NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO 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.
No. 1 U.S. $500,000
EUROTECH, LTD.
8% CONVERTIBLE DEBENTURE DUE JULY 20, 2001
THIS DEBENTURE is one of a series of duly authorized issued debentures
of Eurotech, Ltd., a corporation organized under the laws of the District of
Columbia and having a principal place of business at 0000 00xx Xxxxxx XX,
Xxxxx 000, Xxxxxxxxxx, XX 00000 (the "Company"), designated as its 8%
Convertible Debentures, due July 20, 2001 (the "Debentures"), in an aggregate
principal amount of $1,000,000.
FOR VALUE RECEIVED, the Company promises to pay to JNC STRATEGIC FUND
LTD., or registered assigns (the "Holder"), the principal sum of Five Hundred
Thousand Dollars ($500,000), on or prior to July 20, 2001 or such earlier
date as the Debentures are required to be repaid as provided hereunder (the
"Maturity Date") and to pay interest to the Holder on the principal sum at
the rate of 8% per annum, payable quarterly in arrears commencing September
30, 1998, but in no event later than the earlier to occur of a Conversion
Date (as defined in Section 4(a)(ii)) for such principal amount or the
Maturity Date. Interest shall accrue daily commencing on the Original Issue
Date (as defined in Section 6) until payment in full of the principal sum,
together with all accrued and unpaid interest and other amounts which may
become due hereunder, has been made. Interest shall be calculated on the
basis of a 360-day year and for the actual number of days elapsed. Interest
hereunder will be paid to the Person (as defined in Section 6) in whose name
this Debenture (or one or more predecessor Debentures) is registered on the
records of the Company regarding registration and transfers of the Debentures
(the "Debenture Register"). All overdue, accrued and unpaid interest and
other amounts due hereunder shall bear interest at the rate of 15% per annum
(to accrue daily) from the date such interest is due hereunder through and
including the date of payment. The principal of, and interest on, this
Debenture are payable 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, at the address of the Holder last appearing on the Debenture
Register, except that interest due on the principal amount (but not overdue
interest) may, at the Company's option, be paid in shares of Common Stock (as
defined in Section 6) calculated based upon the Conversion Price (as defined
below) on the date such interest was due. All amounts due hereunder other
than such interest shall be paid in cash. Notwithstanding anything to the
contrary contained herein, the Company may not issue shares of Common Stock
in payment of interest on the principal amount if: (i) the number of shares
of Common Stock at the time authorized, unissued and unreserved for all
purposes, or held as treasury stock, is insufficient to pay interest
hereunder in shares of Common Stock; (ii) such shares are not either
registered for resale pursuant to an Underlying Securities Registration
Statement (as defined in Section 6) or freely transferable without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act of
1933, as amended (the "Securities Act"), as determined by counsel to the
Company pursuant to a written opinion letter addressed and in form and
substance acceptable to the Holder and the transfer agent for such shares; or
(iii) such shares are not actively traded on the OTC Bulletin Board (or
listed or quoted for trading on the American Stock Exchange, Nasdaq National
Market, Nasdaq SmallCap Market or The New York Stock Exchange, and any other
exchange on which the Common Stock is then listed for trading (each, a
"Subsequent Market")). The Common Stock shall be deemed to be "actively
traded" on the OTC Bulletin Board under this Debenture if (a) no less than
$400,000 of the Common Stock trades on the OTC Bulletin Board in any one week
and (b) there are no fewer than six (6) market makers actively making a
market in the Common Stock.
This Debenture is subject to the following additional provisions:
Section 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same but shall not be issuable in
denominations of less than integral multiplies of Fifty Thousand Dollars
($50,000) unless such amount represents the full principal balance of
Debentures outstanding to such Holder. No service charge will be made for
such registration of transfer or exchange.
Section 2. This Debenture has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement (as defined in Section 6) and may be transferred or exchanged only
in compliance with the Purchase Agreement. Prior to due presentment to the
Company 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 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.
Section 3. Events of Default.
(a) "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment,
decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):
(i) any default in the payment of the principal of, interest on or
liquidated damages in respect of, this Debenture, free of any claim of
subordination, as and when the same shall become due and payable
(whether on the applicable quarterly interest payment date, the
Conversion Date or the Maturity Date or by acceleration or otherwise);
(ii) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any
breach of, this Debenture, the Purchase Agreement or the Registration
Rights Agreement (as defined in Section 6), and such failure or breach
shall not have been remedied within 10 days after the date on which
notice of such failure or breach shall have been given;
(iii) the Company or any of its subsidiaries shall commence, or
there shall be commenced against the Company or any such subsidiary a
case under any applicable bankruptcy or insolvency laws as now or
hereafter in effect or any successor thereto, or the Company commences
any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction whether now or hereafter in effect
relating to the Company or any subsidiary thereof or there is commenced
against the Company or any subsidiary thereof any such bankruptcy,
insolvency or other proceeding which remains undismissed for a period of
60 days; or the Company or any subsidiary thereof is adjudicated
insolvent or bankrupt; or any order of relief or other order approving
any such case or proceeding is entered; or the Company or any subsidiary
thereof suffers any appointment of any custodian or the like for it or
any substantial part of its property which continues undischarged or
unstayed for a period of 60 days; or the Company or any subsidiary
thereof makes a general assignment for the benefit of creditors; or the
Company shall fail to pay, or shall state that it is unable to pay, or
shall be unable to pay, its debts generally as they become due; or the
Company or any subsidiary thereof shall call a meeting of its creditors
with a view to arranging a composition or adjustment of its debts; or
the Company or any subsidiary thereof shall by any act or failure to act
indicate its consent to, approval of or acquiescence in any of the
foregoing; or any corporate or other action is taken by the Company or
any subsidiary thereof for the purpose of effecting any of the
foregoing;
(iv) the Company shall default in any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement or
other instrument under which there may be issued, or by which there may
be secured or evidenced any indebtedness of the Company in an amount
exceeding one hundred thousand dollars ($100,000), whether such
indebtedness now exists or shall hereafter be created and such default
shall result in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become due and
payable;
(v) the Common Stock shall fail to be actively traded on the OTC
Bulletin Board or fail to be listed or quoted for trading on any
Subsequent Market if after the Original Issue Date the Common Stock
shall be listed or quoted for trading on any such Subsequent Market, or
if the Common Stock shall be suspended from trading thereon without
being actively traded, relisted or having such suspension lifted, as the
case may be, within three (3) Trading Days;
(vi) the Company shall be a party to any merger or consolidation
pursuant to which the Company shall not be the surviving entity (or, if
the Company is the surviving entity, the Company shall issue or sell to
another Person, or group thereof, in excess of 50% of the Common Stock)
or shall dispose of all or substantially all of its assets in one or
more transactions, or shall redeem more than a de minimis number of
shares of Common Stock (other than redemptions of Underlying Shares);
(vii) an Underlying Securities Registration Statement shall not have
been declared effective by the Securities and Exchange Commission (the
"Commission") on or prior to the 90th day after the Original Issue Date;
(viii) an Event (as hereinafter defined) shall not have been cured to
the satisfaction of the Holder prior to the expiration of thirty (30)
days from the Event Date (as hereinafter defined) relating thereto
(other than an Event resulting from a failure of an Underlying
Securities Registration Statement to be declared effective by the
Commission on or prior to the Effectiveness Date (as defined in the
Registration Rights Agreement); or
(ix) the Company shall fail to deliver certificates to a Holder
prior to the Twentieth (20th) day after the Conversion Date pursuant to
Section 5(b).
(b) If any Event of Default occurs and is continuing, the full
principal amount of this Debenture (and, at the Holder's option, all other
Debentures then held by the Holder), together with interest and other amounts
owing in respect thereof, to the date of acceleration, to be, shall become,
immediately due and payable in cash. The aggregate amount payable upon an
Event of Default in respect of the Debentures shall be equal to the sum of
(i) the Mandatory Prepayment Amount (as defined in Section 6) plus (ii) the
product of (A) the number of Underlying Shares issued in respect of
conversions or as payment of interest hereunder and then held by the Holder
and (B) the Per Share Market Value (as defined in Section 6) on the date
prepayment is demanded or the date the full prepayment price is paid,
whichever is greater. The Holder need not provide and the Company hereby
waives any presentment, demand, protest or other notice of any kind, and the
Holder may immediately and without expiration of any grace period enforce any
and all of its rights and remedies hereunder and all other remedies available
to it under applicable law. Such declaration may be rescinded and annulled
by the Holder at any time prior to payment hereunder. No such rescission or
annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.
Section 4. Conversion.
(a)(i) This Debenture shall be convertible into shares of Common
Stock at the option of the Holder in whole or in part at any time and from
time to time after the Original Issue. The number of shares of Common Stock
as shall be issuable upon a conversion hereunder shall be determined by
dividing the outstanding principal amount of this Debenture to be converted,
plus all accrued but unpaid interest thereon, by the Conversion Price (as
defined below), each as subject to adjustment as provided hereunder. The
Holder shall effect conversions by surrendering the Debentures (or such
portions thereof) to be converted, together with the form of conversion
notice attached hereto as Exhibit A (a "Holder Conversion Notice") to the
Company. Each Holder Conversion Notice shall specify the principal amount of
Debentures to be converted and the date on which such conversion is to be
effected, which date may not be prior to the date such Conversion Notice is
deemed to have been delivered hereunder (a "Holder Conversion Date"). If no
Holder Conversion Date is specified in a Holder Conversion Notice, the Holder
Conversion Date shall be the date that such Holder Conversion Notice is
deemed delivered hereunder. Subject to Section 4(b) hereof, each Holder
Conversion Notice, once given, shall be irrevocable. If the Holder is
converting less than all of the principal amount represented by the
Debenture(s) tendered by the Holder with the Holder Conversion Notice, or if
a conversion hereunder cannot be effected in full for any reason, the Company
shall honor such conversion to the extent permissible hereunder and shall
promptly deliver to such Holder (in the manner and within the time set forth
in Section 4(b)) a new Debenture for such principal amount as has not been
converted.
(ii) At any time from and after the second anniversary of the
Original Issue Date, all or any portion of the then outstanding principal
amount under this Debenture (plus accrued and unpaid interest thereon) shall
be convertible into Common Stock at the Conversion Price at the option of the
Company; provided, that the Company is not permitted to deliver a Company
Conversion Notice (as defined below) within ten (10) days of issuing any
press release or other public statement relating to such conversion or at any
time when the Underlying Securities Registration Statement is not then
effective or shares of Common Stock are not actively traded on the OTC
Bulletin Board or listed or quoted for trading on a Subsequent Market. The
Company shall effect such conversion by delivering to the Holder a written
notice in the form attached hereto as Exhibit B (the "Company Conversion
Notice"), which Company Conversion Notice, once given, shall be irrevocable.
Each Company Conversion Notice shall specify the principal amount of
Debentures (and accrued but unpaid interest thereon) to be converted. The
Company shall deliver such Company Conversion Notice at least two (2) Trading
Days, but not more than five (5) Trading Days before the Maturity Date or
earlier date of intended conversion (the date that the Company intends to
effect such conversion is hereinafter referred to as the "Company Conversion
Date"). Upon its receipt of a Company Conversion Notice, the Holder shall
surrender the principal amount of Debentures subject thereto to the office of
the Company or of any transfer agent of the Common Stock. If the Company is
converting less than the aggregate principal amount of all Debentures, the
Company shall, upon conversion of the principal amount of Debentures subject
to such Company Conversion Notice and receipt of the Debentures surrendered
for conversion, deliver to the Holder, a replacement Debenture for such
principal amount of Debentures as have not been converted in the manner and
within the time period set forth in Section 4(b). Each of a Holder
Conversion Notice and a Company Conversion Notice is sometimes referred to
herein as a "Conversion Notice," and each of a Holder Conversion Date and a
Company Conversion Date is sometimes referred to herein as a "Conversion
Date."
(b) Not later than three Trading Days after the Conversion Date,
the Company will deliver to the Holder (i) a certificate or certificates
which shall be free of restrictive legends and trading restrictions (other
than those required by Section 3.1(b) of the Purchase Agreement) representing
the number of shares of the Common Stock being acquired upon the conversion
of Debentures, (ii) Debentures in a principal amount equal to the principal
amount of Debentures not converted; (iii) a bank check in the amount of all
accrued and unpaid interest (if the Company has elected to pay accrued
interest in cash), together with all other amounts then due and payable in
accordance with the terms hereof, in respect of Debentures tendered for
conversion and (iv) if the Company has elected and is permitted hereunder to
pay accrued interest in shares of the Common Stock, certificates, which shall
be free of restrictive legends and trading restrictions (other than those
required by Section 3.1(b) of the Purchase Agreement), representing such
number of shares of the Common Stock as equals such interest divided by the
Conversion Price calculated on the Conversion Date; provided, however, that
the Company shall not be obligated to issue certificates evidencing the
shares of the Common Stock issuable upon conversion of the principal amount
of Debentures until Debentures are delivered for conversion to the Company or
the Holder notifies the Company that such Debenture has been mutilated, lost,
stolen or destroyed and complies with Section 9 hereof. If in the case of
any Conversion Notice such certificate or certificates, including for
purposes hereof, any shares of the Common Stock to be issued on the
Conversion Date on account of accrued but unpaid interest hereunder, are not
delivered to or as directed by the Holder by the third Trading Day after a
Conversion Date, the Holder shall be entitled by written notice to the
Company at any time on or before its receipt of such certificate or
certificates thereafter, to rescind such conversion (whether subject to a
Holder or a Company Conversion Notice), in which event the Company shall
immediately return the Debentures tendered for conversion. If the Company
fails to deliver to the Holder such certificate or certificates pursuant to
this Section, including for purposes hereof, any shares of the Common Stock
to be issued on the Conversion Date on account of accrued but unpaid interest
hereunder, prior to the fourth Trading Day after the Conversion Date, the
Company shall pay to such Holder, in cash, as liquidated damages and not as a
penalty, $1,500 for each day thereafter until the Company delivers such
certificates (such amount shall also be due for each Trading Day after the
date that the Holder may rescind such conversion until such date as the
Holder shall have received the return of the principal amount of Debentures
relating to such rescission).
(c) (i) The conversion price (the "Conversion Price") in effect
on any Conversion Date shall be the lesser of (A) $1.06 (the "Initial
Conversion Price") and (B) the Applicable Percentage (as defined in Section
6) multiplied by the Average Price calculated on the Conversion Date. If
(a) an Underlying Securities Registration Statement is not filed on or prior
to the Filing Date (as defined in the Registration Rights Agreement) (if the
Company files such Underlying Securities Registration Statement without
affording the Holder the opportunity to review and comment on the same as
required by Section 3(a) of the Registration Rights Agreement, the Company
shall not be deemed to have satisfied this clause (a)) or (b) the Company
fails to file with the Commission a request for acceleration in accordance
with Rule 12d1-2 promulgated under the Securities Exchange Act of 1934, as
amended, within five (5) Business Days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the Commission that
an Underlying Securities Registration Statement will not be "reviewed" or is
not subject to further review or comment by the Commission, or (c) the
Underlying Securities Registration Statement is not declared effective by the
Commission on or prior to the Effectiveness Date, or (d) such Underlying
Securities Registration Statement is filed with and declared effective by the
Commission but thereafter ceases to be effective as to all Registrable
Securities (as such term is defined in the Registration Rights Agreement) at
any time prior to the expiration of the "Effectiveness Period" (as such term
as defined in the Registration Rights Agreement), without being succeeded by
a subsequent Underlying Securities Registration Statement filed with and
declared effective by the Commission within ten (10) days, or (e) trading in
the Common Stock shall fail to be actively traded on the OTC Bulletin Board
or if the Common Stock shall be suspended or delisted from trading on any
Subsequent Market for any reason for more than three (3) Trading Days, or (f)
the conversion rights of the Holder are suspended for any reason or if the
Holder is not permitted to resell Registrable Securities under the Underlying
Securities Registration Statement, or (g) an amendment to the Underlying
Securities Registration Statement is not filed by the Company with the
Commission within ten (10) days of the Commission's notifying the Company
that such amendment is required in order for the Underlying Securities
Registration Statement to be declared effective (any such failure being
referred to as an "Event," and for purposes of clauses (a), (c) and (f) the
date on which such Event occurs, or for purposes of clause (b) the date on
which such five (5) days period is exceeded, or for purposes of clauses (d)
and (g) the date which such ten (10) day period is exceeded, or for purposes
of clause (e) the date on which such three (3) Trading Day period is
exceeded, being referred to as "Event Date"), the Company shall pay, in cash,
as liquidated damages and not as a penalty, on the Event Date and on the
first day of each month thereafter until the triggering Event is cured, 1.0%
of the aggregate principal amount of Debentures then outstanding.
(ii) If the Company, at any time while any Debentures are
outstanding, (a) shall pay a stock dividend or otherwise make a distribution
or distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of the Common Stock, (b) subdivide
outstanding shares of the Common Stock into a larger number of shares, (c)
combine outstanding shares of the Common Stock into a smaller number of
shares, or (d) issue by reclassification of shares of the Common Stock any
shares of capital stock of the Company, the Initial Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares
of the Common Stock (excluding treasury shares, if any) outstanding before
such event and of which the denominator shall be the number of shares of the
Common Stock outstanding after such event. Any adjustment made pursuant to
this Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date
in the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while any Debentures are
outstanding, shall issue rights or warrants to all holders of the Common
Stock (and not to the Holder) entitling them to subscribe for or purchase
shares of the Common Stock at a price per share less than the Per Share
Market Value of the Common Stock at the record date mentioned below, the
Initial Conversion Price shall be multiplied by a fraction, of which the
denominator shall be the number of shares of the Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such rights
or warrants plus the number of additional shares of the Common Stock offered
for subscription or purchase, and of which the numerator shall be the number
of shares of the Common Stock (excluding treasury shares, if any) outstanding
on the date of issuance of such rights or warrants plus the number of shares
which the aggregate offering price of the total number of shares so offered
would purchase at such Per Share Market Value. Such adjustment shall be made
whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such rights or warrants. However, upon the expiration of
any right or warrant to purchase shares of the Common Stock the issuance of
which resulted in an adjustment in the Initial Conversion Price pursuant to
this Section, if any such right or warrant shall expire and shall not have
been exercised, the Initial Conversion Price shall immediately upon such
expiration be recomputed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting any other
adjustments in the Initial Conversion Price made pursuant to the provisions
of this Section 4 after the issuance of such rights or warrants) had the
adjustment of the Initial Conversion Price made upon the issuance of such
rights or warrants been made on the basis of offering for subscription or
purchase only that number of shares of the Common Stock actually purchased
upon the exercise of such rights or warrants actually exercised.
(iv) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of the Common Stock (and not to
the Holder) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security, then in each such case the Initial
Conversion Price at which Debentures shall thereafter be convertible shall be
determined by multiplying the Initial Conversion Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be the
Per Share Market Value of the Common Stock determined as of the record date
mentioned above, and of which the numerator shall be such Per Share Market
Value of the Common Stock on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness
so distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith; provided, however, that
in the event of a distribution exceeding ten percent (10%) of the net assets
of the Company, such fair market value shall be determined by a nationally
recognized or major regional investment banking firm or firm of independent
certified public accountants of recognized standing (which may be the firm
that regularly examines the financial statements of the Company) (an
"Appraiser") selected in good faith by the holders of a majority in interest
of Debentures then outstanding; and provided, further, that the Company,
after receipt of the determination by such Appraiser shall have the right to
select an additional Appraiser, in good faith, in which case the fair market
value shall be equal to the average of the determinations by each such
Appraiser. In either case the adjustments shall be described in a statement
provided to the holders of Debentures of the portion of assets or evidences
of indebtedness so distributed or such subscription rights applicable to one
share of the Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.
(v) In case of any reclassification of the Common Stock or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, the Holder of this Debenture shall
have the right thereafter to, at its option, (A) convert the then outstanding
principal amount, together with all accrued but unpaid interest and any other
amounts then owing hereunder in respect of this Debenture only into the
shares of stock and other securities, cash and property receivable upon or
deemed to be held by holders of the Common Stock following such
reclassification or share exchange, and the Holder shall be entitled upon
such event to receive such amount of securities, cash or property as the
shares of the Common Stock of the Company into which the then outstanding
principal amount, together with all accrued but unpaid interest and any other
amounts then owing hereunder in respect of this Debenture could have been
converted immediately prior to such reclassification or share exchange would
have been entitled or (B) require the Company to prepay, from funds legally
available therefor at the time of such prepayment, the aggregate of its
outstanding principal amount of Debentures, plus all interest and other
amounts due and payable thereon, at a price determined in accordance with
Section 3(b). The entire prepayment price shall be paid in cash. This
provision shall similarly apply to successive reclassifications or share
exchanges.
(vi) All calculations under this Section 4 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
(vii) Whenever the Initial Conversion Price is adjusted
pursuant to any of Section 4(c)(ii) - (v), the Company shall promptly mail to
each Holder of Debentures a notice setting forth the Initial Conversion Price
after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
(viii) If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common
Stock; or
C. the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital
stock of any class or of any rights; or
D. the approval of any stockholders of the Company
shall be required in connection with any
reclassification of the Common Stock of the Company,
any consolidation or merger to which the Company is
a party, any sale or transfer of all or
substantially all of the assets of the Company, of
any compulsory share of exchange whereby the Common
Stock is converted into other securities, cash or
property; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up
of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of the Debentures, and shall cause to be mailed
to the Holder at its last addresses as it shall appear upon the stock books
of the Company, at least 30 calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date
as of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined
or (y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record
shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, however,
that the failure to mail such notice or any defect therein or in the mailing
thereof shall not affect the validity of the corporate action required to be
specified in such notice. The Holder is entitled to convert the Debentures
during the 30-day period commencing the date of such notice to the effective
date of the event triggering such notice.
(d) The Company covenants that it will at all times reserve and
keep available out of its authorized and unissued shares of the Common Stock
solely for the purpose of issuance upon conversion of the Debentures and
payment of interest on the Debentures, each as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the Holder, not less than such number of shares of the Common
Stock as shall (subject to any additional requirements of the Company as to
reservation of such shares set forth in the Purchase Agreement) be issuable
(taking into account the adjustments and restrictions of Section 4(c)) upon
the conversion of the outstanding principal amount of the Debentures and
payment of interest hereunder. The Company covenants that all shares of the
Common Stock that shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid, nonassessable and, if the Underlying
Securities Registration Statement has been declared effective under the
Securities Act, freely tradeable.
(e) Upon a conversion hereunder the Company shall not be required
to issue stock certificates representing fractions of shares of the Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Per Share Market Value at such time.
If the Company elects not, or is unable, to make such a cash payment, the
holder shall be entitled to receive, in lieu of the final fraction of a
share, one whole share of Common Stock.
(f) The issuance of certificates for shares of the Common Stock on
conversion of the Debentures shall be made without charge to the Holder
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the
Company shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate
upon conversion in a name other than that of the Holder of such Debentures so
converted and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(g) Any and all notices or other communications or deliveries to
be provided by the Holder, including, without limitation, any Conversion
Notice, shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service or sent by certified or
registered mail, postage prepaid, addressed to the Company, at 0000 00xx
Xxxxxx XX, Xxxxx 000, Xxxxxxxxxx, XX 00000 (facsimile number (000) 000-0000),
attention Chief Financial Officer, or such other address or facsimile number
as the Company may specify for such purposes by notice to the Holder
delivered in accordance with this Section. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be
in writing and delivered personally, by facsimile, sent by a nationally
recognized overnight courier service or sent by certified or registered mail,
postage prepaid, addressed to each Holder of the Debentures at the facsimile
telephone number or address of such Holder appearing on the books of the
Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the holder. Any notice or other communication
or deliveries hereunder shall be deemed given and effective on the earliest
of (i) the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile telephone number specified in this Section
prior to 7:00 p.m. (New York City time), (ii) the date after the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section later than 7:00 p.m.
(New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) four days after deposit in the United States mail,
(iv) the Business Day following the date of mailing, if send by nationally
recognized overnight courier service, or (v) upon actual receipt by the party
to whom such notice is required to be given.
Section 5. Optional Prepayment.
(a) The Company shall have the right, exercisable at any time upon
twenty (20) Trading Days prior written notice to the Holder (the "Optional
Prepayment Notice"), to prepay, from funds legally available therefor at the
time of such prepayment, all or any portion of the outstanding principal
amount of the Debentures which have not previously been repaid or for which
Conversion Notices have not previously been delivered hereunder, at a price
equal to the Optional Prepayment Price (as defined below). Any such
prepayment by the Company shall be in cash and shall be free of any claim of
subordination. The Holder shall have the right to tender, and the Company
shall honor, Conversion Notices delivered prior to the expiration of the
twentieth (20th) Trading Day after receipt by the Holder of an Optional
Prepayment Notice for such Debentures (such date, the "Optional Prepayment
Date").
(b) If any portion of the Optional Prepayment Price shall not be
paid by the Company by the Optional Prepayment Date, the Optional Prepayment
Price shall be increased by 15% per annum (to accrue daily) until paid (which
amount shall be paid as liquidated damages and not as a penalty). In
addition, if any portion of the optional Prepayment Price remains unpaid
through the expiration of the Optional Prepayment Date, the Holder subject to
such prepayment may elect by written notice to the Company to either (i)
demand conversion in accordance with the formula and the time period therefor
set forth in Section 4 of any portion of the principal amount of Debentures
for which the Optional Prepayment Price (including interest therefor), plus
accrued liquidated damages thereof, has not been paid in full (the "Unpaid
Prepayment Principal Amount"), in which event the applicable Per Share Market
Value shall be the lower of the Per Share Market Value calculated on the
Optional Prepayment Date and the Per Share Market Value as of the Holder's
written demand for conversion, or (ii) invalidate ab initio such optional
redemption, notwithstanding anything herein contained to the contrary. If
the Holder elects option (i) above, the Company shall, within three (3)
Trading Days of the date such election is deemed delivered hereunder, deliver
to the Holder the shares of Common Stock issuable upon conversion of the
Unpaid Prepayment Amount subject to such conversion demand and otherwise
perform its obligations hereunder with respect thereto; or, if the Holder
elects option (ii) above, the Company shall promptly, and in any event not
later than three (3) Trading Days from receipt of notice of such election,
return to the Holder new Debentures for the full Unpaid Prepayment Principal
Amount. If, upon an election under option (i) above, the Company fails to
deliver the shares of Common Stock issuable upon conversion of the Unpaid
Prepayment Principal Amount within four (4) Trading Days of the date that
such election is deemed delivered hereunder, the Company shall pay to the
Holder in cash, as liquidated damages and not as a penalty, $1,500 per day
until the Company delivers such Common Stock to the Holder.
(c) The "Optional Prepayment Price" for any Debentures shall equal
the sum of (i) the principal amount of Debentures to be prepaid, plus all
accrued and unpaid interest thereon, divided by the Conversion Price on (x)
the Optional Prepayment Date or (y) the date the Optional Prepayment Price is
paid in full, whichever is less, multiplied by the Average Price on (x) the
Optional Prepayment Date or (y) the date the Optional Prepayment Price is
paid in full, whichever is greater, and (ii) all other amounts, expenses,
costs and liquidated damages due in respect of such principal amount.
Section 6. Definitions. For the purposes hereof, the following
terms shall have the following meanings:
"Applicable Percentage" means (i) 75% for any conversion honored
prior to the 180th day after the Original Issue Date and (ii) 70% for any
conversion honored thereafter. For purposes hereof, a conversion is deemed
to have been honored when the shares of Common Stock issuable in respect of
such conversion are received by the Holder.
"Average Price" on any date means the average Per Share Market
Value for the five (5) Trading Days immediately preceding such date.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government
action to close.
"Common Stock" means the common stock, $.00025 par value per share,
of the Company and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"Mandatory Prepayment Amount" for any Debentures shall equal the
sum of (i) the principal amount of Debentures to be prepaid, plus all accrued
and unpaid interest thereon, divided by the Conversion Price on (x) the date
the Mandatory Prepayment Amount is demanded or (y) the date the Mandatory
Prepayment Amount is paid in full, whichever is less, multiplied by the
Average Price on (x) the date the Mandatory Prepayment Amount is demanded or
(y) the date the Mandatory Prepayment Amount is paid in full, whichever is
greater, and (ii) all other amounts, costs, expenses and liquidated damages
due in respect of such Debentures.
"Original Issue Date" shall mean the date of the first issuance of
any Debentures regardless of the number of transfers of any Debenture and
regardless of the number of instruments which may be issued to evidence such
Debenture.
"Per Share Market Value" on any particular date means (a) the
closing bid price per share of the Common Stock on such date as quoted by
Bloomberg Information Services, Inc. ("Bloomberg"), or similar organizations
or agencies succeeding to its functions of reporting prices, or (b) if the
Common Stock is no longer reported by Bloomberg, or such similar
organizations or agencies, such closing bid price per share shall be
determined by reference to "Pink Sheet" quotes for the relevant conversion
period as determined in good faith by the Holder or (c) if the Common Stock
is not then publicly traded, the fair market value of a share of Common Stock
as determined by an appraiser selected in good faith by the Holders of a
majority in interest of the Debentures (the Company, after receipt of the
determination by such appraiser, shall have the right to select an additional
appraiser, in which case, the fair market value shall be equal to the average
of the determinations by each such appraiser).
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Purchase Agreement" means the Convertible Debenture Purchase
Agreement, dated as of the Original Issue Date, between the Company and the
original Holder of Debentures, as amended, modified or supplemented from time
to time in accordance with its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, between the Company and the
original Holder of Debentures, as amended, modified or supplemented from time
to time in accordance with its terms.
"Trading Day" means (a) a day on which the Common Stock is traded
on the Nasdaq Stock Market or other stock exchange or market on which the
Common Stock has been listed, or (b) if the Common Stock is not listed on the
Nasdaq Stock Market or any stock exchange or market, a day on which the
Common Stock is traded on the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted on the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding its functions of reporting prices);
provided, however, that in the event that the Common Stock is not listed or
quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean
any day except Saturday, Sunday and any day which shall be a legal holiday or
a day on which banking institutions in the State of New York are authorized
or required by law or other government action to close.
"Underlying Shares" means the shares of Common Stock into which the
Debentures are convertible in accordance with the terms hereof and the
Purchase Agreement.
"Underlying Securities Registration Statement" means an amended
registration statement meeting the requirements set forth in the Registration
Rights Agreement, covering, among other things, the resale of the Initial
Registrable Securities (as defined in the Registration Rights Agreement ) and
the Underlying Shares and naming the Holder as a "selling stockholder"
thereunder, provided, however, that in the event that the Initial
Registration Statement (as defined in the Registration Rights Agreement) is
declared effective by the Commission on or prior to the Filing Date (as
defined in the Registration Rights Agreement), the term "Underlying
Securities Registration Statement" shall mean a registration statement
meeting the requirements set forth in the Registration Rights Agreement,
covering the Underlying Shares and naming the Holder as a "selling
stockholder" thereunder.
Section 7. Except as expressly provided herein, no provision of
this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, interest and liquidated
damages (if any) on, this Debenture at the time, place, and rate, and in the
coin or currency, herein prescribed. This Debenture is a direct obligation
of the Company. This Debenture ranks pari passu with all other Debentures
now or hereafter issued under the terms set forth herein. The Company may
only voluntarily prepay the outstanding principal amount on the Debentures in
accordance with Section 5 hereof.
Section 8. This Debenture shall not entitle the Holder 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, unless and to the extent converted into shares of
Common Stock in accordance with the terms hereof.
Section 9. If this Debenture shall be mutilated, lost, stolen
or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu
of or in substitution for a lost, stolen or destroyed debenture, a new
Debenture for the principal amount of this Debenture so mutilated, lost,
stolen or destroyed but only upon receipt of evidence of such loss, theft or
destruction of such Debenture, and of the ownership hereof, and indemnity, if
requested, all reasonably satisfactory to the Company.
Section 10. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflicts of laws thereof. The Company hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of
New York, borough of Manhattan, 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, or that such suit, action or
proceeding is improper. The Company hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by receiving a copy thereof sent to the Company at the
address in effect for notices to it under this instrument 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 manner permitted by law.
Section 11. Any waiver by the Company or the Holder of a breach
of any provision of this 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 this Debenture. The failure of the Company or the Holder to
insist upon strict adherence to any term of this 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
this Debenture. Any waiver must be in writing.
Section 12. If any provision of this Debenture is invalid,
illegal or unenforceable, the balance of this 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 13. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day (or, if such next succeeding Business Day
falls in the next calendar month, the preceding Business Day in the
appropriate calendar month).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Company has caused this Debenture to be
duly executed by a duly authorized officer as of the date first above
indicated.
EUROTECH, LTD.
By:________________________________
Name:
Title:
Attest:
By:___________________________
Name:
Title:
EXHIBIT A
EUROTECH, LTD.
NOTICE OF CONVERSION
AT THE ELECTION OF THE HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert the above Debenture into shares of
Common Stock, $.00025 par value per share (the "Common Stock"), of EUROTECH,
LTD. (the "Company") according to the conditions hereof, as of the date
written below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the holder for any conversion, except for such transfer taxes, if
any.
Conversion calculations: ___________________________________________________
Date to Effect Conversion
___________________________________________________
Principal Amount of Debentures to be Converted
___________________________________________________
Number of shares of Common Stock to be Issued
___________________________________________________
Applicable Conversion Price
___________________________________________________
Signature
___________________________________________________
Name
___________________________________________________
Address
EXHIBIT B
EUROTECH, LTD.
NOTICE OF CONVERSION
AT THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of EUROTECH, LTD. (the "Company")
hereby notifies the addressee hereof that the Company hereby elects to
exercise its right to convert the above Debenture into shares of Common
Stock, par value $.00025 per share (the "Common Stock"), of the Company
according to the conditions hereof, as of the date written below. No fee
will be charged to the Holder for any conversion hereunder, except for such
transfer taxes, if any, which may be incurred by the Company if shares are to
be issued in the name of a person other than the person to whom this notice
is addressed.
Conversion calculations: ___________________________________________________
Date to Effect Conversion
___________________________________________________
Principal Amount of Debentures to be Converted
___________________________________________________
Applicable Conversion Price
___________________________________________________
Amount of Interest due on the Principal Amount of
Debentures to be Converted
___________________________________________________
Number of Shares of Common Stock
outstanding at close of trading
on Conversion Date
___________________________________________________
Signature
___________________________________________________
Name:
___________________________________________________
Address:
