaries has complied with all applicable laws of federal, state, local, and
foreign governments, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply.

             (l) Tax Matters.

                  (i) The Target Stockholder has filed all consolidated federal
Tax Returns with respect to the Target and its Subsidiaries that it was required
to file. Each of the Target and its Subsidiaries has filed all other Tax Returns
that it was required to file. All such Tax Returns were correct and complete in
all material respects. All Taxes due and payable by any of the Target and its
Subsidiaries or by the Target Stockholder with respect to the Target and its
Subsidiaries have been paid. None of the Target and its Subsidiaries currently
is the beneficiary of any extension of time within which to file any Tax Return,
other than the customary six-month extension with respect to the 1999 tax year.
To the Knowledge of the officers and directors of the Target and the Target
Stockholder, no claim has ever been made by an authority in a jurisdiction where
any of the Target and its Subsidiaries does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction. There are no Security Interests
on any of the assets of any of the Target and its Subsidiaries that arose in
connection with any failure (or alleged failure) to pay any Tax.

                                       12
<PAGE>   14

                  (ii) Each of the Target and its Subsidiaries has withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.

                  (iii) None of the Target and its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.

                  (iv) The unpaid Taxes of the Target and its Subsidiaries (A)
did not, as of the Most Recent Fiscal Year End, exceed the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth in the Most Recent
Financial Statements; and (B) do not exceed that reserve as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of the Target and its Subsidiaries in filing their Tax Returns.

             (m) Owned Real Property. Neither the Target nor any of its
Subsidiaries owns any real property.

             (n) Leased Real Property. Section 3(n) of the Target Disclosure
Schedule lists and describes briefly all real property leased to any of the
Target and its Subsidiaries. The Target has delivered to the Buyer correct and
complete copies of the leases listed in Section 3(n) of the Target Disclosure
Schedule (as amended to date). With respect to each lease listed in Section 3(n)
of the Target Disclosure Schedule:

                  (i) the lease is legal, valid, binding, enforceable, and in
full force and effect;

                  (ii) to the Knowledge of the officers and directors of the
Target Stockholder and the Target, (i) no party to the lease is in breach or
default; and (ii) no event has occurred which, with notice or lapse of time,
would constitute a breach or default or permit termination, modification, or
acceleration thereunder;

                  (iii) no party to the lease has repudiated any provision
thereof;

                  (iv) except as set forth in Section 3(n) of the Target
Disclosure Schedule, there are no material disputes or oral agreements in effect
as to the lease;

                  (v) none of the Target and its Subsidiaries has assigned,
subleased, transferred, conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold;

                  (vi) all facilities leased thereunder have received all
material approvals of governmental authorities (including licenses and permits)
required in connection with the operation thereof and have been operated and
maintained in accordance with applicable laws, rules, and regulations; and

                                       13
<PAGE>   15

                  (vii) all facilities leased thereunder are supplied with
utilities and other services necessary for the operation thereof.

             (o) Intellectual Property. The Target and its Subsidiaries own or
have the right to use pursuant to license, sublicense, agreement, or permission
all Intellectual Property necessary for the operation of the businesses of the
Target and its Subsidiaries as presently conducted.

                  (i) To the Knowledge of the directors and officers of the
Target and the Target Stockholder,

                          (A) none of the Target and its Subsidiaries has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties,

                          (B) none of the Target and its Subsidiaries has ever
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that any of the Target and its Subsidiaries must license or refrain from using
any Intellectual Property rights of any third party), and

                           (C) no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property rights of any of the Target and its Subsidiaries.

                  (ii) Section 3(o)(ii) of the Target Disclosure Schedule
identifies each patent or registration which has been issued to any of the
Target and its Subsidiaries with respect to any of its Intellectual Property,
identifies each pending patent application or application for registration which
any of the Target and its Subsidiaries has made with respect to any of its
Intellectual Property, and identifies each license, agreement, or other written
permission which any of the Target and its Subsidiaries has granted to any third
party with respect to any of its Intellectual Property (together with any
exceptions). The Target has delivered to the Buyer correct and complete copies
of all such patents, registrations, applications, licenses, agreements, and
permissions (as amended to date). Section 3(o)(ii) of the Target Disclosure
Schedule also identifies each trade name or unregistered trademark used by any
of the Target and its Subsidiaries in connection with any of its businesses.
With respect to each item of Intellectual Property required to be identified in
Section 3(o)(ii) of the Target Disclosure Schedule:

                           (A) the Target and its Subsidiaries possess all
right, title, and interest in and to the item, free and clear of any Security
Interest, license, or other restriction, except for security interests securing
the FINOVA Debt, which is to be repaid by the Buyer as a portion of the Merger
Consideration;

                           (B) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;

                           (C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
Knowledge of the directors and officers of the

                                       14
<PAGE>   16

Target and the Target Stockholder, is threatened which challenges the legality,
validity, enforceability, use, or ownership of the item; and

                           (D) none of the Target and its Subsidiaries has ever
agreed to  indemnify any Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.

                  (iii) None of the Target or its Subsidiaries uses any
Intellectual Property that any third party owns pursuant to license, sublicense,
agreement, or permission other than licenses implied by the sale of goods.

             (p) Tangible Assets. The Target and its Subsidiaries own or lease
all machinery, equipment, and other tangible assets necessary for the conduct of
their businesses as presently conducted. Each such tangible asset is free from
material defects, has been maintained in accordance with normal industry
practice, and is in good operating condition and repair (subject to normal wear,
tear and obsolescence).

             (q) Inventory. The inventory of the Target and its Subsidiaries
consists of supplies and purchased parts, all of which is merchantable and fit
for the purpose for which it was procured, subject only to the reserve for the
inventory write-down for inventory which is slow-moving, obsolete, damaged, or
defective as set forth in the Most Recent Financial Statements as adjusted for
the passage of time through the Closing Date in accordance with the past custom
and practice of the Target and its Subsidiaries.

             (r) Contracts. Section 3(r) of the Target Disclosure Schedule lists
the following contracts and other agreements to which any of the Target and its
Subsidiaries is a party:

                  (i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease payments in
excess of $10,000 per annum;

                  (ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year, result in a material
loss to any of the Target and its Subsidiaries, involve consideration in excess
of $10,000 or which was entered into outside the Ordinary Course of Business;

                  (iii) any agreement concerning a partnership or joint venture;

                  (iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of $10,000 or
under which it has imposed a Security Interest on any of its assets, tangible or
intangible, other than agreements or guaranties relating to the FINOVA Debt,
which is to be repaid by the Buyer as a portion of the Merger Consideration;

                  (v) any agreement concerning confidentiality or
noncompetition;

                                       15
<PAGE>   17

                  (vi) any agreement with any of the Target Stockholder and its
affiliates (other than the Target and its Subsidiaries) other than agreements or
guaranties relating to the FINOVA Debt, which is to be repaid by the Buyer as a
portion of the Merger Consideration;

                  (vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement for
the benefit of its current or former directors, officers, and employees;

                  (viii) any collective bargaining agreement;

                  (ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of $10,000 or providing severance benefits;

                  (x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the Ordinary
Course of Business;

                  (xi) any agreement under which the consequences of a default
or termination could have a material adverse effect on the business, financial
condition, operations, results of operations, or future prospects of any of the
Target and its Subsidiaries; or

                  (xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000.

The Target has delivered to the Buyer a correct and complete copy of each
written agreement listed in Section 3(r) of the Target Disclosure Schedule (as
amended to date) and a written summary setting forth the terms and conditions of
each oral agreement referred to in Section 3(r) of the Target Disclosure
Schedule. With respect to each such agreement: (A) the agreement is legal,
valid, binding, enforceable, and in full force and effect; (B) the agreement
will continue to be legal, valid, binding, enforceable, and in full force and
effect as of the Closing Date on identical terms upon the consummation of the
transactions contemplated hereby; (C) to the Knowledge of the officers and
directors of the Target Stockholder and the Target, no party is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (D) no party has repudiated any provision
of the agreement.

             (s) Notes and Accounts Receivable. All notes and accounts
receivable of the Target and its Subsidiaries are reflected properly on their
books and records; are valid receivables subject to no defenses, setoffs or
counterclaims; and are current and will be collected in accordance with their
terms at their recorded amounts, except to the extent of any reserve for bad
debts set forth in the Most Recent Financial Statements as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of the Target and its Subsidiaries.

                                       16
<PAGE>   18

             (t) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of any of the Target and its Subsidiaries other than those
given to freight forwarders in connection with the importation of goods, if any.

             (u) Insurance. Section 3(u) of the Target Disclosure Schedule sets
forth the following information with respect to each insurance policy to which
any of the Target and its Subsidiaries is a party, a named insured, or otherwise
the beneficiary of coverage:

                  (i) the name, address, and telephone number of the agent;

                  (ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured; and

                  (iii) the policy number and the period of coverage.

             (v) Litigation. Section 3(v) of the Target Disclosure Schedule sets
forth each instance in which any of the Target and its Subsidiaries (i) is
subject to any outstanding injunction, judgment, order, decree, or ruling; or
(ii) is a party or, to the Knowledge of the officers and directors of the Target
Stockholder and the Target, is threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. None of the actions, suits, proceedings,
hearings, and investigations set forth in Section 3(v) of the Target Disclosure
Schedule could result in any adverse change in the business, financial
condition, operations, results of operations, or future prospects of any of the
Target and its Subsidiaries.

             (w) Product Warranty. Each product sold by any of the Target and
its Subsidiaries has been sold pursuant to the warranty of the manufacturer of
the product. Section 3(w) of the Target Disclosure Schedule includes copies of
the standard terms and conditions of sale or lease for each of the Target and
its Subsidiaries. None of the Target and its Subsidiaries has any Liability (and
there is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) for replacement or repair thereof or other damages in
connection therewith, subject only to any reserve for product warranty claims
set forth on the face of the Most Recent Financial Statements (rather than in
any notes thereto) as adjusted for the passage of time through the Closing Date
in accordance with the past custom and practice of the Target and its
Subsidiaries. No product manufactured, sold, leased, or delivered by any of the
Target and its Subsidiaries is subject to any guaranty, warranty, or other
indemnity beyond the applicable standard terms and conditions of sale or lease.

             (x) Product Liability. To the Knowledge of the officers and
directors of the Target Stockholder and the Target, none of the Target and its
Subsidiaries has any Liability arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product sold by
Target or its Subsidiaries.

             (y) Employees.

                                       17
<PAGE>   19

                  (i) None of the Target and its Subsidiaries is a party to or
bound by any collective bargaining agreement, nor has any of them experienced
any strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. None of the Target and its Subsidiaries has committed any
unfair labor practice. None of the officers and directors of the Target
Stockholder and the Target has any Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of any of the Target and its Subsidiaries.

                  (ii) The Target and its Subsidiaries are in full compliance
with all applicable laws, rules, regulations, standards and contracts relating
to employment, including those relating to wages, hours, working conditions,
hiring, promotion, occupational health and safety (including those dealing with
employee handling or use of or exposure to hazardous or toxic substances and the
training of employees with respect to such substances), and the payment and
withholding of taxes and other similar obligations, and the Target and its
Subsidiaries have not received any notice of any violation of any such rules,
law, regulation, standard or contract. The Target and its Subsidiaries are in
full compliance with all applicable affirmative action and equal employment
opportunity obligations arising under any state or federal law, regulation,
executive order or ordinance, or any contract or subcontract with any
governmental entity or other person. The Target and its Subsidiaries have
withheld from the wages and salaries of their respective employees as is
required by law and are not liable for any arrears or wages or any tax or
penalty in connection therewith.

                  (iii) Except as set forth in Section 3(y)(iii) of the Target
Disclosure Schedule, there is no employment-related claim, cause of action,
grievance, judgment or other adverse charge or decision of any kind (including
any in the nature of employment discrimination of any type, breach of contract,
wrongful discharge, retaliation, health, safety or right-to-know violations,
child labor violations, or non-payment of wages, benefits or wage supplements),
under any law, rule, regulation, standard, collective bargaining agreement or
other contract, pending against any of the Target and its Subsidiaries or any of
their respective officer, employees or agents and, to the Knowledge of the
officers and directors of the Target and Target Stockholder, there is no basis
for any such claim, cause or action, grievance, judgment or other adverse charge
or decision.

                  (iv) To the Knowledge of the officers and directors of the
Target and the Target Stockholder, no current or former employee of the Target
and its Subsidiaries has any claim against the Target and its Subsidiaries or
any of their respective officers, employees or agents under any law, rule,
regulation, standard or contract on account of or for overtime pay (other than
overtime pay for the current payroll period), wages or salary for any period
other than the current payroll period, vacation, holiday or other time off or
pay in lieu thereof (other than time off or pay in lieu thereof earned in
respect of the current year), or any violation of any law, rule, regulation,
standard or contract relating to the payment of wages, fringe benefits, wage
supplements or hours of work.

                  (v) Except as set forth in Section 3(y)(v) of the Target
Disclosure Schedule, none of the Target, its Subsidiaries, the Buyer and the
Transitory Subsidiary is, or, as a result of the consummation of the
transactions contemplated by this Agreement, will be, liable for severance pay
or any other payment of monies to any employee of the Target or its Subsidiaries
as

                                       18
<PAGE>   20

the result of the execution of this Agreement or the parties' performance of its
terms, or for any other reason in any way related to the consummation of the
transactions contemplated hereby, including any change of ownership or any
change in the employing entity.

                  (vi) The Target and its Subsidiaries are in full compliance
with all employment-related notice, reporting and filing requirements and
obligations, including those under the Immigration Reform and Control Act
(IRCA), and the Worker Adjustment and Retraining Notification Act (WARN plant
closing and mass layoff notification).

             (z) Employee Benefits.

                  (i) Section 3(z) of the Target Disclosure Schedule lists each
Employee Benefit Plan that any of the Target and its Subsidiaries maintains or
to which any of the Target and its Subsidiaries contributes or has any
obligation to contribute.

                  (ii) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all respects
with the applicable requirements of ERISA, the Code, and other applicable laws.

                  (iii) All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been timely filed and distributed appropriately with respect
to each such Employee Benefit Plan. The requirements of COBRA have been met with
respect to each such Employee Benefit Plan which is an Employee Welfare Benefit
Plan.

                  (iv) All contributions (including all employer contributions
and employee salary reduction contributions) which are due have been paid to
each such Employee Benefit Plan which is an Employee Pension Benefit Plan and
all contributions for any period ending on or before the Closing Date which are
not yet due have been paid to each such Employee Pension Benefit Plan or accrued
in accordance with the past custom and practice of the Target and its
Subsidiaries. All premiums or other payments for all periods ending on or before
the Closing Date have been paid with respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan.

                  (v) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified plan" under Code
Sec. 401(a) and has received a favorable determination letter from the Internal
Revenue Service that it is a "qualified plan".

                  (vi) None of the Target and its Subsidiaries contributes to
any Multiemployer Plan or has any Liability (including withdrawal Liability)
under any Multiemployer Plan.

                  (vii) The Target has delivered to the Buyer correct and
complete copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service, the most
recent Form 5500 Annual Report, and all related trust agreements, insurance
contracts, and other funding agreements which implement each such Employee
Benefit Plan.

                                       19
<PAGE>   21

             (aa) Guaranties. Except for certain guarantees by Target of G&O
Sales Company obligations set forth in Section 3(aa) of the Target Disclosure
Schedule and except as will be discharged at the Closing, none of the Target or
its Subsidiaries is a guarantor or otherwise is liable for any Liability or
obligation (including indebtedness) of any other Person.

             (bb) Environment, Health, and Safety.

                  (i) To the Knowledge of the officers and directors of Target
Stockholder and the Target, each of the Target, its Subsidiaries, and their
respective predecessors has complied and is in compliance with all
Environmental, Health, and Safety Requirements.

                  (ii) Without limiting the generality of the foregoing, each of
the Target and its Subsidiaries has obtained and complied in all material
respects with, and is in compliance with, all permits, licenses and other
authorizations that are required pursuant to Environmental, Health, and Safety
Requirements for the occupation of its facilities and the operation of its
business; a list of all such permits, licenses and other authorizations is set
forth in Section 3(bb)(ii) of the Target Disclosure Schedule.

                  (iii) Neither the Target, its Subsidiaries, nor to the
Knowledge of the officers and directors of the Target and the Target
Stockholder, their respective predecessors, has received any written or oral
notice, report or other information regarding any actual or alleged violation of
Environmental, Health, and Safety Requirements, or any Liabilities or potential
Liabilities (whether accrued, absolute, contingent, unliquidated or otherwise),
including any investigatory, remedial or corrective obligations, relating to any
of them or its facilities arising under Environmental, Health, and Safety
Requirements.

                  (iv) To the Knowledge of the officers and directors of the
Target Stockholder and the Target, except as described in (A) the Phase I
Environmental Site Assessment Report dated August 1994 prepared by ENSR
Consulting and Engineering for Target Stockholder and (B) the Phase I
Environmental Site Assessment Report dated February 29, 1996 prepared by GZA Geo
Environmental, Inc. for the Target Stockholder, copies of which were delivered
to Buyer, none of the following exists at any property or facility operated by
the Target or its Subsidiaries: (1) underground storage tanks, (2)
asbestos-containing material in any form or condition, (3) materials or
equipment containing polychlorinated biphenyls, or (4) landfills, surface
impoundments, or disposal areas.

                  (v) To the Knowledge of the officers and directors of the
Target Stockholder and the Target, none of the Target, its Subsidiaries, or
their respective predecessors has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or released any substance,
including without limitation any hazardous substance, or owned or operated any
property or facility (and no such property or facility is contaminated by any
such substance) in a manner that has given or would give rise to liabilities,
including any liability for response costs, corrective action costs, personal
injury, property damage, natural resources damages or attorney fees, pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act of

                                       20
<PAGE>   22

1980, as amended ("CERCLA"), the Solid Waste Disposal Act, as amended ("SWDA")
or any other Environmental, Health, and Safety Requirements.

                  (vi) Neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will result in any obligations
for site investigation or cleanup, or notification to or consent of government
agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" Environmental,
Health, and Safety Requirements.

                  (vii) Neither the Target, its Subsidiaries, nor any of their
respective predecessors has, either expressly or by operation of law, assumed or
undertaken any liability, including without limitation any obligation for
corrective or remedial action, of any other Person relating to Environmental,
Health, and Safety Requirements.

                  (viii) No facts, events or conditions relating to the past or
present facilities, or properties occupied by the Target or its Subsidiaries or
operations of the Target, its Subsidiaries, or, to the Knowledge of the officers
and directors of the Target and the Target Stockholder, any of their respective
predecessors or Affiliates and occurring on or before the Closing Date, will
prevent, hinder or limit continued compliance with Environmental, Health, and
Safety Requirements, give rise to any investigatory, remedial or corrective
obligations pursuant to Environmental, Health, and Safety Requirements, or give
rise to any other Liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) pursuant to Environmental, Health, and Safety
Requirements, including without limitation any relating to onsite or offsite
releases or threatened releases of hazardous materials, substances or wastes,
personal injury, property damage or natural resources damage.

             (cc) Certain Business Relationships With the Target and Its
Subsidiaries. The Target Stockholder does not own any asset, tangible or
intangible, which is used in the business of any of the Target and its
Subsidiaries.

             (dd) Suppliers and Customers. The Target's major suppliers are
Buyer, Modine Manufacturing Company ("Modine"), Go\Dan Industries, CSF and
Spectra Premium Industries. Except as otherwise disclosed in Section 3(dd) of
the Target Disclosure Schedule:

                  (i) the Buyer, the Target and the Target Stockholder have
received a copy of Modine's Proposed 2000 Program for Target, as set forth in a
letter dated May 24, 2000 from Modine to the Target (the "Modine Proposal"). The
Modine Proposal sets forth the proposed terms on which Modine will sell
inventory to the Target. To the knowledge of the Target and the Target
Stockholder, Modine has not changed any of terms set forth in the Modine
proposal or otherwise amended or modified the Modine Proposal;

                  (ii) except for Buyer, since the Most Recent Fiscal Year End,
no supplier including, without limitation, Modine, or customer of Target or its
Subsidiaries has cancelled or otherwise terminated, or made any written or oral
threat to the Target or its Subsidiaries or Target Stockholder to cancel or
otherwise terminate, for any reason, including the contemplated consummation of
the Merger, its relationship with Target or its Subsidiaries, or has decreased
materially its services or products supplied to the Target or its Subsidiaries
in the case of any such

                                       21
<PAGE>   23

supplier, or its usage of the services or products of the Target or its
Subsidiaries, in the case of any such customer; and

                  (iii) neither the Target nor the Target Stockholder has any
knowledge that any such supplier or customer intends to cancel or otherwise
terminate its relationship with the Target or its Subsidiaries or to decrease
materially its services or products supplied to the Target or its Subsidiaries,
or its usage of the services or products of the Target or its Subsidiaries, as
the case may be.

             (ee) Disclosure. The representations and warranties contained in
this Section 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 3 not misleading.

         4. REPRESENTATIONS AND WARRANTIES OF THE TARGET STOCKHOLDER, BUYER AND
THE TRANSITORY SUBSIDIARY.

             (a) Representations and Warranties of the Target Stockholder. The
Target Stockholder represents and warrants to the Buyer and the Transitory
Subsidiary that the statements contained in this Section 4(a) are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4(a)) with
respect to itself.

                  (i) Organization of Target Stockholder. The Target Stockholder
is duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.

                  (ii) Authorization of Transaction. The Target Stockholder has
full corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by Target Stockholder and the consummation of the transactions contemplated
hereby have all been, or will be by Closing, duly and validly authorized by all
necessary corporate action. This Agreement constitutes the valid and legally
binding obligation of the Target Stockholder, enforceable in accordance with its
terms and conditions except as enforceability may be limited by any bankruptcy,
insolvency, reorganization, moratorium and other similar laws now or hereafter
in effect relating to creditors' rights generally. The Target Stockholder need
not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.

                  (iii) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Target Stockholder is subject or any
provision of its charter or bylaws or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or

                                       22
<PAGE>   24

other arrangement to which the Target Stockholder is a party or by which it is
bound or to which any of its assets is subject other than with respect to
certain agreements evidencing the FINOVA Debt, which is to be repaid by the
Buyer as a portion of the Merger Consideration.

                  (iv) Brokers' Fees. The Target Stockholder has no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which the Buyer
could become liable or obligated.

             (b) Representations and Warranties of the Buyer and Transitory
Subsidiary. Each of the Buyer and the Transitory Subsidiary represents and
warrants to the Target and the Target Stockholder that the statements contained
in this Section 4(b) are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the date of this Agreement
throughout this Section 4(b)), except as set forth in the Buyer Disclosure
Schedule. The Buyer Disclosure Schedule will be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Section
4(b).

                  (i) Organization. Each of the Buyer and the Transitory
Subsidiary is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation.

                  (ii) Authorization of Transaction. Each of the Buyer and the
Transitory Subsidiary has full power and authority (including full corporate
power and authority) to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement by each of
the Buyer and the Transitory Subsidiary, and their consummation of the
transactions contemplated hereby, have all been duly and validly authorized by
all necessary corporate action. This Agreement constitutes the valid and legally
binding obligation of each of the Buyer and the Transitory Subsidiary,
enforceable in accordance with its terms and conditions except as enforceability
may be limited by any bankruptcy, insolvency, reorganization, moratorium and
other similar laws now or hereafter in effect relating to creditors' rights
generally.

                  (iii) Noncontravention. To the Knowledge of any director or
officer of the Buyer and the Transitory Subsidiary, neither the execution and
the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which either the Buyer or
the Transitory Subsidiary is subject or any provision of the charter or bylaws
of either the Buyer or the Transitory Subsidiary; or (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument or
other arrangement to which either the Buyer or the Transitory Subsidiary is a
party or by which it is bound or to which any of its assets is subject, except
where the violation, conflict, breach, default, acceleration, termination,
modification, cancellation, or failure to give notice would not have a material
adverse effect on the ability of the Parties to consummate the transactions
contemplated by this Agreement and except where appropriate waivers or consents
have been obtained. To the Knowledge of any director or officer of the Buyer and
the Transitory Subsidiary, and other than in connection with the provisions

                                       23
<PAGE>   25

of the Business Corporation Law of the Sate of New York and applicable state
securities laws, neither the Buyer nor the Transitory Subsidiary needs to give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.

                  (iv) Brokers' Fees. Neither the Buyer nor the Transitory
Subsidiary has any Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this
Agreement for which any of the Target and its Subsidiaries could become liable
or obligated.

         5. COVENANTS. The Parties agree as follows with respect to the period
from and after the execution of this Agreement:

             (a) General. Each of the Parties will use commercially reasonable
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in Section 6, below).

             (b) Notices and Consents. The Target and/or Target Stockholder, as
applicable, will give any notices (and will cause each of its Subsidiaries to
give any notices) to third parties, and will use commercially reasonable efforts
to obtain (and will cause each of its Subsidiaries to use commercially
reasonable efforts to obtain) any third-party consents, that the Buyer
reasonably may request in connection with the matters referred to in Sections
3(d) and 4(a)(iii), above.

             (c) Regulatory Matters and Approvals. Each of the Parties will (and
the Target will cause each of its Subsidiaries to) give any notices to, make any
filings with, and use commercially reasonable efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in Sections 3(d) and 4(a)(iii),
above.

             (d) Operation of Business. During the Pre-Closing Period, neither
the Target Stockholder nor the Buyer will cause or permit any of the Target and
its Subsidiaries to engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business or commit to any of the
foregoing, except as authorized by the Pre-Closing Board in accordance with
Section 2(f). Without limiting the generality of the foregoing, except as
authorized by the Pre-Closing Board in accordance with Section 2(f), neither the
Target Stockholder nor the Buyer will cause or permit any of the Target and its
Subsidiaries to (i) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase, or otherwise
acquire any of its capital stock, (ii) prepay any indebtedness, (iii) take any
action or engage in any conduct that could impair or adversely affect the
Target's relationships with any of its customers or suppliers, or (iv) otherwise
engage in any practice, take any action, or enter into any transaction of the
sort described in Section 3(i) above.

             (e) Preservation of Business. Each Party will cause each of the
Target and its Subsidiaries to keep its business and properties substantially
intact, including its present operations,

                                       24
<PAGE>   26

physical facilities, working conditions, and relationships with lessors,
licensors, suppliers, customers, and employees.

             (f) Full Access. The Target will (and will cause each of its
Subsidiaries to) permit representatives of the Buyer to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of the Target and its Subsidiaries, to all premises,
properties, personnel, books, records (including tax records), contracts, and
documents of or pertaining to each of the Target and its Subsidiaries. Each of
the Buyer and the Transitory Subsidiary will treat and hold as such any
Confidential Information it receives from any of the Target and its Subsidiaries
in the course of the reviews contemplated by this Section 5(f); will not use any
of the Confidential Information except in connection with this Agreement, and,
if this Agreement is terminated for any reason whatsoever, agrees to return to
the Target all tangible embodiments (and all copies) thereof which are in its
possession.

             (g) Notice of Developments. Each Party will give prompt written
notice to the others of any material adverse development causing a breach of any
of its own representations and warranties in Sections 3 and 4, above. No
disclosure by any Party pursuant to this Section 5(g), however, shall be deemed
to amend or supplement its respective disclosure schedule or to prevent or cure
any misrepresentation, breach of warranty, or breach of covenant.

             (h) Insurance and Indemnification. The Buyer will not take any
action to alter or impair any exculpatory or indemnification provisions now
existing in the certificate of incorporation or bylaws of the Target for the
benefit of any individual who served as a director or officer of the Target at
any time prior to the Closing Date.

             (i) Exclusivity. Between the date of this Agreement and the earlier
of Closing or termination of this Agreement as provided herein, the Target
Stockholder will not (and the Target Stockholder will not cause or permit any of
the Target and its Subsidiaries to) (i) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any substantial portion of
the assets, of any of the Target and its Subsidiaries (including any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. The Target Stockholder
will not vote its Target Shares in favor of any such acquisition structured as a
merger, consolidation, or share exchange. The Target Stockholder will notify the
Buyer immediately if any Person makes any proposal, offer, inquiry, or contact
with respect to any of the foregoing.

             (j) Further Assurances. The parties agree to execute and deliver,
or to cause to be executed and delivered, such further instruments or documents
or take such other action as may be reasonably necessary or convenient to carry
out the transactions contemplated hereby.

             (k) Insurance Policies. To the extent any insurance policies or
insurance products in any Employee Benefit Plan were obtained by or through
Target Stockholder for the benefit and at the cost and expense of the Target
and/or its Subsidiaries, including without limitation, property and casualty
insurance, group life or disability insurance and workers'

                                       25
<PAGE>   27

compensation insurance, any premium refunds, credits, rebates or audit
adjustments (collectively, "Premium Refunds") shall be and remain the property
of the Target and/or its Subsidiaries and the Target Stockholder agrees to make
application promptly after the Closing for any such Premium Refunds with the
insurance carrier and to pay or cause such Premium Refunds to be paid to the
Buyer on behalf of the Target and/or its Subsidiaries promptly upon receipt or
issuance. Target Stockholder shall provide copies of all applications for
Premium Refunds to the Buyer. The parties agree to cooperate in the preparation
or processing of such application and cancellation of such insurance policies or
products. This covenant shall survive the Closing.

             (l) Confidentiality. Except as may be required by law or as
otherwise permitted or expressly contemplated herein, no party hereto or their
respective affiliates, employees, agents and representatives (a "Receiving
Party") shall disclose to any third party this Agreement, the subject matter or
terms hereof or any confidential information or other proprietary knowledge
concerning the business or affairs of any other party hereto (a "Disclosing
Party") which it may have acquired from the Disclosing Party in the course of
pursuing the transactions contemplated by this Agreement or any of the documents
executed in connection therewith without the prior consent of the Disclosing
Party; provided, that any information that is known to the Receiving Party prior
to disclosure by the Disclosing Party or which otherwise is or becomes publicly
available, without breach of this provision, or which has been obtained from a
third party without a breach of such third party's duties, shall not be deemed
confidential information. The obligations of the parties under this Section
shall survive the Closing or the termination of this Agreement.

             (m) Covenant Not to Compete. In order to assure that Buyer will
realize the benefits of the Merger, Target Stockholder agrees for itself and any
of its Subsidiaries that for a period of five (5) years from and after the
Closing Date, Target Stockholder and its Subsidiaries will not engage, directly
or indirectly, in any business that the Target or any of its Subsidiaries
conducts as of the Closing Date in any geographic area in which Target or any of
its Subsidiaries conducts that business as of the Closing Date. Target
Stockholder agrees and acknowledges that the restrictions contained in this
Section 5(m) are reasonable in scope and duration and are necessary to protect
Buyer and the Target after the Closing Date. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this Section 5(m)
is invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified. The Parties agree and
acknowledge that the breach of this Section 5(m) will cause irreparable damage
to Buyer and upon any breach or threatened breach of this Section 5(m), Buyer
shall be entitled to injunctive relief, specific performance or other equitable
relief; provided, however, that the foregoing remedies shall in no way limit any
other remedies which Buyer may have (including, without limitation, the right to
such monetary damages). Target Stockholder shall be liable for and pay to Buyer
any and all costs and expenses, including reasonable attorneys' fees, incurred
by Buyer in successfully enforcing the provisions of this Section 5(m).

             (o) Release of Liability. On or before the Closing Date, the Target
and the Target Stockholder shall cause the Target to be released from, and the
Target Stockholder will indemnify the Buyer pursuant to Section 8(a) for, any
and all liabilities (i) due directly from the

                                       26
<PAGE>   28

Target to the Target Stockholder or its Affiliates, (ii) due or which may become
due from the Target to any third party including, without limitation, FINOVA,
with respect to obligations of the Target Stockholder or its Affiliates which
have been guaranteed by the Target, or (iii) relating to loans due from the
Target or the Target Stockholder to Joseph Quattrochi and Robert Keane. On or
before the Closing, the Target and the Target Stockholder will obtain from any
third party lenders and vendors including, without limitation, FINOVA, releases
of the Target from any guarantees of indebtedness made by the Target on behalf
of the Target Stockholder or its Affiliates. The Target hereby releases the
Target Stockholder from any and all liability for any amounts due and owing as
of the Closing from the Target Stockholder to the Target; provided, however,
that this release is not intended to, and shall not, release the Target
Stockholder from, any of its obligations under this Agreement.

             (p) Employee Benefit Plans. If any Employee Benefit Plan which is
an Employee Pension Benefit Plan fails to meet the requirements of a "qualified
plan" under Code Sec. 401(a) or has not received a favorable determination
letter from the Internal Revenue Service that it is a "qualified plan", the
Target Stockholder, at the Target Stockholder's expense, agrees to take all
steps reasonably necessary, both prior to or after the Closing, to correct any
defects as may be necessary for such Employee Benefit Plan to meet the
requirements for a "qualified plan" or, at the election of Buyer, to terminate
such Employee Benefit Plan effective prior to the Closing.

         6. CONDITIONS TO OBLIGATION TO CLOSE.

             (a) Conditions to Obligation of the Buyer and the Transitory
Subsidiary. The obligation of each of the Buyer and the Transitory Subsidiary to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:

                  (i) this Agreement and the Merger shall have received the
approval of the Target Stockholder's board of directors;

                  (ii) the representations and warranties set forth in Sections
3 and 4(a), above, shall be true and correct in all material respects at and as
of the Closing Date, except for any non-conformity resulting from matters
authorized by the Pre-Closing Board during the Pre-Closing Period, as provided
in Section 2(f);

                  (iii) the Target and the Target Stockholder shall have
performed and complied with all of its covenants hereunder in all material
respects through the Closing;

                  (iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of the Buyer to own the
capital stock of the Surviving Corporation and to control the Surviving
Corporation and its Subsidiaries, or (D) affect adversely the right of any of
the Surviving Corporation and its Subsidiaries to own its assets and to operate
its businesses (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);

                                       27
<PAGE>   29

                  (v) there shall have been no material adverse change in the
business, financial condition, assets, operations, results of operations, or
future prospects of any of the Target and its Subsidiaries, except for changes
resulting from matters authorized by the Pre-Closing Board during the
Pre-Closing Period, as provided in Section 2(f);

                  (vi) each of the Target and Target Stockholder shall have
delivered to the Buyer and the Transitory Subsidiary a certificate, in form and
substance reasonably acceptable to the Buyer and the Transitory Subsidiary and
their counsel, to the effect that each of the conditions specified above in
Section 6(a)(i)-(v) is satisfied in all respects;

                  (vii) the Parties shall have received all other
authorizations, consents, and approvals of governments and governmental agencies
referred to in Sections 3(d) and 4(a)(iii) and (b)(iv), above;

                  (viii) the Buyer and the Transitory Subsidiary shall have
received from counsel to the Target and the Target Stockholder an opinion in
form and substance reasonably acceptable to the Buyer and the Transitory
Subsidiary and their counsel, addressed to the Buyer and the Transitory
Subsidiary, and dated as of the Closing Date;

                  (ix) the Buyer and the Transitory Subsidiary shall have
received the resignations, effective as of the Closing, of each director and
officer of the Target and the Target's Subsidiaries other than any
representatives of Buyer serving on the Pre-Closing Board and those whom the
Buyer shall have specified in writing at least 5 business days prior to the
Closing;

                  (x) the Buyer and the Transitory Subsidiary shall have
received good standing certificates, franchise tax reports and Uniform
Commercial Code, federal and state tax lien, judgment and bankruptcy searches
dated not more than five (5) business days before the Closing Date with respect
to the Target Stockholder and the Target and its Subsidiaries from each
jurisdiction in which incorporated or qualified to transact business and all of
the same being reasonably acceptable to the Buyer;

                  (xi) the Target or Target Stockholder shall have used
commercially reasonable efforts to obtain estoppel certificates and landlord
waivers from each lessor of real property occupied by the Target and its
Subsidiaries in form and substance reasonably acceptable to the Buyer, its
lender and their respective counsel;

                  (xii) all actions to be taken by the Target and Target
Stockholder in connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other documents required
to effect the transactions contemplated hereby will be reasonably satisfactory
in form and substance to the Buyer and the Transitory Subsidiary.

                  (xiii) the Buyer shall have obtained financing, on terms
acceptable to Buyer, sufficient to enable the Buyer to pay the Merger
Consideration; provided, however, that if the principal balance of the FINOVA
Debt is reduced, in the ordinary course of business, to

                                       28
<PAGE>   30

$100,000 or less during the Pre-Closing Period, and remains at $100,000 or less
as of the Closing Date, then this condition shall be deemed satisfied by Buyer;

                  (xiv) the Buyer, Target and Modine shall have agreed on (1)
the terms of repayment of amounts past due to Modine from Target as of the
Closing Date, which terms shall be reasonably acceptable to the Buyer, shall not
require the payment of more than $250,000 during the thirty (30) day period
beginning on the Closing Date, and shall provide for the forgiveness by Modine
of $200,000 of the amount due from the Target to Modine, exclusive of service
charges; and (2) a marketing plan for Modine products and credit terms for
future purchases by Target from Modine, which terms shall be reasonably
acceptable to the Buyer; and

                  (xv) the balance, including principal and accrued interest,
outstanding as of the Closing Date with respect to the FINOVA Debt shall be less
than or equal to $1,425,000 (unless otherwise authorized in writing by the
Pre-Closing Board), and the Buyer and FINOVA shall have agreed on the terms of
repayment of the FINOVA Debt, and FINOVA shall have agreed to (1) release the
Target from all liability for other amounts due from the Target Stockholder or
its Affiliates to FINOVA, and (2) terminate all of its security interests in the
assets of the Target and release all other collateral relating to the Target,
including any shares of the Target which have been pledged to FINOVA by the
Target Stockholder, upon payment in full of the FINOVA Debt.

             The Buyer and the Transitory Subsidiary may waive any condition
specified in this Section 6(a) if they execute a writing so stating at or prior
to the Closing.

             (b) Conditions to Obligation of the Target and the Target
Stockholder. The obligation of each of the Target and the Target Stockholder to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:

                  (i) the representations and warranties set forth in Section
4(b), above, shall be true and correct in all material respects at and as of the
Closing Date;

                  (ii) each of the Buyer and the Transitory Subsidiary shall
have performed and complied with all of its covenants hereunder in all material
respects through the Closing;

                  (iii) no action, suit, or proceeding (other than any action,
whether voluntary or involuntary, against the Target or the Target Stockholder
under the Bankruptcy Code) shall be pending or threatened before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement, or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation.

                  (iv) each of the Buyer and the Transitory Subsidiary shall
have delivered to the Target and the Target Stockholder a certificate, in form
and substance reasonably acceptable to the Target, the Target Stockholder and
their counsel, to the effect that each of the conditions specified above in
Section 6(b)(i)-(iii) is satisfied in all respects;

                                       29
<PAGE>   31

                  (v) this Agreement and the Merger shall have received the
approval of the Target Stockholder's board of directors;

                  (vi) the Parties shall have received all other authorizations,
consents, and approvals of governments and governmental agencies referred to in
Sections 3(d) and 4(a)(iii) and (b)(iv), above;

                  (vii) the Target and the Target Stockholder shall have
received from counsel to the Buyer and the Transitory Subsidiary an opinion in
form and substance reasonably acceptable to the Target, the Target Stockholder
and their counsel, addressed to the Target and the Target Stockholder, and dated
as of the Closing Date; and

                  (viii) all actions to be taken by the Buyer and the Transitory
Subsidiary in connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other documents required
to effect the transactions contemplated hereby will be reasonably satisfactory
in form and substance to the Target.

             The Target and the Target Stockholder may waive any condition
specified in this Section 6(b) if it executes a writing so stating at or prior
to the Closing.

         7. TERMINATION.

             (a) Termination of this Agreement. Any of the Parties may terminate
this Agreement with the prior authorization of its board of directors (whether
before or after stockholder approval) as provided below:

                  (i) The Parties may terminate this Agreement by written
consent executed by all of them at any time prior to the Closing Date.

                  (ii) The Buyer and the Transitory Subsidiary may terminate
this Agreement by giving written notice to the Target at any time prior to the
Closing Date (A) in the event the Target has breached any representation,
warranty, or covenant contained in this Agreement in any material respect; the
Buyer or the Transitory Subsidiary has notified the Target of the breach; and
the breach has continued without cure for a period of 30 days after the notice
of breach has been given to the Target; or (B) if the Closing shall not have
occurred within one hundred twenty (120) days following the date of this
Agreement by reason of the failure of any condition precedent under Section 6(a)
hereof (unless the failure results primarily from the Buyer or the Transitory
Subsidiary breaching any representation, warranty, or covenant contained in this
Agreement).

                  (iii) The Target may terminate this Agreement by giving
written notice to the Buyer and the Transitory Subsidiary at any time prior to
the Closing Date (A) in the event the Buyer or the Transitory Subsidiary has
breached any representation, warranty, or covenant contained in this Agreement
in any material respect; the Target has notified the Buyer and the

                                       30
<PAGE>   32

Transitory Subsidiary of the breach; and the breach has continued without cure
for a period of 30 days after the notice of breach; or (B) if the Closing shall
not have occurred within one hundred twenty (120) days following the date of
this Agreement by reason of the failure of any condition precedent under Section
6(b) hereof (unless the failure results primarily from the Target or Target
Stockholder breaching any representation, warranty, or covenant contained in
this Agreement).

             (b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 7(a), above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any Liability of any Party then in breach); provided, however, that
the confidentiality provisions contained in Section 5(f), above, shall survive
any such termination.

         8. REMEDIES FOR BREACHES OF THIS AGREEMENT.

             (a) Indemnification Provisions for Benefit of the Buyer.

                  (i) In the event either of the Target or Target Stockholder
breaches (or in the event any third party alleges facts that, if true, would
mean either of the Target or Target Stockholder has breached) any of its
representations, warranties, and covenants contained herein, and, provided that
the Buyer makes a written claim for indemnification against the Target
Stockholder pursuant to Section 10(h) below within the applicable survival
period, then the Target Stockholder agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the Buyer may suffer through
and after the date of the claim for indemnification (including any Adverse
Consequences the Buyer may suffer after the end of the applicable survival
period) resulting from, arising out of, relating to, in the nature of, or caused
by the breach (or the alleged breach); provided, however, that the Target
Stockholder shall not have any obligation to indemnify the Buyer from and
against any Adverse Consequences resulting from, arising out of, relating to, in
the nature of, or caused by the breach (or alleged breach) of any representation
or warranty of the Target or Target Stockholder contained in Section 3 and
Section 4(a) above until the Buyer has suffered Adverse Consequences by reason
of all such breaches (or alleged breaches) in excess of a $15,000 aggregate
threshold (at which point the Target Stockholder will be obligated to indemnify
the Buyer from and against all such Adverse Consequences only in excess of such
aggregate threshold).

                  (ii) The Target Stockholder agrees to indemnify the Buyer from
and against the entirety of any Adverse Consequences the Buyer may suffer
resulting from, arising out of, relating to, in the nature of, or caused by any
Liability of any of the Target and its Subsidiaries (x) for any Taxes of the
Target and its Subsidiaries with respect to any Tax year or portion thereof
ending on or before the Closing Date (or for any Tax year beginning before and
ending after the Closing Date to the extent allocable (determined in a manner
consistent with Section 9(c)) to the portion of such period beginning before and
ending on the Closing Date), to the extent such Taxes are not reflected in the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown on
the face of the Most Recent Financial Statements (rather than in any notes
thereto), and (y) for the unpaid Taxes of any Person (other than any of the
Target and its Subsidiaries) under Reg. Section 1.1502-6 (or any

                                       31
<PAGE>   33

similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.

                  (iii) Target and Target Stockholder also expressly agree to
indemnify Buyer against any and all liability relating to the Oakhurst Plan.
Buyer may make a written claim for such indemnification against Target
Stockholder pursuant to Section 10(h) below at any time, subject, however, to
Section 10(a), below.

             (b) Indemnification Provisions for Benefit of the Target
Stockholder. In the event the Buyer breaches (or in the event any third party
alleges facts that, if true, would mean the Buyer has breached) any of its
representations, warranties, and covenants contained herein, and, provided that
the Target Stockholder makes a written claim for indemnification against the
Buyer pursuant to Section 10(h) below within the applicable survival period,
then the Buyer agrees to indemnify the Target Stockholder from and against the
entirety of any Adverse Consequences the Target Stockholder may suffer through
and after the date of the claim for indemnification (including any Adverse
Consequences the Target Stockholder may suffer after the end of the applicable
survival period) resulting from, arising out of, relating to, in the nature of,
or caused by the breach (or the alleged breach); provided, however, that the
Buyer shall not have any obligation to indemnify the Target Stockholder from and
against any Adverse Consequences resulting from, arising out of, relating to, in
the nature of, or caused by the breach (or alleged breach) of any representation
or warranty of the Buyer contained in Section 4(b) above until the Target
Stockholder has suffered Adverse Consequences by reason of all such breaches (or
alleged breaches) in excess of a $15,000 aggregate threshold (at which point the
Buyer will be obligated to indemnify the Target Stockholder from and against all
such Adverse Consequences only in excess of such aggregate threshold).

             (c) Matters Involving Third Parties.

                  (i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 8, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying any Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.

                  (ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying
Party notifies the Indemnified Party in writing within fifteen (15) days after
the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (B) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (C) the Third Party Claim
involves only money

                                       32
<PAGE>   34

damages and does not seek an injunction or other equitable relief, (D)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing business
interests of the Indemnified Party, and (E) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.

                  (iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 8(c)(ii) above, (A)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (C) the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be withheld, conditioned or delayed
unreasonably).

                  (iv) In the event any of the conditions in Section 8(c)(ii)
above is or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (B) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (C) the Indemnifying Parties will
remain responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Section 8.

             (d) Determination of Adverse Consequences. All indemnification
payments under this Section 8 shall be deemed adjustments to the Purchase Price.

             (e) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy (including without limitation any such remedy
arising under Environmental, Health, and Safety Requirements) any Party may have
with respect to the transactions contemplated by this Agreement.

         9. TAX MATTERS. The following provisions shall govern the allocation of
responsibility as between Buyer and Target Stockholder for certain tax matters
following the Closing Date:

             (a) Tax Periods Ending on or Before the Closing Date. The Target
Stockholder shall prepare or cause to be prepared and file or cause to be filed
all Tax Returns, and pay all taxes due with respect thereto, for the Target and
its Subsidiaries for all periods ending on or prior to the Closing Date.

             (b) Tax Periods Ending After the Closing Date. Buyer shall prepare
or cause to be prepared and file or cause to be filed any Tax Returns of the
Target and its Subsidiaries, and pay all taxes with respect thereto, for Tax
periods which begin after the Closing Date.

                                       33
<PAGE>   35

             (c) Cooperation on Tax Matters.

                  (i) Buyer, the Target and its Subsidiaries and Target
Stockholder shall cooperate fully, as and to the extent reasonably requested by
the other party, in connection with the filing of Tax Returns pursuant to this
Section and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder. The Target and its Subsidiaries and Target
Stockholder agree (1) to retain all books and records with respect to Tax
matters pertinent to the Target and its Subsidiaries relating to any taxable
period beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Buyer or Target Stockholder, any
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (2) to
give the other party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other party so requests,
the Target and its Subsidiaries or Target Stockholder, as the case may be, shall
allow the other party to take possession of such books and records.

                  (ii) Buyer and Target Stockholder further agree, upon request,
to use commercially reasonable efforts to obtain any certificate or other
document from any governmental authority or any other Person as may be necessary
to mitigate, reduce or eliminate any Tax that could be imposed (including, but
not limited to, with respect to the transactions contemplated hereby).

                  (iii) Buyer and Target Stockholder further agree, upon
request, to provide the other party with all information that either party may
be required to report pursuant to Section 6043 of the Code and all Treasury
Department Regulations promulgated thereunder.

             (d) Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving the Target and its Subsidiaries shall be
terminated as of the Closing Date and, after the Closing Date, the Target and
its Subsidiaries shall not be bound thereby or have any liability thereunder.

             (e) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any similar tax
imposed in other states or subdivisions), shall be paid by Target Stockholder
when due, and Target Stockholder will, at its own expense, file all necessary
Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees, and, if
required by applicable law, Buyer will, and will cause its affiliates to, join
in the execution of any such Tax Returns and other documentation.

         10. MISCELLANEOUS.

                                       34
<PAGE>   36

             (a) Survival. All of the representations and warranties of each of
the Parties hereto contained in this Agreement shall survive the Closing (even
if the damaged Party knew or had reason to know of any misrepresentation or
breach of warranty at the time of the Closing) and shall continue in full force
and effect for a period of 3 years thereafter (subject to any applicable
statutes of limitations) with the exception of the representations and
warranties of Target and Target Stockholder contained in Sections 3(l), (z) and
(bb) of this Agreement, which shall continue in full force and effect without
limitation as to time.

             (b) Press Releases and Public Announcements. The parties shall
consult with each other on the form and substance of a press release to be
issued promptly after the execution and delivery of this Agreement, it being
understood that the Target Stockholder as a publicly traded company will have an
obligation to do so. Nothing however herein shall prevent a party from making
any such press release that it in good faith believes is required by law or good
corporate governance.

             (c) No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns; provided, however, that the
provisions in Section 5(h), above, concerning insurance and indemnification are
intended for the benefit of the individuals specified therein and their
respective legal representatives.

             (d) Entire Agreement. This Agreement (including the schedules and
exhibits referred to herein) constitutes the entire agreement among the Parties
and supersedes any prior understandings, agreements, or representations by or
among the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.

             (e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Parties.

             (f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.

             (g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.

             (h) Notices. All notices, claims, demands or other communications
required or permitted under this Agreement shall be in writing and shall be
deemed given to a Party when either

                                       35
<PAGE>   37

sent (i) by hand delivery to such Party against a written receipt therefor; or
(ii) by a nationally-recognized delivery service with instructions to provide
next-business-day delivery and proof of delivery to such Party -

         If to the Target and/or        Oakhurst Company, Inc.
           Target Stockholder at:       c/o Mezzanine Management
                                        100 First Stamford Place - Suite 600
                                        Stamford, Connecticut  06902
                                        Attention: Robert M. Davies,
                                                   Chairman and CEO

         With a copy to:                Roger M. Barzun, Esq.
                                        60 Hubbard Street
                                        P.O. Box 767
                                        Concord, Massachusetts  01742

         If to Buyer and/or             A.C.F. Imports, Inc.
         Transitory Subsidiary at:      70 Empire Drive
                                        West Seneca, New York  14224
                                        Attention: John Romanelli, President

         With a copy to:                Anthony D. Mancinelli, Esq.
                                        Harter, Secrest & Emery LLP
                                        One HSBC Center, Suite 3550
                                        Buffalo, New York 14203

             or to such other Persons or addresses as may be designated in
writing by the Party to receive such notice, claim, demand or other
communication. Any notice shall be deemed delivered when received by the Party
to which it is addressed, as evidenced by a receipt signed by a representative
of such Party, or by the receipt of the courier service.

             (i) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.

             (j) Amendments and Waivers. The Parties may amend any provision of
this Agreement at any time prior to the Closing Date with the prior
authorization of their respective boards of directors. No amendment of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by all of the Parties. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.

             (k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the

                                       36
<PAGE>   38

remaining terms and provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any other jurisdiction.

             (l) Expenses. Each of the Parties will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.

             (m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including but not limited to any enumerated items.

             (n) Incorporation of Exhibits and Schedules. The exhibits and
schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.

         [the remainder of this page has been left blank intentionally]

                                       37
<PAGE>   39

         IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.

A.C.F. IMPORTS, INC.                        DOWLING'S FLEET SERVICE CO., INC.

By:                                         By:
   ---------------------------------           -------------------------------
   Patricia M. Nolan, Vice President           Roger M. Barzun, Vice President

A.C.F. ACQUISITION, INC.                    OAKHURST COMPANY, INC.

By:                                         By:
   ---------------------------------           -------------------------------
   Patricia M. Nolan, Vice President           Maarten D. Hemsley, President

                                       38<PAGE>   1
                                                                     EXHIBIT 4.1

                                                                  EXECUTION COPY

         THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY NOT BE TRANSFERRED, ASSIGNED,
SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL,
IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS
NOT REQUIRED BECAUSE OF AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.

         NO.  1                                                       $1,000,000

         DATED:  OCTOBER 13, 2000

                                  ZYMETX, INC.

          5% SENIOR SECURED CONVERTIBLE DEBENTURE DUE OCTOBER 12, 2002

         THIS DEBENTURE ("DEBENTURE") is one of a duly authorized issue of
Debentures of ZYMETX, INC. (the "COMPANY"), a corporation duly organized and
existing under the laws of the state of Delaware, designated as the Company's 5%
Senior Secured Convertible Debentures Due October 12, 2002, in an aggregate
principal amount of Two Million U.S. Dollars (U.S. $2,000,000) (the
"DEBENTURES").

         FOR VALUE RECEIVED, the Company promises to pay to PALLADIN OPPORTUNITY
FUND, LLC the initial holder hereof, or its order (including
successors-in-interest, the "HOLDER"), the principal sum of ONE MILLION DOLLARS
(U.S. $1,000,000) on October 12, 2002 (the "MATURITY DATE") and to pay interest
on the principal sum outstanding under this Debenture ("OUTSTANDING PRINCIPAL
AMOUNT"), at the rate of 5% per annum, compounded semi-annually, payable in
arrears on the first day of November and May of each year and on the Maturity
Date (each an "INTEREST PAYMENT DATE"), with the first such payment due on May
1, 2001. Interest shall accrue daily commencing on the date hereof and shall
continue until payment in full of all amounts due under this Debenture. The
interest so payable will be calculated on the basis of a 360 day year of 12
months containing 30 days each and will be paid to the person in whose name this
Debenture is registered on the records of the Company regarding registration and
transfers of the Debenture (the "DEBENTURE REGISTER"). Capitalized terms used
herein and not otherwise defined shall have the meanings set forth in the
Purchase Agreement dated as of October 13, 2000 between the Company and the
Holder (the "PURCHASE AGREEMENT") or the Registration Rights Agreement dated as
of October 13, 2000 between the Company and the Holder (the "REGISTRATION RIGHTS
AGREEMENT").

<PAGE>   2

     1. RANKING AND SECURITY. This Debenture will be secured (on a pro-rata
basis along with all other Debentures) by a perfected first priority security
interest in all the collateral identified on Exhibit 3 hereto. Such security
interest will be senior to the security interests of all other creditors of the
Company; except for a United States commercial bank (or another recognized
lender primarily in the business of entering into such agreements) entering into
a bona fide credit line of at least $1,000,000 with the Company on an arm's
length basis, but only if such lender enters into an intercreditor agreement
acceptable to the Holder. This Debenture will rank senior to all equity and debt
of the Company, other than the debt of such commercial lender, and will rank per
passu with the other Debentures.

     2. INTEREST AND PRINCIPAL.

     The interest on this Debenture is payable in any one (but not more than
one) of the following three ways, at the Company's option (prior to an Event of
Default):

         (a) in such coin or currency of the United States as of the time of
payment is legal tender for payment of public and private debts, (i) by wire
transfer of immediately available funds to the account designated in writing by
the Holder or, in the absence of such designation, (ii) at the address last
appearing on the Debenture Register of the Company as designated in writing by
the Holder hereof from time to time.

         (b) by delivering a number of fully registered, freely tradable shares
of Common Stock equal to the interest due on such Interest Payment date divided
by 95% of the average of the closing bid prices of a share of Common Stock on
the Principal Market ("CLOSING BID") for the five (5) Trading Days immediately
prior to but not including the Interest Payment Date ("COMMON STOCK INTEREST");
or;

         (c) by adding the amount thereof to the Outstanding Principal Amount
due under this Debenture ("PIK INTEREST").

     Except as herein provided for interest, all amounts payable under this
Debenture shall be paid as provided in clause (a) above. The Company's election
under (a), (b) or (c) above is irrevocable.

         (d) The Company shall exercise its interest payment option hereunder by
delivering an irrevocable statement in the form of Exhibit 1 hereto ("PAYMENT
STATEMENT") at least ten (10) Trading Days prior to the applicable Interest
Payment Date and applicable for such Interest Payment Date only. If the Payment
Statement is not timely delivered to the Holder in the form elected by the
Company and as otherwise provided herein, the payment with respect to such
Interest Payment Date shall be paid, at the exclusive option of the Holder,
either (i) in immediately available funds, or (ii) in PIK Interest. Any PIK
Interest when so added to the Outstanding Principal Amount due under this
Debenture shall, for all purposes of this Debenture, be deemed to be part of the
principal indebtedness evidenced by this Debenture including, without
limitation, for purposes of determining interest payable hereunder after the
applicable Interest Payment Date for which such PIK Interest is paid and amounts
convertible into Common Shares hereunder after the applicable Interest Payment
Date for which such PIK Interest is paid.

                                       2
<PAGE>   3

     The Company will pay any principal due and all accrued and unpaid interest
due upon this Debenture to the person that is the Holder of this Debenture on
the records of the Company as of the applicable Interest Payment Date as
provided in Section 2(a).

         (e) The Outstanding Principal Amount and interest due hereunder shall
bear interest, from and after the day following the occurrence and during the
continuance of an Event of Default hereunder, at the per annum rate equal to the
lower of the Citibank Prime Rate (or the "prime" rate announced by any successor
entity) per annum plus six (6%) percent or the highest rate permitted by law.
After an Event of Default, the Holder shall have the option to receive all
interest as cash interest, Common Stock Interest or PIK Interest and shall
exercise its option by delivering to the Company a statement in a form
substantially similar to the Payment Statement which shall be effective until
the Holder delivers an additional statement to the contrary. If the Holder
elects to receive the interest in cash, it shall be payable on demand.

         (f) Certain reductions to the Conversion Price (referred to as
"CONVERSION PRICE REDUCTIONS") may be required pursuant to the Registration
Rights Agreement if there occurs an "INTERFERING EVENT" (as defined therein). If
not implemented when due, the percentage decrease of such Conversion Price
Reduction can be added to the premium used in calculating the Premium Price
Redemption. Furthermore, additional cash payments may be required pursuant to
the Purchase Agreement under the terms set forth in Section 3.14 therein. Such
cash payments, if not paid in cash when due, may be treated by the Holder in its
sole discretion as being added to the Outstanding Principal Amount due under
this Debenture.

         (g) Subject to applicable law, any interest otherwise payable that is
not paid for any applicable period because it would exceed the highest rate
permitted by law shall become payable whenever the payment thereof, together
with other interest due for any such subsequent period, would not exceed such
highest legal rate.

     The Holder of this Debenture is entitled to certain rights and remedies
pursuant to the Purchase Agreement and Registration Rights Agreement, including
without limitation provisions requiring mandatory redemption of the Debenture.
This Debenture does not provide voting rights to the Holder.

                                       3
<PAGE>   4

     3. EXCHANGE. The Debentures are exchangeable for an equal aggregate
principal amount of Debentures of different denominations, as requested by the
Holder surrendering the same. No service charge will be made for such
registration or transfer or exchange.

     4. TRANSFERS. This Debenture may be transferred or exchanged in the United
States only in compliance with the Securities Act of 1933, as amended (the
"ACT") and applicable state securities laws, or applicable exemptions therefrom.
Prior to due presentment for transfer of this Debenture, the Company may treat
the person in whose name this Debenture is duly registered on the Company's
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided, whether or not this Debenture is overdue.

     5. DEFINITIONS. For purposes hereof the following definitions shall apply:

         "ACT" shall have the meaning set forth in Section 4.

         "ADJUSTMENT DATE" shall have the meaning set forth in Section 9(b)(i).

         "AFFECTED CONVERSION PRICE" shall have the meaning set forth in Section
9(a).

         "CHANGE IN CONTROL CONSIDERATION" shall have the meaning set forth in
Section 6 (b) hereof.

         "CHANGE IN CONTROL CONVERSION PRICE" shall have the meaning set forth
in Section 6 (b) hereof.

         "CHANGE IN CONTROL TRANSACTION" shall mean the occurrence of (i) any
consolidation or merger of the Company with or into any other corporation or
other entity or person (whether or not the Company is the surviving
corporation), or any other corporate reorganization or transaction or series of
related transactions in which in excess of 40% of the Company's voting power is
transferred through a merger, consolidation, tender offer or similar
transaction; or (ii) any person (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT")), together with its
affiliates and associates (as such terms are defined in Rule 405 under the Act),
beneficially owns or is deemed to beneficially own (as described in Rule 13d-3
under the Exchange Act without regard to the 60-day exercise period) in excess
of 50% of the Company's voting power; (iii) there is a replacement of more than
one-half of the members of the Company's Board of Directors which is not
approved by those individuals who are members of the Company's Board of
Directors on the date thereof; or (iv) in one or a series of related
transactions there is a sale or transfer of all or substantially all of the
assets of the Company, determined on a consolidated basis.

         "CLOSING DATE" shall mean the date of the original issuance of this
Debenture.

                                       4
<PAGE>   5

         "COMMON STOCK" shall mean the common stock, par value $.001, of the
Company.

         "COMMON STOCK INTEREST" shall have the meaning set forth in Section
2(b).

         "CHANGE IN CONTROL CONVERSION PRICE" shall have the meaning specified
in Section 6(b).

         "COMPANY" shall have the meaning set forth in the Preamble.

         "CALL AMOUNT" shall have the meaning set forth in Section 8(a).

         "CONVERSION NOTICE" shall have the meaning set forth in Section 7(d).

         "CONVERTIBLE SECURITIES " shall have the meaning set forth in Section
9(b)(ii).

         "CONVERSION PRICE" shall have the meaning set forth in Section 7(c).

         "CONVERSION RATE" shall have the meaning set forth in Section 7(b).

         "DEBENTURE" shall have the meaning set forth in the Preamble.

         "DEBENTURES" shall have the meaning set forth in the Preamble.

         "DEBENTURE REGISTER" shall have the meaning set forth in the Preamble.

         "DTC" shall have the meaning set forth in Section 7(d).

         "DWAC" shall have the meaning set forth in Section 7(d).

         "FAST" shall have the meaning set forth in Section 7(d).

         "HOLDER CONVERSION DATE" shall have the meaning set forth in Section
7(d).

         "INTEREST PAYMENT DATE" shall have the meaning set forth in the
Preamble.

         "MATURITY DATE" shall have the meaning set forth in the Preamble.

         "MARKET PRICE FOR SHARES OF COMMON STOCK" shall mean the price of one
share of Common Stock determined as follows:

             (i) If the Common Stock is approved for trading on the Nasdaq
National Market System or the Nasdaq Small-Cap Market, the last reported "bid"
price thereon on the date of valuation;

                                       5
<PAGE>   6

             (ii) If (i) does not apply and the Common Stock is listed on NYSE
or the American Stock Exchange, the closing bid price on such exchange on the
date of valuation;

             (iii) If neither (i) nor (ii) apply but the Common Stock is quoted
in the over-the-counter market, another recognized exchange, on the pink sheets
or bulletin board, (A) the last sales price on the date of valuation or, if
there is no such sales price, (B) the mean between the last reported "bid" and
"asked" prices thereof on the date of valuation; and

             (iv) If neither clause (i), (ii) or (iii) above applies, the market
value as determined by a nationally recognized investment banking firm or other
nationally recognized financial advisor retained by the Company for such
purpose, taking into consideration, among other factors, the earnings history,
book value and prospects for the Company, and the prices at which shares of
Common Stock recently have been traded. Such determination shall be conclusive
and binding on all persons.

         "NYSE" shall mean the New York Stock Exchange.

         "OUTSTANDING PRINCIPAL AMOUNT" shall have the meaning set forth in the
Preamble.

         "PAYMENT STATEMENT" shall have the meaning set forth in Section 2(d).

         "PIK INTEREST" shall have the meaning set forth in Section 2(c).

         "PUBLIC ANNOUNCEMENT" shall mean any public filing with the Securities
and Exchange Commission, any press release by either the Company or a third
party or any other public statement, that announces a proposed transaction
which, if consummated, would constitute a Change in Control Transaction.

         "PURCHASE AGREEMENT" shall have the meaning set forth in the Preamble.

         "REDEMPTION DATE" shall have the meaning set forth in Section 8(a).

         "REDEMPTION NOTICE" shall have the meaning set forth in Section 8(a).

         "REDEMPTION OCCURRENCE" shall have the meaning set forth in Section
8a).

         "REDEMPTION PRICE" shall have the meaning set forth in Section 6(a).

         "REGISTRATION STATEMENT" shall have the meaning set forth in the
Registration Rights Agreement.

         "REGISTRATION RIGHTS AGREEMENT" shall have the meaning set forth in the
Preamble.

         "RESET PRICING PERIOD" shall have the meaning set forth in Section
7(c).

                                       6
<PAGE>   7

         "RESTRICTED OWNERSHIP PERCENTAGE" shall have the meaning set forth in
Section 14.

         "TRADING DAY" shall mean a day on which the Common Stock is traded on
the NASDAQ National Market System or principal exchange on which the Common
Stock has been listed (or any similar organization or agency succeeding such
market or exchange's functions of reporting prices).

     6. Change in Control, Etc.

         (a) If at any time there occurs any Change in Control Transaction,
Holder shall be entitled, at its sole option, to have the Company redeem this
Debenture in whole or in part at a Redemption Price equal to 120% of the sum of
(i) the Outstanding Principal Amount of this Debenture plus (ii) accrued but
unpaid interest and Monthly Delay Payments on this Debenture (the "REDEMPTION
Price"). Such Holder shall be entitled to make such election at any time upon a
Public Announcement of a pending, and up to 10 days after the effective date of
a, Change in Control Transaction.

         (b) If at any time there occurs a Public Announcement of a pending
Change in Control Transaction in which the public stockholders of the Company
are to receive consideration, a portion of which is capital stock or any
security convertible into capital stock of another entity in exchange for shares
of Common Stock ("CHANGE IN CONTROL CONSIDERATION"), then prompt provision shall
be made in a manner reasonably acceptable to the Holders so that each Holder
shall have the right (in addition to its other rights under this Debenture and
the other Transaction Documents) following such Public Announcement to:

             (i) convert its Debentures into the Change in Control Consideration
that such Holder would have been or would be entitled to receive had it
converted all of its Debentures into Common Stock (notwithstanding any
restrictions imposed upon the Holder pursuant to this Debenture or the Purchase
Agreement in its ability to do so) immediately prior to the Change in Control
Transaction at the Change in Control Conversion Price (as defined below), and
acquired the Change in Control Consideration as a shareholder of the Company; or

             (ii) convert its Debentures into Common Stock at the Change in
Control Conversion Price (as defined below).

             The "CHANGE IN CONTROL CONVERSION PRICE" shall mean a price,
subject to adjustments in the same manner as adjustments to the Conversion
Price, equal to the lesser of: (i) the then existing Conversion Price (as
defined in Section 7(c) below); (ii) 100% of the lowest Market Price for Shares
of Common Stock for any of the four Trading Days immediately preceding the
Public Announcement of the Change in Control Transaction; and (iii) 85% of the
lowest Market Price for Shares of Common Stock on (A) the Trading Day on which
there was a Public Announcement of the Change in Control Transaction and the two
Trading Days thereafter or (B) in the event that the Public Announcement did not
occur on a Trading Day, the three Trading Days immediately following the Public
Announcement. The Market Price for Shares of

                                       7
<PAGE>   8

Common Stock shall be appropriately adjusted for stock splits, reverse splits,
stock dividends and other dilutive events, including those events occurring in
connection with the Change in Control Transaction, that occur during the Trading
Days referred to above.

     7. CONVERSION AT THE OPTION OF THE HOLDER. The Holder of this Debenture
shall have the following conversion rights:

         (a) Holder's Right to Convert. This Debenture shall be convertible at
any time, in whole or in part, at the option of the Holder hereof, into fully
paid, validly issued and nonassessable shares of Common Stock. If this Debenture
is converted in part, the remaining portion of this Debenture not so converted
shall remain entitled to the conversion rights provided herein.

         (b) Conversion Rate. The Outstanding Principal Amount of this Debenture
that is converted into shares of Common Stock at the option of the Holder shall
be convertible into the number of shares of Common Stock which results from
application of the following formula:

                                    P + I + D
                         ------------------------------

                                Conversion Price

         P =      Outstanding Principal Amount of this Debenture submitted for
                  conversion as of the Holder Conversion Date
         I =      accrued but unpaid interest (not previously added to
                  principal) on P as of the Holder Conversion Date
         D =      Monthly Delay Payments (not previously added to principal) on
                  P as of the Holder Conversion Date

                  The number of shares of Common Stock into which each $1,000
principal amount of this Debenture hereto may be converted pursuant to this
paragraph hereof is hereafter referred to as the "CONVERSION RATE."

         (c) Conversion Price. This Debenture will have an initial conversion
price (the "INITIAL CONVERSION PRICE", which shall be $3.124836) equal to 110%
of the average of the volume weighted average prices (as reported by Bloomberg
Financial Markets) ("VWAP"S) for Common Stock on the Principal Market for each
of the ten (10) consecutive Trading Days ending on and including the Trading Day
immediately prior to the Closing Date (such price, as Reset (as defined below)
and as adjusted in accordance with Sections 6 and 9 of this Debenture, shall be
referred to herein as the "CONVERSION PRICE").

     On April 13, 2001, July 13, 2001, and October 13, 2001, only if the average
of the Closing Bids (the "RESET AVERAGE") for the fifteen (15) consecutive
Trading Day period immediately preceding and excluding such respective date (the
"RESET PRICING Period") is less than the lower of the Initial Conversion Price
or the otherwise applicable Conversion Price, the Conversion Price shall reset
("RESET") to the Reset Average

                                       8
<PAGE>   9

(subject to further adjustment in each case). Without limiting the foregoing, if
there is not Effective Registration (as defined in the Purchase Agreement) by
the 120th day after the Closing Date, then there shall be three (3) additional
Reset Periods measured from either (as elected by the Investors in a written
notice to the Company) (i) the two (2), five (5) and eight (8) month anniversary
of the first day there is Effective Registration; or (ii) the fifteen (15),
eighteen (18) and twenty-one (21) month anniversary of the Closing Date. The
Closing Bid for shares of Common Stock shall be appropriately adjusted for stock
splits, reverse splits, stock dividends and other dilutive events that occur
during the Reset Pricing Period.

     In addition to the foregoing and in addition to any other rights or
remedies which may be available to the Holder hereunder, under the Purchase
Agreement and/or the Registration Rights Agreement, if at any time the Company
fails for any reason to repurchase the Debenture (or portion thereof, as
applicable) or make any cash payment in accordance with the terms of this
Debenture, the Purchase Agreement or the Registration Rights Agreement, then the
Conversion Price shall be subject to further adjustment (downwards only) so that
it shall thereafter be equal to the lesser of (x) the lowest Market Price for
Shares of Common Stock during any of the five (5) days prior to the date that
the Holder submits a Conversion Notice (as defined below) to the Company and (y)
the Conversion Price otherwise applicable at such time, subject to further
adjustment in each case.

         (d) Mechanics of Conversion. In order to convert this Debenture (in
whole or in part) into full shares of Common Stock, the Holder (i) shall give
written notice in the form of Exhibit 2 hereto (the "CONVERSION NOTICE") by
facsimile to the Company that the Holder elects to convert the principal amount
(plus accrued but unpaid interest and Monthly Delay Payments) specified therein,
which such notice and election shall be revocable by the Holder at any time
prior to its receipt of the Common Stock upon conversion, and (ii) if the entire
Outstanding Principal Amount is being converted, as soon as practicable after
such notice, shall surrender this Debenture, duly endorsed, by either overnight
courier or 2-day courier, to the principal office of the Company; provided,
however, that the Company shall not be obligated to issue certificates
evidencing the shares of the Common Stock issuable upon such conversion (where
the entire Outstanding Principal Amount is being converted) unless either the
Debenture evidencing the principal amount is delivered to the Company as
provided above, or the Holder notifies the Company that such Debenture(s) have
been lost, stolen or destroyed and promptly executes an agreement reasonably
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such lost, stolen or destroyed Debentures.

              The Holder shall not be required to physically surrender this
Debenture to the Company unless the full Outstanding Principal Amount
represented by this Debenture is being converted. The Holder and the Company
shall maintain records showing the Outstanding Principal Amount so 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 Debenture upon each such conversion. In the event of any
dispute or discrepancy, such records of the Company shall be controlling and
determinative in the absence of manifest error. Notwithstanding

                                       9
<PAGE>   10

the foregoing, if this Debenture is converted as aforesaid, the Holder may not
transfer this Debenture unless the Holder first physically surrenders this
Debenture to the Company, whereupon the Company will forthwith issue and deliver
upon the order of the Holder a new Debenture of like tenor, registered as the
Holder may request, representing in the aggregate the remaining Outstanding
Principal Amount represented by this Debenture. The Holder and any assignee, by
acceptance of this Debenture or a new Debenture, acknowledge and agree that, by
reason of the provisions of this paragraph, following conversion of any portion
of this Debenture, the Outstanding Principal Amount represented by this
Debenture may be less than the Outstanding Principal Amount and the accrued
interest set forth on the face hereof.

             The Company shall issue and deliver within three (3) Trading Days
of the delivery to the Company of such Conversion Notice, to such Holder of
Debenture(s) at the address of the Holder, or to its designee, a certificate or
certificates for the number of shares of Common Stock to which the Holder shall
be entitled as aforesaid, together with a calculation of the Conversion Rate and
a Debenture or Debentures for the principal amount of Debentures not submitted
for conversion. The date on which the Conversion Notice is given (the "HOLDER
CONVERSION DATE") shall be deemed to be the date the Company received by
facsimile the Conversion Notice, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock on
such date. In the event that such Holder or its designee has not received such
certificate or certificates within ten (10) calendar days of the Company's
receipt of the Conversion Notice, the Holder may, in addition to any other
rights or remedies it may have, revoke its Conversion Notice.

             In lieu of delivering physical certificates representing the Common
Shares issuable upon conversion of Debentures or the Warrant Shares (as defined
in the Purchase Agreement) deliverable upon exercise of Warrants (as defined in
the Purchase Agreement), provided the Company's transfer agent is participating
in the Depository Trust Company ("DTC") Fast Automated Securities Transfer
("FAST") program, upon request of the holder, the Company shall use its best
efforts to cause its transfer agent to electronically transmit the Common Shares
and Warrant Shares issuable upon conversion or exercise to the Holder, by
crediting the account of Holder's prime broker with DTC through its Deposit
Withdrawal Agent Commission ("DWAC") system. The time periods for delivery
described above shall apply to the electronic transmittals through the DWAC
system. The parties agree to coordinate with DTC to accomplish this objective.
The conversions pursuant to Sections 5 shall be deemed to have been made
immediately prior to the close of business on the Holder Conversion Date. The
person or persons entitled to receive the Common Shares issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such Common Shares at the close of business on the Holder Conversion Date.

         (e) Conversion Warrants. If the Holder delivers a Conversion Notice
when the previous Closing Bid of a share of Common Stock exceeds $4.00 per share
(as such number may be adjusted for the circumstances specified in Section 9),
then, for each ten (10) shares of Common Stock covered by such Conversion
Notice, the Company shall deliver to the Holder (simultaneously with the
delivery of such Common Stock) a

                                       10
<PAGE>   11

Warrant (in substantially the form of Exhibit B to the Purchase Agreement)
exercisable for one (1) (as such number may be adjusted for the circumstances
specified in Section 9) share of Common Stock. The exercise price of such
Warrant will be $4.00 (as such number may be adjusted for the circumstances
specified in Section 9) and the Warrant will be exercisable for five (5) years
from the date of its issue. Each share of Common Stock issuable upon exercise of
such Warrant will be a "Registrable Security" entitled to registration rights
under the Registration Rights Agreement.

     8. Company Option to Redeem and Force Conversion.

         (a) Subject to Section 8(c) below, if at any time that there is
Effective Registration the Reset Average is less than the Initial Conversion
Price (a "REDEMPTION OCCURRENCE"), then the Company may state its intention to
redeem all, but not less than all, of the Debentures for a cash price equal to
one hundred twelve percent (112%) of (i) the Outstanding Principal Amount of the
Debentures plus (ii) all accrued but unpaid interest and Monthly Delay Payments
thereon (the "CALL AMOUNT") by providing an irrevocable, written notice (the
"REDEMPTION NOTICE") to the Holder; provided that such Redemption Notice shall
be no later than one (1) Trading Day before a Reset Pricing Period and must be
sent concurrently to the holders of all Debentures. The Redemption Notice shall
indicate that the Company seeks to redeem the Debenture and shall set the date
for the Company's redemption of the Debenture (the "REDEMPTION DATE"), which
date shall be thirty (30) Trading Days from the date the Redemption Notice is
delivered (the "POST-NOTICE PERIOD"). The Redemption Notice will be void if
either (i) there is not Effective Registration for each day in the Past-Notice
Period and Reset Pricing Period, or (ii) the Reset Average is greater than the
Conversion Price then in effect.

         (b) Subject to Section 8(c) below, if at any time that there is
Effective Registration the CLOSING BID of the Common Stock exceeds $4.687254 for
each of fifteen (15) consecutive Trading Days (a "CONVERSION OCCURRENCE"), then
the Company may state its intention to cause the conversion of all, but not less
than all, of the Debentures at the Conversion Price in effect as of the Forced
Conversion Date by providing an irrevocable written notice (the "CONVERSION
OCCURRENCE NOTICE") to the Holder; provided that such Conversion Occurrence
Notice shall be sent within one (1) Trading Day of a Conversion Occurrence and
must be sent concurrently to the holders of all Debentures. The Conversion
Occurrence Notice shall indicate that the Company seeks to cause conversion of
the Debenture and shall set the date for such conversion of the Debenture (the
"FORCED CONVERSION DATE"), which date shall be thirty (30) Trading Days from the
date the Conversion Occurrence Notice is delivered (the "CONVERSION NOTICE
PERIOD").

         (c) Notwithstanding the foregoing, the Company may not effect a
redemption of the Debentures pursuant to Section 8(a) above or a forced
conversion of the Debentures pursuant to Section 8(b) above unless:

              (i) Effective Registration (as defined in the Purchase Agreement)
existed, as applicable, (A) at all times during the Redemption Occurrence and at
all times thereafter up to and including the Redemption Date or (B) at the time
of

                                       11
<PAGE>   12

the Conversion Occurrence and at all times thereafter up to and including the
Forced Conversion Date;

             (ii) No Interfering Event or material default or breach exists, and
no event shall have occurred which constitutes (or would constitute with notice
or the passage of time or both) an Interfering Event or a material default or
breach of the Transaction Documents;

             (iii) Conversion by the Holder will not exceed the limits on a
Holder's right to convert under Section 14 below. However, at the option of the
Holder, (A) the portion of the Outstanding Principal Amount that may not be
converted by reason of such Section 14 shall be paid to the Holder in cash, if
any, in an amount equal to (in the case of redemptions pursuant to Section 8(a))
the greater of the Call Amount and the Conversion Value (as defined in the
Registration Rights Agreement) or (in the case of conversions pursuant to
Section 8(b)) the Conversion Value or (B) the redemption of this Debenture shall
be deferred until such time as the conversion hereof shall not exceed such
limits.

         (d) The redemption shall occur on the Redemption Date and the
conversion shall occur on the Forced Conversion Date at the offices of Holder's
counsel. If the Company fails to pay the Call Amount in full on the Redemption
Date in immediately available funds or convert all Debentures on the Forced
Conversion Date, (i) the Company shall lose its right to redeem or force
conversion of any Debenture in accordance with this Section 8 and (ii) in
addition to any other rights or remedies it may have, the Holder shall have the
right to require the Company to repurchase this Debenture (or any portion
thereof, as selected by the Holder) at a price equal to 110% of the applicable
purchase price pursuant to Section 8(c)(iii) above pursuant to a written notice
to the Company.

         (e) Nothing in this Debenture shall limit the Holder's right to convert
after a Redemption Notice or Conversion Occurrence Notice has been received but
before actual redemption or forced conversion.

         (f) If the Holder has not exercised its rights under Section
1.1(c)(iii) of the Purchase Agreement by the time the Company converts the
Debenture under Section 8(b), then the Holder's rights under Section 1.1(c)(iii)
of the Purchase Agreement automatically will expire.

                                       12
<PAGE>   13

     9. Stock Splits; Dividends; Adjustments; Reorganizations.

         (a) If the Company, at any time while the Debentures are outstanding,
shall (i) pay a stock dividend or otherwise make a distribution or distributions
on any equity securities (including investments or securities convertible into
or exchangeable for such equity securities) in shares of Common Stock; (ii)
subdivide the outstanding shares of Common Stock into a larger number of shares;
(iii) combine outstanding shares of Common Stock into a smaller number of
shares, then each Affected Conversion Price (as defined below) shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding before such event and of which the denominator shall be
the number of shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section 9(a) shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of an issuance, a subdivision or a combination.

         As used herein, the Affected Conversion Prices (each an "AFFECTED
CONVERSION PRICE") shall refer to: (x) the Conversion Price; and (y) each Market
Price for Shares of Common Stock occurring on any Trading Day included in the
Pricing Period, which Trading Day occurred before the record date in the case of
events referred to in clause (i) of this Section 9(a) and the effective date in
the case of the events referred to in clauses (ii) and (iii) of this Section
9(a).

         (b) In the event that the Company issues or sells any Common Stock or
securities which are convertible into or exchangeable for its Common Stock, or
any warrants or other rights to subscribe for or to purchase or any options for
the purchase of its Common Stock at a per share of Common Stock selling price
("PER SHARE SELLING PRICE") which is less than:

              (i) the Conversion Price on the Trading Day next preceding such
issue or sale or, in the case of issuances to holders of its Common Stock, the
date fixed for the determination of stockholders entitled to receive such
warrants, rights or options (the "ADJUSTMENT DATE"), then the Conversion Price
per share shall be adjusted downward to equal such lower Per Share Selling Price
effective concurrently with such issue or sale (it being acknowledged that upon
a conversion or exercise by a third party of a security convertible into or
exercisable for Common Stock of the Company, the Holder shall be entitled only
to the weighted average adjustments provided by (ii) below; except that there
shall be no adjustment whatsoever upon the exercise of the following warrants:
ZymeTx Purchase Partners (43,876 shares); Presbyterian Health Foundation (21,875
shares and 5,666 shares); Oklahoma Medical Research Foundation (21,875 shares
and 5,666 shares)); and

              (ii) the Market Price for Shares of Common Stock on the Adjustment
Date, then the Affected Conversion Prices per share shall be reduced effective
concurrently with such issue or sale to an amount determined by multiplying the
Conversion Price then in effect by a fraction, (A) the numerator of which shall
be the sum of (1) the number of shares of Common Stock and Convertible
Securities (as defined below) outstanding immediately prior to such issue or
sale, plus (2) the number of shares

                                       13
<PAGE>   14

of Common Stock which the aggregate consideration received by the Company for
such additional shares would purchase at such lower Per Share Selling Price and
(B) the denominator of which shall be the number of shares of Common Stock and
Convertible Securities (as defined below) of the Company outstanding immediately
after such issue or sale.

         Notwithstanding the foregoing, this provision shall not apply to (x)
any issuances or sales of securities pursuant to employee, director, bona fide
consultant option plans of the Company approved by stockholders or pursuant to
contracts currently in effect and disclosed to the Holders and (y) arrangements
with the Holders.

         If the Company makes a MFN Offering (as defined in the Purchase
Agreement), then the Holder shall have the right but not the obligation to
exchange this Debenture for a economically equivalent amount/number of the
securities issued in such MFN offering.

         For the purposes of the foregoing adjustment, in the case of the
issuance of any convertible securities, warrants, options or other rights to
subscribe for or to purchase or exchange for, shares of Common Stock
("CONVERTIBLE Securities"), the maximum number of shares of Common Stock
issuable upon exercise, exchange or conversion of such Convertible Securities
shall be deemed to be issued and outstanding based upon a Per Share Selling
Price equal to the lowest price at which Common Stock can be acquired pursuant
to the Convertible Securities, provided that no further adjustment shall be made
upon the actual issuance of Common Stock upon exercise, exchange or conversion
of such Convertible Securities.

         (c) If the Company, at any time while the Debentures are outstanding,
shall distribute to all holders of shares of Common Stock evidences of its
indebtedness or assets, or rights or warrants to subscribe for or purchase any
security (excluding those referred to in Section 9(b) above), then the prices
referred to in (y) of the definition of the Affected Conversion Prices set forth
in Section 9(a) above shall be reduced to equal the relevant Affected Conversion
Price multiplied by a fraction (i) the numerator of which is equal to (A) the
Market Price for Shares of Common Stock on the record date for the distribution
minus (B) the price allocable to one share of Common Stock of the value (as
jointly determined in good faith by the board of directors of the Company and
the Holder) of any and all such evidences of indebtedness, shares of capital
stock, other securities or property, so distributed and (ii) the denominator of
which is equal to the Market Price for Shares of Common Stock on the record date
for the distribution.

         (d) In the event that at any time or from time to time after the
Closing Date, the Common Stock issuable upon the conversion of the Debentures is
changed into the same or a different number of shares of any class or classes of
stock, whether by merger, consolidation, recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
or reorganization provided for elsewhere in this Section 9), then and as a
condition to each such event provision shall be made in a manner reasonably
acceptable to the Holders of Debentures so that each Holder of Debentures shall
have the right thereafter to convert such Debenture into the kind of stock
receivable upon such recapitalization, reclassification or other change by
holders of

                                       14
<PAGE>   15

shares of Common Stock, all subject to further adjustment as provided herein. In
such event, the formulae set forth herein for conversion and redemption shall be
equitably adjusted to reflect such change in number of shares or, if shares of a
new class of stock are issued, to reflect the market price of the class or
classes of stock (applying the same factors used in determining the Conversion
Price) issued in connection with the above described transaction.

         (e) Whenever any element of the Conversion Price is adjusted pursuant
to Section 9 by at least 1% cumulatively, the Company shall promptly mail to
each Holder of the Debentures, a notice setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment.

         (f) In the event of any taking by the Company of a record date of the
holders of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution, any
security or right convertible or exchangeable into or entitling the holder
thereof to receive additional shares of Common Stock, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Company shall deliver
to each Holder of Debentures at least twenty (20) days prior to the date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution, security or right and
the amount and character of such dividend, distribution, security or right.

         (g) If the Company, at any time while the Debentures are outstanding,
shall distribute to all holders of shares of Common Stock evidences of its
indebtedness or assets, or rights or warrants to subscribe for or purchase any
security (excluding those referred to in Section 9(b) above) then the Holder
shall participate in such distribution on a pro rata basis with the holders of
shares of Common Stock entitled to receive such dividend, distribution,
issuance, subdivision or combination as if the Holder held that number of shares
of Common Stock that the Holder would have been entitled to receive hereunder
upon conversion of the Debenture (without regard to Section 14) immediately
prior to the record date fixed for determination of stockholders entitled to
receive such dividend, at the Conversion Price then in existence.

     10. Fractional Shares. No fractional shares of Common Stock or scrip
representing fractional shares of Common Stock shall be issuable hereunder. The
number of shares of Common Stock that are issuable upon any conversion shall be
rounded up to the nearest whole share.

     11. RESERVATION OF STOCK ISSUABLE UPON CONVERSION.

         (a) Reservation Requirement. The Company covenants that it will at all
times reserve and keep available out of its authorized and unissued Common Stock
solely for the purpose of issuance upon conversion of the Debentures as herein
provided, free from preemptive rights or any other present or contingent
purchase rights of persons other than the Holders of the Debentures, 200% of the
maximum number of shares of Common Stock as shall be issuable (taking into
account the adjustments and restrictions of Sections 6 and 9 hereof) upon the
conversion of all of the Debentures pursuant hereto.

                                       15
<PAGE>   16

The Company covenants that all shares of Common Stock that shall be so issuable
shall upon issue, be duly and validly authorized, issued and fully paid and
nonassessable. Without in any way limiting the foregoing, so long as any
Debentures remain outstanding the Company agrees to reserve and at all times
keep available solely for purposes of conversion of Debentures such number of
authorized but unissued shares of Common Stock that is set forth in the Purchase
Agreement.

         (b) Deficiency. If the Company does not have a sufficient number of
shares of Common Stock available to satisfy the Company's obligations to a
Holder of Debentures upon receipt of a Conversion Notice or is otherwise unable
to issue such shares of Common Stock in accordance with the terms of this
Agreement such Holder shall be entitled to the rights and remedies set forth in
the Registration Rights Agreement.

     12. NO REISSUANCE OF THE DEBENTURE. No Debentures acquired by the Company
by reason of redemption, purchase, exchange or otherwise shall be reissued, and
all such Debentures shall be retired.

     13. NO IMPAIRMENT. The Company shall not intentionally take any action
which would impair the rights and privileges of the Debentures set forth herein
or the Holders thereof.

     14.      LIMITATIONS ON HOLDER'S RIGHT TO CONVERT.

         (a) Notwithstanding anything to the contrary contained herein, the
number of shares of Common Stock that may be acquired by the Holder upon
conversion of this Debenture pursuant to the terms hereof shall not exceed a
number that, when added to the total number of shares of Common Stock deemed
beneficially owned by such Holder (other than by virtue of the ownership of
securities or rights to acquire securities that have limitations on the holder's
right to convert, exercise or purchase similar to the limitation set forth
herein), together with all shares of Common Stock deemed beneficially owned
(other than by virtue of the ownership of securities or rights to acquire
securities that have limitations on the right to convert, exercise or purchase
similar to the limitation set forth herein) by the Holder's "affiliates" (as
defined in Rule 144 of the Act) ("AGGREGATION Parties") that would be aggregated
for purposes of determining whether a group under Section 13(d) of the
Securities Exchange Act of 1934 as amended, exists, would exceed 9.99% of the
total issued and outstanding shares of the Common Stock (the "RESTRICTED
OWNERSHIP PERCENTAGE"). Each Holder shall have the right (i) at any time and
from time to time to reduce its Restricted Ownership Percentage immediately upon
notice to the Company and (ii) (subject to waiver) at any time and from time to
time, to increase its Restricted Ownership Percentage immediately in the event
of the announcement as pending or planned, of a Change of Control Transaction.

         (b) The Holder covenants at all times on each day (each such day being
referred to as a "COVENANT DAY") as follows: During the balance of such Covenant
Day and the succeeding sixty-one (61) days (the balance of such Covenant Day and
the succeeding sixty-one (61) days being referred to as the "COVENANT PERIOD")
such Holder will not acquire shares of Common Stock pursuant to any right
existing at the

                                       16
<PAGE>   17

commencement of the Covenant Period to the extent the number of shares so
acquired by such Holder and its Aggregation Parties (ignoring all dispositions)
would exceed:

               (x) the Restricted Ownership Percentage of the total number of
               shares of Common Stock outstanding at the commencement of the
               Covenant Period,

               minus

               (y) the number of shares of Common Stock owned by such Holder and
               its Aggregation Parties at the commencement of the Covenant
               Period.

         A new and independent covenant will be deemed to be given by the Holder
as of each moment of each Covenant Day. No covenant will terminate, diminish or
modify any other covenant. The Holder agrees to comply with each such covenant.
This Section 14 controls in the case of any conflict with any other provision of
any other agreement to which the Company and the Holder may be parties.

         (c) The Company's obligation to issue shares of Common Stock which
would exceed such limits referred to in this Section 14 shall be suspended to
the extent necessary until such time, if any, as shares of Common Stock may be
issued in compliance with such restrictions.

     15. OBLIGATIONS ABSOLUTE. No provision of this Debenture, the Purchase
Agreement or the Registration Rights Agreement shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest and Monthly Delay Payments on, this Debenture or to
issue shares of Common Stock in response to a Conversion Notice at the time,
place and rate, and in the manner, herein prescribed.

     16. WAIVERS OF DEMAND, ETC. The Company hereby expressly and irrevocably
waives demand and presentment for payment, notice of nonpayment, protest, notice
of protest, notice of dishonor, notice of acceleration or intent to accelerate,
bringing of suit and diligence in taking any action to collect amounts called
for hereunder and will be directly and primarily liable for the payment of all
sums owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of any amount
called for hereunder.

     17. REPLACEMENT DEBENTURE. In the event that any Holder notifies the
Company that its Debenture(s) have been lost, stolen or destroyed, replacement
Debenture(s) identical in all respects to the original Debenture(s) (except for
registration number and Outstanding Principal Amount, if different than that
shown on the original Debenture(s)), shall be issued to the Holder, provided
that the Holder executes and delivers to the Company an agreement reasonably
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such Debenture.

                                       17
<PAGE>   18

     18. PAYMENT OF EXPENSES; ISSUE TAXES. The Company agrees to pay all debts
and expenses, including attorneys' fees, which may be incurred by the Holder in
enforcing the provisions of this Debenture and/or collecting any amount due
under this Debenture, the Escrow Agreement, the Purchase Agreement, any Warrant
or the Registration Rights Agreement. The Company shall pay any and all issue
and other taxes (excluding any income, franchise or similar taxes) that maybe
payable in respect of any issue or delivery of shares of Common Stock on
conversion of any Debenture pursuant hereto.

     19. DEFAULTS. If one or more of the following described "Events of Default"
shall occur:

               (a)  the Company shall default in the payment of (i) interest on
                    this Debenture or any other Debenture issued pursuant to the
                    Purchase Agreement in the manner elected by the Company, and
                    such default shall continue for five (5) days after the due
                    date thereof, or (ii) the principal of this Debenture or any
                    other Debenture issued pursuant to the Purchase Agreement;
                    or

               (b)  any of the representations or warranties made by the Company
                    in any of the Debentures, in the Purchase Agreement, the
                    Escrow Agreement, the Registration Rights Agreement, any
                    Warrant or in any certificate or financial or other
                    statements heretofore or hereafter furnished by or on behalf
                    of the Company in connection with the execution and delivery
                    of this Debenture or such other documents shall be false or
                    misleading at the time made; or

               (c)  the Company shall fail to materially perform or observe any
                    covenant or agreement in the Purchase Agreement, the Escrow
                    Agreement, any Warrant or the Registration Rights Agreement,
                    or any other covenant, term, provision, condition, agreement
                    or obligation of the Company under any of the Debentures and
                    such failure shall continue uncured for a period of ten (10)
                    days after notice of such failure; or

               (d)  the Company shall (1) become insolvent; (2) admit in writing
                    its inability to pay its debts generally as they mature; (3)
                    make an assignment for the benefit of creditors or commence
                    proceedings for its dissolution; or (4) apply for or consent
                    to the appointment of a trustee, liquidator or receiver for
                    it or for a substantial part of its property or business; or

               (e)  a trustee, liquidator or receiver shall be appointed for the
                    Company or for a substantial part of its property or
                    business without its consent and shall not be discharged
                    within forty-five (45) days after such appointment; or

                                       18
<PAGE>   19

               (f)  any governmental agency or any court of competent
                    jurisdiction at the instance of any governmental agency
                    shall assume custody or control of the whole or any
                    substantial portion of the properties or assets of the
                    Company and shall not be dismissed within forty-five (45)
                    days thereafter; or

               (g)  the Company shall, in one or a series of transactions, sell
                    or otherwise transfer all or substantially all of its
                    assets; or

               (h)  bankruptcy, reorganization, insolvency or liquidation
                    proceedings or other proceedings, or relief under any
                    bankruptcy law or any law for the relief of debt shall be
                    instituted by or against the Company and, if instituted
                    against the Company shall not be dismissed within forty-five
                    (45) days after such institution, or the Company shall by
                    any action or answer approve of, consent to, or acquiesce in
                    any such proceedings or admit to any material allegations
                    of, or default in answering a petition filed in any such
                    proceeding; or

               (i)  the Company shall be in default of any other of its
                    indebtedness exceeding $25,000, or any other event shall
                    have occurred, and as a result thereof the holders thereof
                    shall have accelerated or shall have the right (upon the
                    giving of notice, the passage of time, or both) to
                    accelerate such indebtedness; provided that it shall not be
                    deemed an Event of Default if the Company is in good faith
                    disputing an amount of indebtedness with a trade creditor.

               (j)  a "going private" transaction under Rule 13e-3 promulgated
                    pursuant to the Exchange Act shall have been announced; or

               (k)  a tender offer by the Company under Rule 13e-4 promulgated
                    pursuant to the Exchange Act shall have been announced;

     then, or at any time thereafter, and in each and every such case, unless
such Event of Default shall have been waived in writing by the Holder (which
waiver shall not be deemed to be a waiver of any subsequent default) at the
option of the Holder and in the Holder's sole discretion, the Holder may
consider the Debenture immediately due and payable, without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything herein or in any other instruments contained to the contrary
notwithstanding, and the Holder may immediately, and without expiration of any
period of grace, enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law. In such event,
the Debenture shall be redeemed at the Premium Redemption Price (as defined in
the Registration Rights Agreement).

                                       19
<PAGE>   20

     20. SAVINGS CLAUSE. In case any provision of this Debenture is held by a
court of competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Debenture will not in any way
be affected or impaired thereby, and such provision shall remain effective in
all other jurisdictions.

     21. ENTIRE AGREEMENT. This Debenture and the agreements referred to in this
Debenture constitute the full and entire understanding and agreement between the
Company and the Holder with respect to the subject hereof. Neither this
Debenture nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the Company and the Holder.

     22. ASSIGNMENT, ETC. The Holder (but not the Company) may without notice,
transfer or assign this Debenture in accordance with applicable securities laws
or any interest herein and may mortgage, encumber or transfer any of its rights
or interest in and to this Debenture or any part hereof and, without limitation,
each assignee, transferee and mortgagee (which may include any affiliate of the
Holder) shall have the right to transfer or assign its interest. Each such
assignee, transferee and mortgagee shall have all of the rights of the Holder
under this Debenture. The Company agrees that, subject to compliance with the
Purchase Agreement, after receipt by the Company of written notice of assignment
from the Holder or from the Holder's assignee, all principal, interest and other
amounts which are then and thereafter become due under this Debenture shall be
paid to such assignee at the place of payment designated in such notice. This
Debenture shall be binding upon the Company and its successors and affiliates
and shall inure to the benefit of the Holder and its successors and assigns.

     23. NO WAIVER. No failure on the part of the Holder to exercise, and no
delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Holder of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to the Holder or allowed it by law or other agreement shall be
cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time.

     24. CERTIFICATE. The Company shall, upon the written request at any time of
any Holder of Debentures, furnish or cause to be furnished to such Holder a
certificate prepared by the chief financial officer of the Company setting forth
any adjustments or readjustments of the Conversion Price pursuant to this
Debenture and any right of the Holder to receive additional shares of Common
Stock or any other equity or debt security pursuant to Section 9.

                                       20
<PAGE>   21

     25. NOTICES. The Company shall distribute to the Holders of Debentures
copies of all notices, materials, annual and quarterly reports, proxy
statements, information statements and any other documents distributed generally
to the holders of shares of Common Stock of the Company, at such times and by
such method as such documents are distributed to such holders of such Common
Stock, but shall not directly or indirectly provide material non-public
information to the Holder without such Holder's prior written consent.

     26. SPECIFIC ENFORCEMENT. The Company agrees that irreparable damage would
occur in the event that any of the provisions of this Debenture were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the Holders of Debentures shall be entitled to swift
specific performance, injunctive relief or other equitable remedies to prevent
or cure breaches of the provisions of this Debenture and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which any of them may be entitled under agreement, at law or in equity.

     27. MISCELLANEOUS. Unless otherwise provided herein, any notice or other
communication to a party hereunder shall be sufficiently given if in writing and
personally delivered, mailed or sent by facsimile to said party by certified
mail, return receipt requested, at its address set forth herein or such other
address as either may designate for itself in such notice to the other and
communications shall be deemed to have been received when delivered personally
or, if sent by mail or facsimile, then when actually received by the party to
whom it is addressed. Whenever the sense of this Debenture requires, words in
the singular shall be deemed to include the plural and words in the plural shall
be deemed to include the singular. Paragraph headings are for convenience only
and shall not affect the meaning of this document.

                                       21
<PAGE>   22

     28. GOVERNING LAW; CONSENT TO JURISDICTION. THIS DEBENTURE SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO CONTRACTS TO BE EXECUTED AND PERFORMED ENTIRELY WITHIN
SUCH STATE. THE COMPANY (I) HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURT LOCATED IN NEW YORK COUNTY, NEW YORK
FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO
THIS DEBENTURE AND (II) HEREBY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH
SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM OR THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS
IMPROPER. THE COMPANY CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING BY MAILING A COPY THEREOF TO SUCH PARTY AS PROVIDED HEREIN AND
AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS
AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR LIMIT ANY RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

                             SIGNATURE PAGE FOLLOWS

                                       22
<PAGE>   23

     IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.

                                      ZYMETX, INC.

                                      By:
                                         --------------------------------------
                                          Norman R. Proulx
                                          Chief Executive Officer

    SIGNATURE PAGE TO 5% SENIOR SECURED CONVERTIBLE DEBENTURE OF ZYMETX, INC.

                                       23
<PAGE>   24

                                    EXHIBIT 1

                                PAYMENT STATEMENT

Date:______________

To: [NAME OF HOLDER OF DEBENTURE] ("HOLDER")

RE: 5% SENIOR SECURED CONVERTIBLE DEBENTURE DUE OCTOBER 12, 2002 ("DEBENTURE")
OF ZYMETX, INC. (THE "COMPANY"), IN THE OUTSTANDING PRINCIPAL AMOUNT OF
US$_____.

         The Company hereby irrevocably elects to pay interest on the Debenture,
for the Interest Payment Date indicated below, in the following manner (the
Company should check its selection):

              cash interest; or
         ----

              Common Stock Interest.
         ----

         Interest Payment Date:
                                -------------------------

         The Company hereby certifies to the Holder, its successors and assigns
that the Outstanding Principal Amount due under the Debenture after delivery of
this Payment Statement equals the amount indicated below. Capitalized terms used
in this Payment Statement and not otherwise defined shall have the meaning
ascribed thereto in the Debenture.

          $________

                                       24
<PAGE>   25

         IN WITNESS WHEREOF, this Payment Statement has been duly executed and
delivered on the date first written above.

                                  ZYMETX, INC.

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

                                       25
<PAGE>   26

                                    EXHIBIT 2

                      (To be Executed by Registered Holder
                         in order to Convert Debenture)

                                CONVERSION NOTICE
                                       FOR
          5% SENIOR SECURED CONVERTIBLE DEBENTURE DUE OCTOBER 12, 2002

     The undersigned, as Holder of the 5% Senior Secured Convertible Debenture
Due October 12, 2002 of ZYMETX, INC. (the "COMPANY"), in the outstanding
principal amount of U.S. $_____________ (the "DEBENTURE"), hereby elects to
convert that portion of the outstanding principal amount of the Debenture shown
on the next page into shares of Common Stock, $.001 par value per share (the
"COMMON STOCK"), of the Company according to the conditions of the Debenture, as
of the date written below. The undersigned hereby requests that share
certificates for the Common Stock to be issued to the undersigned pursuant to
this Conversion Notice be issued in the name of, and delivered to, the
undersigned or its designee as indicated below. If shares are to be issued in
the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto. No fee will be charged to the
Holder for any conversion, except for transfer taxes, if any.

Conversion Information:             NAME OF HOLDER:
                                                    ----------------------------

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

                                Print Address of Holder:

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

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

                                Issue Common Stock to:
                                                      --------------------------
                                at:
                                   ---------------------------------------------

                                Electronically transmit and credit Common Stock
                                to:          at:
                                   ----------   --------------------------------

                                ------------------------------------------------
                                Date of Conversion

                                ------------------------------------------------
                                Applicable Conversion Rate

                THE COMPUTATION OF THE NUMBER OF COMMON SHARES TO
                  BE RECEIVED IS SET FORTH ON THE ATTACHED PAGE

<PAGE>   27

PAGE 2 TO CONVERSION NOTICE FOR:
                                ------------------------------------------------
                                       (NAME OF HOLDER)

              COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED

<TABLE>
<S>                                                                             <C>
A.       Outstanding Principal Amount converted:                                $
                                                                                ------------------
B.       Accrued, unpaid interest on Outstanding Principal Amount converted:    $
                                                                                ------------------
C.       Delay payments due Holder on Outstanding Principal Amount converted:   $
                                                                                ------------------

                                                                                ------------------
TOTAL DOLLAR AMOUNT CONVERTED (TOTAL OF A + B + C)                              $
                                                                                ------------------

                                                                                ==================
</TABLE>

<TABLE>
<S>                                                                             <C>
EXCHANGE PRICE                                                                  $
                                                                                ------------------

Number of Shares of Common Stock = Total dollar amount converted              = $
                                   -----------------------------                ------------------
                                          Conversion Price                      $
</TABLE>

NUMBER OF SHARES OF COMMON STOCK =
                                   -----------------------------

If the conversion is not being settled by DTC, please issue and deliver _____
certificate(s) for shares of Common Stock in the following amount(s):

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

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

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

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

Please issue and deliver _____ new Debenture(s) in the following amounts:

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

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

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

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

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