EXHIBIT 10.39

NEITHER THIS DEBENTURE NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES ISSUABLE UPON
CONVERSION HEREOF MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR
(B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY OR (II) UNLESS SOLD
PURSUANT TO RULE 144 UNDER SAID ACT.

 

COPYTELE, INC.

8% Convertible Debenture

Due January __, 2015

 

$________

         January 25, 2013

 

COPYTELE, INC., a Delaware corporation (the “Company” or “Maker”), for value
received, hereby promises to pay to [NAME OF PURCHASER] or its registered
assigns (the “Payee” or “Holder”), at [PURCHASER ADDRESS], upon due presentation
and surrender of this 8% Convertible Debenture (this “Debenture”), on or after
January 25, 2015 (the “Maturity Date”), the principal amount of
____________________ Dollars ($_________) and accrued interest thereon as
hereinafter provided.

 

This Debenture is one of a series of debentures issued by the Company as of
January __, 2013 (the “Issuance Date”) in the aggregate principal amount of up
to $5,000,000 (collectively, the “Debentures”).

 

ARTICLE I

PAYMENT OF PRINCIPAL AND INTEREST; METHOD OF PAYMENT

 

Section I.1 Payment of Principal and Interest.  Payment of the principal and
accrued interest on this Debenture shall be made in such coin or currency of the
United States of America as at the time of payment shall be legal tender for the
payment of public and private debts.  Interest (computed on the basis of a
360-day year for the number of days elapsed) on the unpaid portion of said
principal amount from time to time outstanding shall be paid by the Company at
the rate of eight percent (8%) per annum, in like coin and currency, or at the
option of the Company, in shares of the Company’s Common Stock (as hereinafter
defined) or additional Debentures, upon the same terms and conditions of this
Debenture payable to the Payee in quarterly installments on each January 1,
April 1, July 1 and October 1 during the term of this Debenture (each, an
“Interest Payment Date”), with the first Interest Payment Date hereunder
scheduled to be April 1, 2013 and the last Interest Payment Date to be on the
Maturity Date. Interest shall accrue from the Issuance Date. Both principal
hereof and interest thereon are payable at the Holder’s address above or such
other address as the Holder shall designate from time to time by written notice
to the Company. The Company will pay or cause to be paid all sums becoming due
hereon for principal and interest by check, sent to the Holder’s above address
or to such other address as the Holder may designate for such purpose from time
to time by written notice to the Company, without any requirement for the
presentation of this Debenture or making any notation thereon, except that the
Holder hereof agrees that payment of the final amount due shall be made only
upon surrender of this Debenture to the Company for cancellation.

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If the Company elects to pay the interest due on a particular Interest Payment
Date in shares of Common Stock, the number of shares issued as payment of the
accrued interest shall be equal to the quotient of the aggregate accrued and
unpaid interest divided by the Market Price (as defined in Section 5.1 hereof)
on the Interest Payment Date.  No fractional shares or scrip representing
fractional shares will be issued upon the payment of accrued interest, but a
payment in cash will be made, in respect of any fraction of a share which would
otherwise be issuable in connection with the payment of accrued interest in
shares of Common Stock.

Prior to any sale or other disposition of this instrument, the Holder hereof
agrees to endorse hereon the amount of principal paid hereon and the last date
to which interest has been paid hereon and to notify the Company of the name and
address of the transferee in accordance with the terms of Section 2.2 of this
Debenture.

 

Section I.2 Extension of Payment Date.  If this Debenture or any installment
hereof becomes due and payable on a Saturday, Sunday or other day on which banks
in the State of New York are authorized to remain closed, the due date hereof
shall be extended to the next succeeding full Business Day (as defined in
Section 5.1 hereof).  

Section I.3 Prepayment.  The Company may prepay the principal amount of this
Debenture and any accrued and unpaid interest thereon, in whole or in part, at
any time and from time to time without penalty or premium, subject to first
offering the Holder the option to convert this Debenture into Common Stock in
accordance with Section 2.1, but only if the sales price of the Common Stock on
the Principal Market equals or exceeds $0.30 for twenty (20) Trading Days in any
thirty (30) Trading Day period ending no more than fifteen (15) days before the
Redemption Notice.  The Company must provide written notice (the “Redemption
Notice”) to the Holder of its intention to prepay this Debenture and allow the
Holder thirty (30) days after receipt of such notice to convert.  All payments
on this Debenture shall be applied first to accrued interest hereon, if any, and
the balance to the payment of outstanding principal hereof. 

ARTICLE II CONVERSION AND OTHER RIGHTS

 

 

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Section II.1 Conversion into Common Stock at Option of Holder. At any time and
from time to time until the Maturity Date, this Debenture is convertible in
whole or in part at the Holder’s option into shares of the Company’s common
stock, par value $0.01 per share (“Common Stock”), upon surrender of this
Debenture, at the office of the Company, accompanied by a written notice of
conversion in the form of Attachment II hereto, or otherwise in form reasonably
satisfactory to the Company, duly executed by the registered Holder or his, her
or its duly authorized attorney.  The aggregate principal amount of this
Debenture shall be convertible at any time from the Issuance Date until the
Maturity Date into shares of Common Stock at a price per share equal to $0.15
(“Conversion Price”), subject to the adjustments as provided for in Section
2.4.  Interest shall accrue to and include the day prior to the date of
conversion and shall be paid by check or in shares of Common Stock, at the
option of the Company, on the last day of the month in which conversion rights
hereunder are exercised.  In the event this Debenture is converted in part, the
Company shall deliver a new Debenture of like tenor in the principal amount
equal to the remaining principal balance of this Debenture after giving effect
to such partial conversion.

Section II.2   Transfer of Debenture; Conversion Procedure.  This Debenture and
all rights hereunder may be sold, transferred or otherwise assigned to any
person in accordance with and subject to the provisions of the Securities Act of
1933, as amended (the “Securities Act”), and the rules and regulations
promulgated thereunder.  Upon the transfer of this Debenture through the use of
the assignment form attached hereto as Attachment I, and in accordance with
applicable law or regulation, and the payment by the Holder of funds sufficient
to pay any transfer tax, the Company shall issue and register this Debenture in
the name of the new Holder.

The Company shall convert this Debenture upon surrender thereof for conversion
properly endorsed and accompanied by a properly completed and executed
Conversion Notice attached hereto as Attachment II and any documentation deemed
necessary by the Company showing the availability of an exemption under
applicable state and federal securities laws.  Subject to the terms of this
Debenture, upon surrender of this Debenture, the Company shall promptly issue
and deliver to and in the name of the Holder of this Debenture, a certificate or
certificates for the number of full shares of Common Stock due to such Holder
upon the conversion of this Debenture.  No fractional shares or scrip
representing fractional shares will be issued upon any conversion, but a payment
in cash will be made, in respect of any fraction of a share which would
otherwise be issuable upon the surrender of this Debenture for conversion. The
person or persons to whom such certificate or certificates are issued by the
Company shall be deemed to have become the holder of record of such shares of
Common Stock as of the date of the surrender of this Debenture.  Upon
conversion, the Holder will be required to execute and deliver any documentation
deemed necessary by the Company showing the availability of an exemption under
applicable state and federal securities laws.

 

Section II.3 Covenants.

(a)  Issuance and Shares of Common Stock upon Conversion.  The Company covenants
that it will at all times reserve and keep available, free from preemptive
rights, out of its authorized Common Stock, solely for the purpose of issuance
upon conversion of this Debenture, such number of shares of Common Stock as
shall equal the aggregate number of shares of Common Stock that would be issued
under this Debenture if fully converted.  The Company also covenants that all of
the shares of Common Stock that shall be issuable upon conversion of this
Debenture shall, at the time of delivery, and, subject to Section 2.4(h) hereof,
be duly and validly issued, fully paid, nonassessable and free from all taxes,
liens and charges with respect to the issue thereof (other than those which the
Company shall promptly pay or discharge).

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(b) Restrictive Legend.  Each certificate evidencing shares of Common Stock
issued to the Holder following the conversion of this Debenture shall bear the
following restrictive legend or a similar legend until such time as the transfer
of such security is not restricted under the federal securities laws:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR UNDER APPLICABLE STATE SECURITIES LAWS.  THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF (I)  IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR (B) AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY OR (II) UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT.

(c) At any time after the Issuance Date, the Company will not directly or
indirectly, enter into, create, incur, assume or suffer to exist any additional
indebtedness for borrowed money that by its terms is expressly senior in right
of payment to the Company's obligations under the Debentures, unless the Company
has obtained the written consent of the holders representing at least two-thirds
of the outstanding principal amount of the Debentures. 

Section II.4  Adjustment of Conversion Price and Number of Underlying
Shares.  The number of shares of Common Stock issuable upon the conversion of
this Debenture shall be subject to adjustment from time to time as follows:

(a)  Adjustment for Stock Splits and Combinations.  If the Company shall at any
time after the Issuance Date (i) subdivide the outstanding Common Stock, (B)
combine the outstanding Common Stock into a smaller number of shares, or (C)
declare a dividend or otherwise distribute to all holders of Common Stock
(including any such distribution made to the stockholders of the Company in
connection with a consolidation or merger in which the Company is the continuing
corporation) evidences of its indebtedness, cash, or assets (including
distributions and dividends payable in shares of Common Stock), or rights,
options, or warrants to subscribe for or purchase Common Stock, or securities
convertible into or exchangeable for shares of Common Stock, then, in each case,
the number of shares of Common Stock issuable upon the conversion of this
Debenture shall be proportionately adjusted so that the Holder after such time
shall be entitled to receive the aggregate number and kind of shares which, if
this Debenture had been converted immediately prior to such time, the Holder
would have owned upon such conversion and been entitled to receive by virtue of
such dividend, subdivision, combination, or distribution.

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(b) Change in Conversion Shares upon Consolidations and Mergers in Which the
Company Is Not the Surviving Company and upon Certain Sales, Leases, and
Conveyances.  In case of any consolidation with or merger of the Company with or
into another corporation or other entity (other than a merger or consolidation
in which the Company is the surviving or continuing corporation), or in case of
any sale, lease, or conveyance to another corporation or entity of the property
and assets of any nature of the Company as an entirety or substantially as an
entirety (such actions being hereinafter collectively referred to as
“Reorganizations”), there shall thereafter be deliverable upon conversion of
this Debenture (in lieu of the number of shares of Common Stock theretofore
deliverable) the kind and amount of shares of stock or other securities or
property receivable upon such Reorganization by a holder of the number of shares
of Common Stock equal to the number of shares of Common Stock issuable upon the
conversion of this Debenture for which this Debenture might have been converted
immediately prior to such Reorganization. The Company shall not effect any such
Reorganization unless upon or prior to the consummation thereof the successor
corporation, or if the Company shall be the surviving corporation in any such
Reorganization and is not the issuer of the shares of stock or other securities
or property to be delivered to holders of shares of the Common Stock outstanding
at the effective time thereof, then such issuer, shall assume by written
instrument the obligation to deliver to the Holder such shares of stock,
securities, cash or other property as the Holder shall be entitled to upon a
conversion of this Debenture in accordance with the foregoing provisions.    

(c) Change in Shares upon Certain Reclassifications, Consolidations, and
Mergers.  In case of any reclassification or change of the Common Stock (other
than a change in par value or from no par value to a specified par value, or as
a result of a subdivision or combination of the outstanding shares of Common
Stock, but including any change of the shares of Common Stock into two or more
classes or series of shares), or in case of any consolidation or merger of
another corporation or entity into the Company in which the Company is the
continuing corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property) of the
shares of Common Stock (other than a change in par value, or from no par value
to a specified par value, or as a result of a subdivision or combination of the
outstanding shares of Common Stock, but including any change of the shares into
two or more classes or series of shares), the Holder shall have the right
thereafter to receive upon conversion of this Debenture solely the kind and
amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such reclassification, change,
consolidation, or merger by a holder of the number of shares of Common Stock
equal to the number of shares of Common Stock for which this Debenture might
have been converted immediately prior to such reclassification, change,
consolidation, or merger.

(d) Other Events.  If any event occurs of the type contemplated by the
provisions of this Section 2.4 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the Company's
Board of Directors will make an appropriate adjustment in the Conversion Price
so as to protect the rights of the Holder under this Debenture; provided that no
such adjustment will increase the Conversion Price as otherwise determined
pursuant to this Section 2.

(e) No Impairment.  The Company will not, through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company.

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(f)  Record Date.  If the Company takes a record of the holders of Common Stock
for the purpose of entitling them (i) to receive a dividend or other
distribution payable in Common Stock, or in any rights, options or warrants to
subscribe for or to purchase Common Stock (such rights or options or warrants
being herein called “Options”) or in any stock or other securities convertible
into or exchangeable for Common Stock (such convertible or exchangeable stock or
securities being herein called “Convertible Securities”) or (ii) to subscribe
for or purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be.

(g)  Subsequent Equity Sales.  

(i)

If, at any time while this Debenture is outstanding, the Company issues
additional shares of Common Stock or rights, warrants, options or other
securities or debt convertible, exercisable or exchangeable for shares of Common
Stock or otherwise entitling any Person to acquire shares of Common Stock
(collectively, “Common Stock Equivalents”) at an effective net price to the
Company per share of Common Stock (the “Effective Price”) less than the
Conversion Price (as adjusted hereunder to such date), then the Conversion Price
shall be reduced to equal the Effective Price.  For purposes of this paragraph,
in connection with any issuance of any Common Stock Equivalents, (A) the maximum
number of shares of Common Stock potentially issuable at any time upon
conversion, exercise or exchange of such Common Stock Equivalents (the “Deemed
Number”) shall be deemed to be outstanding upon issuance of such Common Stock
Equivalents, (B) the Effective Price applicable to such Common Stock shall equal
the minimum dollar value of consideration payable to the Company to purchase
such Common Stock Equivalents and to convert, exercise or exchange them into
Common Stock (net of any discounts, fees, commissions and other expenses),
divided by the Deemed Number, and (C) no further adjustment shall be made to the
Conversion Price upon the actual issuance of Common Stock upon conversion,
exercise or exchange of such Common Stock Equivalents.

(ii)

If, at any time while this Debenture is outstanding, the Company issues Common
Stock Equivalents with an Effective Price or a number of underlying shares that
floats or resets or otherwise varies or is subject to adjustment based (directly
or indirectly) on market prices of the Common Stock (a “Floating Price
Security”), then for purposes of applying the preceding paragraph in connection
with any subsequent conversion, the Effective Price will be determined
separately on each Conversion Date and will be deemed to equal the lowest
Effective Price at which any holder of such Floating Price Security is entitled
to acquire Common Stock on such Conversion Date (regardless of whether any such
holder actually acquires any shares on such date).

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(iii)

Notwithstanding the foregoing, no adjustment will be made under this Section
2.4(g) in respect of:

(A) shares of Common Stock issuable upon exercise of rights, options or warrants
outstanding on the date hereof;

(B) shares of Common Stock issued (or issuable upon exercise of rights, options
or warrants outstanding from time to time) granted or issued to officers,
directors or employees of, or consultants to, the Company pursuant to a stock
grant, stock option grant, stock option plan or other similar plan, in each case
as approved by the Company’s Board of Directors;

(C) shares of Common Stock issued in connection with a strategic alliance,
acquisition or others transaction, where the primary purpose of such transaction
is not to raise equity capital;

(D) shares of Common Stock issued (or issuable upon exercise of rights, options
or warrants outstanding from time to time) for bona fide services; or

(E) shares of Common Stock issued or issuable as a result of any stock split,
combination, dividend, distribution, reclassification, exchange or substitution.

(h)  Actions to Maintain Conversion Price Above Par Value.  Before taking any
action which would cause an adjustment in the Conversion Price such that, upon
conversion of this Debenture, shares of Common Stock with par value, if any,
would be deemed to be issued below the then par value of the Common Stock, the
Company will take any corporate action which may, in the opinion of its counsel,
be reasonably necessary in order that the Company may validly and legally issue
fully paid and non-assessable shares of Common Stock at the Conversion Price as
so adjusted.

(i)  Certificate of Adjustment.  In any case of an adjustment of the number of
shares of Common Stock or other securities issuable upon conversion of this
Debenture, the chief financial officer or the president of the Company shall
compute such adjustment in accordance with the provisions hereof and prepare and
sign a certificate showing such adjustment, and shall mail such certificate, by
first class mail, postage prepaid, to the Holder of this Debenture at the
Holder’s address as shown in the Company’s books.  The certificate shall set
forth such adjustment, showing in detail the facts upon which such adjustment is
based, including a statement of the number of shares of Common Stock and the
type and amount, if any, of other property which at the time would be received
upon conversion of this Debenture.

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(j) Notices of Record Date. In the event of (i) any taking by the Company of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, (ii) any reclassification or recapitalization of Common Stock
outstanding involving a change in Common Stock or (iii) any consolidation,
merger, sale of all or substantially all of the Company’s assets to another
Person (as defined in Section 5.1 hereof) and any transaction which is effected
in such a way that holders of more than fifty percent (50%) of the shares of
Common Stock then outstanding are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets of another Person with
respect to or in exchange for Common Stock (being herein called a “Change of
Control”) or voluntary or involuntary dissolution, liquidation or winding up of
the Company, the Company shall mail to the Holder of this Debenture, not less
than ten (10) days and not more than sixty (60) days prior to the date on which
the books of the Company shall close, the record date specified therein or the
effective date thereof as the case may be, a notice specifying (A) the material
terms and conditions of the proposed action, (B) the date on which any such
record is to be taken for the purpose of such dividend or distribution and a
description of such dividend or distribution, (C) the date on which any such
Change of Control, dissolution, liquidation or winding up is expected to become
effective, and (D) the time, if any, that is to be fixed, as to when the holders
of record of Common Stock (or other securities) shall be entitled to exchange
their shares of Common Stock (or other securities) for securities or other
property deliverable upon such Change of Control, dissolution, liquidation or
winding up.   

(k) Notices.  Any notice required by the provisions of this Section 2.4 shall be
in writing and shall be deemed given upon delivery if delivered personally or by
a recognized commercial courier with receipt acknowledged, or upon the
expiration of seventy-two (72) hours after the same has been deposited in the
United States mail, by certified or registered mail, return receipt requested,
postage prepaid, and addressed to the Holder at its address appearing on the
books of the Company.

(l) Closing of Books.  The Company will at no time close its transfer books
against the transfer of any shares of Common Stock issued or issuable upon the
conversion of this Debenture in any manner which interferes with the timely
conversion of this Debenture into shares of Common Stock.

Section II.5  Maximum Conversion.  The Company shall not effect any conversions
of this Debenture and the Holder shall not have the right to convert any portion
of this Debenture or to the extent that after giving effect to such conversion,
the Holder, together with any affiliate thereof, would beneficially own (as
determined in accordance with Section 13(d) of the Exchange Act and the rules
promulgated thereunder) in excess of 4.99% (the "Maximum Percentage") of the
number of shares of Common Stock outstanding immediately after giving effect to
such conversion.  Since the Holder will not be obligated to report to the
Company the number of shares of Common Stock it may hold at the time of a
conversion hereunder, unless the conversion at issue would result in the
issuance of shares of Common Stock in excess of 4.99% of the then outstanding
shares of Common Stock without regard to any other shares which may be
beneficially owned by the Holder or an affiliate thereof, the Holder shall have
the authority and obligation to determine whether the restriction contained in
this Section will limit any particular conversion hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the principal amount of this
Debenture is convertible shall be the responsibility and obligation of the
Holder.  If the Holder has delivered a Conversion Notice for a principal amount
of this Debenture that, without regard to any other shares that the Holder or
its affiliates may beneficially own, would result in the issuance in excess of
the permitted amount hereunder, the Company shall notify the Holder of this fact
and shall honor the conversion for the maximum principal amount permitted to be
converted on such Conversion Date in accordance with Section 2.2 and, any
principal amount tendered for conversion in excess of the permitted amount
hereunder shall remain outstanding under this Debenture. By written notice to
the Company, the Holder may (but only as to itself and not to any other holder)
from time to time increase the Maximum Percentage to any other percentage not in
excess of 9.99% specified in such notice; provided that any such increase will
not be effective until the sixty-first (61st) day after such notice is delivered
to the Company. Upon request of the Company, the holder shall promptly advise
the Company as to the number of shares of Common stock then owned by the holder.
Upon request of the Company, the Holder shall promptly advise the Company as to
the number of shares of Common stock then owned by the Holder.

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ARTICLE III EVENTS OF DEFAULT

Section III.1 Default.  If one or more of the following described events (each
of which being an “Event of Default” hereunder) shall occur and shall be
continuing:

(a) the Company shall default in the payment of any principal on this Debenture
when and as the same shall become due and payable;

(b) the Company shall default in the payment of interest on this Debenture
within five (5) Business Days of written notice to the Company that such amount
is due and payable;

(c) any of the representations, covenants, or warranties made by the Company
herein shall have been incorrect when made in any material respect;

(d)  the Company shall breach, fail to perform, or fail to observe in any
material respect any material covenant, term, provision, condition, agreement or
obligation of the Company under this Debenture, and such breach or failure to
perform shall not be cured within thirty (30) days after written notice to the
Company; or

(e)  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, 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 such proceedings
shall not be dismissed within ninety (90) calendar days thereafter.

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) or cured as
provided herein, the Holder may consider the entire principal amount of this
Debenture (and all interest through such date) immediately due and payable in
cash, without presentment, demand protest or notice of any kind, all of which
are hereby expressly waived, anything herein or in any Debenture 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.

 

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ARTICLE IV

REGISTRATION RIGHTS

 

Section IV.1 Registration Rights.

(a) The Company shall use its reasonable best efforts to prepare and file with
the Securities and Exchange Commission (the “Commission”) a Registration
Statement on Form S-1 or other applicable form under the Securities Act (the
“Registration Statement”) covering the resale the Registrable Securities (as
defined in Section 5.1) by the Holder (and the other subscribers) as promptly as
possible, and in any event within 90 days after the Issuance Date (the Filing
Date”).  Notwithstanding anything in this Agreement to the contrary, the Company
may, by written notice to the Holder, delay the filing of a Registration
Statement  or any amendment thereto, if in the good faith determination of the
Board of Directors, the filing of any registration statement would adversely
affect a material proposed or pending acquisition, merger or other material
corporate event to which the Company is or expects to be a party.

(b) If a Registration Statement covering the resale the Registrable Securities
is not filed on or prior to its Filing Date (any such failure or breach being
referred to as an “Filing Default”), then on the date of the Filing Default and
on each monthly anniversary thereof (if the Filing Default shall not have been
cured by such date) until the Filing Default is cured, the Company shall pay to
each holder of Debentures an amount in cash, as liquidated damages (“Liquidated
Damages”) and not as a penalty, equal to 1.0% of the aggregate purchase price
paid by such holder pursuant to the Subscription Agreement for such Debentures
then held by such holder.  The parties agree that the Company shall not be
liable for Liquidated Damages with respect to any Warrants or Warrant Shares.
The Liquidated Damages pursuant to the terms hereof shall apply on a daily
pro-rata basis for any portion of a month prior to the cure of an Event

Section IV.2  Obligations of the Company.  In connection with the registration
of the Registrable Securities as contemplated by Section 4.1, the Company shall:

(a)  prepare a Registration Statement and file it with the Commission,  and
thereafter use its reasonable best efforts to cause the Registration Statement
to become effective as soon as possible after the filing thereof, but in any
event within 180 days after the Issuance Date, which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading;

(b)  use its reasonable best efforts to prepare and file with the Commission
such amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities covered by the Registration
Statement Act until the Registrable Securities can be sold under Rule 144(k) or
such earlier date when all Registrable Securities covered by such Registration
Statement have been sold publicly; provided, however, the Company shall not be
required to keep the Registration Statement effective for a period of more than
three years from the Issuance Date;

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(c)  furnish to the Holder such number of copies of a prospectus, including a
preliminary prospectus and all amendments and supplements thereto, and such
other documents, as the Holder may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by the Holder;

(d)  use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
Blue Sky laws of such jurisdictions reasonably requested by the Holder, (ii)
prepare and file in those jurisdictions all required amendments (including
post-effective amendments) and supplements, (iii) take such other actions as may
be necessary to maintain such registrations and qualifications in effect at all
times the Registration Statement is in effect, and (iv) take all other actions
necessary or advisable to enable the disposition of such securities in all such
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Article IV;

(e)  use its reasonable best efforts to prepare a supplement or amendment to the
Registration Statement to correct any untrue material statement or omission, and
deliver a number of copies of such supplement or amendment to the Holder as he,
she or it may reasonably request;

(f)  promptly notify the Holder (or, in the event of an underwritten offering,
the managing underwriters) of the issuance by the Commission of any stop order
or other suspension of effectiveness of the Registration Statement, and make
every reasonable effort to obtain the withdrawal of any order suspending the
effectiveness of the Registration Statement at the earliest possible time;

(g)  provide a transfer agent and registrar, which may be a single entity, for
the Registrable Securities not later than the effective date of the Registration
Statement; and

(h)  cooperate with the Holder to enable such certificates to be in such
denominations or amounts, as the case may be, and registered in such names as
the managing underwriter or underwriters, if any, or the Holder may reasonably
request in order for the Holder and the managing underwriter or underwriters, if
any, to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing Registrable Securities to be sold
pursuant to the Registration Statement.

Section IV.3 Obligations of the Holder.

(a)  It shall be a condition precedent to the obligations of the Company to take
any action pursuant to this Article IV with respect to the Holder that the
Holder shall furnish to the Company such information regarding the Holder, the
Registrable Securities held by the Holder and the intended method of disposition
of such securities as shall be reasonably required to effect the registration of
the Registrable Securities and shall execute such documents and agreements in
connection with such registration as the Company may reasonably request.  At
least five (5) Business Days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify the Holder of the information
the Company requires from the Holder (the “Requested Information”) if the Holder
elects to have any of its Registrable Securities included in the Registration
Statement. If within three (3) Business Days of the filing date the Company has
not received the Requested Information from the Holder, then the Company may
file the Registration Statement without including Registrable Securities of the
Holder.

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(b)  The Holder, by its, his or her acceptance of the Registrable Securities,
agrees to cooperate with the Company in connection with the preparation and
filing of any Registration Statement hereunder.

(c) In the event of an underwritten offering, the Holder agrees to enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, including, without limitation, customary indemnification and
contribution obligations, with the managing underwriter of such offering and to
take such other actions as are reasonably required in order to expedite or
facilitate the disposition of the Registrable Securities, unless the Holder has
decided not to participate.

(d) The Holder agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 4.2(e), the Holder will
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until its, his or
her receipt of the copies of the supplemented or amended prospectus contemplated
by Section 4.2(e).  In addition, the Company may restrict disposition of
Registrable Securities and the Holder will not be able to dispose of such
Registrable Securities, if the Company shall have delivered a certificate to the
Holder signed by an officer of the Company stating that in the good faith
judgment of the Board of Directors of the Company a delay in the disposition of
such Registrable Securities is necessary because the Company has determined that
such sales would require public disclosure by the Company of material nonpublic
information that is not included in such registration statement.    

Section IV.4  Expenses of Registration.  In connection with any and all
registrations pursuant to Article IV, all expenses other than underwriting
discounts and commissions incurred in connection with registration, filings or
qualifications, including, without limitation, all registration, listing, filing
and qualification fees, printing and accounting fees and costs, the fees and
disbursements of counsel for the Company shall be borne by the Company.

Section IV.5  Indemnification.  In the event any Registrable Securities are
included in a Registration Statement under this Debenture:

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(a) To the extent permitted by law, the Company will indemnify and hold harmless
the Holder (in such capacity) and its members, managers, directors, officers
and/or agents, any underwriter (as defined in the Securities Act) for the
Holder, and each person, if any, who controls any such underwriter within the
meaning of Section 15 of the Securities Act (each, an “Indemnified Party”),
against any losses, claims, damages, expenses, liabilities (joint or several)
(collectively, “Claims”) to which any of them may become subject under of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (each, a “Violation”); (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or any post-effective amendment thereof, or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (ii) any
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented if
the Company files any amendment thereof or supplement thereto with the
Commission), or the omission or alleged omission to state therein a material
fact required to be stated therein, or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.  Subject to the restrictions set forth in Section 4.5(d) with
respect to the number of legal counsel, the Company shall promptly reimburse the
Holder, and each such other person entitled to indemnification under this
Section 4.5, as such expenses are incurred and are due and payable, for any
legal fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim, whether or not such Claim,
investigation or proceeding is brought or initiated by the Company or a third
party. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 4.5(a) shall not (i) apply
to a Claim arising out of or based upon a Violation which occurs in reliance
upon and in conformity with information furnished in writing to the Company by
the Holder expressly for use in connection with the preparation of the
Registration Statement, any prospectus or any such amendment thereof or
supplement thereto or any failure of the Holder to deliver a prospectus as
required by the Securities Act; or (ii) apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent of
the Company, which consent shall not be unreasonably withheld.  Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Holder and shall survive the transfer of the Registrable
Securities by the Holder as provided herein.

(b)  In connection with any Registration Statement in which the Holder is
participating in such capacity, the Holder agrees to indemnify and hold
harmless, to the same extent and in the same manner set forth in Section 4.5(a),
the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other stockholder selling
securities pursuant to the Registration Statement or any of its directors or
officers or any person who controls such stockholder or underwriter (each, also
an “Indemnified Party”), against any Claim to which any of them may become
subject, under the Securities Act, the Exchange Act or otherwise, insofar as
such Claim arises out of or is based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by the Holder
expressly for use in connection with such Registration Statement; and the Holder
shall promptly reimburse an Indemnified Party, as such expenses are incurred and
are due and payable, for any legal fees or other reasonable expenses incurred by
the Indemnified Party in connection with investigating or defending any such
Claim, whether or not such Claim, investigation or proceeding is brought or
initiated by the Indemnified Party or a third party; provided, however, that the
indemnity agreement contained in this Section 4.5(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of the Holder, which consent shall not be unreasonably withheld.

(c)  The Company shall be entitled to receive indemnification from underwriters,
selling brokers, dealer managers, and similar securities industry professionals
participating in the distribution to the same extent as provided above, with
respect to information about such persons so furnished in writing by such
persons expressly for inclusion in the Registration Statement.

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(d)  Promptly after receipt by an Indemnified Party under this Section 4.5 of
notice of the commencement of any action (including any governmental action),
such Indemnified Party shall, if a Claim in respect thereof is to be made
against any indemnifying party under this Section 4.5, deliver to an
indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly given notice, to assume control of the defense thereof with counsel
satisfactory to the Indemnified Party;  provided, however, that an Indemnified
Party shall have the right to retain its, his or her own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel for such party, representation of such party by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interests between such party and any other party represented by such
counsel in such proceeding.  The Company shall pay for only one legal counsel
for the Holder and any Indemnified Party related thereto; such legal counsel
shall be selected by the Holder or such other Indemnified Party subject to the
Company’s approval which shall not be unreasonably withheld.  The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to another under this Section 4.5, except to the extent that such
failure to notify results in the forfeiture by the indemnifying party of
substantive rights or defenses.  The indemnification required by this Section
4.5 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense as such expense, loss, damage or liability is
incurred and is due and payable.

Section IV.6  Contribution.  To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which,
he, she or it would otherwise be liable under Section 4.5 to the fullest extent
permitted by law;  provided, however, that (a) no contribution shall be made
under circumstances where the maker would not have been liable for
indemnification under Section 4.5, (b) no seller of Registrable Securities
guilty of fraudulent misrepresentation (within the meaning used in the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation, and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities.

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ARTICLE V

DEFINITIONS

Section V.1 Definitions.  In addition to those terms already defined herein, the
following terms as used in this Debenture shall have the meanings set forth
below:

“Affiliate” means, with respect to any Person, any other Person directly or
indirectly controlling (including but not limited to all directors and officers
of such Person), controlled by, or under direct or indirect common control with
such Person.  For purposes of this definition, “controlling” (including with its
correlative meanings, the terms “controlled by” and “under common control with”)
as used with respect to any Person shall mean the possession, directly or
indirectly, of the power (a) to vote or direct the vote of ten percent (10%) or
more of the securities having ordinary voting power for the election of
directors of such Company or (b) to direct or cause the direction of the
management and policies of such corporation, whether through the ownership of
securities, by contract of otherwise.

 

“Business Day” means any day that is not a Saturday, a Sunday or a day on which
banks are required or permitted to be closed in the State of New York.

“Market Price”  means, as to any security, the average of the closing prices of
such security’s sales on all domestic securities markets on which such security
may at the time be listed averaged over a period of ten (10) trading days in
which the stock traded immediately preceding the day as of which “Market Price”
is being determined.  If at any time such security is not listed on any domestic
securities exchange or quoted on the OTC Bulletin Board or other domestic
over-the-counter market, the “Market Price” shall be the fair value thereof as
determined in good faith by a majority of the Company’s Board of Directors
(determined without giving effect to any discount for minority interest, any
restrictions on transferability or any lack of liquidity of the Common Stock or
to the fact that the Company has no class of equity registered under the
Securities Act), such fair value to be determined by reference to the price that
would be paid between a fully informed buyer and seller under no compulsion to
buy or sell.

 

“Person” means an individual, partnership, corporation, trust, unincorporated
organization, joint venture, government or agency, political subdivision
thereof, or any other entity of any kind.

“Principal Trading Market” means the Trading Market on which the Common Stock is
primarily listed on and quoted for trading, which, as of the date of this
Debenture, is the OTC Bulletin Board.

“Registrable Securities” means (i) the shares of Common Stock issuable upon
conversion of this Debenture, and (ii) any securities issued or issuable with
respect to Common Stock by way of a stock dividend or stock split or in
connection with a combination or reorganization or otherwise.

“Trading Day” means any day on which the Common Stock is listed or quoted and
traded on its Principal Trading Market.  

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ARTICLE VI

MISCELLANEOUS

Section VI.1 Rights Cumulative.  The rights, powers and remedies given to the
Holder under this Debenture shall be in addition to all rights, powers and
remedies given to him, her or it by virtue of any document or instrument
executed in connection therewith, or any statute or rule of law.

Section VI.2  No Waivers.  Any forbearance, failure or delay by the Payee in
exercising any right, power or remedy under this Debenture, any documents or
instruments executed in connection therewith or otherwise available to the
Holder shall not be deemed to be a waiver of such right, power or remedy, nor
shall any single or partial exercise of any right, power or remedy preclude the
further exercise thereof.

Section VI.3  Amendments in Writing.  Except as otherwise provided herein, the
provisions of the Debentures (including this Debenture) may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written
consent of the holder of this Debenture.

Section VI.4  Governing Law.  This Debenture and the rights and obligations of
the parties hereto, shall be governed, construed and interpreted according to
the laws of the State of New York applicable to agreements made and to be
performed entirely within such State.  

Section VI.5  Successors.  The term “Payee” and “Holder” as used herein shall be
deemed to include the Payee and its successors, endorsees and assigns.

Section VI.6  Stamp or Transfer Tax.  The Company will pay any documentary stamp
or transfer taxes attributable to the initial issuance of the Common Stock
issuable upon the conversion of this Debenture;  provided, however, that the
Company shall not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificates
for the Common Stock in a name other than that of the Holder in respect of which
such Common Stock is issued, and in such case the Company shall not be required
to issue or deliver any certificate for the Common Stock until the person
requesting the same has paid to the Company the amount of such tax or has
established to the Company’s satisfaction that such tax has been paid.

Section VI.7  Mutilated, Lost, Stolen or Destroyed Debenture.  In case this
Debenture shall be mutilated, lost, stolen or destroyed, the Company shall issue
and deliver in exchange and substitution for and upon cancellation of the
mutilated Debenture, or in lieu of and substitution for the Debenture,
mutilated, lost, stolen or destroyed, a new Debenture of like tenor and
representing an equivalent right or interest, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and an
indemnity, if requested, also reasonably satisfactory to it.

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Section VI.8 No Rights as Stockholder. Nothing contained in this Debenture shall
be construed as conferring upon the Holder the right to vote or to receive
dividends (except as provided in Article II of this Debenture) or to consent or
to receive notice as a stockholder in respect of any meeting of stockholders for
the election of directors of the Company or of any other matter, or any rights
whatsoever as stockholders of the Company.

 

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IN WITNESS WHEREOF, CopyTele, Inc. has caused this Debenture to be duly executed
and delivered as of the date first above written.

 

COPYTELE, INC.

By:

Name:

Title:

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ATTACHMENT I

 

Assignment

 

For value received, the undersigned hereby assigns to _____________,
$___________ principal amount of 8% Convertible Debenture due 2015 evidenced
hereby and hereby irrevocably appoints __________________ attorney to transfer
the Debenture on the books of the within named corporation with full power of
substitution in the premises.

 

Dated:

 

 In the presence of:

 

 

 

 

 

 

 

 

 

 

Print Name

 

 

 

 

 

 

 

 

Signature

                                            

 

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ATTACHMENT II

 

CONVERSION NOTICE

 

TO:  COPYTELE, INC.

 

The undersigned holder of this Debenture hereby irrevocably exercises the option
to convert $________ principal amount of such Debenture (which may be less than
the stated principal amount thereof) into shares of Common Stock of CopyTele,
Inc., in accordance with the terms of such Debenture, and directs that the
shares of Common Stock issuable and deliverable upon such conversion, together
with a check (if applicable) in payment for any fractional shares as provided in
such Debenture, be issued and delivered to the undersigned unless a different
name has been indicated below.  If shares of Common Stock are to be issued in
the name of a person other than the undersigned holder of such Debenture, the
undersigned will pay all transfer taxes payable with respect thereto.

 

Address of Holder

 

 

 

 

 

 

 

 

 

 

 

 

 

Print Name of Holder

 

 

 

 

 

 

 

 

Signature of Holder

Principal amount of Debenture to be converted $________

 

If shares are to be issued otherwise then to the holder:

 

Address of Transferee

 

 

 

 

 

 

 

 

 

 

 

 

 

Print Name of Transferee

 

 

 

 

 

 

 

 

Social Security or Employer Identification Number of Transferee

 

Issuance Date of Debenture:  January __, 2013

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