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CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
between
EUROTECH, LTD.
and
JNC OPPORTUNITY FUND LTD.
_____________________________
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 VII
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 VIII
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 govern-
mental 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, proper-
ties, 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 IX
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 X
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 require-
ment 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
___________________________
Name: Xxxxx Xxxxx
Title: Executive Vice President
JNC OPPORTUNITY FUND LTD.
By:/s/ T. H. Xxxxx
___________________________
Name: T. H. Xxxxx
Title: Director
