Exhibit 4.1
SAMPLE
10% CONVERTIBLE DEBENTURE
No. __
$__________ DATED: _______, 2002
FOR VALUE RECEIVED, the undersigned, MORO CORPORATION, a Delaware
corporation ("MORO"), hereby promises to pay to the order of ______________
("Lender"), at ___________________ or at such other place as the Lender may
designate in writing, the principal sum of _____________ Dollars ($_________),
together with interest (computed on the basis of a 360-day year of twelve 30-day
months) from the date hereof on the outstanding principal balance hereof, to be
fixed at a rate equal to 10% per annum, in accordance with the following terms:
1. Principal Amount. The principal amount of this 10% Convertible
Debenture("Convertible Debenture") shall be due and payable on September 30,
2007 at which time all unpaid interest which has accrued on the Convertible
Debenture shall also be due and payable ("Maturity Date"). MORO shall not be
required to pay to the holder hereof any principal amount of this Convertible
Debenture which has been converted into shares of Common Stock of MORO ("Common
Stock") pursuant to Section 7 hereof.
2. Interest. Interest on the outstanding principal balance of this
Convertible Debenture shall accrue at the rate of 10% per annum and shall be
payable semi-annually in arrears on June 30 and December 31 of each year until
the Maturity Date, commencing on the date hereof. From and after the date of any
conversion of the principal amount of this Convertible Debenture pursuant to
Section 7 hereof, no interest shall accrue on the amount of principal which has
been so converted. MORO shall pay any unpaid and accrued interest on any
principal amount of this Convertible Debenture which has been converted into
Common Stock pursuant to Section 7 hereof through the date of such conversion,
payable by MORO to the holder hereof on the semi-annual payment date immediately
following the date of conversion.
3. Restrictive Legend. Neither this Convertible Debenture nor the
Common Stock into which this Convertible Debenture may be converted may be
offered for sale or sold, or otherwise transferred in any transaction which
would constitute a sale thereof within the meaning of the Securities Act of
1933, as amended (the "Act"), unless: (i) such security has been registered for
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sale under the Act and registered or qualified under applicable state securities
laws relating to the offer and sale of securities; or (ii) exemptions from the
registration requirements of the Act and the registration or qualification
requirements of all such state securities laws are available and MORO shall have
received an opinion of counsel reasonably satisfactory to MORO that the proposed
sale or other disposition of such securities may be effected without
registration under the Act and would not result in any violation of any
applicable securities laws relating to the registration or qualification of
securities for sale.
4. Subordination.
A. Subordination to Senior Debt. The indebtedness (including unpaid
principal of and interest on this Convertible Debenture) as well as all other
obligations and liabilities of MORO to Lender hereunder evidenced in this
Convertible Debenture is subordinated to the prior payment when due of the
principal of, premium, if any, interest on, and all other amounts due in
connection with or under all "Senior Debt" (as defined below) as follows: Upon
any distribution of its assets in a liquidation or dissolution of MORO, or in
bankruptcy, reorganization, insolvency, receivership or similar proceedings
relating to MORO, the Lender shall not be entitled to receive payment until the
holders of Senior Debt are paid in full. Until a payment default occurs with
respect to any Senior Debt, all payments of principal and interest due to Lender
under this Convertible Debenture shall be made in accordance with this
Convertible Debenture. Upon the occurrence of any payment default with respect
to any Senior Debt then, upon written notice thereof to MORO and Lender by any
holder of such Senior Debt or its representative, no payments of principal or
interest on the Convertible Debenture shall be made by MORO until such payment
default has been cured to the satisfaction of the holder of such Senior Debt or
waived by such holder, provided, however, that if during the 180 day period
following such default, the holder of Senior Debt has not accelerated its loan,
commenced foreclosure proceedings or otherwise undertaken to act on such default
then MORO shall be required to continue making payments under the Convertible
Debenture, including any which had not been paid during such 180 day period. In
the event that any Bank Or Other Financial Institution at any time so requires,
the Lender shall execute, upon request of MORO, any intercreditor or
subordination agreement(s) with and/or in favor of any such Bank Or Other
Financial Institution on terms not materially more adverse to the Lender then
the subordination terms contained in this Convertible Debenture.
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B. Definitions. For all purposes of this Section 4:
"Senior Debt" means (a) any and all Indebtedness (whether
outstanding on the date hereof or thereafter created) created, Guaranteed,
incurred or assumed by MORO with respect to any Bank Or Other Financial
Institution, or (b) any and all Indebtedness created, Guaranteed, incurred, or
assumed, by MORO to the extent secured by a lien on any assets of MORO. Senior
Debt as described in the prior sentence shall be deemed to exist whether such
Indebtedness is or is not specifically designated by the Company as being
"Senior Debt" in its defining instruments.
Notwithstanding anything herein to the contrary, Senior Debt does
not include (i) unsecured accounts payable to trade creditors of MORO incurred
in the ordinary course of business, (ii) any debt owed by MORO to any officer,
director or stockholder of MORO (not including any Convertible Debentures held
by any of them), (iii) any obligation of MORO issued or contracted for as
payment in consideration of the purchase by ▇▇▇▇ of the capital stock or
substantially all of the assets of another person or in consideration for the
merger or consolidation with respect to which MORO was a party, (iv) any
operating lease obligations of MORO, (v) any other indebtedness which by its
terms is subordinated to the Convertible Debentures, or (vi) any "other
indebtedness" which is subordinated to all indebtedness to which this
Convertible Debenture is subordinated in substantially like terms as this
Convertible Debenture which such "other indebtedness" shall be treated as equal
with the indebtedness evidenced by this Convertible Debenture.
"Bank Or Other Financial Institution" means a bank as defined in
Section 3(a)(2) of the Act whether acting in its individual or fiduciary
capacity; an insurance company as defined in Section 2(a)13 of the Act; an
investment company registered under the Investment Company Act of 1940 or a
business development company as defined in Section 2(a)(48) of that Act; a Small
Business Investment Company licensed by the Small Business Administration; or an
employee benefit plan, including an individual retirement account, which is
subject to the provisions of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, insurance company, or
registered investment adviser.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
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"Indebtedness" means, with respect to any Person any indebtedness of
such Person, whether or not contingent, direct, or indirect, in respect of
borrowed money or evidenced by bonds, notes, debentures or similar instruments
or letters of credit (or reimbursement agreements in respect thereof) or
representing the balance deferred and unpaid of the purchase price of any
property (including capital lease obligations).
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof, including the
Company, or any subsidiary of the Company.
5. Event of Default. An "Event of Default" under this Convertible
Debenture means the occurrence of any of the following events (whether the
reason for such Event of Default shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body): (i) nonpayment of any principal or interest installment when and as due
hereunder which is not cured by MORO within thirty (30) days after the due date;
(ii) any other breach of the terms hereof which is not cured by MORO within
thirty (30) days after notice from Lender; (iii) the institution of any
proceedings by or against MORO under any law relating to bankruptcy, insolvency,
reorganization or other form of debtor relief or ▇▇▇▇'▇ making an assignment for
the benefit of creditors, or the appointment of a receiver, trustee, conservator
or other judicial representative for MORO or any of its respective properties,
or the admission in writing by MORO of its inability to pay its debts generally
as they become due; or (iv) any default by MORO under any agreement for borrowed
money which default continues after expiration of the applicable notice and
grace period, if any, provided in the agreement and which permits the holder
thereof to accelerate the indebtedness due thereunder. Upon the occurrence of an
Event of Default, the entire principal and any accrued interest due hereunder
shall accelerate and become immediately due and payable without presentation,
demand, protest or further demand or notice of any kind, all of which are
expressly waived by ▇▇▇▇, and Lender shall thereupon have all rights and
remedies provided hereunder or otherwise available at law or in equity. The
period of time commencing from the date of the occurrence of an Event of Default
until the date such default is cured shall be referred to as the "Default
Period". During any Default Period, any late interest or principal payments will
accrue interest at a rate of 1% per month, cumulative and compounding until all
accrued and unpaid principal and interest is paid in full.
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6. Prepayment. At any time after the third annual anniversary of the
date of issuance of this Convertible Debenture, MORO shall have the right to
prepay this Convertible Debenture in whole or in part, at any time and from time
to time prior to the Maturity Date, and in its sole and absolute discretion,
without incurring any penalties or additional obligations of any kind. If
following the third annual anniversary of the date of issuance of this
Convertible Debenture, MORO elects to prepay this Convertible Debenture at any
time in an amount less than the then entire remaining outstanding principal
amount hereof, the holders of the Convertible Debentures to be prepaid shall be
selected by MORO on a random basis. If following the third annual anniversary of
the date of issuance of this Convertible Debenture, MORO elects to prepay this
Convertible Debenture in whole or in part any time prior to the Maturity Date,
the holder hereof shall have the right to convert all of (but not less than all
of) the principal amount to be prepaid by MORO into shares of Common Stock
pursuant to the terms and conditions of Section 7 hereof. Such right to convert
must be exercised within thirty (30) days following receipt by the holder hereof
from MORO of notice of prepayment pursuant to this Section 6.
7. Conversion Rights.
A. Conversion. Subject to the terms and conditions hereof, the
holder hereof may convert all or any portion of the principal amount hereof at
any time or from time to time prior to the Maturity Date, into fully paid and
non-assessable shares of MORO's Common Stock, $.001 par value per share (the
"Common Stock"), subject to adjustment as provided in Section 7.F. hereof
("Conversion Rights"). The number of shares of Common Stock to be issued upon
any such conversion shall be determined by dividing the principal amount of this
Convertible Debenture to be converted by the Conversion Price (as defined
herein).
B. Conversion Price. The Conversion Rights shall be exercised by
delivery to MORO (prior to the Maturity Date) of this Certificate and the
completed Election To Convert Form which is attached hereto. The Conversion
Price shall be $2.00 per share of Common Stock, subject to adjustment as
provided in Section 7.F. hereof ("Conversion Price").
C. Exercise. Upon the surrender of this Certificate and the
completed Election To Convert Form as aforesaid, MORO shall issue and cause to
be delivered with all reasonable dispatch to or upon the written order of the
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registered holder of this Convertible Debenture, a certificate or certificates
for the number of full shares of Common Stock so purchased upon the exercise of
the Conversion Rights. Such certificate or certificates shall be deemed to have
been issued and any person so designated to be named therein shall be deemed to
have become a holder of record of such Common Stock on and as of the date of the
delivery to MORO of this Certificate and the completed Election To Convert Form
as aforesaid. If, however, at the date of surrender of this Certificate and the
completed Election To Convert Form, the transfer books for the Common Stock
issuable upon the exercise of the Conversion Rights shall be closed, the
certificates for the Common Stock in respect to which any such Conversion Rights
are then exercised shall be issued and the owner of such Common Stock shall
become a record owner of such Common Stock on and as of the next date on which
such books shall be opened, and until such date MORO shall be under no duty to
deliver any certificate for such Common Stock.
D. Partial Conversion. The Conversion Rights represented by the
Convertible Debenture shall be exercisable, at the election of the registered
holder hereof, either as an entirety, or from time to time for any part of the
outstanding principal amount of this Convertible Debenture, and in the event
that the Conversion Rights are exercised with respect to less than the entire
then outstanding principal amount of this Convertible Debenture, at any time
prior to the Maturity Date, a new certificate will be issued to such registered
holder in the remaining principal amount of this Convertible Debenture.
E. Maturity Date. All of the Conversion Rights must be exercised in
accordance with the terms hereof prior to the Maturity Date. At and after the
Maturity Date any and all unexercised rights hereunder shall expire and all such
unexercised Conversion Rights shall without any action on behalf of MORO become
null and void. MORO shall not be required to provide notice to the holder hereof
of the expiration of the Conversion Rights hereunder, and the Conversion Rights
shall automatically expire without any required prior notice from MORO.
F. Adjustments. Subject and pursuant to the provisions of this
subsection F, the Conversion Price shall be subject to adjustment from time to
time only as set forth hereinafter:
i. In case MORO shall declare a Common Stock dividend on the
Common Stock, then the Conversion Price shall be proportionately decreased as of
the close of business on the date of record of said Common Stock dividend in
proportion to such increase of outstanding shares of Common Stock.
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ii. If MORO shall at any time subdivide its outstanding Common
Stock by recapitalization, reclassification or split-up thereof, the Conversion
Price immediately prior to such subdivision shall be proportionately decreased,
and, if MORO shall at any time combine the outstanding shares of Common Stock by
recapitalization, reclassification, reverse stock split, or combination thereof,
the Conversion Price immediately prior to such combination shall be
proportionately increased. Any such adjustment to the Conversion Price shall
become effective at the close of business on the record date for such
subdivision or combination. The Conversion Price shall be proportionately
increased or decreased, as the case may be, in proportion to such increase or
decrease, as the case may be, of outstanding shares of Common Stock.
iii. Whenever the Conversion Price is adjusted as herein
provided, ▇▇▇▇ shall promptly mail to the registered holder of this Convertible
Debenture a statement signed by an officer of MORO setting forth the adjusted
Conversion Price, determined as so provided.
iv. This form of Certificate need not be changed because of any
adjustment which is required pursuant to this Section F. However, MORO may at
any time in its sole discretion (which shall be conclusive) make any change in
the form of this Certificate that MORO may deem appropriate and that does not
affect the substance hereof; and any Certificate thereafter issued, whether in
exchange or substitution for this Certificate or otherwise, may be in the form
as so changed.
G. Reservation. There has been reserved, and MORO shall at all times
keep reserved out of the authorized and unissued shares of Common Stock, a
number of shares of Common Stock sufficient to provide for the exercise of the
Conversion Rights represented by this Convertible Debenture. ▇▇▇▇ agrees that
all shares of Common Stock issued upon exercise of this Convertible Debenture
shall be, at the time of delivery of the Certificates for such Common Stock,
validly issued and outstanding, fully paid and non-assessable.
H. Fractional Shares. MORO shall not issue any fractional shares of
Common Stock pursuant to any conversion of this Convertible Debenture and shall
pay cash to the holder of this Convertible Debenture in lieu of any such
fractional shares.
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8. No Right. The holder of this Convertible Debenture shall not be
entitled to any of the rights of a stockholder of MORO prior to the date of
issuance of the Common Stock by MORO pursuant to any conversion of this
Convertible Debenture.
9. Securities Laws. As a condition to the issuance of any Common Stock
pursuant to this Convertible Debenture, the holder of such Common Stock shall
execute and deliver such representations, warranties, and covenants, that may be
required by applicable federal and state securities law, or that MORO determines
is reasonably necessary in connection with the issuance of such Common Stock. In
addition, the certificates representing the Common Stock shall contain such
legends, or restrictive legends, or stop transfer instructions, as shall be
required by applicable Federal or state securities laws, or as shall be
reasonably required by MORO or its transfer agent.
10. Choice of Law. This Convertible Debenture shall be construed and
enforced in accordance with and governed by the laws of the State of Delaware
without regard to its conflict of laws provisions.
11. Choice of Forum. Lender irrevocably consents and agrees that any
legal action or proceeding against MORO or brought by ▇▇▇▇▇▇, under, arising out
of, or in any manner relating to, this Convertible Debenture, shall be brought
solely and exclusively in the Court of Common Pleas of the Commonwealth of
Pennsylvania located in the County of Philadelphia, Pennsylvania, or in the
United States District Court for the Eastern District of Pennsylvania, located
in Philadelphia, Pennsylvania. Lender expressly and irrevocably consents to the
personal jurisdiction of such Courts in any such action or proceeding and waives
any claim or defense in any such action or proceeding based upon any alleged
lack of personal jurisdiction, improper venue, or forum non conveniens.
12. Waiver. No failure or delay on the part of the Lender to insist on
strict performance of ▇▇▇▇'▇ obligations hereunder or to exercise any remedy
shall constitute a waiver of the Lender's rights in that or any other instance.
No waiver of any of the Lender's rights shall be effective unless in writing,
and any waiver of any default of any instance of non-compliance shall be limited
to its express terms and shall not extend to any other default or instance of
non-compliance.
13. Lost, Mutilated Certificate. In case this Convertible Debenture
certificate shall become mutilated, lost, stolen or destroyed, MORO shall issue
in exchange and substitution for and upon cancellation of the mutilated
certificate, or in lieu of and in substitution for the Certificate lost, stolen,
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or destroyed, a new Certificate of like tenor and representing an equivalent
right or interest, but only upon receipt of evidence satisfactory to the MORO of
such loss, theft or destruction of such certificate and indemnity, if requested,
also satisfactory to MORO.
14. Illegality. Any provision hereof found to be illegal, invalid or
unenforceable for any reason whatsoever shall not affect the validity, legality
or enforceability of the remainder hereof.
15. Usury. If the effective interest rate on this Convertible Debenture
would otherwise violate any applicable usury law, then the interest rate shall
be reduced to the maximum permissible rate and any payment received by the
Lender in excess of the maximum permissible rate shall be treated as a
prepayment of the principal of this Convertible Debenture.
16. Expenses. ▇▇▇▇ agrees to reimburse Lender for all costs and
expenses, including reasonable attorneys' fees, incurred by the Lender, relating
to the enforcement of this Convertible Debenture.
17. Subscription Agreement. This Convertible Debenture has been issued
by MORO pursuant to the terms of the Subscription Agreement between MORO and
Lender dated September 30, 2002, the terms of which are incorporated herein by
reference.
18. Assigns, Etc..This Convertible Debenture shall be binding upon
▇▇▇▇'▇ successors and assigns and subject to Section 3 hereof, shall inure to
the benefit of each holder of this Convertible Debenture and such holder's
successors, endorsees and assigns.
Intending to be legally bound, MORO has caused this Convertible
Debenture to be executed in its corporate name, by its duly authorized
representative as of the date and year first above written.
MORO CORPORATION
(Corporate Seal) By:_________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Chief Executive Officer
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MORO CORPORATION
Bala Pointe, Suite ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Chief Executive Officer
ELECTION TO CONVERT FORM
------------------------
The undersigned hereby irrevocably elects to exercise the rights of
conversion represented by the attached Convertible Debenture Certificate No. of
MORO. The undersigned desires to convert $ of the principal amount of the
attached Certificate into shares of Common Stock all as provided for therein and
tenders herewith the original Convertible Debenture, all in accordance with the
Certificate. The undersigned requests that a Certificate representing such
shares of Common Stock shall be issued to and registered in the name of the
undersigned and delivered to the undersigned at the address set forth below. If
less than the entire principal amount of the Convertible Debenture represented
by the attached certificate has been converted, then a new Convertible Debenture
Certificate in the remaining principal amount of the Convertible Debenture shall
be issued to and registered in the name of the undersigned and delivered to the
undersigned at the address set forth below.
Dated:__________________, 20__ Signature:________________________________
Print Name:_______________________________
Print Address:____________________________
__________________________________________
__________________________________________
