EXHIBIT 4.5
FORM OF 6% CONVERTIBLE DEBENTURE
DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER
THE SECURITIES ACT OF 1933 (THE "1933 ACT"), AS AMENDED. THE SECURITIES
ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED
EXCEPT AS PERMITTED UNDER THE 1933 ACT PURSUANT TO REGISTRATION OR
EXEMPTION OR SAFE HARBOR THEREFROM.
No. 99- US $ ____________
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LIGHTPATH TECHNOLOGIES, INC.
6% CONVERTIBLE DEBENTURE DUE JULY 31, 2002
THIS DEBENTURE is one of a duly authorized issue of up to $1,000,000 in
Debentures of LightPath Technologies, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "COMPANY") designated as its 6%
Convertible Debentures. Such Debentures may be issued in series, each of which
may have a different maturity date, but which otherwise have substantially
similar terms. Capitalized terms not defined herein shall have the meanings
ascribed to them in the Securities Purchase Agreement, dated July ___, 1999, by
and among the Company and the Buyers (as that term is defined therein) (the
"SECURITIES PURCHASE AGREEMENT").
FOR VALUE RECEIVED, the Company promises to pay to ______________________,
the registered holder hereof (the "HOLDER"), the principal sum of
____________________ and 00/100 Dollars (US $_______________) on July 31, 2002
(the "MATURITY DATE") and to pay interest on the principal sum outstanding from
time to time in arrears (i) upon conversion as provided herein, (ii) upon
redemption as provided herein or (iii) on the Maturity Date, at the rate of 6%
per annum accruing from July 28, 1999, the date of initial issuance of this
Debenture. Accrual of interest shall commence on the first such business day to
occur after the date hereof and shall continue to accrue on a daily basis until
payment in full of the principal sum has been made or duly provided for.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Ten Thousand and
00/100 Dollars (US $10,000.00) and integral multiples thereof. The Debentures
are exchangeable for an equal aggregate principal amount of Debentures of
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different authorized denominations, as requested by the Holder surrendering the
same. No service charge will be made for such registration or transfer or
exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws or
other applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.
3. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged only in compliance with the Securities Act of 1933, as amended (the
"1933 ACT"), and other applicable state and foreign securities laws. In the
event of any proposed transfer of this Debenture, the Company may require, prior
to issuance of a new Debenture in the name of such other person, that it receive
reasonable transfer documentation including legal opinions that the issuance of
the Debenture in such other name does not and will not cause a violation of the
1933 Act or any applicable state or foreign securities laws. Prior to due
presentment for transfer of this Debenture, the Company and any agent of the
Company may treat the person in whose name this Debenture is duly registered on
the Company's Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
4. (A) The Holder of this Debenture is entitled, at its option,
subject to the following provisions of this Section 4, to convert all or a
portion of this Debenture into shares of Class A Common Stock of the Company,
$.01 par value per share ("COMMON STOCK") of the Company at any time (except as
set forth in this Section 4(A) or in Section 4(C) hereunder) prior to the
Maturity Date, at a conversion price (the "Conversion Price") for each share of
Common Stock equal to 80% of the Market Price of the Common Stock as of (X) the
Closing Date or (Y) the Conversion Date, whichever is lower (but the Conversion
Price shall in no event be less than $0.56 (the "MINIMUM CONVERSION PRICE") or
more than $2.00), as such amounts may be equitably adjusted in accordance with
Sections 8, 9 and 10 hereof, if applicable. The minimum principal amount a Buyer
may convert is the lower of (x) at least US $10,000 (unless if at the time of
such election to convert the aggregate principal amount of all Debentures
registered to the Holder is less than US $10,000, then the whole amount thereof)
or (y) the maximum amount which the Holder can then convert pursuant to the
terms of Section 4(C) hereof.
(B) Conversion shall be effectuated by delivery by facsimile or
other delivery to the Company of the form of conversion notice attached hereto
as EXHIBIT A executed by the Holder of the Debenture evidencing such Holder's
intention to convert this Debenture or a specified portion hereof ("NOTICE OF
CONVERSION"), and accompanied, if required by the Company, by proper assignment
hereof in blank. Subject to the provisions of Section 4(C) hereof, interest
accrued or accruing from the date of issuance to the date of conversion shall,
at the option of the Company, be paid in cash or Common Stock upon conversion at
the Conversion Price applicable to such conversion. No fractional shares of
Common Stock or scrip representing fractions of shares will be issued on
conversion, but the number of shares issuable shall be rounded to the nearest
whole share. The date on which notice of conversion is given shall be deemed to
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be the date on which the Holder faxes or otherwise delivers the Notice of
Conversion, duly executed, to the Company (the "CONVERSION DATE"), provided that
the Holder shall deliver to the Company the original Debentures being converted
within five (5) business days thereafter. Facsimile delivery of the Notice of
Conversion shall be accepted by the Company at facsimile number (505) 342-1111;
ATTN: PRESIDENT. Certificates representing Common Stock upon conversion will be
delivered within three (3) business days following the Conversion Date.
(C) Notwithstanding any other provision hereof, of the Warrants or of
any of the other Transaction Agreements (as those terms are defined in the
Securities Purchase Agreement), in no event (except (i) with respect to an
automatic or mandatory conversion, if any, of a Debenture as provided in the
Debentures, (ii) as specifically provided in this Debenture as an exception to
this provision, or (iii) while there is outstanding a tender offer for any or
all of the shares of the Company's Common Stock) shall the Holder be entitled to
convert any Debenture or shall the Company have the obligation, to convert all
or any portion of this Debenture (and the Company shall not have the right to
pay interest on this Debenture in the form of Common Stock ) to the extent that,
after such conversion, the sum of (1) the number of shares of Common Stock
beneficially owned by the Holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the Debentures or unexercised portion of the Warrants),
and (2) the number of shares of Common Stock issuable upon the conversion of the
Debentures or exercise of the Warrants with respect to which the determination
of this proviso is being made, would result in beneficial ownership by the
Holder and its affiliates of more than 9.99% of the outstanding shares of Common
Stock (after taking into account the shares to be issued to the Holder upon such
conversion or exercise). For purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "1934
ACT"), except as otherwise provided in clause (1) of such sentence. The Holder,
by its acceptance of this Debenture, further agrees that if the Holder transfers
or assigns any of the Debentures to a party who or which would not be considered
such an affiliate, such assignment shall be made subject to the transferee's or
assignee's specific agreement to be bound by the provisions of this Section 4(C)
as if such transferee or assignee were the original Holder hereof.
(D) The Holder recognizes that the Company may be limited in the number
of shares of Common Stock it may issue by (i) reason of its authorized shares,
or (ii) the applicable rules and regulations of the principal securities market
on which the Common Stock is listed or traded (collectively, the "CAP
REGULATIONS"). Without limiting the other provisions hereof, (i) the Company
will take all steps reasonably necessary to be in a position to issue shares of
Common Stock on conversion of the Debentures without violating the Cap
Regulations and (ii) if, despite taking such steps, the Company still cannot
issue such shares of Common Stock without violating the Cap Regulations, the
Holder of this Debenture (to the extent the same can not be converted in
compliance with the Cap Regulations (an "UNCONVERTED DEBENTURE")), shall have
the option, exercisable in the Holder's sole and absolute discretion, to elect
any one of the following remedies:
(x) if permitted by the Cap Regulations, require the Company to
issue shares of Common Stock in accordance with such Holder's Notice
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of Conversion relating to the Unconverted Debenture at a conversion
purchase price equal to the average of the closing bid price per share
of Common Stock for any five (5) consecutive trading days (subject to
the equitable adjustments for certain events occurring during such
period as provided in this Debenture) during the sixty (60) trading
days immediately preceding the date of the Notice of Conversion; or
(y) require the Company to redeem each Unconverted Debenture for
an amount (the "CAP REDEMPTION AMOUNT"), payable in cash, equal to:
V x M
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CP
where:
"V" means the outstanding principal plus accrued interest through
the Cap Redemption Date (as defined below) of an Unconverted
Debenture;
"CP" means the Conversion Price in effect on the date of
redemption (the "CAP REDEMPTION DATE") specified in the notice from
the Holder electing this remedy; and
"M" means the highest closing ask price during the period
beginning on the Cap Redemption Date and ending on the date of payment
of the Cap Redemption Amount.
The holder of an Unconverted Debenture may elect one of the above remedies with
respect to a portion of such Unconverted Debenture and the other remedy with
respect to other portions of the Unconverted Debenture.
(E) Anything herein to the contrary notwithstanding, in the event the
Company breaches the provisions of Section 4(f) of the Securities Purchase
Agreement, the Conversion Price shall be amended to be equal to 90% of the
Conversion Price determined in accordance with Section 4(A) of this Debenture,
and the Holder may require the Company to immediately redeem the outstanding
portion of this Debenture in accordance with clause (y) of Section 4(D).
(F) Any Debentures not previously converted as of the Maturity Date,
shall be deemed to be automatically converted, without further action of any
kind by the Company or any of its agents, employees or representatives, as of
the Maturity Date at the Conversion Price applicable on the Maturity Date
("MANDATORY CONVERSION").
5. REDEMPTION. This Debenture can be redeemed for cash at any time, in
whole or in part, by the Company. To redeem the Debenture, the Company must (i)
send a written notice to the Holder not less than five (5) nor more than ten
(10) business days prior to the date on which it wishes to redeem the Debenture,
and (ii) pay the Holder cash or immediately available funds in the amount of
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115% times the principal amount of the Debenture then outstanding plus all
accrued but unpaid interest. If the Company does not pay the redemption price to
the Holder on or before the date of redemption specified in the notice, the
Holder will have the right to deem such notice of redemption to be null and void
and the Company will lose its right to further redeem this Debenture. A holder
may convert all or any part of this Debenture up to the amount redeemed pursuant
to such notice at any time during the first five (5) business days following the
notice of redemption and without regard to the provisions of Section 4(C).
6. Subject to the terms of the Securities Purchase Agreement, no provision
of this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, and interest on, this
Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture and all other Debentures now or hereafter issued of
similar terms are direct obligations of the Company.
7. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
8. If the Company merges or consolidates with another corporation or sells
or transfers all or substantially all of its assets to another person and the
holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that the Debenture may thereafter be
converted on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which shall
be as nearly equivalent as may be practicable. In the event of any proposed
merger, consolidation or sale or transfer of all or substantially all of the
assets of the Company (a "SALE"), the Holder hereof shall have the right to
convert this Debenture by delivering a Notice of Conversion to the Company
within fifteen (15) days of receipt of notice of such Sale from the Company. In
the event the Holder hereof elects not to convert, the Company may prepay all
outstanding principal and accrued interest on this Debenture pursuant to Section
5 hereof, less all amounts required by law to be deducted, upon which tender of
payment following such notice, the right of conversion shall terminate.
9. If, for any reason, prior to the conversion or redemption, the Company
spins off or otherwise divests itself of a part of its business or operations or
disposes all of or a substantial part of its assets in a transaction (the "SPIN
OFF") in which the Company does not receive compensation for such business,
operations or assets, but causes securities of another entity (the "SPIN OFF
SECURITIES") to be issued to security holders of the Company, then the Company
shall cause (i) to be reserved Spin Off Securities equal to the number thereof
which would have been issued to the Holder had all of the Holder's Debentures
outstanding on the record date (the "RECORD DATE") for determining the amount
and number of Spin Off Securities to be issued to security holders of the
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Company (the "OUTSTANDING DEBENTURES") been converted as of the close of
business on the trading day immediately before the Record Date (the "RESERVED
SPIN OFF SHARES"), and (ii) to be issued to the Holder on the conversion of all
or any of the Outstanding Debentures, such amount of the Reserved Spin Off
Shares equal to (x) the Reserved Spin Off Shares multiplied by (y) a fraction,
of which (I) the numerator is the principal amount of the Outstanding Debentures
then being converted, and (II) the denominator is the principal amount of the
Outstanding Debentures.
10. If, at any time while any portion of this Debenture remains
outstanding, the Company effectuates a stock split or reverse stock split of its
Common Stock or issues a dividend on its Common Stock consisting of shares of
Common Stock, the Conversion Price shall be equitably adjusted to reflect such
action. By way of illustration, and not in limitation, of the foregoing: (i) if
the Company effectuates a 2:1 split of its Common Stock, thereafter, with
respect to any conversion for which the Company issues the shares after the
record date of such split, the Conversion Price shall be deemed to be one-half
of the Conversion Price calculated in Section 4(A); (ii) if the Company
effectuates a 1:10 reverse split of its Common Stock, thereafter, with respect
to any conversion for which the Company issues the shares after the record date
of such reverse split, the Conversion Price shall be deemed to be ten times the
Conversion Price calculated in Section 4(A); and (iii) if the Company declares a
stock dividend of one share of Common Stock for every 10 shares outstanding,
thereafter, with respect to any conversion for which the Company issues the
shares after the record date of such dividend, the Conversion Price shall be
deemed to be the amount of the Conversion Price calculated in Section 4A
multiplied by a fraction, of which the numerator is the number of shares (10)
for which a dividend share will be issued and the denominator is such number of
shares plus the dividend share(s) issuable or issued thereon (11).
11. All payments contemplated hereby to be made "in cash" shall be made in
immediately available good funds in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts. All payments of cash and each delivery of shares of Common Stock
issuable to the Holder as contemplated hereby shall be made to the Holder at the
address last appearing on the Debenture Register of the Company as designated in
writing by the Holder from time to time; except that the Holder can designate,
by notice to the Company, a different delivery address for any one or more
specific payments or deliveries.
12. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment purposes and that such Holder will
not offer, sell or otherwise dispose of this Debenture or the Shares of Common
Stock issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.
13. This Debenture shall be governed by and construed in accordance with
the laws of the State of Delaware. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of Wilmington or the state courts of the State of Delaware sitting in the
City of Wilmington in connection with any dispute arising under this Agreement
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on FORUM NON COVENIENS, to the bringing of any
such proceeding in such jurisdictions. To the extent determined by such court,
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the Company shall reimburse the Holder for any reasonable legal fees and
disbursements incurred by the Holder in enforcement of or protection of any of
its rights under any of this Debenture.
14. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or
interest on this Debenture and same shall continue for a period of ten
(10) days; or
b. 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 the Company in
connection with the execution and delivery of this Debenture or the
Securities Purchase Agreement shall be false or misleading in any
material respect at the time made; or
c. The Company fails to issue shares of Common Stock to the
Holder or to cause its Transfer Agent to issue shares of Common Stock
upon exercise by the Holder of the conversion rights of the Holder in
accordance with the terms of this Debenture, fails to transfer or to
cause its Transfer Agent to transfer any certificate for shares of
Common Stock issued to the Holder upon conversion of this Debenture
and when required by this Debenture or the Registration Rights
Agreement, and such transfer is otherwise lawful, or fails to remove
any restrictive legend or to cause its Transfer Agent to transfer on
any certificate or any shares of Common Stock issued to the Holder
upon conversion of this Debenture as and when required by this
Debenture, the Agreement or the Registration Rights Agreement and such
legend removal is otherwise lawful, and any such failure shall
continue uncured for five (5) business days.
d. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition, agreement or
obligation of any Debenture in this series and such failure shall
continue uncured for a period of thirty (30) days after written notice
from the Holder of such failure; or
e. The Company shall fail to perform or observe, in any material
respect, any covenant, term, provision, condition, agreement or
obligation of the Company under the Securities Purchase Agreement or
the Registration Rights Agreement and such failure shall continue
uncured for a period of thirty (30) days after written notice from the
Holder of such failure (other than a failure to cause the Registration
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Statement to become effective no later than the Required Effective
Date, as defined and provided in the Registration Rights Agreement, as
to which no such cure period shall apply); or
f. The Company shall (1) admit in writing its inability to pay
its debts generally as they mature; (2) make an assignment for the
benefit of creditors or commence proceedings for its dissolution; or
(3) apply for or consent to the appointment of a trustee, liquidator
or receiver for its or for a substantial part of its property or
business; or
g. A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after
such appointment; or
h. Any governmental agency or any court of competent jurisdiction
at the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or
assets of the Company and shall not be dismissed within sixty (60)
days thereafter; or
i. Any money judgment, writ or warrant of attachment, or similar
process in excess of Two Hundred Thousand ($200,000) Dollars in the
aggregate shall be entered or filed against the Company or any of its
properties or other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of sixty (60) days or in any event
later than five (5) days prior to the date of any proposed sale
thereunder; or
j. Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against
the Company and, if instituted against the Company, shall not be
dismissed or stayed within sixty (60) days after such institution or
the Company shall by any action or answer approve of, consent to, or
acquiesce in any such proceedings or admit the material allegations
of, or default in answering a petition filed in any such proceeding;
or
k. The Company shall have its Common Stock suspended or delisted
from an exchange or over-the-counter market from trading for in excess
of five (5) trading days; or
l. The Company fails to file the Registration Statement within
sixty (60) days following the Closing Date or the Registration
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Statement is not declared effective within one hundred fifty (150)
days following the Closing Date.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kinds, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law.
15. Nothing contained in this Debenture shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or any
rights whatsoever as a shareholder of the Company, unless and to the extent
converted in accordance with the terms hereof.
16. In the event for any reason, any payment by or act of the Company or
the Holder shall result in payment of interest which would exceed the limit
authorized by or be in violation of the law of the jurisdiction applicable to
this Debenture, the obligation of the Company to pay interest or perform such
act or requirement shall be reduced to the limit authorized under such law, so
that in no event shall the Company be obligated to pay any such interest,
perform any such act or be bound by any requirement which would result in the
payment of interest in excess of the limit so authorized. In the event any
payment by or act of the Company shall result in the extraction of a rate of
interest in excess of a sum which is lawfully collectible as interest, then such
amount (to the extent of such excess not returned to the Company) shall, without
further agreement or notice between or by the Company or the Holder, be deemed
applied to the payment of principal, if any, hereunder immediately upon receipt
of such excess funds by the Holder, with the same force and effect as though the
Company had specifically designated such sums to be so applied to principal and
the Holder had agreed to accept such sums as an interest-free prepayment of this
Debenture. If any part of such excess remains after the principal has been paid
in full, whether by the provisions of the preceding sentences of this Section 16
or otherwise, such excess shall be deemed to be an interest-free loan from the
Company to the Holder, which loan shall be payable immediately upon demand by
the Company. The provisions of this Section 16 shall control every other
provision of this Debenture.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: __________________, 1999
LIGHTPATH TECHNOLOGIES, INC.
By:
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(Print Name)
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(Title)
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $ ________________ of
the principal amount of the above Debenture No. ___ into Shares of Common Stock
of LightPath Technologies, Inc. (the "COMPANY") according to the conditions
hereof, as of the date written below.
Conversion Date*
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Applicable Conversion Price
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Signature
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[Name]
Address:
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* This original Debenture must be received by the Company by the fifth
business date following the Conversion Date.