EXHIBIT 4.1
DEBENTURE SERIAL NUMBER
000195
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ROYAL MORTGAGE CORPORATION
8 1/2 % CONVERTIBLE SENIOR DEBENTURE DUE 2000
March 17, 1997
Royal Mortgage Corporation, a Texas Corporation organized and
existing under the laws of Texas of the United States of America (herein called
the "Company"), for value received, hereby promises to pay to the order of
______________________________________________ or registered assigns the
principal amount of One Hundred Thousand ($100,000.00) Dollars on March 31,
2000, in securities of the Company or in such coin or currency of the United
States of America as at the time of payment shall be legal tender for public and
private debts, at the principal office of the Company, in Arlington, Texas, USA
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) at said office, in like coin or currency, on the unpaid portion of said
principal amount from the date hereof, payable semi annually on October 1 and
April 1 at the rate of eight and one half (8.5%) percent per annum until March
31, 2000. This Debenture may be converted in whole or in part at the election of
either the Company or the Debenture Holder.
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ss. 1. The Agreement; Security; Exchanges and Transfers of the
Debenture.
ss. 1.1. The Agreement. This Debenture (herein called the
"Debenture") is issued pursuant to a Subscription Agreement dated April 18, 1997
(herein called the "Agreement") between the Company and
_______________________________________________ (Debenture Holder).
ss. 1.2. Register; Transfer or Exchange of Debentures. The Company
shall keep as its Company office maintained in Arlington, Texas a register in
which the Company shall provide for the registration of Debentures and for the
registration of transfer of Debentures.
ss. 1.3. Loss, Theft, Destruction or Mutilation of Debentures. Upon
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any Debenture and, in the case of any such loss,
theft or destruction, upon receipt of any indemnity bond in such reasonable
amount as the Company may determine (or if such Debenture is held by the
original Debenture Holder, of an unsecured indemnity agreement reasonably
satisfactory to the Company) or, in the case of any such mutilation, upon
surrender of an cancellation of such Debenture, the Company will make and
deliver, in lieu of such lost, stolen, destroyed or mutilated Debenture, a new
Debenture of like tender and unpaid principal amount and dated as of the date to
which interest has been paid on the Debenture so lost, stolen, destroyed or
mutilated.
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ss. 1.4. Registered Holders. The Company may deem and treat the
person in whose name any Debenture is registered as the absolute owner and
holder of such Debenture for the purpose of receiving payment of the principal
of and interest on such Debenture and for the purpose of any notices, waivers or
consents thereunder, whether or not such Debenture shall be overdue, and the
Company shall not be affected by notice to the contrary. Payments with respect
to any Debenture shall be made only to the registered Debenture Holder thereof.
ss. 2. Surrender of the Debenture.
ss. 2.1. Surrender of Debentures. The Company may, as a condition of
payment of all or any of the principal of, and interest on, this Debenture or
its conversion, in whole or in part, require the Debenture Holder to present
this Debenture for notation of such payment and, if this Debenture be paid in
full or converted at the option of the Company as herein provided, require the
surrender hereof.
ss. 3. Covenants.
ss. 3.1. To Pay Principal and Interest. The Company covenants and
agrees that so long as this Debenture shall be outstanding it will pay principal
and interest as herein provided and in accordance with the Company's agreement,
with both the custodian, ▇▇▇▇ ▇. ▇▇▇▇▇▇, Attorney at Law and paying agent bank,
Von Graffenried AG.
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ss. 3.2. To Keep Books. The Company will keep proper books of record
and accounts in which full, true and correct entries will be made of its
transactions in accordance with generally accepted accounting principals.
ss. 3.3. Payment of Taxes; Corporate Existence; Maintenance of
Properties. The Company will pay and discharge promptly or cause to be paid and
discharged promptly all taxes, assessments and governmental charges or levies
imposed upon its income or profits or upon any of its property, real, personal
or mixed, or upon any part thereof, before the same shall become in default, as
well as all lawful claims for labor, materials and supplies which, if unpaid,
might by law become a lien or charge upon its property; provided, however, that
the Company shall not be required to pay any such tax, assessment, charge, levy
or claim if the amount, applicability or validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books reserves (provided for and segregated to the extent
required by generally accepted accounting principles) deemed by it adequate with
respect thereto;
(a) maintain and keep or cause to be maintained and kept its
properties in good repair, working order and condition, and from time to time
make or cause to be made all needful and proper repairs, renewals, replacements
and improvements so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.
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ss. 3.4. To Insure. The Company will maintain insurance in such
extent and against such hazards and liabilities as is commonly maintained by
companies similarly situated.
ss. 4. Conversion of Debentures.
ss. 4.1. Rights to Convert. The Company and/or the Debenture Holder
shall have the right, exercisable at any time, to convert this Debenture into
Common Stock of the Company as set forth in Section 4.2 below. The Company shall
give forty-five (45) days written notice to the Debenture Holder hereof of such
conversion and the Debenture Holder shall give forty-five (45) days written
notice to the Company in order to convert.
This Debenture shall be deemed to have been converted immediately
prior to the close of business on the day the Company designates as the
effective conversion day. At such time the rights of the Debenture Holder shall
cease and the persons entitled to receive the Common Stock issuable upon
conversion shall be treated for all purposes as the record holders of such
Common Stock at such time. The Company shall issue and shall deliver a
certificate or certificates for the number of full shares of Common Stock
issuable upon conversion, together with payment in lieu of any fraction of a
share, as provided in ss. 4.3.
ss. 4.2. Conversion Price. In the event the Company elects to
convert this Debenture, the Holder will receive shares of Common Stock of the
Company at a price equal to a twenty percent (20%) discount to the Initial
Public Offering price.
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If, due to some unforseen circumstance(s), the Company is unable to complete an
Initial Public Offering of its shares prior to maturity of the Convertible
Senior Debentures the Debenture Holder may, at his choosing, elect to; (1)
redeem his Debentures or (2) convert his Debentures into shares of the private
Company at a price per share equal to a 20% discount to the value of the shares
of the private Company as determined by an independent arms length evaluation.
ss. 4.3. Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of any Debentures. If more than one Debenture is
converted the number of full shares which shall be issuable upon conversion
thereof shall be computed on the basis of the aggregate principal amount of the
Debenture so converted. Instead of any fractional share of Common Stock which
would otherwise be issuable upon conversion of any Debenture, the Company shall
pay a cash adjustment in respect of such fraction.
ss. 4.4. Taxes on Conversion. The Company shall pay any and all
taxes that may be payable in respect of the issue or delivery of shares of
Common Stock on conversion of Debenture pursuant hereto. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that of the holder of the Debenture to be converted, and no such
issuance or delivery shall be made unless and until the person requesting such
issuance has paid to the Company the amount of any such tax, or has established,
to the satisfaction of the Company, that such tax has been paid.
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ss. 4.5. Covenant as to Stock. The Company convenants that all
shares of Common Stock which shall be issued upon conversion of Debentures shall
be fully paid and nonassessable and, except as provided in ss. 4.4, the Company
will pay all taxes, liens and charges, including any legal or accounting fees
and expenses with respect to the issuance thereof.
ss. 5. Senior Debt.
(a) "Senior Debt" means all indebtedness for principal and
interest, including interest accruing during the period of any bankruptcy and
other amounts payable, for money borrowed (but not trade debt or other accounts
payable).
(b) The Company covenants and agrees, and each Debenture
Holder, by his acceptance hereof likewise covenants and agrees that the payment
of the principal of, interest and all other amounts payable on the Debentures
shall be senior to any other debt of the Company in accordance with the
provisions of this ss. 5 and each Debenture Holder, whether upon original issue
or upon transfer or assignment thereof, accepts and agrees to be bound by such
provisions.
(c) Upon any payment or distribution of assets or securities
of the Company of any kind or character, whether in cash, property or
securities, upon any dissolution or winding up or total or partial liquidation
or reorganization of the Company whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all Senior Debt of
the Company shall first be paid in cash or cash equivalents.
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(d) Upon any payment or distribution of assets or securities
of the Company referred to in this ss. 5, the Debenture Holders shall be
entitled to rely upon any order or decree of a court of competent jurisdiction
in which such dissolution, winding up, liquidation or reorganization preceedings
are pending, and upon a certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making any such payment or
distribution, delivered to the Debenture Holders for purpose of ascertaining the
persons entitled to participate in such distribution, the Holders of Senior Debt
and other indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this ss. 5.
(e) The provisions of this ss. 5 are intended to be for the
benefit of, and shall be enforceable directly by, the holders of Senior Debt of
the Company.
ss. 6. Events of Default.
ss. 6.1. Events of Default. If one or more of the following events,
herein called Events of Default, shall happen for any reason whatsoever and
whether such happening shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court of any order, rule or regulation of any
administrative or governmental body) and be continuing:
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(a) Default shall be made in the payment of the principal of
any Debenture, when and as the same shall become due and payable, whether at
maturity or at a date fixed for prepayment or by acceleration or otherwise; or
(b) Default shall be made in the payment of any installment of
interest on any Debenture according to its tenor when and as the same shall
become due and payable and such default shall continue for a period of 30 days;
or
(c) Default shall be made in the due observance or performance
of any covenant, condition or agreement on the part of the Company contained in
this Debenture and such default shall continue for a period of 30 days; or
(d) The Company shall be adjudicated a bankrupt or insolvent,
or shall consent to the appointment of a receiver, trustee or liquidator of
itself or of any material part of its property, or shall admit in writing its
inability to pay its debts generally as they come due, or shall make a general
assignment for the benefit of creditors, or shall file a voluntary petition or
an answer seeking reorganization or arrangement in a proceeding under any
bankruptcy law (as now or hereafter in effect) or any answer admitting the
material allegation of a petition filed against the Company in any such
proceeding, or shall, by voluntary petition, answer or consent, seek relief
under the provisions of any other now existing or future bankruptcy or other
similar law providing for the reorganization or winding up of corporations, or
the Company or its directors or majority stockholders shall take action looking
to the dissolution or liquidation of the Company; or
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(e) An order, judgment or decree shall be entered by any court
of competent jurisdiction appointing, without the consent of the Company, a
receiver, trustee or liquidator of the Company or of any material part of its
property, and such receiver, trustee or liquidator shall not have been removed
or discharged within 90 days thereafter, or any material part of the property of
the Company shall, in any judicial proceeding, be sequestered and shall not be
returned to the possession of the Company within 90 days thereafter; or
(f) A petition against the Company in a proceeding under any
bankruptcy law (as now or hereinafter in effect) shall be filed and shall not be
dismissed within 30 days after such filing, or, in case the approval of such
petition by a court of competent jurisdiction is required, shall be filed and
approved by such a court as properly filed and such approval shall not be
withdrawn or the proceeding dismissed within 30 days thereafter, or if, under
the provisions of any other similar law providing for reorganization or winding
up of corporations and which may apply to the Company, any court of competent
jurisdiction, custody or control of the Company or of any material part of its
property and such jurisdiction, custody or control shall not be relinquished or
terminated within 30 days thereafter; or
(g) The Company shall (1) be declared in default in the
payment of principal or interest on any evidence of indebtedness for money
borrowed (other than the Debentures) and such default shall continue for more
than the period of grace, if any, therein specified, unless such default shall
have been cured or waived prior to such indebtedness becoming or being declared
to be due and payable prior to its stated maturity, or (2) default shall
continue for more than the period of grace, if any, therein specified, or (3)
default in the performance or observance of any other term,
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condition or agreement contained in any such evidence of indebtedness for money
borrowed or in any agreement relating thereto if as a result of such default
such evidence of indebtedness is declared to be due and payable prior to its
stated maturity; then, in any such event, any registered holder or Debenture
Holder may declare the Debenture or Debentures held by it or them to be
immediately due and payable and upon such declaration the same shall become and
be immediately due and payable, together with accrued interest thereon, anything
in the Debentures to the contrary notwithstanding.
ss. 6.2 Suits for Enforcement. In case any one or more of the Events
of Default specified in ss. 6.1 shall happen and be continuing, each Debenture
Holder which may, pursuant to the provisions of ss. 6.1, declare the Debenture
or Debentures held by it to be immediately due and payable, may proceed to
protect and enforce its rights by suit in equity, action at law and/or by other
appropriate proceeding, whether for the specific performance (to the extent
permitted by law) of any covenant or agreement contained in this Debenture, such
Debenture or in aid of the exercise of any power granted in this Debenture, such
Debenture, or may proceed to enforce the payment of such Debenture or to enforce
any other legal or equitable right of holder of such Debenture. If, pursuant to
the provision of ss. 6.1 or of this ss. 6.2, the Debenture Holder shall demand
payment thereof or take any action in respect of a default or an Event of
Default, the Company will forthwith give written notice, addressed as provided
in ss. 6.4, to the other Debenture Holders, specifying such action and the
nature of the default or Event of Default. Nothing contained in the ss. 6.2 or
in ss. 6.1 shall in any manner impair that absolute and unconditional right of
each Debenture Holder to receive payment of the principal of and interest, on
such Debenture when the same shall become due and payable in accordance with the
terms thereof, and to institute suit for the enforcement of such payment.
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ss. 6.3. Remedies Cumulative. No remedy herein conferred upon the
Debenture Holder is intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute or otherwise.
ss. 6.4 Remedies Not Waived. No course of dealing between the
Company and any Debenture Holder shall operate as a waiver of any right of such
Debenture Holder hereunder or under such ▇▇▇▇▇▇▇▇▇, and no delay on the part of
such Debenture Holder in exercising any right hereunder or thereunder shall so
operate.
ss. 7. Costs of Collection. In case of a default in the payment of
any principal of or interest on this Debenture, the Company will pay to the
Debenture Holder hereof such further amount as shall be sufficient to cover the
costs and expenses of collection, including (without limitation) reasonable
attorneys' fees.
ss. 8. Legend. Each Debenture and share of Common Stock issued by
the Company upon conversion hereof, shall bear the following legend:
"The Securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or registered or
qualified under the "blue sky" laws of any State. The securities may not be
pledged, hypothecated, assigned, sold or transferred unless registered under
that Act and registered or qualified under the blue sky laws as may be
applicable or unless, in the opinion of counsel reasonably satisfactory to the
Company, exemptions from such laws are available."
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ss. 9. Covenants Bind Successors and Assigns. All covenants,
stipulations, promises and agreements in this Debenture contained by or on
behalf of the Company shall bind its successors and assigns, whether so
expressed or not. This Debenture may only be assigned by the Debenture Holder to
affiliates of the Debenture Holder.
ss. 10. Governing Law. This Debenture shall be governed by and
construed in accordance with the laws of Texas.
ss. 11. Notice. Any notice pursuant to this Debenture shall be made
by registered or certified mail:
If to the Debenture Holder at the address shown on the register
maintained by the Company pursuant to ss. 1.2 of this Debenture.
If to the Company, at the address of the Company:
Royal Mortgage Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
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ss. 12 Headings. The headings of the sections and subsections of
this Debenture are inserted for convenience only and do not constitute a part of
this Debenture.
IN WITNESS WHEREOF, Royal Mortgage Corporation has caused this
Debenture to be signed in its corporate name by one of its officers thereunto
duly authorized and this Debenture to be dated as of the day and year first
above written.
ROYAL MORTGAGE CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President/CEO
ROYAL MORTGAGE CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Secretary/Treasurer
[SEAL]
State of Texas
County of Tarrant
This instrument was acknowledged before me on April 14, 1997 by ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, of Royal Mortgage Corporation, on behalf of said
corporation.
------------------------------------- /s/ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ -------------------------
[SEAL] Notary Public, State of Texas Notary Public's Signature
My Commission Expires
JANUARY 27, 1999
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