Hybrid Coating Technologies Inc. - Exhibit 4.1 - Filed by newsfilecorp.com






Exhibit 4.1

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
SAID ACT, OR AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE REASONABLY
SATISFACTORY TO COUNSEL TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.” 

Original Issue Date: ___, 2014 

US $ ______________ 

CONVERTIBLE DEBENTURE
DUE  _______ ___, 2016



      
     FOR VALUE RECEIVED, Hybrid Coating Technologies
Inc., a Nevada Company (hereinafter called the "Borrower" or “Company”), hereby
promises to pay to the order of ____________________ or its registered assigns
(the "Holder") the sum of USD $___________ (___________US), on ____, 2016 (the
"Maturity Date"), or such earlier date as this Debenture is required or
permitted to be repaid as provided hereunder, and to pay interest to the Holder
on the aggregate unconverted and then outstanding principal amount of this
Debenture in accordance with the provisions hereof. This Convertible Debenture
(including all Convertible Debentures issued in exchange, transfer or
replacement hereof, this "Debenture") is a duly authorized issue of Debentures
of the Company, designated as its Convertible Debentures due ___, 2016 (the
"Debentures") issued pursuant to a Securities Purchase Agreement entered into
between the Company and the Holder on ____, 2014 (“Securities Purchase
Agreement”).

This Debenture may not be prepaid by
the Borrower. All payments due hereunder in accordance with the terms hereof
shall be made in lawful money of the United States and any accrued Interest
shall be added to the principal amount of this Debenture, in which event
Interest shall accrue thereon in accordance with the terms of this Debenture and
such additional principal amount shall be convertible into Common Stock in
accordance with the terms of this Debenture. All payments shall be made at the
address of the Holder as designated by the Holder or at such address as the
Holder shall hereafter give to the Borrower by written notice made in accordance
with the provisions of this Debenture. Whenever any amount expressed to be due
by the terms of this Debenture is due on any day which is not a Business Day (as
defined below), the same shall instead be due on the next succeeding day which
is a Business Day.

This Debenture is subject to the
following additional provisions: 




Section 1.      Interest.
Subject to the terms and conditions of this Debenture, the Company shall pay
interest (“Interest”) to the Holder on the aggregate unconverted and then
outstanding principal amount (“Outstanding Principal Amount”) of this Debenture
at the rate of ten percent (10%) per annum (the “Interest Rate”) from the
Original Issue Date (as defined herein) until the same becomes due and payable.
Interest shall commence accruing on the Original Issue Date, shall be computed
on the basis of a 365-day year and the actual number of days elapsed and shall
be payable on an annual basis every twelve (12) months, in accordance with the
terms hereof. The Company shall have the option of paying the Holder the amount
of interest due and payable in cash or in shares of the Company’s Common Stock
(“Share(s)” or “shares of Common Stock”) and the price per Share shall be equal
to the average closing price per Share in the five trading days immediately
preceding the date on which the Interest becomes due and payable. The amount of
interest payable in respect of the Debenture shall be reduced proportionately in
the event of its partial or full conversion prior to maturity.

Section 2.       
Conversion.

(a) Conversion Right. 

                                                             (i)
Conversion Timing and Amount. Subject to the limitations on Conversion
contained herein, the record Holder of this Debenture shall have the right (a
“Conversion Right”) at any time commencing at the earlier occurrence of: (a) 12
(twelve) months after the date of Closing (as defined in the Securities Purchase
Agreement) or (b) upon the average closing price for any one 5 (five)
consecutive trading day period exceeds $0.60, and from time to time thereafter
and prior to the Maturity Date, to convert any part or all of the Debenture into
a number of units (“Units” and individually each a "Unit") of the Company at a
price per Unit equal to the Conversion Price (as defined in subsections (ii) and
(iii) below). Each Unit shall be comprised of the following: (i) 1 (one) share
of the Company’s common stock (“Common Stock”) par value $0.001 per share
(“Share” and collectively “Shares”); and (ii) 1 (one) stock purchase warrant to
purchase one share of Common Stock of the Company. Each stock purchase warrant
(“Warrant” and collectively “Warrants”) is exercisable at an exercise price per
Share equal to the Conversion Price, to purchase 1 (one) additional Share, and
shall be exercisable at any time from the date of issuance and shall expire 3
(three) years from the date of issuance. Any Shares issuable pursuant to the
exercise of the Conversion Right and/or the exercise of the Warrants shall be
issued as fully paid and non-assessable shares of Common Stock, or any shares of
capital stock or other securities of the Company into which such Common Stock
shall hereafter be changed or reclassified, at the Conversion Price determined
as provided herein (a "Conversion"). The Conversion Rights set forth in this
Section 2 shall remain in full force and effect immediately from the Original
Issue Date until the Debenture is paid in full. 

                                                             (ii)
Calculation of Conversion Price. Subject to Section 2(a)(iii) below, the
Conversion Price shall be calculated as follows: The Market Price discounted by
45% (forty-five percent).




                                                             “Market
Price” shall mean the average Closing Price per share for the Common Stock
during the five Trading Day period ending immediately prior to the date the
Conversion Notice is sent by the Holder to the Borrower via facsimile (the
“Conversion Date”). “Closing Price” means, for any security as of any date, the
closing price on the OTCQB Venture Stage Marketplace (”OTCQB”) as reported by a
reliable reporting service (“Reporting Service”) mutually acceptable to Borrower
or, if the OTCQB is not the principal trading market for such security, the
closing price of such security on the principal securities exchange or trading
market where such security is listed or traded or, if no closing price of such
security is available in any of the foregoing manners, the average of the
closing price of any market makers for such security that are listed on the OTC
Pinks. “Trading Day” shall mean any day on which the Common Stock is traded for
any period on the OTCQB, or on the principal securities exchange or other
securities market on which the Common Stock is then being traded.

                                                             The
Conversion Rights set forth in this Section 2 shall remain in full force and
effect immediately from the Original Issue Date until the Debenture is paid in
full. 

                                                             
(iii) Minimum and Maximum Conversion Price. Notwithstanding the above,
the Conversion Price shall never be lower than $0.08 per Share nor shall it
exceed $0.30 per Share.

                                                             (iv)
Limitation On Conversion Amount. Notwithstanding the above, in no
event shall the Holder be entitled to convert any portion of this Debenture in
excess of that portion of this Debenture upon Conversion of which the sum of (1)
the number of shares of Common Stock beneficially owned by the Holder and any
applicable affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Debenture or the unexercised portion of the Warrants or of any other security of
the Company subject to a limitation on Conversion or exercise analogous to the
limitations contained herein)(the “Beneficially Owned Shares”) and (2) the
number of shares of Common Stock issuable upon the Conversion of the portion of
the Debenture alone or in combination with the subsequent exercise of all or a
portion of the Warrants, the whole 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 4.99% (the “Maximum Percentage”) of the number
of shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon conversion of this Debenture
and subsequent possible exercise of the Warrants held by the Holder (the
“Beneficial Ownership Limitation”). For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined by the
Holder in accordance with Section 13(d) of the Exchange Act and Regulations
13D-G thereunder, except as otherwise provided in clause (1) of such proviso in
the immediately preceding sentence, and provided that the Beneficial Ownership
Limitation shall be conclusively satisfied if the applicable Notice of
Conversion includes a signed representation by the Holder, if requested by the
Company, that the issuance of the shares in such Notice of Conversion and any
subsequent exercise of the Warrants will not violate the Beneficial Ownership
Limitation, and the Company shall not be entitled to require additional
documentation of such satisfaction.




            (b)
Mechanics of Conversion. In order to convert the Debentures into full
shares of Common Stock and Warrants, the Holder shall deliver a copy of the
fully executed notice of conversion in the form on the rear of the certificate
evidencing the Debenture (‘Notice of Conversion’) to the Company at the office
of the Company which notice shall specify the amount of the Debenture to be
converted (together with a copy of the first page of each Debenture to be
converted) prior to Midnight, Eastern time (the ‘Conversion Notice Deadline’) on
the date of Conversion specified on the Notice of Conversion and (ii) surrender
the original Debenture(s); provided, however, that the Company shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon such conversion and Warrants unless either the original Debentures are
delivered to the Company as provided above, or the Holder notifies the Company
that such Debenture(s) have been lost, stolen or destroyed. In the case of a
dispute as the calculation of the Conversion Price, the Company’s calculation
shall be deemed conclusive absent manifest error. 

                                                             (i)
Lost or Stolen Debentures. Upon receipt by the Company of evidence of the
loss, theft, destruction or mutilation of a Debenture, and (in the case of loss,
theft or destruction) indemnity or security reasonably satisfactory to the
Company, and upon surrender and cancellation of the Debenture, if mutilated, the
Company shall execute and deliver new Debenture(s) of like tenor and date. 

                                                             (ii)
Delivery of Common Stock and Warrants upon Conversion. The Company shall
issue and use its best efforts to deliver within a reasonable time after
delivery to the Company of a Debenture and Notice of Conversion, or after
provision for security or indemnification required by (i) above, to such Holder
of the Debenture at the address of the Holder on the books of the Company, a
certificate for the number of shares of Common Stock and Warrants to which the
Holder shall be entitled as aforesaid. 

                                                             (iii)
No Fractional Shares. No fractional shares of Common Stock shall be issued
upon conversion of a Debenture. If any conversion of the Debenture would create
a fractional share of Common Stock or a right to acquire a fractional share of
Common Stock, a cash adjustment will be made for the fractional interest. 

                                                             (iv)
Date of Conversion. The date on which conversion occurs (the ‘Date of
Conversion’) shall be deemed to be the date set forth in such Notice of
Conversion, provided that the copy of the Notice of Conversion is delivered or
faxed to the Company before midnight, Eastern time, on the Date of Conversion,
and (ii) that the original Debentures to be converted are surrendered, and
received by the Company within five business days from the Date of Conversion.
The person or persons entitled to receive the shares of common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date. If the original Debentures
to be converted are not received by the Transfer Agent or the Company within
five business days after the Date of Conversion or if the facsimile of the
Notice of Conversion is not received by the Company or its designated transfer
agent prior to the Conversion Notice Deadline, the Notice of
Conversion, at the Company’s option, may be declared null and void. 




            (c)
Reservation of Stock Issuable Upon Conversion. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the
Debentures, such number of its shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all then outstanding Debentures; and
if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding
Debentures, the Company will immediately take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose. 

           
(d) Adjustment to Conversion Price. 

                          (i)
Adjustment Due to Stock Split, Stock Dividend, Etc. If at any time when the
Debentures are issued and outstanding, the number of outstanding shares of
Common Stock is increased by a stock split, stock dividend, or other similar
event, the Conversion Price shall be proportionately reduced, or if the number
of outstanding shares of Common Stock is decreased by a combination or
reclassification of shares, or other similar event, the Conversion Price share
be proportionately increased. 

                          (ii)
Adjustment Due to Merger, Consolidation, Etc. If at any time when the
Debentures are issued and outstanding, there shall be any merger, amalgamation,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of another class or
classes of stock or securities of the company or another entity (“Material
Transaction”), then the Holder of the Debentures shall thereafter have the right
to receive upon conversion of the Debentures, upon the basis and upon the terms
and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such stock and/or securities
which the Holder would have been entitled to receive in such transaction had the
Debentures been converted immediately prior to the Material Transaction.

Section 3.        No
Voting Rights. The Debentures shall not entitle the Holders thereof to any
of the rights of a stockholder of the Company, including without limitation, the
right to vote, to receive dividends and other distributions, or to receive any
notice of, or to attend meetings of stockholders or any other proceedings of the
Company. 

Section 4.        Rule
144 Hold Period. For purposes of Rule 144, it is intended, understood and
acknowledged that the Common Stock issuable upon Conversion of this Debenture
shall be deemed to have been acquired at the time the Debenture was issued.
Moreover, it is intended, understood and acknowledged that the holding period
for the Common Stock issuable upon Conversion of this Debenture shall be deemed
to have commenced on the date this Debenture was issued.




Section
5.        Agreement of
the Holder. 

5.1                     
The Holder acknowledges that the Shares are "restricted securities" within the
meaning of the Securities Act and will be issued to the Holder in accordance
with the Securities Act. 

5.2                     
The Holder agrees not to engage in hedging transactions with regard to the
Shares unless in compliance with the Securities Act. 

5.3                     
The Holder and the Company agree that the Company will refuse to register any
transfer of the Shares not made in accordance with the provisions of the
Securities Act, pursuant to registration under the Securities Act, pursuant to
an available exemption from registration, or pursuant to this Agreement. 

5.4                     
The Holder agrees to resell the Shares only in accordance with the provisions of
the Securities Act, pursuant to registration under the Securities Act, or
pursuant to an available exemption from registration pursuant to the Securities
Act.

5.5                     
The Holder acknowledges and agrees that all certificates representing the Shares
will be endorsed with a restrictive legend in substantially the following form:



  
    
      
        “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
          BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
          STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
          IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
          SAID ACT, OR AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE REASONABLY
          SATISFACTORY TO COUNSEL TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
          SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.” 

      

    

  



Section 6.       
Transfer to Comply with the Securities Act. This Debenture shall be
binding upon the Company and its successors and assigns, and shall inure to be
the benefit of the Holder and its successors and assigns. This Debenture may be
sold, assigned or transferred only in compliance with applicable federal and
state securities laws and regulations. 

Section 7.       
Governing Law. The Debenture shall be governed by and construed in
accordance with the laws of the State of Nevada. All questions concerning the
construction, validity, enforcement and interpretation of this Debenture shall
be governed by and construed and enforced in accordance with the internal laws
of the State of Nevada, without regard to the principles of conflicts of law
thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in the State of Nevada for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Debenture
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any other manner permitted by law. The
parties hereby waive all rights to a trial by jury. If either party shall
commence an action or proceeding to enforce any provisions of the Debenture,
then the prevailing party in such action or proceeding shall be reimbursed by
the other party for its reasonable attorneys’ fees and other costs and expenses
incurred with the investigation, preparation and prosecution of such action or
proceeding. 




Section
8.              
Business Day Definition. For purposes hereof, the term ‘business day’
shall mean any day on which banks are generally open for business in the State
of Nevada and excluding any Saturday and Sunday. 

Section
9.              
Notices. Any notice or other communication required or permitted to be
given hereunder shall be given as provided herein or delivered against receipt
if to (i) the Company at 950 John Daly blvd., Suite 260, Daly City, CA 94015
(ii) the Holder of a Debenture, to such holder at its last address as shown on
the Debenture Register (or to such other address as the party shall have
furnished in writing as its new address to be entered on the Debenture Register.
Any notice or other communication needs to be made by facsimile and delivery
shall be deemed give, except as otherwise required herein, at the time of
transmission of said facsimile. Any notice given on a day that is not a business
day shall be effective upon the next business day. 

Section
10.            
Waiver of any Breach to be in Writing. Any waiver by the Company or the
Holder of a Debenture of a breach of any provision of the Debenture shall not
operate as, or be construed to be a waiver of any other breach of such provision
or of any breach of any other provision of the Debenture. The failure of the
Company or the Holder hereof to insist upon strict adherence to any term of the
Debenture on one or more occasions shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of the Debenture. Any waiver must be in writing. 

Section
11.            
Unenforceable Provisions. If any provision of a Debenture is invalid,
illegal or unenforceable, the balance of the Debenture shall remain in effect,
and if any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances. 




Section
12.              
Construction; Headings. This Debenture shall be deemed to be jointly
drafted by the Company and all the Purchasers and shall not be construed against
any person as the drafter hereof. The headings of this Debenture are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Debenture. 

                                   IN
WITNESS WHEREOF, Company has caused the Debenture to be signed in its name by
its duly authorized officer this ______ day of ___________, 2014. 

COMPANY:

Hybrid Coating Technologies Inc.


 

By:  
__________________________________
        
Joseph Kristul, CEO & Chairman





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 $__________in principal amount of the Debenture (defined
herein) into Units of  Hybrid Coating Technologies Inc., a Nevada
Company (the "Company"), plus: 

            -$_________any
Interest owing, if applicable and at the Company’s sole discretion

all according to the conditions of the Debenture of the Company
dated as of _____, 2014, (the "Debenture"), as of the date written below.
If securities are to be issued in the name of a Person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates. No fee will be charged to
the Holder for any Conversion, except for transfer taxes, if any. By submitting
this Notice of Conversion, the Holder certifies that the issuance of the number
of shares of Common Stock requested hereby will not result in a violation of the
Beneficial Ownership Limitation. 

            The
undersigned hereby requests that the Company issue a certificate or certificates
for the number of shares of Common Stock and Warrants set forth above (which
number is based on the Holder's calculation attached hereto) in the name(s)
specified immediately below or, if additional space is necessary, on an
attachment hereto: 

           
Name: _________________________________________________


            Address:
_______________________________________________


The undersigned represents and warrants that all offers and
sales by the undersigned of the securities issuable to the undersigned upon
Conversion of the Debenture shall be made pursuant to an exemption from
registration under the Securities Act of 1933, as amended (the "ACT").


(i) Date of
Conversion:_______________________________
Applicable Conversion
Price:________________________
Number of Shares of Common Stock to be Issued
_______________
Number of Shares of Warrants to be Issued
_______________

Conversion of the
Debenture:_______________________

Signature:
______________________________________________________
Name:
_________________________________________________________




Address: 
_______________________________________________________


Upon Conversion of the Debenture in accordance with the terms
thereof, the Holder shall not be required to physically surrender the Debenture
(or evidence of loss, theft or destruction thereof) to the Company unless all of
the Debenture is converted, in which case such Holder shall deliver the
Debenture being converted to the Company promptly following the Conversion Date
at issue. The Company shall issue and deliver shares of Common Stock to an
overnight courier not later than the fifth Business Day following receipt of the
Notice of Conversion with respect to the Debenture(s) to be converted, and shall
make payments pursuant to the Debenture for the number of Business Days such
issuance and delivery is late.