EXHIBIT 10.40
 

 
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
 

 
sionix corporation
 
Convertible Debenture
 
 
 
Principal Amount:
 

 
U.S. $_______________________
 
Issuance Date:  December ___, 2009
Maturity Date: May ___, 2011

PURCHASER:

[Please print] __________________________________

 
FOR VALUE RECEIVED, Sionix Corporation, a Nevada corporation (the "Company"),
hereby promises to pay to the above-referenced purchaser or its registered
assigns ("Holder") the amount set out above as the Principal Amount (the
"Principal") when due, whether upon the Maturity Date written above or such
earlier date as this Debenture is required or permitted to be repaid as provided
hereunder.  This Convertible Debenture (including all Convertible Debentures
issued in exchange, transfer or replacement hereof, this "Debenture") is one of
an issue of Convertible Debentures issued pursuant to the Securities Purchase
Agreement (as defined below) on the Closing Date (collectively, the "Debentures"
and such other Convertible Debentures, the "Other Debentures").  Certain
capitalized terms used herein are defined in Section 15 hereof.
 
(1) INTEREST. Simple interest shall accrue at a rate of ten percent (10%) per
annum on the outstanding Principal of this Debenture. All interest shall be due
and payable on the Maturity Date. At the Company’s election, interest can be
converted into Common Stock (as defined below) in accordance with Section 2.
 
(2) CONVERSION OF DEBENTURES.  This Debenture shall be convertible into shares
of the Company's common stock, par value $0.001 per share (the "Common Stock"),
on the terms and conditions set forth in this Section 2.
 
(a) Conversion.  From and after the Stockholder Approval Date, the outstanding
and unpaid Principal and accrued interest under this Debenture (the “Conversion
Amount”) shall be convertible into fully paid and nonassessable shares of Common
Stock in accordance with Section 2(c), at the Conversion Rate (as defined
below).  The Company shall not issue any fraction of a share of Common Stock
upon any conversion.  If the issuance would result in the issuance of a fraction
of a share of Common Stock, the Company shall round such
 

 
 

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(b) fraction of a share of Common Stock up to the nearest whole share.  The
Company shall pay any and all taxes that may be payable with respect to the
issuance and delivery of Common Stock upon conversion; provided that the Company
shall not be required to pay any tax that may be payable in respect of any
issuance of Common Stock to any Person other than the converting Holder or with
respect to any income tax due by the Holder with respect to such Common
Stock.  Notwithstanding anything to the contrary set forth herein, this
Debenture shall not be convertible prior to the Stockholder Approval Date.
 
(c) Conversion Rate and Price.
 
(i) The number of shares of Common Stock issuable upon conversion pursuant to
Section 2(a) shall be determined by dividing (x) such Conversion Amount by (y)
the Conversion Price (the "Conversion Rate").
 
(ii) "Conversion Price" means, as of any Conversion Date (as defined below) or
other date of determination, $0.15, subject to adjustment as provided herein.
 
(d) Mechanics of Conversion.
 
(i) Delivery of Debenture.  To convert any Conversion Amount into shares of
Common Stock, the Holder shall surrender this original Debenture along with an
executed conversion notice in the form attached hereto (the “Conversion Notice”)
to an overnight courier for delivery to the Company (or an affidavit of lost
Debenture and indemnification undertaking with respect to this Debenture in the
case of its loss, theft or destruction).  The date that the Company receives the
original Debenture and executed Conversion Notice is referred to herein as the
“Conversion Date”. On or before the fifth (5th) Business Day following the
Conversion Date (the "Share Delivery Date"), the Company shall (X) provided that
the Company’s transfer agent (the “Transfer Agent”) is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer Program,
credit such aggregate number of shares of Common Stock to which the Holder shall
be entitled to the Holder's or its designee's balance account with DTC through
its Deposit Withdrawal Agent Commission system or (Y) if the Transfer Agent is
not participating in the DTC Fast Automated Securities Transfer Program, issue
and deliver to the address as specified in the Conversion Notice, a certificate,
registered in the name of the Holder or its designee, for the number of shares
of Common Stock to which the Holder shall be entitled.  The Person or Persons
entitled to receive the shares of Common Stock issuable upon a conversion of
this Debenture shall be treated for all purposes as the record holder or holders
of such shares of Common Stock on the Conversion Date.
 
(ii) Adjustment of Conversion Price.  If the Company at any time on or after the
Issuance Date subdivides (by any stock split, stock dividend, recapitalization
or otherwise) one or more classes of its outstanding shares of Common Stock into
a greater number of shares, the Conversion Price in effect immediately prior to
such subdivision will be proportionately reduced.  If the Company at any time on
or after the Issuance Date combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price in effect immediately prior to
such combination will be proportionately increased.
 
(iii) Registration; Book-Entry.  The Company shall maintain a register (the
"Register") for the recordation of the names and addresses of the holders of
each Debenture and the principal amount of the Debenture held by each holder
(the "Registered Debenture").  The entries in the Register shall be conclusive
and binding for all purposes absent manifest error.  The Company and the holders
of the Debentures shall treat each Person whose name is recorded in the Register
as the owner of a Debenture for all purposes, including, without limitation, the
right to receive payments of principal and interest hereunder, notwithstanding
notice to the contrary.  A Registered Debenture may be assigned or sold in
whole, but not in part, only by registration of such assignment or sale on the
Register.  Upon its receipt of a request to assign or sell all of any Registered
Debenture by a Holder, the Company shall record the information contained
therein in the Register and issue one or more new Registered Debentures in the
same aggregate principal amount as the principal amount of the surrendered
Registered Debenture to the designated assignee or transferee pursuant to
Sections 7 and 8.
 

 
 

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(iv) RESERVATION OF AUTHORIZED SHARES.  Following the Stockholder Approval Date,
so long as any of the Debentures are outstanding, the Company shall take all
action necessary to reserve and keep available out of its authorized and
unissued Common Stock, solely for the purpose of effecting the conversion of the
Debentures, 100% of the number of shares of Common Stock as shall from time to
time be necessary to effect the conversion of all of the Debentures then
outstanding; provided that at no time shall the number of shares of Common Stock
so reserved be less than the number of shares required to be reserved by the
previous sentence (without regard to any limitations on conversions) (the
"Required Reserve Amount").
 
(3) EVENT OF DEFAULT
 
(a) Each of the following events shall constitute an "Event of Default":
 
(i) the Company's failure to issue the Conversion Shares within ten (10)
business days after the Conversion Date, it being understood and agreed that the
Conversion Date may not precede the Stockholder Approval Date;
 
(ii) the Company, pursuant to or within the meaning of Title 11, U.S. Code, or
any similar Federal, foreign or state law for the relief of debtors
(collectively, "Bankruptcy Law"), (A) commences a voluntary case, (B) consents
to the entry of an order for relief against it in an involuntary case, (C)
consents to the appointment of a receiver, trustee, assignee, liquidator or
similar official (a "Custodian"), (D) makes a general assignment for the benefit
of its creditors or (E) admits in writing that it is generally unable to pay its
debts as they become due;
 
(iii) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (A) is for relief against the Company in an involuntary
case, (B) appoints a Custodian of the Company or (C) orders the liquidation of
the Company; or
 
(iv) the Company fails to pay the outstanding Principal and accrued interest on
or before the Maturity Date.
 
(b)           Rights Upon Event of Default.  At any time after the Holder
becoming aware of a Event of Default, the Holder may require the Company to
accelerate payment of the then outstanding and unpaid Principal (the “Default
Amount”) under this Debenture by delivering written notice thereof (the "Event
of Default Notice") to the Company, which Event of Default Notice shall indicate
the manner of acceleration the Holder is electing. At the election of the
Holder, the Default Amount shall become immediately due and payable in cash,
provided however, the Holder may request payment of the Default Amount in Common
Stock if the Event of Default Notice is delivered after the Stockholder Approval
Date.  The Company shall deliver the applicable Default Amount to the Holder
within ten (10) Business Days after the Company's receipt of the Holder's Event
of Default Notice.
 
(4) VOTING RIGHTS.  The Holder shall have no voting rights as the holder of this
Debenture, except as required by law and as expressly provided in this
Debenture.
 
(5) TRANSFER.  This Debenture may be offered, sold, assigned or transferred by
the Holder in whole only, subject to Section 2(f) of the Securities Purchase
Agreement.
 
(6) REISSUANCE OF THIS DEBENTURE.
 
(a) Transfer.  If this Debenture is to be transferred, the Holder shall
surrender this original Debenture to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Debenture (in
accordance with Section 8(c)), registered as the Holder may request,
representing the outstanding Principal being transferred by the Holder.
 

 
 

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(b) Lost, Stolen or Mutilated Debenture.  Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Debenture (including, without limitation, an affidavit of
lost Debenture), and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Debenture,
the Company shall execute and deliver to the Holder a new Debenture (in
accordance with Section 8(c)) representing the outstanding Principal.
 
(c) Issuance of New Debentures.  Whenever the Company is required to issue a new
Debenture pursuant to the terms of this Debenture, such new Debenture (i) shall
be of like tenor with this Debenture, (ii) shall represent, as indicated on the
face of such new Debenture, the Principal remaining outstanding, (iii) shall
have an issuance date, as indicated on the face of such new Debenture, which is
the same as the Issuance Date of this Debenture, and (iv) shall have the same
rights and conditions as this Debenture.
 
(7) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS.  If (a) this Debenture
is placed in the hands of an attorney for collection or enforcement or is
collected or enforced through any legal proceeding or the Holder otherwise takes
action to collect amounts due under this Debenture or to enforce the provisions
of this Debenture or (b) there occurs any bankruptcy, reorganization,
receivership of the Company or other proceedings affecting Company creditors'
rights and involving a claim under this Debenture, then the Company shall pay
the costs incurred by the Holder for such collection, enforcement or action or
in connection with such bankruptcy, reorganization, receivership or other
proceeding, including, but not limited to, financial advisory fees and
attorneys' fees and disbursements.
 
(8) CONSTRUCTION; HEADINGS.  This Debenture shall be deemed to be jointly
drafted by the Company and all the Purchasers and shall not be construed against
any person as the drafter hereof.  The headings of this Debenture are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Debenture.
 
(9) FAILURE OR INDULGENCE NOT WAIVER.  No failure or delay on the part of the
Holder in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.
 
(10) NOTICES; PAYMENTS.
 
(a) Notices.  Whenever notice is required to be given under this Debenture,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement.
 
(b) Payments.  Whenever any payment of cash is to be made by the Company to any
Person pursuant to this Debenture, such payment shall be made in lawful money of
the United States of America by a check drawn on the account of the Company and
sent via overnight courier service to such Person at such address as previously
provided to the Company in writing (which address, in the case of each of the
Purchasers, shall initially be as set forth on the Schedule of Buyers attached
to the Securities Purchase Agreement); provided that the Holder may elect to
receive a payment of cash via wire transfer of immediately available funds by
providing the Company with prior written notice setting out such request and the
Holder's wire transfer instructions.  Whenever any amount expressed to be due by
the terms of this Debenture is due on any day which is not a Business Day, the
same shall instead be due on the next succeeding day which is a Business Day.
 
(c) Prepayment.  The Company may prepay, without penalty or premium, all
outstanding Principal and interest accrued on this Debenture at any time
following the 20th Business Day following the Stockholder Approval Date
(assuming such date is prior to the Maturity Date). If the Company elects to
prepay the Note, the Company shall send the Holder written notice of its intent
to prepay the Note (the “Prepayment Notice”). The Holder shall have five
Business Days from receipt of the Prepayment Notice to convert the Note in
accordance with Section 2.
 

 
 

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(d) CANCELLATION.  After all Principal and accrued interest owed on this
Debenture has been paid in full or converted, this original Debenture shall
automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.
 
(11) GOVERNING LAW; JURISDICTION; SEVERABILITY; JURY TRIAL.  This Debenture
shall be construed and enforced in accor­dance with, and all questions
concerning the construction, validity, interpretation and performance of this
Debenture shall be governed by, the internal laws of the State of California,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of California or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of
California.  The parties hereby irrevocably submit to the exclusive jurisdiction
of the state and federal courts sitting in The City of Los Angeles, California
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper.  Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.  In the event that any provision of this Debenture is invalid
or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law.  Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision of this
Debenture.
 
(12) CERTAIN DEFINITIONS.  For purposes of this Debenture, the following terms
shall have the following meanings:
 
(a) “Stockholder Approval Date” has the meaning ascribed to such term in the
Securities Purchase Agreement.
 
(b) "Business Day" means any day other than Saturday, Sunday or other day on
which commercial banks in The City of New York, New York are authorized or
required by law to remain closed.
 
(c) "Closing Date" shall have the meaning set forth in the Securities Purchase
Agreement, which date is the date the Company initially issued Debentures
pursuant to the terms of the Securities Purchase Agreement.
 
(d) “Conversion Shares” has the meaning ascribed to such term in the Securities
Purchase Agreement.
 
(e) "Person" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof.
 
(f) "OTCBB" means the Over-The-Counter Bulletin Board.
 
(g) "Securities Purchase Agreement" means that certain securities purchase
agreement dated as of November __, 2009 by and among the Company and the initial
holders of the Debentures pursuant to which the Company issued the Debentures.
 

 
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IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed as
of the Issuance Date set out above.
 

SIONIX CORPORATION
By:  _____________________    
Name: Rodney Anderson
Title:   CEO