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. 2 U.S. $1,500,000
EUROTECH, LTD.
8% CONVERTIBLE DEBENTURE DUE FEBRUARY 23, 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 February 23, 2001 (the "Debentures"), in an aggregate principal
amount of $3,000,000.
FOR VALUE RECEIVED, the Company promises to pay to JNC OPPORTUNITY FUND
LTD., or registered assigns (the "Holder"), the principal sum of One Million
Five Hundred Thousand Dollars ($1,500,000), on or prior to February 23, 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 March 31, 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);
-2-
(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
-3-
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;
or
(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).
(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 upon the earlier to occur of (1) the date an Underlying Securities
Registration Statement is declared effective by the Commission and (2) the 90th
day after the Original Issue Date, and prior to the close of business on the
Maturity Date. 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
-4-
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
-5-
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). If the Company fails to deliver to the Holder such certificate or
certificates pursuant to this Section prior to the 20th day after the Conversion
Date, the Company shall, upon notice from the Holder, prepay such portion of the
aggregate of the principal amount of Debentures then held by such Xxxxxx, as
requested by such Holder, for the Mandatory Prepayment Amount, in cash. If any
portion of the Mandatory Prepayment Amount pursuant to this Section is not paid
within seven days after notice therefor is deemed delivered hereunder, the
Company will pay interest on the Mandatory Prepayment Amount at a rate of 15%
per annum (to accrue daily), in cash to such Holder, accruing from such seventh
day until the Mandatory Prepayment Amount, plus all accrued interest thereon, is
paid in full.
(c) (i) The conversion price (the "Conversion Price") in effect on
any Conversion Date shall be the lesser of (A) $2.62 (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
-6-
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
-7-
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
-8-
(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
-9-
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
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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
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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) 80% for any conversion honored
prior to the 180th day after the Original Issue Date, (ii) 75% for any
conversion honored on or after the 180th day and prior to the 360th after the
original Issue Date, and (iii) 70% for any conversion honored after the 360th
day after the Original Issue Date. 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.
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"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 governmental 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
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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
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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).
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:
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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:
