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CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
between
EUROTECH, LTD.
and
JNC OPPORTUNITY FUND LTD.
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February 23, 1998
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CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, dated as of February 23, 1998
(this "Agreement"), between Eurotech, Ltd., a corporation organized under the
laws of the District of Columbia (the "Company"), and JNC Opportunity Fund Ltd.,
a corporation organized under the laws of the Cayman Islands (the "Purchaser").
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchaser and the Purchaser desires
to purchase an aggregate principal amount of $3,000,000 of the Company's 8%
Convertible Debentures, due February 23, 2001 (the "Debentures"), which are
convertible into shares of the Company's common stock, par value $.00025 per
share (the "Common Stock").
IN CONSIDERATION of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF DEBENTURES; CLOSING
1.1 The Closing.
(a) The Closing. (i) Subject to the terms and conditions set forth
in this Agreement, the Company shall issue and sell to the Purchaser and the
Purchaser shall purchase the Debentures for an aggregate purchase price of
$3,000,000. The closing of the purchase and sale of the Debentures (the
"Closing") shall take place at the offices of Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx
& Xxxxxx LLP (the "Escrow Agent"), 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, immediately following the execution hereof or such later date as the
parties shall agree. The date of the Closing is hereinafter referred to as the
"Closing Date."
(ii) Prior to the Closing, the parties shall deliver or shall
cause to be delivered to the Escrow Agent such items as are required to be
delivered by them in accordance with and subject to the terms and conditions of
the Escrow Agreement, dated as of the date hereof, by and among the Company, the
Purchaser and the Escrow Agent (the "Escrow Agreement"), including the
following: (A) the Company shall deliver (1) Debentures, registered in the name
of the Purchaser, with an aggregate principal amount of $3,000,000, (2) the
Warrant (as defined in Section 3.16), and (3) the legal opinions of Ruffa &
Ruffa, P.C. and Xxxxxxxx Xxxxx Xxxxxxxx Xxxx & Ballon LLP, substantially in the
form of Exhibit C ("Legal Opinions"); (B)
the Purchaser shall deliver $3,000,000; and (C) each party hereto shall deliver
all other executed instruments, agreements and certificates as are required to
be delivered hereunder by or on their behalf at the Closing.
1.2 Form of Debentures. The Debentures shall be in the form of
Exhibit A.
For purposes of this Agreement, "Average Price," "Business Day,"
"Conversion Price," "Original Issue Date," "Conversion Date" and "Trading Day"
shall have the meanings set forth in the Debentures.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) Organization and Qualification. The Company is a corporation,
duly incorporated, validly existing and in good standing under the laws of the
District of Columbia, with the requisite corporate power and authority to own
and use its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than as set forth in Schedule
2.1(a) attached hereto (collectively, the "Subsidiaries"). Each of the
Subsidiaries is a corporation, duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, with the full
corporate power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
could not, individually or in the aggregate, (x) adversely affect the legality,
validity or enforceability of this Agreement, the Escrow Agreement, the
Debentures, the Warrant or the Registration Rights Agreement, dated the date
hereof, among the Company and the Purchaser (the "Registration Rights Agreement"
and, together with this Agreement, the Escrow Agreement, the Debentures and the
Warrant, the "Transaction Documents"), (y) have a material adverse effect on the
results of operations, assets, prospects, or financial condition of the Company
and the Subsidiaries, taken as a whole, or (z) adversely impair the Company's
ability to perform fully on a timely basis
its obligations under any Transaction Document (any of the foregoing, a
"Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company. Each of the Transaction Documents has been duly executed by
the Company and when delivered in accordance with the terms hereof shall
constitute the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its respective certificate of incorporation, by-laws or other
charter documents.
(c) Capitalization. The authorized, issued and outstanding capital
stock of the Company is set forth in Schedule 2.1(c). No shares of Common Stock
are entitled to preemptive or similar rights, nor is any holder of the Common
Stock entitled to preemptive or similar rights arising out of any agreement or
understanding with the Company by virtue of any of the Transaction Documents.
Except as disclosed in Schedule 2.1(c), there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or, except as a result of the purchase and sale of the
Debentures and Warrant hereunder, securities, rights or obligations convertible
into or exchangeable for, or giving any person any right to subscribe for or
acquire any shares of Common Stock, or contracts, commitments, understandings,
or arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. To the knowledge of the Company,
except as specifically disclosed in the SEC Documents (as defined below) or
Schedule 2.1(c), no Person (as defined below) beneficially owns (as determined
pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) or has the right to acquire by agreement with or
by obligation binding upon the Company, beneficial ownership of in excess of 5%
of the Common Stock. Except as specified in Schedule 6(b) to the Registration
Rights Agreement, there are no agreements or arrangements under which the
Company or any Subsidiary is obligated to register the sale
of any of their securities under the Securities Act of 1933, as amended (the
"Securities Act"). A "Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.
(d) Issuance of Debentures and Warrant. The Debentures and the
Warrant are duly authorized, and, when issued in accordance with the terms
hereof, shall be validly issued, fully paid and nonassessable, free and clear of
all liens, encumbrances and rights of first refusals of any kind (collectively,
"Liens"). The Company has and at all times while the Debentures and the Warrant
are outstanding will maintain an adequate reserve of duly authorized shares of
Common Stock to enable it to perform its conversion, exercise and other
obligations under this Agreement, the Warrant and the Debentures and in no
circumstances shall such reserved and available shares of Common Stock be less
than the sum of (i) two times the number of shares of Common Stock as would be
issuable upon conversion in full of the Debentures, assuming such conversion
were effected on the Original Issue Date or the Filing Date (as defined in the
Registration Rights Agreement), whichever yields a lower Conversion Price, (ii)
the number of shares of Common Stock as are issuable as payment of interest on
the Debentures, and (iii) the number of shares of Common Stock as are issuable
upon exercise in full of the Warrant. The shares of Common Stock issuable upon
conversion of the Debentures, as payment of interest in respect thereof and upon
exercise of the Warrant are sometimes referred to herein as the "Underlying
Shares," and the Debentures, Warrant and Underlying Shares are, collectively,
the "Securities." When issued in accordance with the terms of the Debentures and
the Warrant, the Underlying Shares will be duly authorized, validly issued,
fully paid and nonassessable, free and clear of all Liens.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its certificate of incorporation, bylaws or other
charter documents (each as amended through the date hereof) or (ii) subject to
obtaining the consents referred to in Section 2.1(f), conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument (evidencing a Company debt or otherwise) to which the Company is a
party or by which any property or asset of the Company is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or
other restriction of any court or governmental authority to which the Company is
subject (including Federal and state securities laws and regulations), or by
which any property or asset of the Company is bound or affected, except in the
case of each of clauses (ii) and (iii), as could not, individually or in the
aggregate, have or result in a Material Adverse Effect. The business of the
Company is not being conducted in violation of any law, ordinance or regulation
of any governmental authority, except for violations which, individually or in
the aggregate, do not have a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set forth in
Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, or make any filing or
registration with, any court or other Federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents other than
(i) the filing of a pre-effective amendment to the Company's Registration
Statement on Form S-1 promulgated under the Securities Act (Registration
Statement No. 333-26673) (the "Initial Registration Statement"), previously
filed with the Securities and Exchange Commission (the "Commission"), which
amendment shall register for resale by the Purchaser of the Underlying Shares
(such pre-effective amendment, the "Underlying Securities Registration
Statement"), provided, however that in the event the Initial Registration
Statement has been declared effective by the Commission on or prior to the
Filing Date (as such term is defined in the Registration Rights Agreement), the
term Underlying Securities Registration Statement shall mean a registration
statement on Form S-1 to be filed with the Commission which shall register the
Underlying Shares for resale by the Purchaser, (ii) the application for the
listing of the Underlying Shares on any national securities exchange or market
on which the Common Stock is then listed and (iii) in all other cases, where the
failure to obtain such consent, waiver, authorization or order, or to give or
make such notice or filing, could not have or result in, individually or in the
aggregate, a Material Adverse Effect (together with the consents, waivers,
authorizations, orders, notices and filings referred to in Schedule 2.1(f), the
"Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed in the
Disclosure Materials (as hereinafter defined), there is no action, suit, notice
of violation, proceeding or investigation pending or, to the best knowledge of
the Company, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (Federal, state,
county, local or foreign) which (i) adversely affects or challenges the
legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii)
could, individually or in the aggregate, have or result in a Material Adverse
Effect.
(h) No Default or Violation. Neither the Company nor any Subsidiary
(i) is in default under or in violation of (and no event has occurred which has
not been waived which, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound, (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or regulation
of any governmental authority, except as could not individually or in the
aggregate, have or result in, individually or in the aggregate, a Material
Adverse Effect.
(i) Private Offering. Assuming the accuracy of the representations
and warranties of the Purchaser set forth in Section 2.2(b)-(f), the offer,
issuance and sale of the Securities to the Purchaser as contemplated hereby are
exempt from the registration requirements of the Securities Act. Neither the
Company nor any Person acting on its behalf has taken or will take any action
which might subject the offering, issuance or sale of the Securities to the
registration requirements of the Securities Act.
(j) SEC Documents. Except as set forth in Schedule 2.1(j), since
April 14, 1997, the Company has filed all reports required to be filed by it
under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof
(such reports, the "SEC Documents" and, together with the Schedules to this
Agreement and other documents and information furnished by or on behalf of the
Company at any time prior to the Closing, the "Disclosure Materials") on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Documents prior to the expiration of any such extension. As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto. Such financial statements have
been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved, except as
may be otherwise specified in such financial statements or the notes thereto,
and fairly present in all material respects the financial position of the
Company as of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited statements,
to normal year-end audit adjustments. Since the date of the financial statements
included in the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1997, (a) there has been no event, occurrence or development that
has had or that could have or result in a Material Adverse Effect, (b) the
Company has not incurred any liabilities (contingent or otherwise) other than
(x) liabilities incurred in the ordinary course of business consistent with past
practice and (y) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP, and (c) the Company has not altered its
method of accounting or the identity of its auditors.
(k) Investment Company. The Company is not, and is not an Affiliate
of an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
(l) Certain Fees. Except for fees payable to CDC Consulting, Inc.,
no fees or commissions will be payable by the Company to any broker, financial
advisor, finder, investment banker, or bank with respect to the transactions
contemplated hereby. The Purchaser shall have no obligation with respect to such
fees or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this Section that may be due in connection with
the transactions contemplated hereby. The Company shall indemnify and hold
harmless the Purchaser, its respective employees, officers, directors, agents,
and partners, and its respective Affiliates (as such term is defined under Rule
405 promulgated under the Securities Act), from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees.
(m) Solicitation Materials. The Company has not (i) distributed any
offering materials in connection with the offering and sale of the Securities
other than the Disclosure Materials and any amendments and supplements thereto
or (ii) solicited any offer to buy or sell the Securities by means of any form
of general solicitation or advertising.
(n) Exclusivity. The Company shall not issue and sell Debentures to
any Person other than the Purchaser.
(o) Listing and Maintenance Requirements Compliance. The Company has
not in the two years preceding the date hereof received written notice from any
stock exchange, market or trading facility on which the Common Stock is or has
been listed or quoted to the effect that the Company is not in compliance with
the listing, maintenance or other requirements of such exchange, market, trading
or quotation facility. The Company has no reason to believe that it does not now
or will not in the future meet any such requirements.
(p) Patents and Trademarks. The Company has, or has rights to use,
all patents, patent applications, trademarks, trademark applications, service
marks, trade names, copyrights, licenses and rights which are necessary for use
in connection with its business and which the failure to so have would have a
Material Adverse Effect (collectively, the "Intellectual Property Rights"). To
the best knowledge of the Company, there is no existing infringement of any of
the Intellectual Property Rights.
(r) Disclosure. All information relating to or concerning the
Company set forth in the Transaction Documents or provided to the Purchaser or
its respective representatives and counsel in connection with the transactions
contemplated hereby (including, without limitation, the letter, dated February
18, 1998, of Ruffa & Ruffa to the Purchaser regarding the use of the proceeds
from the issuance and sale of the Company's 8% Convertible Debentures due
November 27, 2000) is true and correct in all material respects and does not
fail to state any material fact necessary in order to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading. The Company confirms that it has not provided to the Purchaser or
any of its representatives, agents or counsel any information that constitutes
or might constitute material nonpublic information. The Company understands and
confirms that the Purchaser shall be relying on the foregoing representation in
effecting transactions in securities of the Company.
2.2 Representations and Warranties of the Purchaser. The Purchaser hereby
makes the following representations and warranties to the Company.
(a) Organization; Authority. The Purchaser is an entity organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents and to
carry out its obligations thereunder. The acquisition of the Securities to be
acquired hereunder by the Purchaser has been duly authorized by all necessary
action on the part of the Purchaser. Each of this Agreement, the Registration
Rights Agreement and the Escrow Agreement has been duly executed and
delivered by the Purchaser and constitutes the valid and legally binding
obligation of the Purchaser, enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity.
(b) Investment Intent. The Purchaser is acquiring the Securities for
its own account for investment purposes only and not with a view to or for
distributing or reselling such Securities or any part thereof or interest
therein, without prejudice, however, to the Purchaser's right, subject to the
provisions of this Agreement and the Registration Rights Agreement, at all times
to sell or otherwise dispose of all or any part of such Securities pursuant to
an effective registration statement under the Securities Act and in compliance
with applicable state securities laws or under an exemption from such
registration.
(c) Purchaser Status. At the time the Purchaser was offered the
Securities, it was, at the date hereof, it is, and at the Closing Date, it will
be, an "accredited investor" as defined in Rule 501(a) under the Securities Act.
(d) Experience of Purchaser. The Purchaser either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. The Purchaser
acknowledges that the Securities are speculative investments and involve a high
degree of risk and the Purchaser is able to bear the economic risk of an
investment in the Securities to be acquired hereunder by the Purchaser, and, at
the present time, is able to afford a complete loss of such investment.
(f) Access to Information. The Purchaser acknowledges receipt of the
Disclosure Materials and further acknowledges that it has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Securities, and the merits and risks of investing in the
Securities, (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment, and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision with respect
to the investment and to verify the accuracy and completeness of the information
contained in the Disclosure Materials. Neither such inquiries nor any other
investigation conducted by or on behalf of the Purchaser or its representatives
or counsel shall modify, amend or affect the Purchaser's right to rely on the
truth, accuracy and completeness of the Disclosure Materials and the Company's
representations and warranties contained in the Transaction Documents.
(g) Reliance. The Purchaser understands and acknowledges that (i)
the Securities to be acquired by it hereunder are being offered and sold to it
without registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act and (ii) the
availability of such exemption, depends in part on, and the Company will rely
upon the accuracy and truthfulness of, the foregoing representations and the
Purchaser hereby consents to such reliance.
The Company acknowledges and agrees that the Purchaser make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed of pursuant
to an effective registration statement under the Securities Act, to the Company
or pursuant to an available exemption from or in a transaction not subject to
the registration requirements thereof. In connection with any transfer of any
Securities other than pursuant to an effective registration statement or to the
Company, the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration under the Securities Act.
Notwithstanding the foregoing, the Company hereby consents to and agrees to
register any transfer by the Purchaser to an Affiliate of the Purchaser, or any
transfers among any such Affiliates provided in such case the transferee
certifies to the Company that it is an "accredited investor" as defined in Rule
501(a) under the Securities Act and that it is acquiring any such Securities in
accordance with the representation provided by the original Purchaser in Section
2.2(b). Each such transferee shall have the rights of the
Purchaser under this Agreement and the Registration Rights Agreement.
(b) The Purchaser agrees to the imprinting, so long as is required
by this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] 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.
[FOR DEBENTURES ONLY] THIS DEBENTURE IS SUBJECT TO CERTAIN RESTRICTIONS ON
CONVERSION SET FORTH IN SECTION 3.8 OF A CONVERTIBLE DEBENTURE PURCHASE
AGREEMENT, DATED AS OF FEBRUARY 23, 1998, BETWEEN EUROTECH, LTD. (THE
"COMPANY") AND THE ORIGINAL HOLDER HEREOF. A COPY OF THAT AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
Underlying Shares shall not contain any legend if conversion of
Debentures, exercise of Warrant or other issuances of Underlying Shares in as
contemplated hereby, as the case may be, occurs at any time while an Underlying
Securities Registration Statement is effective under the Securities Act or, in
the event there is not an effective Underlying Securities Registration Statement
at such time, if in the opinion of counsel to the Company such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company agrees that it will provide each Purchaser, upon request, with a
certificate or certificates representing Underlying Shares, free from such
legend at such time as such legend is no longer required hereunder. The Company
may not make any notation on its records or give instructions to any transfer
agent of the Company which enlarge the restrictions of transfer set forth in
this Section 3.1(b).
3.2 Acknowledgement of Dilution. The Company acknowledges that the
issuance of Underlying Shares upon (i) conversion of the Debentures and as
payment of interest thereon and (ii) exercise of the Warrant may result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges
that its obligation to issue Underlying Shares in accordance with the
terms of the Debentures and the Warrant is unconditional and absolute regardless
of the effect of any such dilution.
3.3 Furnishing of Information. As long as the Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act. If at any time prior to the date on which the Purchaser may resell
all of their Underlying Shares without volume restrictions pursuant to Rule
144(k) promulgated under the Securities Act (as determined by counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent for the benefit of and enforceable by
the Purchaser) the Company is not required to file reports pursuant to Section
13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the Purchaser
and make publicly available in accordance with Rule 144(c) promulgated under the
Securities Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be included
in reports required by Section 13(a) or 15(d) of the Exchange Act in the time
period that such filings would have been required to have been made under the
Exchange Act. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including the legal
opinion referenced above in this Section. Upon the request of any such Person,
the Company shall deliver to such Person a written certification of a duly
authorized officer as to whether it has complied with such requirements. In
connection with any future access or diligence of the Company by the Purchaser,
the Company agrees that its will not furnish to the Purchaser any non-public
information unless it first discloses in writing that such information is of
such character and the Purchaser thereafter agrees to receive such information.
3.4 Use of Disclosure Materials. The Company consents to the use of the
Disclosure Materials (which for purposes of the non-SEC Document Disclosure
Materials shall take into account any amendments and supplements thereto) and
any information provided by or on behalf of the Company pursuant to Section 3.3
by the Purchaser in connection with resales of the Securities other than
pursuant to an effective registration statement.
3.5 Blue Sky Laws. In accordance with the Registration Rights Agreement,
the Company shall qualify and obtain exemptions
for the Underlying Shares under the securities or Blue Sky laws of such
jurisdictions as the Purchaser may request and shall continue such qualification
or exemption at all times until the Purchaser notify the Company in writing that
it no longer owns Securities; provided, however, that neither the Company nor
its Subsidiaries shall be required in connection therewith to qualify as a
foreign corporation where they are not now so qualified or to take any action
that would subject the Company to general service of process in any such
jurisdiction where it is not then so subject.
3.6 Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate shall sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in Section 2 of the
Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the issue or sale of the Securities to the Purchaser.
3.7 Increase in Authorized Shares. At such time as the Company would be,
if a notice of conversion or exercise (as the case may be) were to be delivered
on such date, precluded from (a) converting the full outstanding principal
amount of Debentures (and paying any accrued but unpaid interest in respect
thereof in shares of Common Stock) that remain unconverted at such date or (b)
honoring the exercise in full of the Warrant due to the unavailability of a
sufficient number of shares of authorized but unissued or re-acquired Common
Stock, the Board of Directors of the Company shall promptly (and in any case
within 30 Business Days from such date) prepare and mail to the shareholders of
the Company proxy materials requesting authorization to amend the Company's
certificate of incorporation to increase the number of shares of Common Stock
which the Company is authorized to issue to at least such number of shares as
reasonably requested by the Purchaser in order to provide for such number of
authorized and unissued shares of Common Stock to enable the Company to comply
with its conversion, exercise and reservation of shares obligations as set forth
in this Agreement, the Debentures and the Warrant. In connection therewith, the
Board of Directors shall (a) adopt proper resolutions authorizing such increase,
(b) recommend to and otherwise use its best efforts to promptly and duly obtain
stockholder approval to carry out such resolutions (and hold a special meeting
of the shareholders no later than the 60th day after delivery of the proxy
materials relating to such meeting) and (c) within 5 Business Days of obtaining
such shareholder authorization, file an appropriate amendment to the Company's
certificate of incorporation to evidence such increase.
3.8 Purchaser Ownership of Common Stock. The Purchaser agrees not to
convert Debentures or exercise the Warrant to the extent such conversion or
exercise would result in the Purchaser beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules thereunder) in
excess of 4.999% of the then issued and outstanding shares of Common Stock,
including shares issuable upon conversion of the Debentures held by the
Purchaser after application of this Section. To the extent that the limitation
contained in this Section applies, the determination of whether Debentures are
convertible (in relation to other securities owned by the Purchaser) and of
which portion of the principal amount of such Debentures are convertible shall
be in the sole discretion of the Purchaser, and the submission of Debentures for
conversion shall be deemed to be the Purchaser's determination of whether such
Debentures are convertible (in relation to other securities owned by the
Purchaser) and of which portion of such Debentures are convertible, in each case
subject to such aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination. Nothing
contained herein shall be deemed to restrict the right of the Purchaser to
convert Debentures at such time as such conversion will not violate the
provisions of this Section. The provisions of this Section may be waived by the
Purchaser upon not less than 75 days prior notice to the Company, and the
provisions of this Section shall continue to apply until such 75th day (or
later, if stated in the notice of waiver).
3.9 Listing of Underlying Shares. The Company will use its best efforts to
list the Common Stock for trading on the Nasdaq SmallCap Market or Nasdaq
National Market as soon as possible after the Closing Date. If the Common Stock
hereafter is listed for trading on the Nasdaq National Market, Nasdaq SmallCap
Market (or on the American Stock Exchange or New York Stock Exchange, or any
other national securities market or exchange), then the Company shall (1) take
all necessary steps to list the Underlying Shares thereon, including the
preparation of any required additional listing application therefor covering at
least the sum of (i) two times the number of Underlying Shares as would be
issuable upon a conversion in full of the then outstanding principal amount of
Debentures (plus all Underlying Shares are issuable as payment of interest
thereon, assuming all such interest were paid in shares of Common Stock) and
upon exercise in full of the then unexercised portion of the Warrants and (2)
provide to the Purchaser evidence of such listing, and the Company shall
thereafter maintain the listing of its Common Stock on such exchange or market
as long as Underlying Shares are issuable and/or outstanding.
3.10 Conversion Procedures. Exhibit E sets forth the procedures with
respect to the conversion of the Debentures, including the form of legal
opinion, if necessary, that shall be
rendered to the Company's transfer agent and such other information and
instructions as may be reasonably necessary to enable the Purchaser to exercise
its right of conversion smoothly and expeditiously which are not set forth in
the Debentures.
3.11 Purchaser's Rights if Trading in Common Stock is Suspended or
Delisted. If at any time while the Purchaser (or any assignee thereof) owns any
Securities, less than $400,000 of the Common Stock trades on the OTC Bulletin
Board in any one week or there are fewer than six (6) market makers actively
making a market in the Common Stock (or, if after the Closing Date the Common
Stock is listed on any of the exchange, markets or trading facilities
contemplated in Section 3.9, if the Common Stock is delisted or suspended from
trading on such exchange, market or trading facility, other than as a result of
the suspension of trading in securities on such market or exchange generally, or
temporary suspensions pending the release of material information) for more than
three (3) Trading Days, then, notwithstanding anything to the contrary contained
in any Transaction Document, at the Purchaser's option exercisable by five (5)
Business Days prior written notice to the Company, the Company shall repay the
entire principal amount of then outstanding Debentures (and all accrued and
unpaid interest thereon) and redeem all then outstanding Underlying Shares then
held by the Purchaser, at an aggregate purchase price equal to the sum of (I)
the aggregate outstanding principal amount of Debentures then held by the
Purchaser divided by the Conversion Price on (a) the day prior to the date of
such suspension or delisting, (b) the day of such notice or (c) the date of
payment in full of the repurchase price calculated under this Section, whichever
is less, and multiplied by the Average Price preceding (x) the day prior to the
date of such suspension or delisting, (y) the day of such notice and (z) the
date of payment in full of the repurchase price calculated under this Section,
whichever is greater, (II) the aggregate of all accrued but unpaid interest and
other non-principal amounts (including liquidated damages, if any) then payable
in respect of all Debentures to be repaid, (III) the number of Underlying Shares
then held by the Purchaser multiplied by the Average Price immediately preceding
(x) the day prior to the date of such suspension or delisting, (y) the date of
the notice or (z) the date of payment in full by the Company of the repurchase
price calculated under this Section, whichever is greater, and (IV) interest on
the amounts set forth in I - III above accruing from the 5th day after such
notice until the repurchase price under this Section is paid in full at the rate
of 15% per annum. If after the Original Issue Date the Common Stock shall be
listed for trading or quoted on the Nasdaq SmallCap Market, Nasdaq National
Market or any other national securities exchange or market, this provision shall
similarly apply to any delistings or suspensions therefrom.
3.12 Use of Proceeds. The Company shall use all of the proceeds from the
sale of the Securities for working capital purposes and not for the satisfaction
of Company debt or to redeem any equity or equity-equivalent securities of the
Company, except that the Company may apply up to $2,000,000 of the proceeds from
the sale of the Securities to repay debt evidenced by the Company's promissory
notes dated as of December 18, 1996. Pending application of the proceeds of this
placement in the manner permitted hereby, the Company will invest such proceeds
in interest bearing accounts and/or short-term, investment grade interest
bearing securities.
3.13 Notice of Breaches. The Company and the Purchaser shall give prompt
written notice to the other of any breach by it of any representation, warranty
or other agreement contained in any Transaction Document, as well as any events
or occurrences arising after the date hereof, which would reasonably be likely
to cause any representation or warranty or other agreement of such party, as the
case may be, contained in the Transaction Document to be incorrect or breached
as of such Closing Date. However, no disclosure by either party pursuant to this
Section shall be deemed to cure any breach of any representation, warranty or
other agreement contained in any Transaction Document.
Notwithstanding the generality of the foregoing, the Company shall
promptly notify the Purchaser of any notice or claim (written or oral) that it
receives from any lender of the Company to the effect that the consummation of
the transactions contemplated by the Transaction Documents violates or would
violate any written agreement or understanding between such lender and the
Company, and the Company shall promptly furnish by facsimile to the holders of
the Debentures a copy of any written statement in support of or relating to such
claim or notice.
3.14 Conversion Obligations of the Company. The Company shall honor
conversions of the Debentures and exercises of the Warrant and shall deliver
Underlying Shares in accordance with the respective terms and conditions and
time periods set forth in the Debentures and the Warrant.
3.15 Right of First Refusal; Subsequent Registrations; Certain Corporate
Actions. (a) The Company shall not, directly or indirectly, without the prior
written consent of Encore Capital Management, L.L.C. ("Encore"), offer, sell,
grant any option to purchase, or otherwise dispose of (or announce any offer,
sale, grant or any option to purchase or other disposition) any of its or its
Affiliates' equity or equity-equivalent securities or any instrument that
permits the holders thereof to acquire Common Stock at any time over the life of
the security or investment at a price that is less than the market
price of the Common Stock at the time of issuance of such security or investment
(a "Subsequent Financing") for a period of 180 days after the Closing Date,
except (i) the granting of options or warrants to employees, officers and
directors, and the issuance of shares upon exercise of options granted, under
any stock option plan heretofore or hereinafter duly adopted by the Company,
(ii) shares issued upon exercise of any currently outstanding warrants and upon
conversion of any currently outstanding convertible preferred stock in each case
disclosed in Schedule 2.1(c), (iii) shares of Common Stock issued upon
conversion of Debentures, as payment of interest thereon, or upon exercise of
the Warrant in accordance with their respective terms, unless (A) the Company
delivers to Encore a written notice (the "Subsequent Financing Notice") of its
intention to effect such Subsequent Financing, which Subsequent Financing Notice
shall describe in reasonable detail the proposed terms of such Subsequent
Financing, the amount of proceeds intended to be raised thereunder, the Person
with whom such Subsequent Financing shall be affected, and attached to which
shall be a term sheet or similar document relating thereto and (B) Encore shall
not have notified the Company by 5:00 p.m. (New York City time) on the tenth
(10th) Trading Day after its receipt of the Subsequent Financing Notice of its
willingness to cause the Purchaser to provide (or to cause its sole designee to
provide), subject to completion of mutually acceptable documentation, financing
to the Company on substantially the terms set forth in the Subsequent Financing
Notice. If Encore shall fail to notify the Company of its intention to enter
into such negotiations within such time period, the Company may effect the
Subsequent Financing substantially upon the terms and to the Persons (or
Affiliates of such Persons) set forth in the Subsequent Financing Notice;
provided, that the Company shall provide Encore with a second Subsequent
Financing Notice, and Encore shall again have the right of first refusal set
forth above in this paragraph (a), if the Subsequent Financing subject to the
initial Subsequent Financing Notice shall not have been consummated for any
reason on the terms set forth in such Subsequent Financing Notice within thirty
(30) Trading Days after the date of the initial Subsequent Financing Notice with
the Person (or an Affiliate of such Person) identified in the Subsequent
Financing Notice.
(b) Except for Underlying Shares and other "Registrable Securities"
(as such term is defined in the Registration Rights Agreement) to be registered
in accordance with the Registration Rights Agreement, the Company shall not,
without the prior written consent of the Purchaser, (i) issue or sell any of its
or any of its Affiliates' equity or equity-equivalent securities pursuant to
Regulation S promulgated under the Securities Act, or (ii) register for resale
any securities of the Company for a period of not less than 90 Trading Days
after the date that the Underlying Securities Registration Statement is
declared effective by the Commission. Any days that the Purchaser is unable to
sell Underlying Shares under the Underlying Securities Registration Statement
shall be added to such 90 Trading Day period for the purposes of (i) and (ii)
above.
(c) As long as there are Debentures outstanding, the Company shall
not and shall cause the Subsidiaries not to, without the consent of the holders
of the Debentures, (i) amend its certificate of incorporation, bylaws or other
charter documents so as to adversely affect any rights of the holders of
Debentures; (ii) repay, repurchase or offer to repay, repurchase or otherwise
acquire shares of its Common Stock other than as to the Underlying Shares; or
(iii) enter into any agreement with respect to any of the foregoing.
3.16 The Warrant. At the Closing, the Company shall issue to the
Purchaser, a Common Stock purchase warrant, in the form of Exhibit D (the
"Warrant"), pursuant to which the Purchaser shall have the right at any time and
from time to time thereafter through the second anniversary of the date of
issuance thereof, to acquire 60,000 shares of Common Stock at an exercise price
per share equal to 110% of the Average Price on the Closing Date.
3.17 Certain Securities Laws Disclosures; Publicity. (a) The Company shall
timely file with the Commission a Form D promulgated under the Securities Act as
required under Regulation D promulgated under the Securities Act and provide a
copy thereof to each Purchaser promptly after the filing thereof. The Company
shall file with the Commission (i) a press release acceptable to the Purchaser
disclosing the transactions contemplated hereby within three (3) Business Days
after the Closing Date and (ii) a Report on Form 8-K disclosing this Agreement
and the transactions contemplated hereby within ten (10) Business Days after the
Closing Date.
(b) In furtherance and in addition to the obligation of the Company
set forth in Section 3.17(a) above, the Company and the Purchaser shall consult
with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law, in which such case the
disclosing party shall provide the other party with prior notice of such public
statement.
ARTICLE IV
MISCELLANEOUS
4.1 Fees and Expenses. At the Closing the Company shall pay $10,000
to the Escrow Agent for the legal fees and disbursements incurred by the
Purchaser in connection with the preparation and negotiation of the Transaction
Documents. Other than the amounts contemplated by the immediately preceding
sentence, and except as set forth in the Registration Rights Agreement, each
party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all stamp and other taxes and duties levied in
connection with the issuance of the Debentures pursuant hereto. The Purchaser
shall be responsible for its own tax liability that may arise as a result of the
investment hereunder or the transactions contemplated by this Agreement.
4.2 Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto, the Debentures and the Warrant contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters.
4.3 Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and 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 4:30 p.m. (New
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in the Purchase Agreement later than 4:30
p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the Business Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as follows:
If to the Company: Eurotech, Ltd.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
XxXxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
With copies to: Ruffa & Ruffa, P.C.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx
If to the Purchaser: JNC Opportunity Fund Ltd.
Olympia Capital (Cayman) Ltd.
c/o Olympia Capital (Bermuda) Ltd.
Xxxxxxxx Xxxxx, 00 Xxxx Xxxxxx
Xxxxxxxx XX00, Xxxxxxx
Facsimile No.: (000) 000-0000
Attn: Director
With copies to (for Encore Capital Management, L.L.C.
communications to 00000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
the Purchaser): Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxx
-and-
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxx
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchaser; or, in the case of a waiver,
by the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
4.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
4.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the Purchaser. Except as set forth in Section 3.1(a), neither
Purchaser may assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Company. The assignment by a party of
this Agreement or any rights hereunder shall not affect the obligations of such
party under this Agreement.
4.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and, other than with respect Encore, who is an intended beneficiary of
the provisions of Section 3.15, entitled to enforce such provisions against the
parties hereto and permitted assignees under Section 4.6, is not for the benefit
of, nor may any provision hereof be enforced by, any other Person.
4.8 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the non-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 (including with respect to
the enforcement of the any of the Transaction Documents), 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. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement 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.
4.9 Survival. The representations, warranties, agreements and
covenants contained in this Agreement shall survive the Closing and the and
conversion of the Debentures and exercise of the Warrant.
4.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create
a valid and binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
4.11 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Debenture Purchase Agreement to be duly executed by their respective authorized
persons as of the date first indicated above.
EUROTECH, LTD.
By: /s/ Xxxxx Xxxxx
-------------------------------------
Xxxxx Xxxxx
Director
JNC OPPORTUNITY FUND LTD.
By: /s/ Xxxx Xxxxx
-------------------------------------
Xxxx Xxxxx
Director
