EXHIBIT 4.3
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND IS
BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THIS SECURITY MAY NOT BE SOLD
OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS.
9 3/4% CONVERTIBLE DEBENTURE
COMPANY: SonicPort, Inc.
MATURITY DATE: March 29, 2004
AMOUNT: $300,000
SonicPort, Inc., a Nevada corporation, with principal executive
offices located at 00000 Xxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxx 00000 (the
"COMPANY"), for value received, hereby promises to pay to the Holder (as such
term is hereinafter defined), or such other Person (as such term is hereinafter
defined) upon order of the Holder, on March 29, 2004 (the "MATURITY DATE"), the
principal sum of three hundred thousand dollars ($300,000), as such sum may be
adjusted pursuant to Article 3, and to pay interest thereon from the date
hereof, monthly in arrears, on the 15th day of each month (each an "INTEREST
PAYMENT DUE DATE" and collectively, the "INTEREST PAYMENT DUE DATES"),
commencing on May 15, 2002, at the rate of nine and three-quarters percent
(9 3/4%) per annum (the "DEBENTURE INTEREST RATE"), until the Principal Amount
(as such term is hereinafter defined) of this Debenture has been paid in full.
All interest payable on the Principal Amount of this Debenture shall be
calculated on the basis of a 360-day year for the actual number of days elapsed.
Payment of interest on this Debenture shall be in cash.
ARTICLE I
DEFINITIONS
1.1 Definitions. The terms defined in this Article whenever used in this
Debenture have the following respective meanings:
(i) "AFFILIATE" has the meaning ascribed to such term in
Rule 12b-2 under the Securities Exchange Act of 1934, as amended.
(ii) "BANKRUPTCY CODE" means the United States Bankruptcy
Code of 1986, as amended (11 U.S.C. Sections 101 et. seq.).
(iii) "BUSINESS DAY" means a day other than Saturday,
Sunday or any day on which banks located in the State of California are
authorized or obligated to close.
(iv) "CAPITAL SHARES" means the Common Stock and any other
shares of any other class or series of capital stock, whether now or hereafter
authorized and however
designated, which have the right to participate in the distribution of earnings
and assets (upon dissolution, liquidation or winding-up) of the Company.
(v) "CLOSING DATE" means March 29, 2002.
(vi) "COMMON SHARES" or "COMMON STOCK" means shares of the
Company's Common Stock.
(vii) "COMMON STOCK ISSUED AT CONVERSION", when used with
reference to the securities deliverable upon conversion of this Debenture, means
all Common Shares now or hereafter Outstanding and securities of any other class
or series into which this Debenture hereafter shall have been changed or
substituted, whether now or hereafter created and however designated.
(viii) "COMPANY" means SonicPort, Inc., a Nevada
corporation, and any successor or resulting corporation by way of merger,
consolidation, sale or exchange of all or substantially all of the Company's
assets or otherwise.
(ix) "CONVERSION" or "CONVERSION" means the repayment by
the Company of the Principal Amount of this Debenture (and, to the extent the
Holder elects as permitted by Section 3.1, accrued and unpaid interest thereon)
by the delivery of Common Stock on the terms provided in Section 3.2, and
"CONVERT," "CONVERTED," "CONVERTIBLE" and like words shall have a corresponding
meaning.
(x) "CONVERSION DATE" means any day on which all or any
portion of the Principal Amount of this Debenture is converted in accordance
with the provisions hereof.
(xi) "CONVERSION NOTICE" means a written notice of
conversion substantially in the form annexed hereto as Exhibit A.
(xii) "CONVERSION PRICE" on any date of determination
means the applicable price for the conversion of this Debenture into Common
Shares on such day as set forth in Section 3.1(a).
(xiii) "CURRENT MARKET PRICE" on any date of determination
means the closing price of a Common Share on such day as reported on the
American Stock Exchange; provided that, if such security is not listed or
admitted to trading on the American Stock Exchange, as reported on the principal
national security exchange or quotation system on which such security is quoted
or listed or admitted to trading, or, if not quoted or listed or admitted to
trading on any national securities exchange or quotation system, the closing bid
price of such security on the over-the-counter market on the day in question as
reported by Bloomberg LP or a similar generally accepted reporting service, as
the case may be.
(xiv) "DEADLINE" means the date which is the 120th day
from the Closing Date.
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(xv) "DEBENTURE" or "DEBENTURES" means this 9 3/4%
Convertible Debenture due March 29, 2004 of the Company or such other
convertible debenture(s) exchanged therefor as provided in Section 2.1.
(xvi) "DEFAULT INTEREST RATE" shall be equal to the
Debenture Interest Rate plus an additional four percent (4%) per annum
calculated on the basis of a 360-day year.
(xvii) "DISCOUNT MULTIPLIER" has the meaning set forth in
Section 3.1(a).
(xviii) "EVENT OF DEFAULT" has the meaning set forth in
Section 6.1.
(xix) "HOLDER" means La Jolla Cove Investors, Inc., any
successor thereto, or any Person to whom this Debenture is subsequently
transferred in accordance with the provisions hereof.
(xx) "INTEREST PAYMENT DUE DATE" has the meaning set forth
in the opening paragraph of this Debenture.
(xxi) "MARKET DISRUPTION EVENT" means any event that
results in a material suspension or limitation of trading of the Common Shares.
(xxii) "MARKET PRICE" per Common Share means the lowest
price of the Common Shares during any Trading Day as reported on the American
Stock Exchange; provided that, if such security is not listed or admitted to
trading on the American Stock Exchange, as reported on the principal national
security exchange or quotation system on which such security is quoted or listed
or admitted to trading, or, if not quoted or listed or admitted to trading on
any national securities exchange or quotation system, the lowest price of the
Common Shares during any Trading Day on the over-the-counter market as reported
by Bloomberg LP or a similar generally accepted reporting service, as the case
may be.
(xxiii) "MAXIMUM RATE" has the meaning set forth in
Section 6.3.
(xxiv) "OUTSTANDING" when used with reference to Common
Shares or Capital Shares (collectively, "SHARES") means, on any date of
determination, all issued and outstanding Shares, and includes all such Shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in such Shares; provided, however, that any such Shares
directly or indirectly owned or held by or for the account of the Company or any
Subsidiary of the Company shall not be deemed "OUTSTANDING" for purposes hereof.
(xxv) "PERSON" means an individual, a corporation, a
partnership, an association, a limited liability company, an unincorporated
business organization, a trust or other entity or organization, and any
government or political subdivision or any agency or instrumentality thereof.
(xxvi) "PRINCIPAL AMOUNT" means, for any date of
calculation, the principal sum set forth in the first paragraph of this
Debenture (but only such principal amount as to which the Holder has (a)
actually advanced pursuant to the Securities Purchase Agreement (b) not
theretofore furnished a Conversion Notice in compliance with Section 3.2).
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(xxvii) "REGISTRATION RIGHTS AGREEMENT" means that certain
Registration Rights Agreement dated as of March 29, 2002 by and between the
Company and Holder, as the same may be amended from time to time.
(xxviii) "SEC" means the United States Securities and
Exchange Commission.
(xxix) "SECURITIES ACT" means the Securities Act of 1933,
as amended, and the rules and regulations of the SEC thereunder, all as in
effect at the time.
(xxx) "SECURITIES PURCHASE AGREEMENT" means that certain
Securities Purchase Agreement dated as of March 29, 2002 by and among the
Company and Holder, as the same may be amended from time to time.
(xxxi) "SUBSIDIARY" means any entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are owned
directly or indirectly by the Company.
(xxxii) "TRADING DAY" means any day on which (i) purchases
and sales of securities on the principal national security exchange or quotation
system on which the Common Shares are traded are reported thereon, or, if not
quoted or listed or admitted to trading on any national securities exchange or
quotation system, as reported by Bloomberg LP or a similar generally accepted
reporting service, as the case may be, (ii) at least one bid for the trading of
Common Shares is reported and (iii) no Market Disruption Event occurs.
All references to "cash" or "$" herein means currency of the
United States of America.
ARTICLE II
EXCHANGES, TRANSFER AND OPTIONAL REDEMPTION
2.1 Exchange and Registration of Transfer of Debentures. The Holder may,
at its option, surrender this Debenture at the principal executive offices of
the Company and receive in exchange therefor a Debenture or Debentures, each in
the denomination of $1,000 or an integral multiple of $1,000 in excess thereof,
dated as of the date of this Debenture (which shall accrue interest from the
most recent Interest Payment Due Date on which an interest payment was made in
full), and payable to such Person or order as may be designated by such Holder.
The aggregate Principal Amount of the Debenture or Debentures exchanged in
accordance with this Section 2.1 shall equal the aggregate unpaid Principal
Amount of this Debenture as of the date of such surrender; provided, however,
that upon any exchange pursuant to this Section 2.1 there shall be filed with
the Company the name and address for all purposes hereof of the Holder or
Holders of the Debenture or Debentures delivered in such exchange. This
Debenture, when presented for registration of transfer or for exchange or
conversion, shall (if so required by the Company) be duly endorsed, or be
accompanied by a written instrument of transfer in form reasonably satisfactory
to the Company duly executed, by the Holder duly authorized in writing.
2.2 Loss, Theft, Destruction of Debenture. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Debenture and, in the case of any
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such loss, theft or destruction, upon receipt of indemnity or security
reasonably satisfactory to the Company, or, in the case of any such mutilation,
upon surrender and cancellation of this Debenture, the Company shall make, issue
and deliver, in lieu of such lost, stolen, destroyed or mutilated Debenture, a
new Debenture of like tenor and unpaid Principal Amount dated as of the date
hereof (which shall accrue interest from the most recent Interest Payment Due
Date on which an interest payment was made in full). This Debenture shall be
held and owned upon the express condition that the provisions of this Section
2.2 are exclusive with respect to the replacement of a mutilated, destroyed,
lost or stolen Debenture and shall preclude any and all other rights and
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement of negotiable instruments or other
securities without the surrender thereof.
2.3 Who Deemed Absolute Owner. The Company may deem the Person in whose
name this Debenture shall be registered upon the registry books of the Company
to be, and may treat it as, the absolute owner of this Debenture (whether or not
this Debenture shall be overdue) for the purpose of receiving payment of or on
account of the Principal Amount of this Debenture, for the conversion of this
Debenture and for all other purposes, and the Company shall not be affected by
any notice to the contrary. All such payments and such conversions shall be
valid and effectual to satisfy and discharge the liability upon this Debenture
to the extent of the sum or sums so paid or the conversion or conversions so
made.
2.4 Repayment at Maturity. At the Maturity Date, the Company shall repay
the outstanding Principal Amount of this Debenture in whole in cash, together
with all accrued and unpaid interest thereon, in cash, to the Maturity Date.
SECTION 2.5 Optional Redemption. At anytime after the Registration
Statement has been declared effective by the SEC, the Company may redeem this
Debenture in whole in cash as follows:
(i) if the closing price of the Company Common Stock is
less than $0.45 on the date of the redemption, for one hundred fifteen percent
(115%) of the outstanding Principal Amount plus accrued and unpaid interest.
(ii) if the closing price of the Company Common Stock is
$0.45 or greater on the date of the redemption, for one hundred thirty percent
(130%) of the outstanding Principal Amount plus accrued and unpaid interest.
ARTICLE III
CONVERSION OF DEBENTURE
3.1 Conversion; Conversion Price; Valuation Event. (a) At the option of
the Holder, this Debenture may be converted, either in whole or in part, up to
the full Principal Amount hereof (in increments of $1,000 in Principal Amount)
into Common Shares (calculated as to each such conversion to the nearest 1/100th
of a share), at any time and from time to time on any Business Day, subject to
compliance with Section 3.2. The number of Common Shares into which this
Debenture may be converted is equal to (i) the Principal Amount of the Debenture
being converted at the Conversion Date (plus, at the option of the Holder, any
accrued and
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unpaid interest on the Debenture being converted through the Conversion Date)
divided by (ii) the Conversion Price. In addition, the Company shall pay to the
Holder on the Conversion Date, in cash, any accrued and unpaid interest on the
Debenture being converted not included at the option of the Holder in clause (i)
of the immediately preceding sentence. The "CONVERSION PRICE" shall be equal to
the lesser of (i) one-hundred twenty-five percent (125%) of the Market Price on
the Trading Day immediately prior to the Closing Date, or (ii) seventy-six
percent (76%) of the lowest Market Price during the thirty (30) Trading Days
prior to Holder's election to convert (a "DISCOUNT MULTIPLIER"); provided, that
in the event the Registration Statement has not been declared effective by the
SEC by the Deadline, then the applicable Discount Multiplier shall decrease by
three percent (3%) for each month or partial month occurring after the Deadline
that the Registration Statement has not been declared effective by the SEC.
(b) Notwithstanding the provisions of Section 3.1(a), in the
event the Company's Registration Statement has not been declared effective by
the Deadline or, if the Registration Statement has theretofore been declared
effective but is not thereafter effective, the following will also apply in
addition to any damages incurred by the Holder as a result thereof:
(i) The Holder may demand repayment of one hundred and
fifty percent (150%) of the Principal Amount of the Debenture, together with all
accrued and unpaid interest thereon, in cash, at any time prior to the Company's
Registration Statement being declared effective by the SEC or during the period
that the Company's Registration Statement is not effective, such repayment to be
made within three (3) business days of such demand. In the event that the
Debenture is so accelerated, in addition to the repayment of one hundred and
fifty percent (150%) of the Principal Amount together with accrued interest as
aforesaid, the Company shall immediately issue and pay, as the case may be, to
the Holder 50,000 Shares of Common Stock and $15,000 for each thirty (30) day
period, or portion thereof, during which the Principal Amount, including
interest thereon, remains unpaid, with the monthly payment amount to increase to
$20,000 for each thirty (30) day period, or portion thereof, after the first
ninety (90) day period;
(ii) If the Holder does not elect to accelerate the
Debenture, the Company shall immediately issue or pay, as the case may be, to
Holder 50,000 Shares of Common Stock and $15,000 for each thirty (30) day
period, or portion thereof, that the Registration Statement is not effective,
with the monthly payment amount to increase to $20,000 for each thirty (30) day
period, or portion thereof, after the first ninety (90) day period.
3.2 Exercise of Conversion Privilege. (a) Conversion of this Debenture
may be exercised on any Business Day by the Holder by telecopying an executed
and completed Conversion Notice to the Company. Each date on which a Conversion
Notice is telecopied to the Company in accordance with the provisions of this
Section 3.2 shall constitute a Conversion Date. The Company shall convert this
Debenture and issue the Common Stock Issued at Conversion in the manner provided
below in this Section 3.2, and all voting and other rights associated with the
beneficial ownership of the Common Stock Issued at Conversion shall vest with
the Holder, effective as of the Conversion Date at the time specified in the
Conversion Notice. The Conversion Notice also shall state the name or names
(with addresses) of the persons who are to become the holders of the Common
Stock Issued at Conversion in connection with such conversion. The Holder shall
deliver this Debenture by express courier within thirty
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(30) days following the date on which the telecopied Conversion Notice has been
transmitted to the Company. Upon surrender for conversion, this Xxxxxxxxx shall
be accompanied by a proper assignment hereof to the Company or be endorsed in
blank. As promptly as practicable after the receipt of the Conversion Notice as
aforesaid, but in any event not more than five (5) Business Days after the
Company's receipt of such Conversion Notice, the Company shall (i) issue the
Common Stock Issued at Conversion in accordance with the provisions of this
Article 3 and (ii) cause to be mailed for delivery by overnight courier, or if a
Registration Statement covering the Common Stock has been declared effective by
the SEC cause to be electronically transferred, to Holder (x) a certificate or
certificate(s) representing the number of Common Shares to which the Holder is
entitled by virtue of such conversion, (y) cash, as provided in Section 3.3, in
respect of any fraction of a Common Share deliverable upon such conversion and
(z) cash or shares of Common Stock, as applicable, representing the amount of
accrued and unpaid interest on this Debenture as of the Conversion Date. Such
conversion shall be deemed to have been effected at the time at which the
Conversion Notice indicates, and at such time the rights of the Holder of this
Debenture, as such (except if and to the extent that any Principal Amount
thereof remains unconverted), shall cease and the Person and Persons in whose
name or names the Common Stock Issued at Conversion shall be issuable shall be
deemed to have become the holder or holders of record of the Common Shares
represented thereby, and all voting and other rights associated with the
beneficial ownership of such Common Shares shall at such time vest with such
Person or Persons. The Conversion Notice shall constitute a contract between the
Holder and the Company, whereby the Holder shall be deemed to subscribe for the
number of Common Shares which it will be entitled to receive upon such
conversion and, in payment and satisfaction of such subscription (and for any
cash adjustment to which it is entitled pursuant to Section 3.4), to surrender
this Debenture and to release the Company from all liability thereon (except if
and to the extent that any Principal Amount thereof remains unconverted). No
cash payment aggregating less than $1.00 shall be required to be given unless
specifically requested by the Holder.
(b) If, at any time after the date of this Debenture, (i) the
Company challenges, disputes or denies the right of the Holder hereof to effect
the conversion of this Debenture into Common Shares or otherwise dishonors or
rejects any Conversion Notice delivered in accordance with this Section 3.2 or
(ii) any third party who is not and has never been an Affiliate of the Holder
commences any lawsuit or legal proceeding or otherwise asserts any claim before
any court or public or governmental authority which seeks to challenge, deny,
enjoin, limit, modify, delay or dispute the right of the Holder hereof to effect
the conversion of this Debenture into Common Shares, then the Holder shall have
the right, by written notice to the Company, to require the Company to promptly
redeem this Debenture for cash at one hundred and fifty (150%) of the Principal
Amount thereof, together with all accrued and unpaid interest thereon to the
date of redemption. Under any of the circumstances set forth above, the Company
shall be responsible for the payment of all costs and expenses of the Holder,
including reasonable legal fees and expenses, as and when incurred in defending
itself in any such action or pursuing its rights hereunder (in addition to any
other rights of the Holder).
(c) The Holder shall be entitled to exercise its conversion
privilege notwithstanding the commencement of any case under the Bankruptcy
Code. In the event the Company is a debtor under the Bankruptcy Code, the
Company hereby waives to the fullest extent permitted any rights to relief it
may have under 11 U.S.C. Section 362 in respect of the Holder's
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conversion privilege. The Company hereby waives to the fullest extent permitted
any rights to relief it may have under 11 U.S.C. Section 362 in respect of the
conversion of this Debenture. The Company agrees, without cost or expense to the
Holder, to take or consent to any and all action necessary to effectuate relief
under 11 U.S.C. Section 362.
3.3 Fractional Shares. No fractional Common Shares or scrip representing
fractional Common Shares shall be delivered upon conversion of this Debenture.
Instead of any fractional Common Shares which otherwise would be delivered upon
conversion of this Debenture, the Company shall pay a cash adjustment in respect
of such fraction in an amount equal to the same fraction multiplied by the
Current Market Price on the Conversion Date. No cash payment of less than $1.00
shall be required to be given unless specifically requested by the Holder.
3.4 Adjustments. The Conversion Price and the number of shares
deliverable upon conversion of this Debenture are subject to adjustment from
time to time as follows:
(i) Reclassification, Etc. In case the Company shall
reorganize its capital, reclassify its capital stock, consolidate or merge with
or into another Person (where the Company is not the survivor or where there is
a change in or distribution with respect to the Common Stock of the Company),
sell, convey, transfer or otherwise dispose of all or substantially all its
property, assets or business to another Person, or effectuate a transaction or
series of related transactions in which more than fifty percent (50%) of the
voting power of the Company is disposed of (each, a "FUNDAMENTAL CORPORATE
CHANGE") and, pursuant to the terms of such Fundamental Corporate Change, shares
of common stock of the successor or acquiring corporation, or any cash, shares
of stock or other securities or property of any nature whatsoever (including
warrants or other subscription or purchase rights) in addition to or in lieu of
common stock of the successor or acquiring corporation ("OTHER PROPERTY") are to
be received by or distributed to the holders of Common Stock of the Company,
then the Holder of this Debenture shall have the right thereafter, at its sole
option, to (x) require the Company to prepay this Debenture for cash at one
hundred and fifty percent (150%) of the Principal Amount thereof, together with
all accrued and unpaid interest thereon to the date of prepayment, (y) receive
the number of shares of common stock of the successor or acquiring corporation
or of the Company, if it is the surviving corporation, and Other Property as is
receivable upon or as a result of such Fundamental Corporate Change by a holder
of the number of shares of Common Stock into which such the outstanding portion
of this Debenture may be converted at the Conversion Price applicable
immediately prior to such Fundamental Corporate Change or (z) require the
Company, or such successor, resulting or purchasing corporation, as the case may
be, to, without benefit of any additional consideration therefor, execute and
deliver to the Holder a debenture with substantial identical rights, privileges,
powers, restrictions and other terms as this Debenture in an amount equal to the
amount outstanding under this Debenture immediately prior to such Fundamental
Corporate Change. For purposes hereof, "COMMON STOCK OF THE SUCCESSOR OR
ACQUIRING CORPORATION" shall include stock of such corporation of any class
which is not preferred as to dividends or assets over any other class of stock
of such corporation and which is not subject to prepayment and shall also
include any evidences of indebtedness, shares of stock or other securities which
are convertible into or exchangeable for any such stock, either immediately or
upon the arrival of a specified date or the happening of a specified event and
any warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions shall similarly apply to successive Fundamental Corporate
Changes.
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3.5 Certain Conversion Limits.
Notwithstanding anything herein to the contrary, if and to the extent
that, on any date (the "SECTION 16 DETERMINATION DATE"), the holding by the
Holder of this Debenture would result in the Holder's becoming subject to the
provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended,
by virtue of being deemed the "BENEFICIAL OWNER" of more than ten percent (10%)
of the then Outstanding shares of Common Stock, then the Holder shall not have
the right, and the Company shall not have the obligation, to convert any portion
of this Debenture (the "SECTION 16 PREPAYMENT PORTION") as shall cause such
Holder to be deemed the beneficial owner of more than ten percent (10%) of the
then Outstanding shares of Common Stock during the period ending sixty (60) days
after the Section 16 Determination Date. If any court of competent jurisdiction
shall determine that the foregoing limitation is ineffective to prevent a Holder
from being deemed the beneficial owner of more than ten percent (10%) of the
then Outstanding shares of Common Stock for the purposes of such Section 16(b),
then the Company shall prepay the Section 16 Prepayment Portion. Upon such
determination by a court of competent jurisdiction, the Holder shall have no
interest in or rights under such Section 16 Prepayment Portion. Any and all
interest paid on or prior to the date of such determination shall be deemed
interest paid on the remaining portion of this Debenture held by the Holder.
Such prepayment shall be for cash at a prepayment price of one hundred and fifty
percent (150%) of the Principal Amount thereof, together with all accrued and
unpaid interest thereon to the date of prepayment.
3.6 Surrender of Debentures. Upon any redemption of this Debenture
pursuant to Sections 3.2, 3.5 or 6.2, or upon maturity pursuant to Section 2.4,
the Holder shall either deliver this Debenture by hand to the Company at its
principal executive offices or surrender the same to the Company at such address
by nationally recognized overnight courier. Payment of the redemption price or
the amount due on maturity specified in Section 2.4, shall be made by the
Company to the Holder against receipt of this Debenture (as provided in this
Section 3.5) by wire transfer of immediately available funds to such account(s)
as the Holder shall specify by written notice to the Company. If payment of such
redemption price is not made in full by the redemption date, or the amount due
on maturity is not paid in full by the Maturity Date, the Holder shall again
have the right to convert this Debenture as provided in Article 3 hereof or to
declare an Event of Default.
ARTICLE IV
STATUS; RESTRICTIONS ON TRANSFER
4.1 Status of Debenture. This Debenture is an unsecured obligation of
the Company, and constitutes a legal, valid and binding obligation of the
Company, enforceable in accordance with its terms subject, as to enforceability,
to general principles of equity and to principles of bankruptcy, insolvency,
reorganization and other similar laws of general applicability relating to or
affecting creditors' rights and remedies generally.
4.2 Restrictions on Transfer. This Debenture, and any Common Shares
deliverable upon the conversion hereof, have not been registered under the
Securities Act. The Holder by accepting this Xxxxxxxxx agrees that this
Debenture and the shares of Common Stock to be acquired as interest on and upon
conversion of this Debenture may not be assigned or otherwise
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transferred unless and until (i) the Company has received the opinion of counsel
for the Holder that this Debenture or such shares may be sold pursuant to an
exemption from registration under the Securities Act or (ii) a registration
statement relating to this Debenture or such shares has been filed by the
Company and declared effective by the SEC.
Each certificate for shares of Common Stock deliverable hereunder shall
bear a legend as follows unless and until such securities have been sold
pursuant to an effective registration statement under the Securities Act:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"). The securities may not be offered for sale,
sold or otherwise transferred except (i) pursuant to an effective
registration statement under the Securities Act or (ii) pursuant
to an exemption from registration under the Securities Act in
respect of which the issuer of this certificate has received an
opinion of counsel satisfactory to the issuer of this certificate
to such effect. Copies of the agreement covering both the
purchase of the securities and restrictions on their transfer may
be obtained at no cost by written request made by the holder of
record of this certificate to the Secretary of the issuer of this
certificate at the principal executive offices of the issuer of
this certificate."
ARTICLE V
COVENANTS
5.1 Conversion. The Company shall cause the transfer agent, not later
than three (3) Business Days after the Company's receipt of a Conversion Notice,
to issue and deliver to the Holder the requisite shares of Common Stock Issued
at Conversion. Such delivery shall be by electronic transfer if a Registration
Statement covering the Common Stock has been declared effective by the SEC.
5.2 Notice of Default. If any one or more events occur which constitute
or which, with notice, lapse of time, or both, would constitute an Event of
Default, the Company shall forthwith give notice to the Holder, specifying the
nature and status of the Event of Default or such other event(s), as the case
may be.
5.3 Payment of Obligations. So long as this Debenture shall be
outstanding, the Company shall pay, extend, or discharge at or before maturity,
all its respective material obligations and liabilities, including, without
limitation, tax liabilities, except where the same may be contested in good
faith by appropriate proceedings.
5.4 Compliance with Laws. So long as this Debenture shall be
outstanding, the Company shall comply with all applicable laws, ordinances,
rules, regulations and requirements of governmental authorities, except for such
noncompliance which would not have a material adverse effect on the business,
properties, prospects, condition (financial or otherwise) or results of
operations of the Company and the Subsidiaries.
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5.5 Inspection of Property, Books and Records. So long as this Debenture
shall be outstanding, the Company shall keep proper books of record and account
in which full, true and correct entries shall be made of all material dealings
and transactions in relation to its business and activities and shall permit
representatives of the Holder at the Holder's expense to visit and inspect any
of its respective properties, to examine and make abstracts from any of its
respective books and records, not reasonably deemed confidential by the Company,
and to discuss its respective affairs, finances and accounts with its respective
officers and independent public accountants, all at such reasonable times and as
often as may reasonably be desired.
ARTICLE VI
REMEDIES
6.1 Events of Default. "EVENT OF DEFAULT" wherever used herein means any
one of the following events:
(i) the Company shall default in the payment of principal
of or interest on this Debenture as and when the same shall be due and payable
and, in the case of an interest payment default, such default shall continue for
five (5) Business Days after the date such interest payment was due, or the
Company shall fail to perform or observe in any other covenant, agreement, term,
provision, undertaking or commitment under this Debenture, the Conversion
Warrants (as defined in the Securities Purchase Agreement), the Securities
Purchase Agreement or the Registration Rights Agreement and such default shall
continue for a period of ten (10) Business Days after the delivery to the
Company of written notice that the Company is in default hereunder or
thereunder;
(ii) any of the representations or warranties made by the
Company herein, in the Securities Purchase Agreement, the Registration Rights
Agreement or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection
with the execution and delivery of this Debenture, the Warrants, the Securities
Purchase Agreement or the Registration Rights Agreement shall be false or
misleading in a material respect on the Closing Date;
(iii) under the laws of any jurisdiction not otherwise
covered by clauses (iv) and (v) below, the Company or any Subsidiary (A) becomes
insolvent or generally not able to pay its debts as they become due, (B) admits
in writing its inability to pay its debts generally or makes a general
assignment for the benefit of creditors, (C) institutes or has instituted
against it any proceeding seeking (x) to adjudicate it a bankrupt or insolvent,
(y) liquidation, winding-up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors including any plan
of compromise or arrangement or other corporate proceeding involving or
affecting its creditors or (z) the entry of an order for relief or the
appointment of a receiver, trustee or other similar person for it or for any
substantial part of its properties and assets, and in the case of any such
official proceeding instituted against it (but not instituted by it), either the
proceeding remains undismissed or unstayed for a period of sixty (60) calendar
days, or any of the actions sought in such proceeding (including the entry of an
order for relief against it or the appointment of a receiver, trustee, custodian
or other similar official for it or for any substantial part of its
11
properties and assets) occurs or (D) takes any corporate action to authorize any
of the above actions;
(iv) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company or any Subsidiary a bankrupt
or insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company under the
Bankruptcy Code or any other applicable Federal or state law, or appointing a
receiver, liquidator, assignee, trustee or sequestrator (or other similar
official) of the Company or of any substantial part of its property, or ordering
the winding-up or liquidation of its affairs, and any such decree or order
continues and is unstayed and in effect for a period of sixty (60) calendar
days;
(v) the institution by the Company or any Subsidiary of
proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to
the institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization or relief
under the Bankruptcy Code or any other applicable federal or state law, or the
consent by it to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee or sequestrator (or other similar
official) of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as and when they
become due, or the taking of corporate action by the Company in furtherance of
any such action;
(vi) a final judgment or final judgments for the payment
of money shall have been entered by any court or courts of competent
jurisdiction against the Company and remains undischarged for a period (during
which execution shall be effectively stayed) of thirty (30) days, provided that
the aggregate amount of all such judgments at any time outstanding (to the
extent not paid or to be paid, as evidenced by a written communication to that
effect from the applicable insurer, by insurance) exceeds Five Hundred Thousand
Dollars ($500,000);
(vii) it becomes unlawful for the Company to perform or
comply with its obligations under this Debenture, the Conversion Warrant, the
Securities Purchase Agreement or the Registration Rights Agreement in any
respect;
(viii) the Common Shares shall be delisted from the NASDAQ
OTCBB (the "TRADING MARKET" or, to the extent the Company becomes eligible to
list its Common Stock on any other national security exchange or quotation
system, upon official notice of listing on any such exchange or system, as the
case may be, it shall be the "TRADING MARKET") or suspended from trading on the
Trading Market, and shall not be reinstated, relisted or such suspension lifted,
as the case may be, within five (5) days or;
6.2 Acceleration of Maturity; Rescission and Annulment. If an Event of
Default occurs and is continuing, then and in every such case the Holder may, by
a notice in writing to the Company, rescind any outstanding Conversion Notice
and declare that all amounts owing or otherwise outstanding under this Debenture
are immediately due and payable and upon any such declaration this Debenture
shall become immediately due and payable in cash at a price of one hundred and
fifty percent (150%) of the Principal Amount thereof, together with all accrued
and unpaid interest thereon to the date of payment; provided, however, in the
case of any Event of
12
Default described in clauses (iii), (iv), (v) or (vii) of Section 6.1, such
amount automatically shall become immediately due and payable without the
necessity of any notice or declaration as aforesaid.
6.3 Default Interest Rate. (a) If any portion of the principal of or
interest on this Debenture shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise) such principal of and interest on the
Debenture which is due and owing but not paid shall, without limiting the
Holder's rights under this Debenture, bear interest at the Default Interest Rate
until paid in full.
(b) Notwithstanding anything herein to the contrary, if at any
time the applicable interest rate as provided for herein shall exceed the
maximum lawful rate which may be contracted for, charged, taken or received by
the Holder in accordance with any applicable law (the "MAXIMUM RATE"), the rate
of interest applicable to this Debenture shall be limited to the Maximum Rate.
To the greatest extent permitted under applicable law, the Company hereby waives
and agrees not to allege or claim that any provisions of this Note could give
rise to or result in any actual or potential violation of any applicable usury
laws.
6.4 Remedies Not Waived. No course of dealing between the Company and
the Holder or any delay in exercising any rights hereunder shall operate as a
waiver by the Holder.
ARTICLE VII
MISCELLANEOUS
7.1 Notice of Certain Events. In the case of the occurrence of any event
described in Section 3.4 of this Debenture, the Company shall cause to be mailed
to the Holder of this Debenture at its last address as it appears in the
Company's security registry, at least twenty (20) days prior to the applicable
record, effective or expiration date hereinafter specified (or, if such twenty
(20) days' notice is not possible, at the earliest possible date prior to any
such record, effective or expiration date), a notice thereof, including, if
applicable, a statement of (y) the date on which a record is to be taken for the
purpose of such dividend, distribution, issuance or granting of rights, options
or warrants, or if a record is not to be taken, the date as of which the holders
of record of Common Stock to be entitled to such dividend, distribution,
issuance or granting of rights, options or warrants are to be determined or (z)
the date on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up is expected to become effective, and the
date as of which it is expected that holders of record of Common Stock will be
entitled to exchange their shares for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale transfer,
dissolution, liquidation or winding-up.
7.2 Register. The Company shall keep at its principal office a register
in which the Company shall provide for the registration of this Debenture. Upon
any transfer of this Debenture in accordance with Articles 2 and 4 hereof, the
Company shall register such transfer on the Debenture register.
7.3 Withholding. To the extent required by applicable law, the Company
may withhold amounts for or on account of any taxes imposed or levied by or on
behalf of any taxing
13
authority in the United States having jurisdiction over the Company from any
payments made pursuant to this Debenture.
7.4 Transmittal of Notices. Except as may be otherwise provided herein,
any notice or other communication or delivery required or permitted hereunder
shall be in writing and shall be delivered personally, or sent by telecopier
machine or by a nationally recognized overnight courier service, and shall be
deemed given when so delivered personally, or by telecopier machine or overnight
courier service as follows:
(1) if to the Company, to:
SonicPort, Inc.
00000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
(2) if to the Holder, to:
La Jolla Cove Investors, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Each of the Holder or the Company may change the foregoing address by notice
given pursuant to this Section 7.4.
SECTION 7.5 Attorneys' Fees. Should any party hereto employ an attorney
for the purpose of enforcing or construing this Agreement, or any judgment based
on this Agreement, in any legal proceeding whatsoever, including insolvency,
bankruptcy, arbitration, declaratory relief or other litigation, the prevailing
party shall be entitled to receive from the other party or parties thereto
reimbursement for all reasonable attorneys' fees and all reasonable costs,
including but not limited to service of process, filing fees, court and court
reporter costs, investigative costs, expert witness fees, and the cost of any
bonds, whether taxable or not, and that such reimbursement shall be included in
any judgment or final order issued in that proceeding. The "prevailing party"
means the party determined by the court to most nearly prevail and not
necessarily the one in whose favor a judgment is rendered.
SECTION 7.6 Governing Law. This Debenture shall be governed by, and
construed in accordance with, the laws of the State of California (without
giving effect to conflicts of laws principles). With respect to any suit, action
or proceedings relating to this Debenture, the Company irrevocably submits to
the exclusive jurisdiction of the courts of the State of California sitting in
San Diego and the United States District Court located in the City of San Diego
and hereby waives, to the fullest extent permitted by applicable law, any claim
that any such suit,
14
action or proceeding has been brought in an inconvenient forum. Subject to
applicable law, the Company agrees that final judgment against it in any legal
action or proceeding arising out of or relating to this Debenture shall be
conclusive and may be enforced in any other jurisdiction within or outside the
United States by suit on the judgment, a certified copy of which judgment shall
be conclusive evidence thereof and the amount of its indebtedness, or by such
other means provided by law.
SECTION 7.7 Headings. The headings of the Articles and Sections of this
Debenture are inserted for convenience only and do not constitute a part of this
Debenture.
SECTION 7.8 Payment Dates. Whenever any payment hereunder shall be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
SECTION 7.9 Binding Effect. Each Holder by accepting this Xxxxxxxxx
agrees to be bound by and comply with the terms and provisions of this
Debenture.
SECTION 7.10 No Stockholder Rights. Except as otherwise provided herein,
this Debenture shall not entitle the Holder to any of the rights of a
stockholder of the Company, including, without limitation, the right to vote, to
receive dividends and other distributions, or to receive any notice of, or to
attend, meetings of stockholders or any other proceedings of the Company, unless
and to the extent converted into shares of Common Stock in accordance with the
terms hereof.
SECTION 7.11 Facsimile Execution. Facsimile execution shall be deemed
originals.
IN WITNESS WHEREOF, the Company has caused this Debenture to be signed
by its duly authorized officer on the date of this Debenture.
SonicPort, Inc.
By:
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Title:
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15
EXHIBIT A
[DEBENTURE CONVERSION NOTICE]
TO: SonicPort, Inc.
The undersigned owner of this 9 3/4% Convertible Debenture due March
29, 2004 (the "DEBENTURE") issued by SonicPort, Inc. (the "COMPANY") hereby
irrevocably exercises its option to convert $__________ Principal Amount of the
Debenture [and accrued and unpaid interest thereon to the date of this Notice]
into shares of Common Stock in accordance with the terms of the Debenture. The
undersigned hereby instructs the Company to convert the portion of the Debenture
specified above into shares of Common Stock Issued at Conversion in accordance
with the provisions of Article 3 of the Debenture. The undersigned directs that
the Common Stock and certificates therefor deliverable upon conversion, the
Debenture reissued in the Principal Amount not being surrendered for conversion
hereby, the check in payment of the accrued and unpaid interest thereon to the
date of this Notice, together with any check in payment for fractional Common
Stock, be registered in the name of and/or delivered to the undersigned unless a
different name has been indicated below. All capitalized terms used and not
defined herein have the respective meanings assigned to them in the Debenture.
The conversion pursuant hereto shall be deemed to have been effected at the date
and time specified below, and at such time the rights of the undersigned as a
Holder of the Principal Amount of the Debenture set forth above shall cease and
the Person or Persons in whose name or names the Common Stock Issued at
Conversion shall be registered shall be deemed to have become the holder or
holders of record of the Common Shares represented thereby and all voting and
other rights associated with the beneficial ownership of such Common Shares
shall at such time vest with such Person or Persons.
Date and time:
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---------------------------------
By:
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Title:
---------------------------
Fill in for registration of Debenture:
Please print name and address
(including ZIP code number):
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