EXHIBIT 4.3
THIS DEBENTURE AND THE SHARES OF COMMON STOCK OF SONUS
COMMUNICATION HOLDINGS, INC., A DELAWARE CORPORATION (THE
"BORROWER") INTO WHICH THIS DEBENTURE MAY BECOME CONVERTIBLE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAW, AND MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAW OR AN OPINION OF COUNSEL SATISFACTORY TO THE BORROWER THAT
SUCH REGISTRATION IS NOT REQUIRED.
SONUS COMMUNICATION HOLDINGS, INC.
8% CONVERTIBLE DEBENTURE
April ____, 2001
New York, New York
$____,000
FOR VALUE RECEIVED, SONUS COMMUNICATION HOLDINGS, INC., a
Delaware corporation ("Borrower"), hereby promises to pay to the
order of _______________________, with an address at
____________________________("Lender") the principal sum of
_________ Thousand Dollars ($____,000), together with interest
accrued thereon at an interest rate equal to eight percent (8%)
per annum on the date (the "Maturity Date") that is twelve (12)
months from the date first set forth above. Anything to the
contrary herein notwithstanding, no payment of principal or
interest shall be required to be made by Borrower to the extent
such principal or interest is converted into shares of common
stock of the Borrower (the "Common Stock") as provided herein.
Notwithstanding any other provision hereof, interest paid
or becoming due hereunder shall in no event exceed the maximum
rate permitted by applicable law. Both principal and interest
are payable in lawful money of the United States of America to
the Lender at the address above indicated.
This Debenture and the provisions hereof are to be
construed according to, and are governed by, the laws of the
State of Delaware, without regard to principles of conflicts of
laws thereof, and this Debenture is further subject to the
following additional provisions:
1. Events of Default. (a) If the Borrower shall default in
the payment of the principal or interest of this Debenture after
the same shall become due and payable, and such default shall
not have been remedied within thirty (30) days after written
notice thereof to Borrower; then the Lender of this Debenture
may, at any time thereafter, at its option by written notice to
the Borrower, declare the principal and all accrued interest
thereon to be immediately due and payable, and thereupon the
same shall become so due and payable.
(b) Non-Waiver and Other Remedies. No course of
dealing or delay on the part of Lender in exercising any right
hereunder shall operate as a waiver thereof or otherwise
prejudice the right of any Lender. No remedy conferred hereby
shall be exclusive of any other remedy referred to herein or now
or hereafter available at law, in equity, by statute or
otherwise. In case of any Event of Xxxxxxx, Xxxxxxxx will
reimburse the Lender for its reasonable attorneys' fees incurred
in connection with the enforcement of its rights hereunder.
2. Conversion Feature; Mechanics of Conversion or Cash
Payment.
(a) At any time on or prior to the Maturity Date, the
Lender may, at its option, convert all or such portion of
outstanding principal and accrued but unpaid interest hereon
(the "Outstanding Amount") as Lender may designate in writing,
into such number of shares of Borrower's Common Stock (the
"Conversion Shares") as is equal to the quotient obtained by
dividing (A) the Outstanding Amount, or in the case of a partial
conversion of this Debenture, such portion of the Outstanding
Amount as Lender may specify in writing to Borrower, by (B)
Three Cent ($.03) (the "Conversion Price"), rounded to the
nearest whole share, by providing the Borrower with written
notice thereof (the "Conversion Notice"). Accrued interest
hereon shall be converted prior to conversion of any outstanding
principal.
(b) Mechanics and Effect of Conversion. No fractional
shares of the Borrower's Common Stock will be issued upon
conversion of this Debenture. In lieu of any fractional share
to which the Lender would otherwise be entitled, the Borrower
will pay to Lender in cash the amount of the unconverted portion
of this Debenture that would otherwise be converted into such
fractional shares. Upon conversion of this Debenture, Xxxxxx
shall surrender this Debenture, duly endorsed, at the principal
offices of the Borrower or any transfer agent of the Borrower.
At its expense, the Borrower will, as soon as practicable
thereafter, issue and deliver to Lender a certificate or
certificates for the number of shares of Common Stock to which
Lender is entitled upon such conversion, together with such
other securities and property to which Lender is entitled upon
such conversion under the terms of this Debenture, including a
check payable to Lender for any cash amounts payable as
described herein. Upon conversion of this Debenture, the
Borrower will be forever released from all of its obligations
and liabilities under this Debenture, including without
limitation the obligation to pay the principal and interest due
and payable under this Debenture.
(c) Mechanics of Cash Payment. Upon request for
payment of this Debenture at any time after the Maturity Date,
Xxxxxx shall surrender this Debenture, duly endorsed, at the
principal offices of the Borrower. At its expense, the Borrower
will, as soon as practicable thereafter, make a cash payment in
lawful money of the United States of the principal and interest
due and payable under this Debenture. Upon request for payment
and satisfaction thereof, the Borrower shall be forever released
from all of its obligations and liabilities under this
Debenture, including without limitation any conversion rights
otherwise applicable under this Debenture.
(d) Adjustment for Merger or Reorganization, Etc. In
case of any consolidation or merger of the Borrower with or into
another corporation, or the conveyance of all or substantially
all of the assets of the Borrower to another corporation, or
upon a stock split, stock dividend, consolidation or like event,
this Debenture shall thereafter be convertible into the number
of shares of stock or other securities or property to which a
Lender of the same number of shares of Common Stock deliverable
upon conversion of this Debenture would have been entitled upon
such event; and, in any such case, appropriate adjustment shall
be made to the Conversion Price, as is appropriate for the
circumstances, to the extent that the provisions set forth
herein shall be thereafter applicable in relation to any shares
of stock or other property thereafter deliverable upon the
conversion of the Debenture.
(e) Certificate as to Adjustments. Upon the
occurrence of each adjustment or readjustment of the Conversion
Price, the Borrower at its expense promptly shall compute such
adjustment or readjustment and furnish to the Lender of this
Debenture a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, which shall be conclusive
absent manifest error.
(f) Further Adjustments. In case at any time
conditions arise which in the opinion of the Board of Directors
or in the opinion of the Lender, are not adequately covered by
the provisions of this Section 2, or which might materially and
adversely affect the rights of the Lender in connection with the
conversion of the Debentures, then the Board of Directors shall
appoint a firm of independent certified public accountants of
recognized national or regional standing, who shall give their
opinion upon the adjustment, if any, necessary with respect to
the Conversion Price, so as to preserve the conversion rights of
the Lender. Upon receipt of such opinion, the Board of
Directors forthwith shall make the adjustments described
therein.
3. Representations and Warranties of Lender. Lender hereby
represents and warrants to Borrower as follows:
a. Purchase Entirely for Own Account, Etc.. The
Conversion Shares to be acquired by Xxxxxx hereunder upon
conversion of this Debenture will be acquired for investment for
Xxxxxx's own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof. Lender
has no present intention of selling, granting any participation
in, or otherwise distributing this Debenture or the Conversion
Shares. Lender does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or
grant participations to any person with respect to this
Debenture or the Conversion Shares. The Lender has not
construed the contents of this Debenture, or any additional
agreement with respect to the proposed investment in the Shares
or any prior or subsequent communications from Borrower, or any
of its officers, employees or representatives, as investment,
tax or legal advice, or as information necessarily applicable to
such Xxxxxx's particular financial situation. The Lender has
consulted its own financial advisor, tax advisor, legal counsel
and accountant, as necessary or desirable, as to matters
concerning his investment in the Conversion Shares.
b. Disclosure. Lender has received or reviewed all
the information which such Lender has requested for the purposes
of determining the merits of the Conversion Shares as an
investment.. Xxxxxx has had an opportunity to ask questions and
receive answers from the Borrower regarding the Borrower, its
business, and the terms and conditions of the conversion of this
Debenture and the Conversion Shares. XXXXXX ACKNOWLEDGES AND
AGREES THAT THE CONVERSION OF THE DEBENTURE INVOLVES A HIGH
DEGREE OF RISK, AND MAY RESULT IN A LOSS OF THE ENTIRE AMOUNT
CONVERTED. THERE IS NO ASSURANCE THAT THE BORROWER'S OPERATIONS
WILL BE PROFITABLE IN THE FUTURE OR THAT ANY PUBLIC MARKET FOR
THE SHARES WILL BE AVAILABLE.
c. Accredited Lender. Lender is, as of the date
hereof and as of the date all or any portion of this Debenture
is converted into Conversion Shares, an accredited Lender as
defined in Rule 501(a) of Regulation D under the Securities Act
of 1933, as amended ("Securities Act"). Lender is capable of
bearing the economic risk of an investment in the Conversion
Shares, including the possible loss of Xxxxxx's entire
investment. Lender has such knowledge and experience in
financial or business matters that it is capable of evaluating
the merits and risks of an investment in the Conversion Shares
offered hereby. If other than an individual, Lender has not
been organized solely for the purpose of acquiring the
Conversion Shares.
d. Restricted Securities. Xxxxxx understands that the
Conversion Shares are "restricted securities" as defined in the
Securities Act, and that under federal and state securities laws
the Conversion Shares may be resold without registration under
the Securities Act only in certain limited circumstances. Xxxxxx
is familiar with Rule 144 promulgated by the Commission under
the Securities Act, and understands the resale limitations
imposed thereby and by the Securities Act generally. Xxxxxx
also acknowledges that the Shares are subject to significant
restrictions on transfer, pledge or hypothecation.
e. Legends. It is understood that certificates or
other evidence of the Conversion Shares may bear the following
legend, as well as any legend required by the laws of any state:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION
OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH
REGISTRATION IS NOT REQUIRED PURSUANT TO A VALID
EXEMPTION THEREFROM UNDER THE SECURITIES ACT OF 1933,
AS AMENDED."
Section 4. Piggy-Back Registration Rights.
(a) Grant of Piggy-Back Rights. In the event that the
Borrower shall hereafter initiate a registration of any of its
common stock (a "Registered Offering"), either for its own
account or the account of any other Lender or Lenders of equity
securities or securities convertible into equity securities of
the Borrower, other than (i) a registration relating solely to
employee benefit plans, (ii) a registration relating solely to a
Rule 145 transaction, (iii) a registration in which the only
equity security being registered is capital stock issuable upon
conversion of convertible (or exchange of exchangeable) debt
securities which are also being registered, or (iv) an initial
public offering of the Borrower, the Borrower will provide the
Lender with written notice thereof within 30 days of the filing
date of the first registration statement filed in connection
with the Registered Offering (the "Borrower Notice"), and,
subject to the other terms and conditions set forth in this
Section, include in such registration (and any related
qualification under blue sky laws or other compliance) and any
underwriting involved therein, if any, the Conversion Shares
which the Lender requests to be included therein within 10 days
after the date of the Borrower Notice (collectively, the
"Registrable Securities").
(b) Underwritten Registered Offering. If the Registered
Offering of which the Borrower gives notice is for a registered
public offering involving an underwriting, the Borrower shall so
advise the Lender as a part of the Borrower Notice. In such
event, the Lender's rights to registration pursuant to this
Section 9 shall be conditioned upon the Lender's participation
in such underwriting, and the inclusion of the Lender's
Registrable Securities in the underwriting shall be limited to
the extent provided herein. The Lender shall (together with the
Borrower and the other Lenders distributing their securities
through such underwriting, if any) enter into an underwriting
agreement in customary form with the managing underwriter
selected for such underwriting by the Borrower. Notwithstanding
any other provision of this Section 9, if the managing
underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the
managing underwriter may limit the number of the Lender's
Registrable Securities to be included in such registration to
such number of the Lender's Registrable Securities which the
managing underwriter determines can be included in such
underwriting without reducing the number of shares to be sold by
the Borrower pursuant to such underwriting or by any persons or
entities exercising demand registration rights in connection
with such registration. In such event, the Borrower shall so
advise the Lender and the number of shares (other than shares
being registered by the Borrower) that may be included in the
registration and underwriting shall be allocated among all the
Lenders of the Borrower's shares wishing to participate in the
Registered Offering in proportion, as nearly as practicable, to
the respective amounts of shares held by such Lenders at the
time of filing the Registration Statement. To facilitate the
allocation of shares in accordance with the above provisions,
the Borrower may round the number of shares allocated to any
Lender to the nearest 100 shares. If the Lender disapproves of
the terms of any such underwriting, the Lender may elect to
withdraw therefrom by written notice to the Borrower and the
managing underwriter. Any securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration, and
shall not be transferred in a public distribution prior to 180
days after the effective date of the registration statement
relating thereto, or such other shorter period of time as the
underwriters may require.
(c) Termination and Withdrawal of Registration. The
Borrower shall have the right to terminate or withdraw any
Registered Offering or other registration prior to the
effectiveness of such registration whether or not the Lender has
elected to include its Registrable Securities in such
registration.
(d) Expenses. All registration expenses incurred in
connection with registrations pursuant to this Section 9 shall
be borne by the Borrower. Unless otherwise stated, all selling
expenses relating to the Lender's Registrable Securities shall
be borne by the Lender.
(e) Notification Requirements. In the case of each
registration, qualification or compliance effected by the
Borrower pursuant to this Agreement, the Borrower will keep the
Lender advised in writing as to the initiation of each
registration, qualification and compliance and as to the
completion thereof. At its expense the Borrower will:
(i) prepare and file with the Commission a
registration statement with respect to such securities and use
reasonable best efforts to cause such registration statement to
become and remain effective for at least one hundred twenty
(120) days or until the distribution described in the
registration statement has been completed, whichever first
occurs; and
(ii) furnish to the Lender, should the Lender
participate in such registration, and to the underwriters of the
securities being registered such reasonable number of copies of
the registration statement, preliminary prospectus, final
prospectus and such other documents the Lender and/or the
underwriters may reasonably request in order to facilitate the
public offering of such securities.
(f) Underwriting Agreement Governs. In the event the
terms of this Section 9 conflicts with the terms of any
underwriting agreement in connection with any registration
hereunder, the terms of such underwriting agreement shall
control.
(g) Information. If the Lender's Registrable Securities
are to be included in any Registered Offering, the Lender shall
furnish to the Borrower such information as the Borrower may
request in writing and as shall be required in connection with
any registration, qualification or compliance referred to in
this Agreement.
(h) Termination. The rights granted pursuant to this
Section 9 shall terminate at such time as the Borrower has
registered the Lender's Registrable Securities in a Registered
Offering or other registration or when the Lender is permitted
to sell all of its Warrant Shares within any ninety day period
under Rule 144 promulgated under the Securities Act of 1933.
Section 5. Indemnification.
(a) Indemnification. The Lenders agree, if any of
Lenders' Registrable Securities are included in the securities
as to which such registration, qualification or compliance is
being effected, to indemnify the Borrower, each of its directors
and officers, each underwriter, if any, of the Borrower's
securities covered by such a registration statement, each Person
who controls the Borrower or such underwriter within the meaning
of Section 15 of the Securities Act, and each other such Lender,
each of its officers and directors and each Person controlling
such Lender within the meaning of Section 15 of the Securities
Act, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus,
offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, and will reimburse the Borrower, such Lenders, such
directors, officers, Persons, underwriters or control Persons
for any legal or any other expenses reasonably incurred, as such
expenses are incurred, in connection with investigating or
defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon
and in conformity with written information furnished to the
Borrower by the Lender. Notwithstanding the foregoing, the
Lender's liability under this subsection shall be limited in an
amount equal to the initial price of the Registrable Securities
sold by the Lender, unless such liability arises out of or is
based on willful misconduct by the Lender.
(b) Indemnification Procedure. Each party entitled to
indemnification under this Section (the "Indemnified Party")
shall give notice to the party required to provide
indemnification (the "Indemnifying Party") after such
Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party
to assume the defense of any such claim or any litigation
resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose
approval shall not be unreasonably withheld), and the
Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this
Agreement, unless the failure to give such notice is materially
prejudicial to an Indemnifying Party's ability to defend such
action, and provided further that the Indemnifying Party shall
not assume the defense for matters as to which there is a
conflict of interest or separate and different defenses. No
Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to
such claim or litigation.
6. Covenants of Lender. Lender hereby covenants with
Borrower that Lender shall not make any disposition of all or
any portion of the Conversion Shares unless and until:
a. There is then in effect a registration
statement under the Securities Act covering such proposed
disposition, and such disposition is made in accordance with
such registration statement; or
b. Such Lender shall have notified Borrower of
the proposed disposition and shall have furnished Borrower with
a detailed statement of the circumstances surrounding the
proposed disposition, and, if requested by Xxxxxxxx, Lender
shall have furnished Borrower with an opinion of counsel, in
form and substance satisfactory to Borrower, that such
disposition will not require registration of the Conversion
Shares under the Securities Act.
7. Covenants of Borrower. The Borrower
covenants and agrees that for so long as this Debenture shall
remain outstanding the Borrower:
a. will cause to be reserved and kept available
out of its authorized and unissued shares of Common Stock such
number of shares that will be sufficient to permit the
conversion in full of all outstanding Debentures;
b. will take all such action as may be necessary
to ensure that all shares of Common Stock delivered upon
conversion of the Debentures shall, at the time of delivery of
the certificates for such shares, be duly and validly
authorized, issued, fully paid and non-assessable;
c. will duly and punctually pay, or cause to be
paid, the principal and interest on this Debenture on the
date(s) on which such principal and interest comes due and
payable in accordance with the terms hereof;
d. will preserve and keep in full force and
effect its corporate existence;
e will not declare or pay any cash dividend or
other distribution on the Common Stock or make, or directly or
indirectly assume, any liability or obligation in connection
with any distribution of any sort in respect to its Common
Stock.
SONUS COMMUNICATION HOLDINGS, INC.
By:
Xxxxx Xxxx, Chief Executive
Officer
AGREED TO AND ACCEPTED BY:
By:______________________________
Name:____________________________
Title:_____________________________
