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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").
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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.
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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.
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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.
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"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;
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(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).
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"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
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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
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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
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(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
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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
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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
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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:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
