Unassociated Document

Exhibit
    4.3
     

    UNLESS
      PERMITTED
      UNDER
      SECURITIES LEGISLATION, THE HOLDER
      OF
      THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THAT DATE THAT IS 4 MONTHS
      AND
      A DAY AFTER THE LATER OF (i) JANUARY 31, 2007, AND (ii) THE DATE THE ISSUER
      BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY OF
      CANADA

    


    The
      securities represented hereby and those issuable upon the conversion hereof
      have
      not been registered under the United States Securities Act of 1933, as amended
      (the "U.S.
      Act"), or qualified or registered under U.S. state securities or "blue sky"
      laws
      and may not be sold, offered for sale, pledged, hypothecated or otherwise
      transferred or disposed of within the United States or to, or for the account
      or
      benefit of, U.S. persons (as such term is defined in Regulation S under the
      U.S.
      Act) except in accordance with the provisions of Regulation 5 under the U.S.
      Act
      or pursuant to an available exemption from registration. Hedging transactions
      involving such securities may not be conducted unless in compliance with the
      U.S. Act.

     

    
      	
               

              FLUID
                AUDIO NETWORK, INC. 

              Unsecured
                Convertible
                Debenture

               

              Issue
                Date:      January
                31, 2007 (the "Issue
                Date")

               

              Issuer:    
                Fluid
                Audio Network, Inc., a Delaware company
                (the
                "Company")

                                       
                Address:         
                5813-A
                Uplander Way

                          Culver
                City, California 90230

                          Attention:
                 Justin
                Beckett

                                      
                Fax:                    (310)
                665-0735

               

              Term:             
                Twelve
                (12) months ending January 31, 2008 (the
                "Maturity
                Date") 

               

              Holder:

               

              Principal
                

              Amount:

            


    

     

    ARTICLE
      1 

    TERMS

                 
      

    
      	1.1 	Issue 


    

     

    The
      Company, a corporation incorporated under the laws of Delaware and having its
      head office at the address shown above, for value received, acknowledges itself
      indebted and promises to pay to or to the order of the Debentureholder, its
      successors and permitted assigns, on the dates specified herein, at the address
      of the Debentureholder as set
      out
      above or as directed
      by the Debentureholder, the Principal Amount and to pay interest on the
      outstanding Principal Amount at the Annual Rate (as hereinafter defined) and
      in
      accordance with the terms hereof.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      
        	1.2	Annual
                Rate


      

    

    


    The
      interest rate applicable hereunder (the "Annual
      Rate") will
      be
      twelve percent (12%)
      per
      annum, calculated and compounded annually.

    
       

      
        
          	1.3	Payment of
                  Interest


        

      

    

     

    Interest
      shall be payable to the Debentureholder on the earlier of the Maturity Date
      and
      the date of conversion of the Debenture pursuant to the provisions of ARTICLE
      2
      hereof. The Debentureholder may elect to receive the accrued interest payable
      in
      cash or to have the amount of accrued interest added to the outstanding
      Principal Amount upon conversion of the Debenture, by electing same on the
      notice of conversion, substantially in the form attached as Schedule 1 hereto
      (the "Conversion
      Notice"). To
      the
      extent that the Company is obliged under any taxing statute (but subject to
      any
      applicable treaty provisions) to withhold and remit on account of payments
      of
      interest hereunder, the Company shall be entitled to withhold and remit the
      same
      for the account of the Debentureholder.

    
      
         

        
          
            	1.4	Term


          

        

      

    

     

    The
      term
      (the "Term")
      of
      the
      Debenture shall be for twelve (12) months commencing on
      the date
      hereof and ending on the Maturity Date. Subject to (i) acceleration following
      the occurrence of an Event of Default (as defined in Section 3.1 hereof) in
      accordance with the terms herein, and (ii) the Debentureholder's right to
      convert the outstanding Principal Amount and interest in accordance with ARTICLE
      2 below, the Debenture (as to any and all outstanding Principal Amount and
      interest) shall be repaid in full by the Company to the Debentureholder at
      the
      end of the Term on the Maturity Date.

    
      
        
           

          
            
              	1.5	No Right of
                      Prepayment


            

             

          

        

      

    

    The
      Company shall have no right to prepay the whole or any part of the Principal
      Amount owing under the Debenture.

    
       

      
        
          	1.6	Liquidity
                  Event


        

      

    

     

    The
      Company will use its commercially reasonable efforts to complete a Liquidity
      Event (as hereinafter defined) on or prior to July 31, 2007 (the "Liquidation
      Deadline"), subject
      to market conditions. For the purposes hereof, a "Liquidity
      Event" means
      the
      Company obtaining a listing or quotation of its shares of common stock (or,
      in
      the event that the Company undergoes a corporate reorganization (a "Reorganization")
      whereby
      the Company becomes a wholly-owned subsidiary of another company ("ShellCo"),
      the
      common shares of ShellCo (the "ShellCo
      Shares")) on
      either
      of the Toronto Stock Exchange or the TSX Venture Exchange and, at the option
      of
      the Company, in addition thereto, Nasdaq or the Alternative Investment Market
      of
      the London Stock Exchange, by way of an initial public offering (an
      "IPO")
      or any
      other transaction which provides holders of the Company's shares of common
      stock
      with comparable liquidity that such holders would have received if such listing
      or quotation was obtained, including by means of a reverse take-over, merger,
      amalgamation, arrangement;
      take-over bid, insider bid, reorganization, joint venture, sale of all or
      substantially all of the Company's assets, exchange of assets or similar
transaction
      or other combination with a reporting issuer or a reporting company, with the
      result that, after giving effect to the occurrence of such Liquidity Event,
      the
      Conversion Securities (as hereinafter defined) issued upon conversion of the
      Debenture
      will become freely-tradeable by the holders thereof under applicable securities
      laws in
      Canada
      (subject to applicable control person restrictions).

    


    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      2

    CONVERSION

    
      
         

        
          
            	2.1	Conversion of
                    Debenture


          

           

        

      

    

    All
      but
      not less than all of the outstanding Principal Amount and, at the option of
      the
      Debentureholder, accrued Interest thereon is convertible at any time following
      the completion of a Liquidity Event and prior to the Maturity Date, at the
      sole
      and exclusive option of the Debentureholder (the "Option
      to Convert"), by
      delivery no later than five (5) business days prior to the Maturity Date of
      the
      Conversion Notice to the head office
      of
      the
      Company, into fully-paid, non-assessable shares of common stock of the Company
      or ShellCo Shares, as the case may be (in either case, as applicable, the
"Conversion
      Securities"). The
      number of Conversion Securities into which the Debenture will be converted
      will
      be equal to (if applicable, the Canadian dollar equivalent, as of the Conversion
      Date (as hereinafter defined) of) the outstanding Principal Amount (and, if
      applicable, any accrued and unpaid interest thereon which the Debentureholder
      elects to receive in the form of additional Conversion Securities pursuant
      to
      the Conversion Notice), divided by 90% of the IPO Price (as hereinafter defined)
      or, in the case of the occurrence of a Liquidity Event by means other than
      an
      IPO, 90% of the RTO Price (as hereinafter defined).

    


    For
      the
      purposes hereof, "IPO
      Price" means
      the
      price per share offered in the IPO, "RTO
      Price" means
      the
      deemed price per share ascribed to the ShellCo Shares in connection with a
      Liquidity Event by means other than an IPO, as determined in good faith by
      the
      board of directors
      of the Company or ShellCo, as applicable, and "Liquidity
      Event Price" means
      the
      IPO
      Price or
      the RTO Price, as the case may be.

    


    In
      case
      of (i) any reclassification of the outstanding shares of common stock of the
      Company (other than in connection with a Reorganization or any stock dividend
      or
      split or consolidation of such shares); (ii) any consolidation, merger or
      amalgamation of the Company with
      or
      into another entity or entities (other than in connection with a Reorganization);
      or (iii) the
      sale of
      the properties and assets of the Company as an entirety or substantially as
      an
      entirety to another entity or entities in which the holders of the outstanding
      shares of common stock of the Company are entitled to receive consideration,
      a
      substantial portion of which consists of securities, the Conversion Securities
      deliverable by the Company upon any conversion of this Debenture thereafter
      shall be such number and kind of
      shares
      or
other
      securities
      and property (or the applicable portion thereof) receivable on such
      reclassification, consolidation, merger, amalgamation or sale that the
      Debentureholder would have been entitled to receive thereupon had the
      Debentureholder been the registered holder of the number of shares of common
      stock of the Company into which this Debenture might have been converted
      immediately prior thereto.

    


    If,
      at
      the end of the Term, the Debentureholder does not exercise its Option to Convert
      the Debenture and the Company fails to repay the Principal Amount and all
      accrued and unpaid interest
      owing under the Debenture, the Debentureholder may, at its discretion, elect
      to
      continue to hold and enforce its rights under the Debenture, including with
      respect to the payment of interest at the Annual Rate.

    


    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

       

      
        
          
            	2.2	Liquidity
                    Penalty


          

        

      

    

    


    In
      the
      event that a Liquidity Event occurs on or prior to the Maturity Date but after
      the Liquidation Deadline, the outstanding Principal Amount and, at the option
      of
      the Debentureholder, accrued interest thereon shall be convertible into the
      number of Conversion Securities described in Section 2. 1, multipled by
      1.1.

    
       

      
        
          
            	2.3	Issuance of Conversion
                    Securities


          

        

      

    

    


    The
      Company will, as of the time a conversion is effected pursuant to Section 2.1,
      pay any interest accrued and unpaid on the amount so converted, if applicable,
      and will issue to the Debentureholder that number of Conversion Securities
      as
      are properly required to satisfy the conversion provisions set out in Section
      2.1. As promptly as practicable, but in no case later than ten days after
      the
issue
      of
      such shares, the Company will deliver or cause to be delivered to the
      Debentureholder certificates representing such shares, registered in such name
      or names as the Conversion Notice may specify, together with a certified cheque
      in payment of all accrued interest payable hereunder, if applicable. No
      fractional shares shall be issued and, if any conversion of this Debenture
      would
      result in the Debentureholder being entitled to receive a fraction of a share,
      the Company shall issue upon the conversion the requisite number of whole shares
      rounded down to the nearest whole number.

    
      
         

        
          
            
              	2.4	Reservation of Conversion
                      Securities


            

          

        

      

    

    


    The
      Company will at all time keep available, and reserve if necessary under
      applicable law, out of its authorized share capital, solely for the purpose
      of
      issuance upon the conversion of the outstanding Principal Amount and interest
      thereon, such number of Conversion Securities as shall then be issuable upon
      the
      conversion of the Principal Amount and interest thereon. The Company covenants
      and agrees that all Conversion Securities which shall be so issuable will be
      duly authorized and issued as fully paid and non-assessable. The Company will
      take all such actions as may be necessary to ensure that all such Conversion
      Securities may be so issued without violation of any applicable law or of any
      applicable requirements of any exchange upon which the Conversion Securities
      may
      be listed or in respect of which the Conversion Securities are qualified for
      unlisted trading privileges.

    


    The
      Company covenants not to enter into any Reorganization with ShellCo unless
      in
      the definitive agreement relating thereto ShellCo covenants to keep available,
      and reserve if necessary under applicable law, out of its authorized share
      capital, solely for the purpose of issuance upon the conversion of the
      outstanding Principal Amount and interest thereon, such number of Conversion
      Securities as shall then be issuable upon the conversion of the Principal Amount
      and interest thereon, and agrees to issue such Conversion
      Securities
      upon due exercise of the Warrants.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    
      
        
          
            
              
                	2.5	Conversion
                        Date


              

            

          

        

      

    

     

    The
      conversion of the Debenture shall be deemed to occur at the close of business
      on
      the date at which the Debenture is surrendered for conversion and the Conversion
      Notice is received by the Company (or such later date as is specified in the
      Conversion Notice, which shall be no later than five (5) business days prior
      to
      the Maturity Date) (the "Conversion
      Date"), and,
      other than the right to receive payment of all accrued interest payable
      hereunder, if applicable, the rights of the Debentureholder terminate to the
      extent of the conversion as of such time and the Debentureholder will be treated
      as having become the holder of record of Conversion Securities at that time.
      Notwithstanding the foregoing or the surrender of this Debenture for conversion,
      if the Company fails to issue such shares to the Debentureholder or pay interest
      pursuant to Section 1.3, the Debentureholder retains, and shall be at liberty
      to
      exercise, all rights contained in this Debenture until such shares are issued
      and interest is paid, as applicable. Upon the conversion of the outstanding
      Principal Amount and
      interest
      thereon, if applicable, under this Debenture pursuant to this ARTICLE
      2, the
      Company shall be thereafter discharged and absolved of all obligations in
      connection with this Debenture, other than the obligation to so issue the
      applicable number of Conversion Securities and, if applicable, to pay all
      accrued interest.

    


    ARTICLE
      3

    DEFAULT
      AND REMEDIES

    
       

      
        
          
            
              
                
                  	3.1	Default


                

                 

              

            

          

        

      

    

    The
      outstanding Principal Amount and interest and other money owing hereunder is
      immediately payable in each of the following events (each, an "Event
      of Default"):

    


    Payment:
      save and
      except for delay that is beyond the control of the Company and does not exceed
      more than two (2) business days, if the Company makes a default in payment
      of
      any Principal Amount or interest when due or in payment of any indebtedness
      or
      liability of the Company to the Debentureholder when due hereunder;

    


    Issuance of Shares:
      if the
      Company fails to issue the Conversion Securities to the Debentureholder on
      a
      timely basis pursuant to the conversion previsions hereof following delivery
      of
      a Conversion Notice;

    


    Winding UP:
      if an
      order is made or an effective resolution passed for the winding-up, dissolution
      or liquidation of the Company, or if a petition is filed for the winding-up
      of
      the Company and such petition is not stayed, withdrawn or dismissed within
      15
      days;

    


    Insolvency:
      if the
      Company becomes insolvent, within the meaning of any applicable legislation.,
      or
      otherwise admits in writing its inability to pay its debts as they become
due;

     

    Bankruptcy or Receivership:
      if a
      bankruptcy petition is filed or
      presented
      against the Company, or if any proceedings with respect to the Company are
      commenced under the United States Bankruptcy Code (as now or in the future
      amended, the "Bankruptcy
      Code") or
      any
      similar legislation providing protection for the benefit of the Company; or
      if
      an execution, sequestration, or any other process of any court becomes
      enforceable against
      the Company or if a distress or analogous process is levied upon the property
      of
      the Company or any
      part
      of
      the property of the Company, unless in any such case such petition, proceeding
      or process is stayed, withdrawn, dismissed or vacated. as the case may be,
      within 15 days;

    


    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

       

    

    Appointment of Trustee or Receiver:
      any
      trustee in bankruptcy, interim receiver, receiver, receiver and manager,
      custodian, sequestrator, administrator, monitor or liquidator of any other
      person with similar powers is appointed in respect of the Company;

    


    Default in Respect of Indebtedness:
      any
      material default by the Company in respect of indebtedness
      (other than the indebtedness represented by (i) this Debenture; and (ii)
      trade
      payables
      that are extended past their due date in the ordinary course of the Company's
      business consistent with past practice), which is not cured within any grace
      period provided therefore; or

    


    Breach of Debenture or Agency Agreement:
      the
      Company fails to perform or comply in any material respect with any covenant,
      undertaking, condition or
      obligation
      contained in this Debenture certificate or the agency agreement dated January
      31, 2007 between the Company
      and Loewen,
      Ondaatje, McCutcheon Limited or if any of the representations or warranties
      contained herein or therein shall have been found to be untrue in any material
      respect as of the date they were made and the Company has not remedied such
      non-compliance or failed to rectify such untruthfulness or inaccuracy within
      ninety (30) days of being advised of same by the Holder, excepting where the
      remedy for non-compliance with a covenant, undertaking, condition or obligation
      may reasonably require longer than ninety (30) days to rectify and where the
      Company, is proceeding diligently to cure such non-compliance.

    
       

      
        
          
            
              
                
                  	3.2	Statutory
                          Waivers


                

              

            

          

        

      

    

    


    To
      the
      fullest extent permitted by law, the Company waives all of the rights, benefits
      and protections given by the provisions of any existing or future statute that
      impose limitations upon the powers, rights or remedies of a Debentureholder
      or
      upon the methods of realization of security, including any seize or sue or
      anti-deficiency statute or any similar provisions of any other
      statute.

    
      
         

        
          
            
              
                
                  
                    	3.3	Enforcement


                  

                

              

            

          

        

      

    

     

    Upon
      the
      occurrence of an Event of Default which is continuing, all of the indebtedness,
      liabilities and obligations of the Company to the Debentureholder, whether
      now
      existing or hereafter incurred, pursuant to this Debenture (the "Obligations"),
      at
      the
      Debentureholder's sole option and upon written notice to the Company, shall
      become immediately due and payable and the Debentureholder may, at its sole
      option, proceed to enforce payment and performance of the Obligations and to
      exercise any or all of the rights and remedies contained
      in
      this
      Debenture, or otherwise afforded by law, in equity or otherwise.

    


    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    
       

      
        
          
            
              
                
                  
                    
                      	3.4	Waivers and
                              Extensions


                    

                  

                

              

            

          

        

      

    

    


    The
      Debentureholder may waive default or any breach by the Company of any of the
      provisions contained in this Debenture. No waiver extends to a subsequent breach
      or default, whether or not the same as or similar to the breach or default
      waived, and
      no
      act or
      omission of the Debentureholder extends to or is be taken in any manner to
      affect any subsequent breach or default of the Company or the rights of the
      Debentureholder resulting therefrom. Any such waiver must be in writing and
      signed by the Debentureholder to be effective.

    


    The
      Debentureholder may also grant extensions of time and other indulgences, take
      and give up securities, accept compositions, grant releases and discharges,
      and
      otherwise deal with the Company's guarantors or sureties and others and other
      securities as the Debentureholder may see fit without prejudice to the liability
      of the Company to the Debentureholder or the Debentureholder's rights, remedies
      and powers under this Debenture. No extension of time, forbearance, indulgence
      or other accommodation previously, now or subsequently given by the
      Debentureholder to the Company operates as a waiver, alteration or amendment
      of
      the rights of the Debentureholder or otherwise preclude the Debentureholder
      from
      enforcing such rights.

    


    ARTICLE
      4

    GENERAL

    
       

      
        
          
            
              
                
                  
                    
                      	4.1	Notice


                    

                     

                  

                

              

            

          

        

      

    

    Any
      notice, consent or approval required or permitted to be given in connection
      with
      this Debenture (in this Section referred to as a "Notice")
      must
      be
      in writing and is sufficiently given if delivered (whether in person, by courier
      service or other personal method of delivery), or if transmitted by fax, at
      the
      addresses or fax numbers set out on the first page of this Debenture. Any Notice
      delivered or transmitted to a party as provided above is deemed to have been
      given and received on the day it is delivered or transmitted if it is delivered
      or transmitted on a business day before 5:00 p.m. local time in the place of
      delivery or receipt. If the Notice is delivered or transmitted after 5:00 p.m.
      local time or if such day is not a business day, then the Notice is deemed
      to
      have been given and received on the next business day.

    
       

      
        
          
            
              
                
                  
                    
                      	4.2	Enurement


                    

                  

                

              

            

          

        

      

    

    


    This
      Debenture enures to the benefit of the Debentureholder and its successors and
      permitted assigns, and is binding upon the Company and its
      successors.

    
       

      
        
          
            
              
                
                  
                    
                      	4.3	Governing
                              Law



                  

                

              

            

          

        

      

    

    


    This
      Debenture is made under and governed by and is to be construed in accordance
      with the laws of the Province of Ontario and the federal laws of Canada
      applicable therein. Each of the Company and the Debentureholder irrevocably
      submit to the exclusive jurisdiction of the courts of the Province of
      Ontario.

     

    
      
        
          
          

        

        
          -7-

          
            

          

        

        
          
          

        

         

        
          
            
              
                
                  
                    
                      
                        
                          	4.4	Pari
                                  Passu


                        

                      

                    

                  

                

              

            

          

        

      

    

    


    This
      Debenture and all other 12% unsecured convertible debentures issued by the
      Company on the date hereof shall rank pari passu, without discrimination,
      preference or priority.

    
       

      
        
          
            
              
                
                  
                    
                      
                        	4.5	Further
                                Assurances



                    

                  

                

              

            

          

        

      

    

    


    The
      Company will at its own expense execute, acknowledge and deliver or cause to
      be
      done, executed, acknowledged or delivered any further acts, deeds, transfers,
      assignments and assurances as the Debentureholder may reasonably require for
      the
      better accomplishing and effectuating of this Debenture or for the purpose
      of
      obtaining or preserving the full benefits of, and the rights and powers granted
      by, this Debenture.

    
      
         

        
          
            
              
                
                  
                    
                      
                        
                          	4.6	Entire
                                  Agreement



                      

                    

                  

                

              

            

          

        

      

    

     

    This
      Agreement constitutes the entire agreement between the parties with respect
      to
      all of the matters herein and their execution has not been induced by, nor
      do
      any of the parties rely upon or regard as material, any representations or
      writings whatever not incorporated herein and made a part hereof and may not
      be
      amended or modified in any respect except by written instrument signed by the
      parties hereto.

    
      
        
           

          
            
              
                
                  
                    
                      
                        
                          
                            	4.7	Assignability



                        

                      

                    

                  

                

              

            

          

        

      

    

    


    The
      Company may not assign its rights in and under this Debenture. The
      Debentureholder may not assign its rights in and under this Debenture, unless
      it
      has received the prior written consent of the Company.

    
      
         

        
          
            
              
                
                  
                    
                      
                        
                          	4.8	Time of
                                  the
                                  Essence



                      

                    

                  

                

              

            

          

        

      

    

     

    Time
      shall be of the essence of this Debenture. 

     

    
      	4.9	Discharge


    

     

    Upon
      full
      payment or full conversion of this Debenture, the Debentureholder shall deliver
      up this Debenture to the Company and shall at the expense of the Company cancel
      and discharge same and execute and deliver to the Company such deeds or other
      instruments as shall be required to discharge the security constituted
      hereby.

     

    [The
      remainder of the
      page is intentionally left blank.)

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF
      the
      Company has caused this Debenture to be signed by a duly authorized officer
      of
      the Company.

     

    
      	 	
              FLUID
                AUDIO NETWORK, INC.

              


              By: ____________________________________

                    
                Name: 

                    
                Title:

            


    

    
       

    

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    Schedule
      1

    Notice
      of Conversion

    


    WHEREAS:

    


    
      	A.             
               	
              Fluid
                Audio Network,
                Inc. (the "Company")
                issued
                an unsecured convertible debenture (the "Debenture")
                to
                * (the
                "Debentureholder")
                on
                January 31, 2007 in the principal amount
                of US$*.

            


    

    


    
      	B.              
               	
              The
                Debentureholder must, pursuant to the terms of the Debenture, deliver
                this
                Notice of Conversion to effect a conversion of the Debenture into
                Conversion Securities.

            


    

    


    
      	C.              
               	
              All
                capitalized terms used but not otherwise defined herein shall have
                the
                meanings ascribed thereto in the
                Debenture.

            


    

    


    NOW
      THEREFORE:

    


    
      	1.              
               	
              The
                Debentureholder hereby tenders the Debenture and requests conversion
                of
                all of the outstanding Principal Amount into that number of Conversion
                Securities required to be delivered by the Company pursuant to the
                Debenture.

            


    

    


    
      	2.              
               	
              The
                Debentureholder hereby elects to have the accrued interest on the
                outstanding Principal Amount (check
                one):

            


    

     

    
      	 	q 	payable in cash; or 


      	 	 	 


      	 	
              q

            	
              added
                to the outstanding Principal Amount (with the result that such amount
                shall be satisfied by the issuance of additional
                Conversion
                Securities).

            


    

     

    DATED
      the
      ___
      day of
      _____________, ___________.

     

    
      
        	 	
                [Insert
                  name of Debentureholder] 

                


                Per: ____________________________________

                      
                  Name: 

                      
                  Title: